The theoretical value of understanding HRM’s financial value

AbstractAbstractAlthough the paper by Joo et al. (2022 Joo, H., Aguinis, H., Lee, J., Kremer, H., & Villamor, I. (2022). HR’s financial value from obtaining more star performers. The International Journal of Human Resource Management, 33(21), 4179–4214. https://doi.org/10.1080/09585192.2021.1948890[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) purports to demonstrate the value of acquiring star performers, we argue that the value of their paper lies more in the demonstration of the use of utility analysis as strong theory, implemented with computational modeling. We articulate why we see the Joo et al. (2022 Joo, H., Aguinis, H., Lee, J., Kremer, H., & Villamor, I. (2022). HR’s financial value from obtaining more star performers. The International Journal of Human Resource Management, 33(21), 4179–4214. https://doi.org/10.1080/09585192.2021.1948890[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) paper contributing to a strong theory about employee value and how its efforts represent more of a theoretical contribution to the star performers, employee value, employee performance, and utility analysis literatures than one simply about the specific returns on investment related to acquiring star employees. Our commentary explains our view of their contribution and develops new questions and directions for future research that this perspective implies.Keywords: Employee valueutility analysisstrong theorycomputational modeling Notes1 In Joo et al.’s (2022 Joo, H., Aguinis, H., Lee, J., Kremer, H., & Villamor, I. (2022). HR’s financial value from obtaining more star performers. The International Journal of Human Resource Management, 33(21), 4179–4214. https://doi.org/10.1080/09585192.2021.1948890[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) procedures, their approach (referred to as the “global procedure”) is based on differences between the 85th, 50th, 15th, and minimum percentiles, and then further simplified based on the overall average finding reported in Burke and Frederick (1986 Burke, M. J., & Frederick, J. T. (1986). A comparison of economic utility estimates for alternative rational SDy estimation procedures. Journal of Applied Psychology, 71(2), 334–339. https://doi.org/10.1037/0021-9010.71.2.334[Crossref], [Web of Science ®] , [Google Scholar]) that the ratio of SDy to SDO is an average of 2.75. They then multiply this by the estimate of SDy using the 40% rule (where SDy = 0.4 * mean salary), and thus their estimate from the global procedure ultimately equals (2.75 * 0.4 * mean salary =) 1.1 * mean salary.