A Study on the Effects of Strategic HRM Systems

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Japanese Journal of Administrative Science
Volume 21, No.1, 2008, 47-60
経営行動科学第21巻第1号, 2008, 47−60
Research Note
研究ノート
A Study on the Effects of Strategic HRM Systems on Performance:
The Case of Pakistani Manufacturing Companies.
Robina Yasmin
(Graduate School of Management, Aichi Gakuin University)
This study explores the relationship between HRM (human resource management) systems
and performance using data from 192 manufacturing companies operating in Pakistan. This
study examines this relationship in two ways: direct impact of HRM systems on performance
and indirect impact or effect of HRM systems on performance through HR outcomes. The
HRM systems include the practices of participative leadership, job security and training and
development. The results of regression analysis suggest that the individual HRM practices
impact the performance significantly in isolation but these direct effects are insignificant
when HR outcomes mediate the relation between HRM systems and performance. The configuration of HRM practices showed a significant impact on performance. These impacts are
more profound when management uses HRM practices to elicit the employee’s attitudes/behaviors in terms of job satisfaction and work motivation. The results of structural equation modeling also suggest the prediction that the HRM systems impact performance more
significantly through HR outcomes. Hence the study emphasizes the systematic and integrated use of behavior oriented HRM practices in order to achieve competitive advantage.
Keywords: strategic HRM systems, HR outcomes, Pakistani companies, configuration approach, mediation perspective.
system of Pakistani companies is in its developing
INTRODUCTION
phase. Many organizations have titled their Personnel
With a rapidly changing economic environ-
and Administration departments as HR departments
ment, businesses all over the world are facing new
while frequently practicing reactive HRM. It is argued
trends of globalization and free market. Organizations
(Khilji, 2001) that the HRM practices in Pakistani com-
in the new economy are facing strong competition.
panies are not applied in a systematic and integrated
Major challenges for organizations in future are more
way. As a result, problems are compounded. No organ-
urgent search for competitive advantage. In order to be
ization claims to be free from HR problems such as low
efficient and competent organizations must continually
motivation, lack of commitment and high turnover in
improve their performance by reducing cost, innovat-
employees. The organizational structure is bureaucratic,
ing products and processes, and improving quality,
centralized and control oriented.
productivity, and speed to market (Becker & Gerhart,
There are very few organizations that have
1996). Human resource management (HRM) systems of
adopted a systematic approach to HRM systems. With
an organization can be a source of sustained competi-
the opening up of economy and large inflows of foreign
tive advantage. The previous studies clearly reveal that
direct investment (FDI), new and fresh perspective to
the HRM practices, applied in a systematic and inte-
management systems are added. Top management and
grated manner, are associated with positive perfor-
HR departments are becoming accessible as an open
mance outcomes, (Appelbaum et al, 2000; Berg, 1999;
door policy is being adopted. As a result, a new pattern
Huselid, 1995) and higher financial success (Huselid,
of HRM is evolving in several private sector organiza-
1995).
tions. It is interesting to explore the transformation in
HRM in Pakistani companies has been
the HRM practices/policies.
adapted to meet these challenges and to speed up the
The purpose of the present article is to empir-
pace of economic and business activities. The HRM
ically examine the relationship of perceived HRM prac-
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研究ノート
経営行動科学第21巻第1号
tices to organizational performance in companies oper-
achieve competitive advantage by increasing the effi-
ating in developing countries like Pakistan. Although
ciency and competency of the work force. Barney
there are a large number of literature and research on
(1991) argues that sustained competitive advantage can
the link between HRM and performance, these are
be achieved by acquisition and effective use of bundles
mostly related to developed countries such as USA and
of distinctive resources that competitors cannot imitate.
UK. Research on HRM systems of developing countries
MacDuffie (1995) contends that human resources can
like Pakistan is scarce. Researchers suggest that more
be a primary source of sustainable competitive advan-
HRM studies should be conducted across more diversi-
tage for a firm. Employee's knowledge about products,
fied cultures and nations (Budhwar & Debrah, 2001).
processes and customers that is embedded in routines
Moreover, the findings of the study can be a source of
and social interaction patterns can create organizational
knowledge and may have practical implications for the
capabilities more difficult to imitate than readily pur-
developing countries' businesses.
chased technological capabilities. An organization's HR
RESEARCH FRAMEWORK
strategies, policies and practices are unique blend of
HRM and Performance
tional culture (p.198).
processes, procedures, styles, capabilities and organiza-
A wide range of research and the majority of
In an attempt to examine the link between
HRM professionals accept that organizational human
HRM strategy and performance, Delery and Doty
resource management policies can, if properly confi-
(1996) explained that there are three approaches to un-
gured, provide a direct and economically significant
derstand this relationship: the universalistic perspective,
contribution to firm performance. Empirical studies ex-
the contingency perspective, and the configurational
plained a strong and direct relationship between the
perspective. Universalistic perspective maintains that
quality of HRM practices and return on shareholder in-
some HRM practices are better than others and most
vestment. These results are also found to be valid in
organizations should adopt these best practices. Be-
companies outside America (Bae & Lawler, 2000).
