www.sciedu.ca/ijba International Journal of Business Administration Vol. 5, No. 2; 2014 Published by Sciedu Press 71 ISSN 1923-4007 E-ISSN 1923-4015 Understanding the HRM-Performance Link: A Literature Review on the HRM Strategy Formulation Process Natalia García-Carbonell 1 , Fernando Martín-Alcázar 1 & Gonzalo Sánchez-Gardey 1 1 Business Management Department, University of Cádiz, Cádiz, Spain Correspondence: Natalia García-Carbonell, Business Management Department, University of Cádiz, Cádiz, Spain. E-mail: natalia.carbonell@uca.es Received: January 12, 2014 Accepted: February 6, 2014 Online Published: March 2, 2014 doi:10.5430/ijba.v5n2p71 URL: http://dx.doi.org/10.5430/ijba.v5n2p71 The research project described in this paper has been developed under the Research Group SEJ-449 from the Andalusian Government (Andalusian Plan for R+D+I 2007-2013) and the Research Project ECO2011-26982, from the Spanish Ministry for Science and Technology (Non-oriented Fundamental Research Projects Subprogram). Abstract Although most studies in strategic human resource management literature have deeply examined the relationship between HRM and performance, extant literature has shown mixed and inconclusive results. In general, researchers have usually focused on how organizations implement their HRM strategies, using the traditional ‘content perspective’. In this sense, SHRM literature has paid less attention to the antecedents of these strategies and the internal dynamic by which HRM systems are defined. Therefore, considering the importance of formulation processes recognized in strategic process research, we propose an integrative model of study focused on the HRM strategy formulation process. From this point of view, we also identify different contingent factors that may impact this strategic process, trying to shed some more light on the complexity of this topic of research. Conclusions and implications of the study will be also discussed. Keywords: strategic human resource management, HR strategy formulation, process 1. Introduction: Justification and Objectives Strategic human resources management (SHRM) emerges as a discipline focused on the strategic contribution of human component in organizations. In the late 1970s, several studies have stressed the need to reorient traditional human resource management (HRM) in order to understand human resources as a crucial element in organizational success. Thus, this traditional view begins to undergo significant changes, focusing its interest on the strategic value of human resources (Lengnick-Hall, Lengnick-Hall, Andrade, & Drake, 2009). Consequently, the HR function has a more proactive role and a long-term orientation what implies some changes in top management teams’ and HR managers’ roles. From this point of view, the literature has proposed new models of study that allow the analysis of this strategic dimension. Therefore, SHRM discipline has increasingly incorporated theoretical arguments from different fields of research to build models more complex and complete. However in spite of the rapid evolution of the field, the relationship between HRM and performance still remains unclear. Reviews by Paauwe (2009), Lengnick-Hall et al. (2009), Guest (2011) and Wright and McMahan (2011) demonstrate that there is a need for more research on certain classic and unanswered issues to clearer understand the way HRM influences organizational performance. To echo these calls from the literature this study presents a comprehensive review in an attempt to clarify what we know about the way organizations design their HRM strategies. Then, adopting a ‘process model focus’ instead of the traditional ‘content view’ (Bowen & Ostroff, 2004; Guest, 2011), we identify and classify diverse influencing factors that may lead HRM systems fail. To do so, a theoretical model of study is proposed with a twofold objective: (1) the description of the HRM strategy formulation process and, (2) the identification of contingent factors that may influence on the formulation process. The paper will be structure in four main sections. We firstly review the literature to define a standard HRM formulation process, identifying key stages and involved actors. Adopting this approach, main influencing factors in