BEYOND HR PRACTICES: INTERACTING HR POLICIES AND FIRM PERFORMANCE1

UOTE

Prepared for the Research Seminar, Australian Centre for Research in Employment and Work 2009

box 9108, 6500 HK

Netherlands

LERY of Management

Sam M. ess, University of Arkansas

R 72701

T DIETZ University

738, NL-3000 Netherlands

Any comments? e.poutsma@fm.ru.nl

DRAFT AUGUST 2009, PLEASE DO NOT Q

(ACREW) at Monash University, August 5

ERIK POUTSMA & PAUL E.M. LIGTHART University of Nijmegen

Nijmegen School of Management, P.O. Nijmegen, the

JOHN DE

Department Walton College of Busin

Business Building, Room 402 Fayetteville, A

BAR

ErasmusRotterdam School of Management, P.O. Box 1

Rotterdam, the

1 The authors thank Chris Brewster, Ed Carberry, Mark Huselid, Wolfgang Mayerhofer, Lisa Nishi and Patrick Wright for helpful suggestions on earlier versions of this manuscript.

1

HR SYSTEMS AND FIRM PERFORMANCE:

ABSTRACT

To do

1,492 firms across 12 European countries, the authors demonstrate that an

c effect on firm

trol HR policy is

industries.

Based on data from

HR system of control and commitment HR policies has a positive synergi

performance. However, the positive interaction effect only holds when the con

geared towards individual employees. The results are robust across countries and

2

INTRODUCTION

An insight into the relationship between HR and performance is essential for both practitioners

and researchers (Rynes, Giluk Scholars exploring this strategic HR area of

forts and

measuring performance outcomes, such that organizational performance is maximized (den

performance management research arrived at a point where “best-

pra established but also

ade (e.g. Delery &

Doty, 1996). This generated a massive sub-stream in the literature on performance management,

ance (e.g.

1996). Scholars

actices (i.e. best-

improvements in

firm performance over and beyond best practice HR approaches (Becker & Huselid, 1998).

and empirical

of HR systems,

literature has to cope

2005: 645). We have two arguments for this observation: firstly, while HR systems have

; Delery & Doty, 1996), the

attributes of HR systems have recently been proposed as being conceptualized from additional

levels of abstraction. Beyond the level of practices, HR attributes have recently been

& Brown, 2007).

“performance management” seek to guide managers in managing employee ef

Hartog, Boselie & Paauwe, 2004).

Over a decade ago,

ctice” or “universalistic” performance effects of HR practices were well

criticized, and a call to move beyond a best-practice mode of theorizing was m

proposing systems of HR practices to have synergic effects on organizational perform

Arthur, 1994; Huselid, 1995; Becker & Gerhardt, 1996; Delaney & Huselid,

from the latter research stream propose numerous “ideal” systems of HR pr

systems), or so called “High Performance Work Systems,” to lead to substantial

Taking stock of this field today, after more than a decade of theoretical

work and despite some empirical evidence for the synergic performance effects

significant conceptual and methodological issues remain and as a result the

with “deficient empirical support” (Martín-Alcázar, Romero-Fernández & Sánchez-Gardey,

typically been composed of HR practices (e.g. Ichniowski et al., 1997

3

theoretically classified into practices, policies and principles (Colbert, 2004); however ,

empirical studies on the performance effects of HR systems have merely been performed on

systems on the level of

this suue

into account (Delery & Shaw, 2001; Arthur & Boyles, 2007). Secondly, while scholars have

plored” (e.g.

R scholars to adopt a

f ideal HR

systems (Becker & Huselid, 1998). Hence, while authors have argued that HR systems “more

ful strategy

ld be “aligned,”

and need to be

position of HR

systems is called upon (Delery & Shaw, 2001: 189).

different

n principle agency work

nitoring

on participation in decision making’ consisting of several information sharing practices. In

eory to denote a

‘collective organizational performance focused policy’ consisting of profit sharing and share

ownership practices. This latest policy is also inspired by the recently developed shared

practice-level HR systems. Consequently, empirical investigation of HR

policies and principles remains unexplored. Scholars have called for research that takes

indeed proposed that HR attributes, when aligned in a coherent system, have synergic effects on

firm performance, the theoretical rationale of these systems remains “under-ex

Kinnie, Swart & Pyrcell, 2005). Delery & Doty (1996) have called upon H

“configurational mode of theorizing” and sparked a research stream in search o

accurately reflect the multiple paths through which HR policies will influence success

implementation” (Becker & Huselid, 1998: 55), and that HR systems shou

(Becker & Huselid, 1997), represent “fit” (Wright & Snell, 1998)