cause of globalization and increasing competitive pres-
Scholars from different disciplines have pre-
sure, HRM practices converge to a universalistic ap-
sented various conceptual frameworks to explain the
proach. These practices are called high performance
nexus between a firm's HRM systems/practices and
work practices or best practices. Osterman (1994), Pfef-
performance. The most prominent ones among these
fer (1994) and Huselid (1995) supported and used the
are general systems theory (Von Bertalanffy, 1950), role
universal perspective in their research. Several other
behavior theory (Katz & Khan, 1978), institutional
empirical studies also support this approach (Delery
theory (Meyer & Rowan, 1977), resource dependency
and Doty, 1996).
theory (Pfeffer & Cohen, 1984), human capital theory
Contingency approach posits that an organiza-
(Becker, 1964), agency theory (Jensen & Meckling, 1976)
tion's HRM practices must be consistent with other as-
and resource-based theory (Barney, 1991). All these
pects of organization in order to be effective (Lengnick-
theories have a consensus on the significant impact of
Hall & Lengnick-Hall, 1988; Schuler & Jackson, 1987).
HRM practices in the determination of employee's and
According to this approach performance is enhanced if
firm's performance. A review of all these theories is
an organization maintains a greater congruence be-
beyond the scope of this study. However, this particular
tween its strategies, external and internal environment,
study analyzes the relationship between HR systems
etc. and HR practices.
and firm's performance using the concept of resource-
Configurational approach tries to build unique
based theory. According to Koch & McGrath (1996), the
patterns or combinations of HRM practices with max-
resource-based perspective offers a useful basis for un-
imum performance. This approach insists that to be
derstanding why human resource management makes
successful, an organization must develop HR systems
a potential contribution to performance at the firm level.
that achieve internal consistency of its HRM practices
The resource-based approach stresses the
(horizontal or internal fit) and congruence of HR system
need for a specific HRM strategy, which seeks to
with its strategy (vertical or external fit). Confguration-
−48−
A Study on the Effects of Strategic HRM Systems on Performance: A Case of Pakistani Manufacturing Companies.
al theories are different from the universalistic and tra-
proposed different models explaining the indirect link
ditional contingency theories. The configurational theo-
between HRM practices and firm's performance. Beer
ries are based on the holistic approach; ideal types (or
et al. proposed competence, commitment, congruence
more sophisticated types) of HRM practices and poli-
and cost effectiveness as intermediary variables. Beck-
cies; and the systems assumption of equifinality. Delery
er & Huselid (1998) identified the mediating variables
and Doty (1996) further describe that “the configura-
such as employee skills, employee motivation, job de-
tional theories are concerned with how the pattern of
sign and work structure link to operating performance,
multiple independent variables is related to a depen-
which in turn influence the profit and market value.
dent variable rather than with how individual indepen-
Ferris et al. presented a social context model that de-
dent variables are related to a dependent variable”
scribed organizational climate, employee attitudes and
(p.804).
behaviors as intervening factors. Chadwick and CappelThis study tries to examine the link between
li (1999) following the resource-based view proposed
HRM practices and performance in two ways: direct
that HR systems may lead to higher performance by
link (i.e. universal approach and configuration approach)
developing and exploiting the key internal capabilities
and indirect link between HRM practices and perfor-
that lead to sustained competitive advantage.
mance or when HR outcomes mediate the relation be-
+
tween HRM practices and performance (i.e. mediation
approach). The universal approach is a simple and most
HR Policies/
widely used approach. However, the configuration ap-
+
HR
+
Outcomes
Performance
Practices
proach does not have much empirical evidence in developing countries like Pakistan. Snell et al. (1996) argue
that the configuration approach is very useful in creat-
Contingency/control variables.
ing sustained competitive advantage, as the combination of various HRM practices may help facilitate organizational learning, adaptation and renewal. In this way
Source: Paauwe (2004, p. 56).
Figure 1: General Overview of the Linkages between HR
Activities, Outcome and Performance.
