Strategic human resource management is now regarded a bit like marketing was 20 years ago - perhaps a little too exotic for medium-sized businesses and a bit too rich with "all that good stuff" which isn't really related to day-to-day business.

I remember a good salesman who went out on his own in the late 1980s on the basis that he could sell office equipment directly instead of doing it for his boss. He developed a successful business selling business machines imported directly from Japan at keen prices and beat off a lot of the bigger players who lived in a world of middle-men, distributors and agents.

My friend could never have been accused of being customer-focused apart from getting the customer's cheque and banking it as quickly as possible.

Within a few years, he had eight employees, one of whom was an eager assistant fresh from a third-level business studies course and with a diploma in marketing. She tried to persuade him to develop customer relations, create a customer data-base and make after-sales contacts.

Initially, none of it was to much effect, so she ignored him and created her database and sent out follow-up letters. Within months she was proposing offering maintenance contracts and customer-support packages.

This was met with: "Why would anyone want maintenance when this stuff is the best and never breaks down?"

"We know that, but they don't," she thought to herself and ploughed on regardless.

Within eight weeks, cheques were coming in and no product was going out as customers signed up for the maintenance contracts. At last, the penny dropped - well, actually thousands of pounds at the time - and my entrepreneurial friend was convinced of the benefits of marketing over one-off sales.

Like marketing back then, strategic human resource management sounds appropriate for big multinationals but otherwise probably a bit of an extravagance.

However a new study shows that effective people-management strategies can have a direct impact on the bottom line.

Strategic human resource management was found to deliver a 12.4 per cent variance in labour productivity; boost innovation by 5 per cent and reduce employee turnover by 4 per cent. If you add the bells and whistles of diversity and equality programmes teamed with flexible working systems (DEF), the results are even more impressive, with a 14.8 per cent boost to labour productivity.

On its own, DEF has the greatest impact on staff turnover but little influence on workforce innovation, according to the new research. Translated into euro per employee over a year, that led to an average €44,000 top-up to labour productivity in 132 firms studied by a team led by Prof Patrick Flood, now of Dublin City University and recently at UL's Kemmy Business School.

The median sample of Irish-based companies, both indigenous and foreign-owned, had 270 employees so that the comparative productivity/sales boost increased revenue by just under €12 million, most of it straight to the bottom line.

The findings are the first to examine specifically the impact of high performance work systems (a marriage of strategic human resource management with DEF work systems). It appears to provide financial proof of what groups such as the Government's Workplace of the Future group and the National Centre for Partnership and Performance have been claiming for the past few years.

Since about four out of five of the 130 management respondents to the survey were HR or personnel managers, we may have to discount a little for their "rosy" view of their people management contribution. Nonetheless, the evidence is persuasive.

However, Prof Flood found that this high-performance approach was more likely to be practised in foreign companies (57 per cent) compared with indigenous firms (39 per cent). Likewise, there was a size threshold; organisations with more than 500 employees showed a 58 per cent adoption compared with 45 per cent in those with fewer than 500 workers.

The pity is that, according to the new study, high performance work systems appear to be rare in many sectors such as health, retail, construction and agriculture when compared with the financial services, pharma-chem manufacturing and personal services sectors.

Gerald Flynn is an employment specialist with Align Management Solutions in Dublin. gflynn@alignmanagement. net