“configurational” (MacDuffie, 1995); a theory-driven rationale for the com

In exploring this theoretical rationale of HR systems, we investigate the

theoretical approaches to the management of the workforce. We draw o

to ‘individual performance focused policy’ consisting of several control and mo

practices. We discuss resource dependency and commitment theory to discover a ‘policy focused

addition we investigated incentive contract theory and property rights th

4

capitalism approach (Freeman et al., 2004). Following the debate on an overarching HR system

versus different HR systems for different groups, we substantiate the debate by investigating the

r level of internal

dual performance

policy and HR participation in decision making policy have a combined impact on organizational

present study aims to advance the field by (a) providing a theoretical underpinning of

HR t and synergic

is structured as

follows: firstly, we will provide a conceptual background on HR systems literature. Secondly, we

s. Thirdly,

systems. Finally

implications for

olars.

to influence firm

acDuffie, 1995,

erous HR

systems (for an overview, see: Becker & Huselid, 1998) and until the present, the extant body of

& Olaverri, 2006; Evans &

Davis, 2005). A common theme in the HR systems literature is the exploration of performance

effects of “ideal type” HR systems. Delery & Doty (1996) called this perspective the

interactions of the different policies as possible HR subsystems adding anothe

consistency of the HR system. We theoretically argue and show that HR indivi

performance.

The

as a system of policy-level attributes, and (b) empirically exploring the direc

performance implications of control and commitment HR policies. The paper

will propose “system of attributes” theory as a theoretical foundation for HR system

we will organize the HR systems literature into practice-level and policy-level

we will develop hypotheses, describe our method, present results and discuss

managers and sch

CONCEPTUAL BACKGROUND

In the mid 1990s, several HR scholars argued that HR is more likely

performance when conceptualized as a “system,” or “configuration” (e.g. M

Delery & Doty, 1996). As a consequence, authors have since been developing num

literature on HR Systems was growing rapidly (e.g. Kintana, Alonso

5

configurational mode of theorizing and advocated “horizontal fit” between practices. The central

idea is that some ideal type HR configurations lead to better performance then others. In their

ad variety of

al” and

“innovative,” “calculative” and “participative,” “internal” and “market type” HR systems

t practices. The

e of the early

tems where his

discovered “control” and “commitment” systems may interact in generating positive

ealize the largest

owski et al: 295),

sults (Delaney &

Huselid, 1996; Delery & Doty, 1996; Ahmad & Schroeder, 2003).

y performance

lizing HR systems

k. (1) A common theme

or

complementarity can blossom (Delery & Doty, 1996). However, a theoretical framework guiding

separately. Consequently, HR variables are aligned sequentially and a “set of best practices”,

instead of a coherent “best system” is the end result. (2) Few studies provide a theoretically

quest for empirical evidence for firm performance in these configurations, a bro

ideal designs have emerged, such as: “control” and “commitment”, “tradition

(Arthur, 1994; Ichniowski, et al., 1997; Gooderham, Nordhaug & Ringdal, 1999; Delery & Doty,

1996). Apparently there is no consensus about the ideal types and its constituen

often argued existence of two opposing ideal types may also be challenged. On

writers on this subject, Arthur (1994), suggested the existence of mixed sys

performance effects (ibid.: 684). Whereas HR systems are typically hypothesized to generate

positive effects on firm performance, and scholars have argued that “firms r

gains in productivity by adopting clusters of complementary practices” (Ichni

the broad stream of HR systems literature has yielded mixed and conflicting re

Scholars have been proposing multiple arguments for these unsatisfactor

effects, such as the level of analysis or the measurement methods in operationa

(Delery & Shaw, 2001). There are a number of reasons for this drawbac

in these lines of research, is that HR systems should be “aligned” so that synergy, fit,

this coherence is lacking and hence, the alignment process is concentrated on each HR attribute

6

driven approach to the rationale behind the system (i.e. what constitutes “fit”?) and why specific

practices are selected for certain HR systems. (3) The relationship between HR practices is

framework

s possible

substitutions and synergies, is lacking. (4) There has been little consistency in the literature

etween levels is

ker and Gerhart

R system

architecture (e.g. a specific appraisal technique or a specific reward technique) that are

cross all

d that, although

uggest that there

howed that there

may be different HR systems for different categories of personnel. Lepak, Takeuchi and Snell

(20 ms on performance.

ng the

ding an additional level of abstraction (i.e. the HR policy level) to

the debate on systems of practices.