HR systems and people create the competitive advantage. However, it is not possible that any one of these
According to Guest (1995), any analysis of in-
practices leads to sustained competitive advantage.
fluences on company profits quickly leads to the con-
Wright & McMahan (1992) further stress that multi-
clusions that factors other than HRM are involved. He
functional system of HRM practices may provide firms
further describes that in understanding the relationship
with a source of sustained competitive advantage if
between HRM practices and performance, it is as-
they possess three characteristics: HR practices create
sumed that improved performance is achieved through
value, are casually ambiguous and are socially complex.
the people in the organization. Guest (1987) presented a
For instance, it is easy to copy an individual HRM
normative model explaining the linkage between HRM
practice like firm's career development program. But it
activities, outcomes and performance. Paauwe and
is more difficult to duplicate a whole HR system con-
Richardson (1997) summarized the Guest’s normative
sisting of different HRM practices like participation, ap-
model in Figure 1. This model (Figure 1) acknowledges
praisal, feedback, career development, compensation
the role context variables, but main thing this model
program, etc.
stresses is that the HRM practices should be designed
RESEARCH DESIGN
to lead to HRM outcomes of employee's attitudes and
behaviors. The Figure 1 presents that there are two
It is now a widely accepted notion that HRM
ways to explain the relationship between HRM polic-
practices contribute to firm's performance through
es/practices and performance. One way is the direct
some intervening factors referred to as HR outcomes.
impact of HRM practices on performance and the oth-
Many scholars have advocated that relating HR sys-
er is the impact of HRM practices through HR out-
tems directly to firm's performance is shortsighted and
comes. In this study it is assumed that the employee’s
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研究ノート
経営行動科学第21巻第1号
behaviors and attitudes are mediating the relationship
most of high performance practices, such as selective
between HRM practices and firm's performance. This
hiring, extensive training, information sharing and dele-
study examines the relation between HR system and
gation. The firm will not invest heavily in careful
performance using both perspectives i.e. direct link be-
screening and training of new employees if these em-
tween HR system and performance, and indirect link
ployees are not expected to stay with the firm for a
between HR system and firm's performance.
long term to reap these investments. Most research on
HYPOTHESES
the effects of high performance management systems
Direct Linkage between HR Practice and Performance
has incorporated employment security as one impor-
The case of universal prediction
eration or productivity improvement are not likely to
Participative Leadership Style: Research has shown
sustain when workers fear that they will lose jobs as a
that participation increases both employee job satisfac-
result of increased productivity (Pfeffer, 1998). It is ar-
tion and productivity. Fernie et al. (1994) found that
gued that provision of job security encourages em-
employee involvement practices have a positive influ-
ployees to work harder. Ichniowski and associates
ence on productivity and product quality. He further
(1994) noted workers will only spend extra effort if they
states that employee involvement results in better so-
expect a lower probability of future layoffs.
cial climate. Huselid & Becker (1995) surveyed the per-
Hypothesis 1.2: The practice of job security will re-
formance and work practices of 222 firms and reached
sult in higher level of performance.
the conclusion that participative practices are signifi-
Training and Development: Training is an essential
cantly associated with decreased turnover, increased
component of high performance work systems (Pfeffer,
productivity and improved financial performance.
1998), because these systems rely on front line em-
tant dimension. This is because the innovations in work
practices or other form of worker management coop-
G. Cole (2002) says that the reason for encour-
ployee skill and initiative to identify and resolve prob-
aging greater employee involvement and participation
lems, to initiate changes in work methods, and to take
in decision-making is that it can lead to improved effi-
responsibility for quality. All of this requires skilled and
ciency and effectiveness in delivering goods and servic-
motivated work force that has the knowledge and ca-
es to customers. If the means of participation not only
pability to perform the requisite tasks. Organizations
increases employee's contribution to problem analysis
can improve the quality of current employees by pro-
(which may bring a sense of recognition to individuals),
viding comprehensive training and development activi-
but also enhances their ability to make important oper-
ties (Delaney & Huselid, 1996). Koch & McGrath (1996)
ational decisions, then increased employee's job satisfac-
suggest that company-sponsored training and devel-
tion and motivation are likely. This in turn leads to bet-
opment programs often increase the firm specific skills
ter product and service quality and enhances customer
of employees. In this way it decreases the likelihood
satisfaction. Thus, there are sound practical reasons for
that other firms would deploy these trained workers in
finding ways of increasing the involvement of ordinary
the same productive way. Becker (1996) argues that
employees in the day-to-day running of an organization.
some kinds of training are equally useful to a firm and
Here it is proposed that participation of employees will
to its competitors. In such cases, the company offering
lead to the higher performance of organization.
training pays cost and competitors are subsidized, if
Hypothesis 1.1: The practice of participative leadership
these trained workers are hired away by them. In re-
will lead to higher level of organizational performance.
sponse to this argument, resource-based theory sug-
Job Security: It is widely accepted that the practice of
gests that firm specific routines make it impossible that
employment security has direct effect on the behavior
an employee trained in one company would be of equal
of employees. According to Appelbaum et al. (2000),
use at the same price in another.
employment security is positively related to productivi-
A large number of studies provide evidence
ty, employee trust, and organizational commitment. It is
that investment in training leads to beneficial organiza-
argued that employment security is prerequisite for
tional outcomes. Appelbaum et al. asserted in a study
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A Study on the Effects of Strategic HRM Systems on Performance: A Case of Pakistani Manufacturing Companies.
(2000) that formal and informal training are positively
their research. Interactions between bundles can also
related to employee trust and intrinsic motivation. Bo-
be tested in two ways that are multiplicative and addi-
selie et al. (2001) asserted that training and develop-
tive. According to MacDuffie (1995) the multiplicative
ment are positively related to trust in decision-making
method is better due to the assumption of complemen-
and perceived employee job security. Training has posi-
tarities between bundles.
To date, studies related to the impact of HR
tive impact on perceived organizational performance
(Delaney & Huselid, 1996).
practices on performance vary significantly in terms of
Hypothesis 1.3: Training and development programs
which practices to be included in the analysis. For ex-
of the company have significant impact on its performance.
ample, Arthur's (1994) high performance employment
system has given less emphasis to the variable pay.
Huselid (1995) and MacDuffie (1995) in their analysis
The case of configurational prediction
have given strong emphasis on variable pay. Huselid
HRM practices are associated with positive
(1995) and Pfeffer (1994) have described such practices
performance outcomes and higher financial success
as high performance. The notion that which practices
(Huselid, 1995; Lawler et al., 1995). It is argued that the
should be configured to achieve performance needs cla-
nexus between HRM and performance becomes
rification. In this particular study it is proposed that an
stronger and pronounced when the HR practices are
organization can experience superior performance if it
implemented together as a system or in a holistic man-
adopts high performing management practices such as
ner. The researchers who favor this approach call for
participative leadership, job security and training and
the HRM policies and practices which are internally
development.
aligned, in order to gain higher performance. According
H2: The particular pattern of internally consistent
to Guest (1997), this approach requires a set of internal-
HRM practices (here referred to as Participative HRM,
Job security and Training and Development) will significantly impact organizational performance.
ly consistent HRM practices, in other words an internal
fit of HRM practices. Internal fit refers to the extent to
which the components of HR are logically connected
and supportive for one another. There may be a number of possible combinations or configurations of prac-
Indirect Linkage between HR Practice and Performance
HRM practices influence HR outcomes
tices which lead to higher performance.
Guest (1997) describes two ways to test the
The behavioral perspective (Jackson et al.
combined impact among HRM systems, named as fit-
1989) implies that successful implementation of strateg-
as-bundle and fit-as-gestalt. The fit-as-bundles implies
ic HRM practices depends heavily on employee's beha-
that multiplicative pattern or an interaction of particu-
vior. It is argued that in order to achieve lasting results
lar pattern of HRM practices brings out the synergic
and to contribute effectively to the success of their
effects on performance. The fit-as-gestalt approach is
company, employees must be motivated and satisfied
based on three assumptions: 1) the sum of each HRM
(Becker & Wilson, 2000; Fey et al., 2000; Guest, 2001).
practice is greater than its parts; 2) the pattern of com-
This behavioral change is possible if a firm applies a
binations among HRM practices is additive rather than
systematic set of high performance HRM practices.
multiplicative; and 3) one key aspect of HRM is needed.
Organizational HR polices and practices result in cer-
The multiplicative approach is more complex and rigid,
tain HR outcomes like high level of job satisfaction, and
which implies that if any single HRM practice is miss-
work motivation which lead to more efficient work-
ing, the bundle score or the effect should be zero. In the
force, This efficient and competent workforce contri-
additive approach the HRM practices are interrelated
bute positively to the achievement of business objec-
but the absence of any particular HR practice will not
tives. For example, the retention-oriented practices like
remove the effect of all other practices. For this reason,
job security will have a positive effect on the em-
in this study the additive approach is followed. MacDuf-
ployee's behavior. Training not only ensures that em-
fie (1995) and Osterman (1994) take this approach in
ployees and managers can perform their jobs compe-
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研究ノート
経営行動科学第21巻第1号
tently, but also demonstrates the firm's commitment to
HRM practices influence performance through HR out-
its employees (Kleiman, 1997). The employees can be
comes
terminated due to lack of their job skills or competence
Ostroff and Bowen (2000) and others (e.g., De-
due to low motivation or job satisfaction. Training can
lery & Shaw, 2001; Becker & Gerhart, 1996) note that
prevent unnecessary termination by improving em-
relating organizational practices directly to outcomes is
ployee’s behavior or harnessing the employee’s mo-
shortsighted and simplistic. The direct relation fails to
tivation. Some employees, often the best ones, choose to
recognize that the HRM practices themselves are not
leave an organization because they are not satisfied
responsible for the change in outcomes. Rather the
with the way company manages its employees. A
HRM practices must be translated in some way by the
company’s training and development practices can
organization's employees to impact jobs and roles. Em-
help to alleviate this problem. Organizations can modify
ployees give meaning to the organizational policies
the behavior of those who practice ineffective man-
through their attitudes and behaviors. Organizations
agement styles through instructional programs.