In economic literature, organizations have been argued to be systems, composed of

attributes (Milgrom & Roberts, 1990; Holmstrom & Milgrom, 1994; Ichniowski et al., 1997).

weakly specified (e.g. substitutes or complements). Consequently, a theoretical

linking HR variables to each other and predicting combined effects, such a

concerning the measurement of HR practices in general and even less concerning the level of

certain HRM practices in the architecture of the organization. A distinction b

called for (Kaarsemaker & Poutsma, 2006; Arthur & Boyles, 2007). As Bec

(1996) pointed out, there are likely very few practices at a low level in the H

universally effective, but higher level policies may have much more predictive power a

types of organizations and situations. (5) Lepak and Snell (1999) argue

intuitively appealing, it may be inappropriate to simplify the HR system and s

exists a single “optimal” HR architecture for managing all employees. They s

03) found also important interaction effects of different HR syste

In what follows, we address these issues in more depth by substantiati

configurational mode and ad

HR AS A SYSTEM OF ATTRIBUTES

7

Within the system of attributes (SOA) paradigm, an attribute represents an organizational aspect.

The attributes form a system together, because the payoffs associated with the level of one

interdependent.

f an HR system. The

SOA view postulates, therefore, that HR systems are built up out of interdependent attributes that

t the payoffs of

re dependent on

mpensation and

the strategies of the

staffing system (e.g. strong versus moderate screening for team skills).

s have coherent

as organizations

grom & Roberts,

1990). From an HR perspective, the challenge is to select attribute values that optimize firm

erception of HR

al effectiveness.

HR system

e simple accumulation

of the effectiveness of all HR practices; (2) substitutable: when the effectiveness of one HR

hen the

combined effectiveness of HR practices is less than the simple accumulation of the effectiveness

of all HR practices; and (4) positively synergic: when the combined effectiveness of HR practices

attribute depend on the levels of all the other attributes. Attributes are therefore

Applied to HR, an HR practice such as “selection” is an attribute o

– in combination – form a system. The central premise of this perspective is tha

attribute choices (i.e. the firm performance effects of alternative HR actions) a

the choices of other attributes. For instance, payoffs of HR strategies of the co

benefit “attribute” (e.g. team-based versus individual) are interdependent on

Recognizing that an HR system as a whole can yield varying payoffs, depending on the

choice of attribute values, SOA literature argues that successful organization

systems of attributes (i.e. such that the attributes are complementary), where

typically fail when there is a misfit between the values of the attributes (Mil

performance. Following this line of reasoning, a fundamental principle in the p

as a system of attributes is that coordination of this system adds to organization

HR practices (i.e. attributes) have been described to co-exist in four ways in an

(Delery, 1998): (1) additive: when the effectiveness of the HR system is th

practice can also be achieved by another HR practice; (3) negatively synergic: w

8

is more then the simple accumulation of the effectiveness of all HR practices. The latter structure

illustrates what HR researchers have been calling “horizontal fit” (Delery & Doty, 1996). The

complementarity

owski & Shaw,

2003).

For coordination towards a coherent system, it is important to establish the “objects” of

coo n proposing to

ight & Snell, 1998;

BEYOND PRACTICES

en formulated in

ndez & Sánchez-

been on the level

of practices. Recently, however, scholars have suggested that HR systems can be theorized on

emaker &

een: (1) HR practices, at

ty circles or

suggestion systems), and finally (3) HR principles, at the highest level of abstraction (e.g. the

explicit communication of the necessity of employee participation in all aspects of a business).2

or HR systems literature, the potential performance

horizontal fit hypothesis proposes that coordination of HR practices can lead to

in terms of the effects on firm performance (Milgrom & Roberts, 1990; Ichni

rdination (i.e. HR system attributes). In line with this, researchers have bee

take an architectural approach to these HR system and its attributes (e.g. Wr

Colbert, 2004).

In their pursuit of “ideal” HR systems or configurations, researchers have generally

focused on HR practices as system-attributes. Whereas HR systems have be

terms of “many different ideal possibilities” (Martín-Alcázar, Romero-Ferná

Gardey, 2005: 637), the level of abstraction of these systems has systematically

multiple levels of abstraction, beyond HR practices (e.g. Colbert, 2004; Kaars

Poutsma, 2006). More specifically, Colbert (2004) distinguished betw

the lowest level of abstraction (e.g. variable compensation schemes, quali

newsletters), followed by (2) HR policies (e.g. team-based work systems, incentive pay or

Using these levels of abstraction as a lens f

2 In this paper, we only focus on HR practices and HR policies. HR principles are guidelines on how to treat and value people and function as higher-order guiding principles for the coordination of HR policies.