Ap-
cannot experience success, unless the employees re-
pelbaum et al. (2000) found in a study that formal and
spond effectively and positively to HR practices and
informal training are positively related to employee
policies.
trust and intrinsic motivation.
HR outcomes mediate the relationship between HRM practices and performance.
Hypothesis 3.3:
A positive relation exists between
HRM practices and HR outcomes.
Hypothesis 3.1:
RESEARCH METHODOLOGY
HR outcomes influence performance significantly
In order to analyze the effect of HRM practic-
It is argued that to achieve lasting and better
es on employee's attitudes and on performance a ques-
performance and to contribute significantly to the suc-
tionnaire survey was conducted. In July 2005, 1000
cess of their organization, employee's behavior and atti-
questionnaires were mailed to HR managers of the
tudes must be supporting to the organizational objec-
manufacturing companies (both Pakistani owned and
tives. If employees have good attitudes and behaviors,
foreign owned companies) operating in Pakistan. Re-
they are more likely to work for the benefit of the or-
garding the size of companies, the companies with
ganization, thus positively affecting firm performance
more than 50 employees were surveyed. After almost
(Arthur, 1994). According to MacDuffie (1995), “Skilled
one year 240 questionnaires were responded and most
and knowledgeable workers who are not motivated are
of responses were received through personal connec-
unlikely to contribute any discretionary effort. Moti-
tion (i.e. friends and relatives). Out of 240questionnaires
vated workers who lack skill or knowledge may con-
192 were usable, making the response rate 19.2%.
tribute discretionary effort with little impact on per-
Most of the companies responded were Pakistani
formance (p.199)”.
owned companies i.e. 171 and 21 multinational compa-
Hypothesis 3.2: HR outcomes (i.e. employee's behavior)
nies (MNCs) responded. (Table 1)
will significantly influence performance.
Table 1: Types of Companies Responded and their Demographic Characteristics:
Types
Food processing
Chemical and Pharmaceutical
Total no.
20
29
LC
18
18
MNCs.
2
11
No. of MNCs by parent country
1 France, 1 Switzerland
5 UK, 3 USA, 1 Austria,
1 Germany, 1 Japan
Textile
Electrical appliances
Construction materials
(Cement, ceramics, tiles, etc.)
Auto parts and automobile
Steel products
Engineering goods
Thermal power plants
Sports goods
FMCG (Fast moving consumer goods)
67
10
67
9
1
1 Germany
18
18
15
7
7
7
7
2
11
7
7
6
7
4
4 Japan
1
1 Austria
2
UK
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A Study on the Effects of Strategic HRM Systems on Performance: A Case of Pakistani Manufacturing Companies.
MEASURES
are internally consistent, factor analysis on all variables
HR systems: Following the study of Delery and Doty
terrelated, correlations were calculated. To test the hy-
(1996) the questionnaire was prepared consisting of
potheses and to examine the impact of variables on
three HRM practices including participative leadership
firm's performance and HR outcomes, multiple regres-
(8 items), job security (5 items), and training and devel-
sion analyses were carried out. Finally, in order to
opment (8 items). A five point Likert scale (very much
check the structure or pattern of effects of HR systems
disagree = 1, neutral = 3 and very much agree = 5)
on performance, structural equation modeling was per-
was used to measure these HRM practices.
formed.
HR outcomes: The HR outcomes are measured
RESULTS
was conducted. After that, to check if variables are in-
through attitudes and behaviors of workers, measures
used by other researchers like Tsui et al. (1997) and
Correlation and Factor Analysis
Katou & Budhwar (2006). However, in this study the
Factor analysis for HRM practice was calcu-
mediating variables are measured by the perceived rat-
lated by principle component analysis using the Vari-
ing of the organization's HR outcome measures follow-
max rotation method. To check the internal reliability
ing the Katou & Budhwar (2006, p.1232). It is acknowl-
of the scale, Cronbach's alpha coefficient was used. The
edged that the study might be affected by the common
Cronbrach's alpha coefficients of 0.6 or higher are con-
method bias, as the single source (i.e. HR manager)
sidered acceptable. Then, correlation among these fac-
provides data on HR policies, HR outcomes and organi-
tors was calculated to check whether these variables
zational performance. The data for the change in em-
are interdependent or not.
ployee's attitudes (HR outcomes) that is based on HR
Table 2: Correlation Matrix and Reliability Values:
manager's perception may not truly represent the employee's feelings. However, it is expected that the
common method bias may be limited in this study because the sample size is large (Cooper and Emory,
1995).