9

effects of HR policies (i.e. a bundled system of practices) and HR principles (i.e. a bundled

system of policies) have received less research attention and remained largely unexplored in the

On the lowest level of abstraction, we find HR attributes to exist as “HR practices.” This

erhart,

represent attributes.

tance, Stavrou

and Development,

(c) Compensations and Benefits and (d) Communication and Participation. Also, Schuler &

ese classes of HR

004: 345). When

, and (b) intensity

of personnel screening are two examples of practice-level attributes of an HR system (e.g.

Ichniowski et al., 1997).

execute these policies. From a cluster of attributes, or “group of activities” (Milgrom & Roberts,

n this level of

abstraction, therefore, a group of HR practices can form an HR policy. An HR policy is a system

of practice attributes. On the level of HR policies, one is much more likely to find theoretical

extant literature.

Practice-level Attributes

conceptualization is quite well-known in the HR literature (Pfeffer, 1994; Becker & G

1996). From the perspective of the system of attributes theory, HR practices

The wide range of HR practices has been classified by multiple authors. For ins

(2005) categorizes HR practices into four domains: (a) Staffing, (b) Training

Jackson (1987: 212) suggested a classification of: (a) Planning Choices, (b) Staffing, (c)

Appraising, and (d) Compensating and Training. A common characteristic of th

practices is that they form the “available array to execute policies” (Colbert, 2

perceived from the system of attributes perspective, (a) the budgets for training

Policy-level Attributes

HR policies serve as governing mechanisms that drive the selection of HR practices needed to

1990) on the level of HR practices, higher order HR attributes can emerge. O

10

rationale for the contemplation, selection and allocation of practices. When HR policies are the

attributes of an HR system, coordination of this system (directed by an HR principle) becomes

ces.

the HR system. We

distinguish three distinct policies relevant for performance. We draw on principle agency work to

yers employ

orkers. To employ this

performance related

pay. In addition, workers should have the ability to perform and part of the policy is investment

t knowledge and

ecause of greater

workers are usually in the position to detect inefficiencies in operations that diminish

he actual

activity is potentially

ansfers will not be

itment

(Meyer and Allen, 1997) and goal-setting theory (Locke et al., 1981) suggest elaborate

ss the important objectives of the company and how workers can

contribute. Employers need a ‘policy focused on participation in decision making’ consisting of

several information sharing practices.

less complex due to the fact that HR policies serve as guidelines for HR practi

From a system perspective HR policies are considered subsystems of

distinguish the ‘individual performance focused policy’ consisting of several control and

monitoring practices. To ensure optimum performance of workers emplo

performance management to control and to monitor the behavior of w

policy a variety of practices can be used, such as performance appraisal and

in training and assessment of the effectiveness of training.

Since the work is becoming more complex workers tend to have taci

skills as important resources for the company. This is specially pertinent now b

levels of private information which reside with employees (Levine and Tyson, 1990). Also,

productivity. They are also likely to acquire important information concerning t

productive contributions of co-workers. The information derived from such

very valuable to the firm as an input to production. Yet such information tr

induced under an individual performance-based reward or appraisal practices. Comm

communication policy to discu

11

A third policy for performance we label ‘collective organizational performance focused

policy’ consisting of profit sharing and share ownership practices. Incentive contract theory

(La te that the concept

means to provide an

incentive to create and to develop an asset. The two fundamental aspects of ownership include,

left over after all

mework which

sible performance

outcomes associated with transferring these rights from owners to non-owner employees. They

ers.

mplications, and

complementary

performance effects between HR policies (i.e. interaction effects).