Leadership
Leadership
Job Security
T&D
HR outcomes
Performance
Mean
SD
The behavioral consequences of these HRM
(0.818)
0.042
0.538**
0.596**
0.433**
11.062
2.551
Job
Security
Training and
Development
HR
outcomes
(0.847)
-0.057
-0.066
0.009
4.896
1.414
(0.791)
0.549**
0.44**
10.115
3.219
(0.758)
0.620**
6.901
1.633
Note: **p< 0.01, ***p< 0.001,
practices included two aspects of HRM outcomes,
Performance
(0.676)
11.365
1.685
( ): Cronbach’s alpha, SD: Standard deviation
namely, employees work motivation and job satisfaction.
Table 2 shows that all five factors produced
The HR manager was asked how he perceives the
alpha values of more than 0.6, depicting that these fac-
change in job satisfaction and work motivation of their
tors are internally consistent. The correlation matrix
employees during past three years. These two factors
also shows that all factors are significantly correlated
were also measured by using the 5-point Likert scale.
except job security. The other HRM practices such as
Performance: The financial performance measure was
participative leadership and training and development
based on three self-report variables, namely, quality,
are positively correlated with performance. The beha-
profit and revenue using the methodology of Delaney
vioral outcome of HR practices is also significantly cor-
and Huselid. It is noted that the research up till now
related to participative leadership, training and devel-
has been based on both objective and subjective indica-
opment and performance.
tors of performance.
From previous researches,
(Guest, 2003; Guthrie, 2001), it is evident that subjective
Multiple Regression Analysis
data may be as valid as objective measures. The res-
Direct Linkages between HR Practices and Performance
pondents were asked how they perceive their perfor-
In order to examine the impact of HR practic-
mance in terms of quality, profit and revenue for last
es on performance, a hierarchical regression analysis
three years. For measurement the same 5-point Likert
was conducted. Table 3 shows the results of hierar-
scale was used.
chical regression analysis. The control variables, com-
Statistical Procedures: In order to check that all items
pany size and age (marginally significant) fail to show
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研究ノート
経営行動科学第21巻第1号
Table 3: Results of Hierarchical Regression Analysis:
D
V
Independent
variables
P
Age
Size
Lead.
JobSec.
T&D
HR outcomes
Lead*JobSec.
Lead*T&D
JobSec.*T&D
R2
Adjusted R2
∆ R2
F
Model 1
B
0.144
0.110
0.044
0.034
4.330*
Model 2
Sig.
.060
.147
Model 3
B
0.087
0.051
0.297
0.022
0.262
Sig.
.208
.455
.000
.733
.001
0.260
0.240
0.216
18.139***
B
0.065
0.071
0.053
0.054
0.099
0.523
Model 4
Sig.
.290
.240
.474
.348
.176
.000
0.415
0.396
0.155
48.857***
B
0.084
0.081
-1.062
-0.564
-0.206
0.521
1.201
0.953
0.479
0.458
0.431
0.043
4.781**
Sig.
.164
.169
.001
.076
.508
.000
.005
.004
.091
Note: *p<0.05, **p< 0.01, ***p< 0.001
DV: Dependent Variable, P: Performance, JobSec: job security, RS: R square
any significant impact individually on performance but
(1994) who found that the evaluation of individual HRM
their joint impact is significant (F= 4.330*).
practices in isolation results in biased estimates and
Table 3 (Model 2) reveals that HR practices,
substantially overstate the effects. Considering the
leadership style and training and development, impact
mediation perspective we can infer from Model 3 (Ta-
performance significantly in isolation (i.e. β =0.297,
ble 3) that the direct impact of HR practices on per-
p< .001and β = 0.262, p < .01 respectively). The prac-
formance is insignificant and the hypotheses 1.1, 1.2 and
tice of job security shows the insignificant impact on
1.3 are rejected.
performance. The reason may be that job security con-
The model 4 (Table 3) presents the interaction
sists of only two factors (the company provides perma-
effects of HR practices. The hypothesis 2 that the con-
nent jobs at the start and the company adopts lay off
figuration of HR practices will reinforce the perfor-
policy in bad economic conditions) that may influence
mance is supported. The interaction between participa-
job security in opposite directions. It may be needed to
tive leadership and job security has significant impact
add some other influential factors to observe the job
on performance as β = 1.201, p < 0.05 and the interac-
policy of the company. After controlling the effects of
tion effects of participative leadership and training and
company age and size, the HR practices as a whole ex-
development are also significant with β = 0.953, p <
plained a significant impact on the performance of
0.05. However, the overall combined interactions
company. This can be viewed from the value of change
showed a significant impact on the performance of a
in R square (∆ RS = 0.216 and F = 18.139***). The
firm with ∆ RS = 0.043, F = 4.781**. The interaction of
change in R square reflects that overall, 21.6 % of varia-
HR practices produced 4.3% variation in the perfor-
tion is explained by HR practices of participative lea-
mance. This change in R square reveals that the hy-
dership, job security and training and development.
pothesis that configuration of HR practices/system will
The results in Model 2 (Table 3) generally state that
significantly impact performance is supported.
HR practices significantly impact performance. Howev-
Table 4: Results of Hierarchical Regression Analysis:
er, this is the case when the effect of HR practices on
DV
performance is evaluated in isolation (Model 2). In case
HR
HR outcomes are added to the model (i.e. Model 3, Table 3), the HRM practices coefficients are smaller and
have become insignificant or we can say that with entering the other measures of HRM practices (here HR
outcomes) the effects of individual HR practices are vanished. These results are consistent with the findings of
Delaney & Huselid (1996, p.962) and Ichniowski et al.
Independent
Variables
Age
Size
Lead.
JobSec.
T&D
R2
Adjusted R2
∆ R2
F
Model 1
B
0.126
0.035
0.020
0.010
1.93
Sig.
0.104
0.649
Model 2
B
0.042
-0.039
0.432
-0.061
0.311
0.435
0.420
0.415
45.531***
Sig.
0.489
0.507
0.000
0.276
0.000
Note: *p<0.05, **p< 0.01, ***p< 0.001
DV: Dependent Variable, HR: HR outcomes, JobSec: job security, RS: R square.
−54−
A Study on the Effects of Strategic HRM Systems on Performance: A Case of Pakistani Manufacturing Companies.
Indirect Linkages between HR Practices and Perfor-
comes insignificant in the presence of HR outcomes,
mance
which strongly supports the view that analysis of indiNext, Hypothesis 3.1 that HR practices will
lead to HR outcomes in terms of employee's attitudes
vidual HR practices lead to substantially larger coefficient (Delaney & Huselid, 1995).
was partially supported. Table 4, Model 2 reflects the
Hypothesis 3.3 that the HR outcomes mediate
effects of HR systems on HR outcomes. The practices
the relationship between HR practices and perfor-
of participative leadership and training and develop-
mance is also supported. It was assumed that if the or-
ment show a significant impact on HR outcomes with
ganization tries to illicit the motivation of employees
β = 0.432, p< .001 and β = 0.311, p< .001 respectively.
through progressive HR systems, it will significantly
It is worth to note that the joint impact of HR systems
impact performance.
shows the highest variation in adjusted R square i.e. ∆
ployee's attitudes are quite an important factor to im-
RS = 0.415, F = 45.531***. Whereas these HRM practic-
pact the performance. The hypothesis 3.3 was also
es as a whole show comparatively less increment in
tested by structural equation modeling.
The results show that em-
performance in terms of adjusted R square (∆ RS =
0.216, F = 18.139***). The HR practices showed a varia-
Structural Equation Modeling
tion of 41.5% on employee's attitudes and behaviors.
In order to test the hypothesis 3.3 that the HR
This confirms the hypothesis that HR systems have
outcomes mediate the relation between HR practices
significant impact on the HR outcomes.
and performance, structural equation modeling (SEM)
Hypothesis 3.2 that the HR outcomes will sig-
was done. Figure 2 explains that the practices of parti-
nificantly impact the performance of company was also
cipative leadership and training and development have
supported. From Model 3 in Table 3, it can be observed
a significant impact on employee's attitudes, whereas
that the HR outcomes show the highest beta value i.e.
these practices have an insignificant direct impact on
β = 0.523, p< .001. The change in performance by HR
performance.
outcomes can be examined from the value of change in
Figure 2 is consistent with Model 3 in Table 3.
R square which is: ∆ RS = 0.155, F = 48.857***. Variation
Hypothesis 3.3 assumes that the HR practices will im-
produced by HR outcomes after removing the effect of
pact the performance through HR outcomes.
other variables is 15.5%. Model 4 in Table 3 also shows
practice of participative leadership has a significant im-
when HR outcomes are added in the model, it has af-
pact on job satisfaction and motivation of employees
fected the beta values and significance level of HRM
with β = 0.457, p < .001. Training and development al-
practices. The individual impact of all HR practices be-
so showed a significant impact on the attitudes of
Trust
Quality
Leadership
Appreciate
Performance
Security
Profit
.457***
Coop-team
Revenue
.534***
Permanentech
JobSecurity
Lay-off
HR
OJT
New-tech.
Outcomes
.450**
T&D
Inter-prsn
Note:
significant impact
Insignificant impact
Note: **p<.01, ***p< .001; GFI: 0.921; CFI: 0.941; RMR: 0.052; AGFI: 0.870; RMSEA: 0.072
Coop-team: cooperative team work, New-tech.: new technology, Inter-prsn.: interpersonal skill,
T&D: training and development.