HYPOTHESES

Gen

ms to improve

organizational performance by aligning behaviors of individual employees

zear, 1986) and property rights theory (Milgrom and Roberts, 1992) indica

of ownership, combined with statutory property rights are the fundamental

firstly, the ‘residual rights of control’, which is the right to make decisions concerning the use of

an asset, secondly, the ‘right of residual returns’, which is the right to revenues

obligations have been met. Ben-Ner and Jones (1995) develop a theoretical fra

combine these two aspects of ownership, control and return, and suggest pos

contend that the greatest efficiency outcomes exist when both these rights are transferred from

owners to non-own

In the following section, we develop hypotheses for the performance i

explore: (a) performance effects of HR policies (i.e. direct effects), and (b)

eric Effects

Individual performance focused policy. Performance management ai

with organizational

ted as a key lever

in achieving this (Arthur, 1994). Indeed, performance management policy is efficiency seeking

by nature, and intend to supply production activities with the necessary input of human resources

goals. Connecting employee rewards with the firm’s output criteria has been no

12

at the lowest possible cost (Gooderham et al., 1999: 510). From this perspective, individual

human behaviors and investments in HR are strictly monitored. Consequently, deviations from

pon. A individuakl

ts into efficient

behaviors, while at the same time behaviors that are undesirable for firm performance are a

ance focused

er the following

Hypothesis 1. An individual performance focused HR policy has a positive effect on firm

ledge and skills

the behaviors of

pre-set norms are relatively transparent and simple for management to act u

performance focused HR policy is likely, therefore, to funnel workforce effor

transparent target for management intervention. We posit that a individual perform

HR policy will increase a firm’s effective use of individual workers and we off

hypothesis:

performance.

As we enter an era in which coordination between employees with tacit know

becomes more and more important to achieve firm performance, aligning

employees collectively becomes more important (Miller & Schuster, 1987; Kidwell & Bennett,

3 nd shared

haring and employee

dies report these

When organizations have a collective alignment HR policy, it is likely that employees will be

1993) . In addition, there is empirical evidence (in the financial participation a

capitalism literature) that collective alignment HR policies, such as profit s

share ownership positively impact firm performance. Indeed, numerous stu

findings (e.g. Conte & Svejnar, 1990; Kruse, 2002; Kruse & Blasi, 1995; Sesil et al., 2001).

3 The distinction between an individual performance focused policy and a is also supported by the possible difference in underlying theoretical principles. Individual performance focus policy is related to the principle of valuing and treating employees as providing labor input that should be controlled for opportunistic behavior. Collective control is related to the principle where employees are valued and treated as stakeholders or co-owners of the firm.

13

more inclined to engage in more efficient teamwork behaviors, and will for instance become

more reflexive (Schippers et al., 2007). We therefore offer the following hypothesis:

d HR policy has a positive

effect on firm performance.

Participation in decision making focused HR Policy. This policy aims to forge

psy r to create employee

s clear and consistent

communication of organizational goals towards employees: not only to inform employees, but

project premised

). More recently,

ces to be adopted

by high performing firms. A participation in decision making policy is based on an emphasis on

tly, individuals are

mitment to these

oals. In addition,

sion making and hence

contributes to dynamic efficiency4. We therefore offer the following hypothesis:

as a positive effect

on firm performance.

Hypothesis 2. A collective organisational performance focuse

chological links between organizational and employee goals in orde

commitment towards organizational goals. We posit that this policy require

also to signal and communicate a culture of partnership. Hence, within this HR policy,

employees are viewed as active partners, core assets and even “participants in a

on commitment, communication and collaboration.” (Gooderham et al., 1999

Ordiz-Fuertes & Fernández-Sánchez (2003) found “high-involvement” practi

management-workforce communication, top-down and bottom-up. Consequen

better informed of the goals of the organization. This is likely to increase com

goals, as well as motivate alignment between organizational and individual g

consulting the views of employees increases the effectiveness of deci

Hypothesis 3. A participation in decision making focused HR policy h

4 Commitment policy relates also to culture as a mechanism of social control or normative control (Kunda, 1992).

14

Synergic Effects

In strategic management literature it has long been recognized that complementary

help a firm attain greater competitive advantage (Barney, 1995). Indeed, it is also

argued in HR that “the variation in firm performance explained by an HR system should be

tem” (Ahmad

posit that an HR

conjecture that

pation in decision

making are candidates for complementary effects.

ad to synergic

heory argues that

ives (Eisenhardt,

other hand, when

an HR policy is focused on participation, the workforce is well-informed about corporate goals

ze the objectives.

likely to lead to

on the concept of

interactive effects. First, in an efficient equilibrium situation, both HR policies are

ts, 1990). Milgrom

& Roberts (1995) proposed the notion of complementarities and defined activities as

complementary if: “doing more of any one of them increases the returns of doing more of the

resources can

significantly greater than that explained by the individual HR practices in that sys