Figure 2: Structural Equation Modeling
−55−
Work motivation
Job satisfaction
The
研究ノート
経営行動科学第21巻第1号
workers (β = 0.452, p< .005 respectively). In the pres-
pirical research in this field.
ence of HR outcomes the individual HR practices have
This study suggests that in isolation, progres-
insignificant impact on performance. The HR outcomes
sive HR practices, participative leadership, and training
show the strongest impact with β = 0.534, p< 0.001.
and development, impact performance significantly.
This positive behavior of employees in terms of job sa-
Most of the companies surveyed expressed that they
tisfaction and work motivation reinforces the perfor-
encourage and appreciate the participation of workers
mance. Thus, the hypothesis that HR practices will in-
in decision-making processes and promote the practice
fluence performance through HR outcomes is sup-
of team-work. In the case of training and development,
ported. The organization can significantly impact the
a majority of companies provide on the job training to
performance, if they first try to change the behavior of
workers at the start of new job. They also provide
employees.
training when new technology is introduced. Only job
Goodness of fit tests determines whether the
security has shown less significant explanatory value.
model presented should be accepted or rejected. There
To explain the predictor's value significantly, we might
is a wide disagreement among researchers which fit
need to take into account the effects of industry type,
indexes to report. Jaccard and Wan (1996) recommend
economic conditions and labor market structure. One
the use of at least three fit tests. GFI is the goodness of
important reason for this might be that most of the
fit index and its value varies from 0 to 1. By convention,
companies in Pakistan (surveyed) adopted the layoff
GFI should be equal to or greater than 0.9 to accept the
policy during the bad economic seasons. Also, some
model. Here, GFI is 0.92, which means the model is ac-
companies had seasonal nature of business (e.g. textile
ceptable. The RMR represents the root mean square
industry and food processing industry). An important
residuals and for a well fitted model RMR should be
point to note is that although the individual impact of
equal to 0.05 or less. Here in this model RMR is 0.052,
job security is insignificant, the combined impact of all
which again shows that the model is acceptable.
HR practices is significant. The combined HRM prac-
RMSEA i.e. the root mean square error of approxima-
tices have brought about 21.6% change in performance.
tion should be 0.08 or less for an adequate fit. In this
While taking into account the mediation perspective in
particular case RMSEA is 0.072 which is below 0.08.
Model 3 in Table 3 the individual effects of HR practic-
Again this fit measure reveals that the model is ac-
es become insignificant. These findings support the
ceptable. P (CMIN) explains the minimum sample dis-
view of Delaney & Huselid (1996) who mention that
crepancy or chi-square index and by criterion it should
“when HRM practices measured individually in our
be greater than 0.05 in order to accept the model. Here
analysis, their estimated coefficients were always larger
P (CMIN) is less than 0.001, revealing that the present
(often substantially larger) than their coefficients in the
model is rejected as being a perfect fit. Many research-
model containing other HRM practices measures”
ers have argued that chi-square can be misleading in
(p. 966).
the case of large size samples. In the case of the
The interactions between HRM practices also
present model, as other fit indexes (GFI, RMR and
showed a significant impact on performance, support-
RMSEA) have revealed the model is acceptable, the
ing the configuration preposition. The interaction of
chi-square index may be misleading because of its sen-
HRM practices have explained 4.3% increment in per-
sitivity to sample size.
formance and thus support the view that configuration
DISCUSSION
of HR practices reinforce performance.
This study shows that these impacts of HRM
The purpose of this study was to find out the
systems are most significant and profound when man-
empirical evidence that HR systems, applied in a sys-
agement adopts a behavioral HR policy. Based on the
tematic way, can lead to superior organizational per-
estimates provided by the HR managers, the participa-
formance in developing countries like Pakistan. To date,
tive HRM practices have showed a 41.5% change in the
only theoretical importance is given to these assertions
employees' attitudes, suggesting that the progressive
in these countries. There is also lack of substantial em-
HRM practices including participative leadership and
−56−
A Study on the Effects of Strategic HRM Systems on Performance: A Case of Pakistani Manufacturing Companies.
training and development have significant impact on
Another limitation is that this study takes into account
employees' job satisfaction and motivation. The HR
one type of industries i.e. manufacturing. Future re-
outcomes have brought 15.5% change in performance.
search on this topic should use multiple respondents
Further, this study also verifies the findings of such re-
and a broad range of organizations, so that the results
searchers as Ostroff and Bowen (2000), Delery & Shaw
can be generalized. This study is limited to the internal
(2001) and Becker & Gerhart (1996) who note that relat-
fit or the fit between HR practices. Further research is
ing organizational practices directly to outcomes does
encouraged, regarding vertical fit or the fit between
not explain the causalities involved. According to them
company's strategy and its HR systems. In spite of all
the HR policies and practices do not directly result in
these limitations this study makes an important contri-
performance but these HR policies bring out changes in
bution in the developing countries context and provides
employees' attitudes and behaviors by impacting their
support to the configuration and mediation perspective.
jobs. These behavioral outcomes significantly impact
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