& Schroeder, 2003). From the perspective of HR as a system of attributes, we

system can be conceived as a system in which HR policies co-exist. Thus, we

individual performance oriented policy and the HR policy focused on partici

We expect coordination between these two attributes of strategic HR to le

effects. On the one hand, when an HR policy is highly controlling, economic t

people will be more inclined to focus on those behaviors that lead to incent

1989). In other words, controlling behavior may have cost implications. On the

and employees have a better insight into how their behaviors can help to reali

We argue, therefore, that individual performance focused HR policy are more

performance when combined with participation in decision making. Building

complementarity theory (Milgrom & Roberts, 1990), we posit that these two HR policies have

complementary, and synergy between the two takes place (Milgrom & Rober

15

others (p. 181).” Agency theory suggests just that. It prescribes that employees’ behaviors in line

with incentives is more likely to occur when the employees are well-informed about the

ed effects of “fun

l and commitment. We

therefore posit that implementing a more commitment-oriented HR policy impacts on the returns

ommodity”) about the

Hypothesis 3. The effectiveness of an individual performance focused

incentives (Eisenhardt, 1989). Kinnie, Hutchinson & Purcell (2000) demonstrat

and surveillance” in call centers, a synergic effect of strategies of contro

of a more controlling HR policy. In terms of Agency Theory: an outcome-oriented contract

becomes more efficient in combination with information (a “purchasable c

outcomes that are expected. We therefore offer the following hypothesis:

HR policy on firm

mes, the issue of

tion has received

much attention (e.g. Kalmi, Pendleton & Poutsma, 2006). There are several reasons why HR

to a participation

e vulnerable to a free-

output and

limitation of financial participation plans in all but the smallest work environment (e.g. Oyer,

ouraging a co-operative

corporate culture (Weitzman & Kruse, 1990) and/or mutual monitoring (Kandel & Lazear, 1992;

Freeman, Kruse & Blasi, 2004). At the same time, financial participation can provide an

performance is increased by a participation in decision making policy.

In the financial participation literature on the impact of collective incentive sche

complementarity between financial participation and other forms of participa

policies that are highly based on financial participation can be complementary

in decision making policy. In themselves, financial participation plans ar

rider effect: each employee may rely on other workers to deliver the enhanced

performance necessary to bring about the incentive payments. This is likely to be a significant

2004). Participation schemes may mitigate the free-rider problem by enc

16

incentive for employees to share information, thereby contributing to the effectiveness of work

groups, and related activities such as quality circles, (e.g. Ben-Ner & Jones, 1995; MacDuffie,

Hypothesis 4. The effectiveness of a collective organizational performance focused

1995). We therefore formulate the following hypothesis:

HR

Here the theoretical rationale for the three way interaction.

METHOD

urvey on Human

ey was to draw

representative national samples of multiple countries in Europe. The strategy was to mail out a

the private sector

items that

s participating in

ll as foreign subsidiaries (for

a detailed description of the sampling procedure, see: Brewster et al., 2004).

e coordinating

business school in each specific country. Researchers in all countries distributed their surveys to

the CRANET coordinating office in the U.K. for data-entry. Following Gooderham (1998), we

policy on firm performance is increased by a participation in decision making HR policy.

Data

The sample of the present study was borrowed from the Euronet-CRANET s

Resource Management (i.e. CRANET), in 1999. The goal of this surv

well-translated survey to HR managers of medium and large-scale firms in

(100 or more employees). In the survey, HR managers were asked to respond on

operationalized organizational HR practices and performances of the firm. Firm

this survey were independent single-establishment businesses, as we

Respondents were asked to return their completed survey via mail to th

17

only included countries that were European Union (EU) member states. For the databases per

country, firms that were: (a) public or semi-public, and (b) employed less than 100 employees

countries were

ated no non-

response bias. Table 1 presents an overview of the number of firms for the main explanatory

-------------------------------

--------------

ies.

Firstly, we distinguished three operationalizations of HR policies: the individual performance

HR policy, the collective alignment HR policy, and the commitment HR policy (See appendix A

for

ring and control of

derham et al.,

(1999) an individual performance HR policy is defined as consisting of the following attributes:

(1) performance appraisal, (2) formal evaluation of training, and (3) individual performance-

ation of the individual performance policy captures the extent to

which firms formally monitor and evaluate training efforts across all individuals as well as

individual performance management.

were excluded from further analysis. While response rates for the individual

relatively low and generally varied between 12 and 35 percent, analyses indic

factors and their categories within the dataset..

Insert Table 1 about here -----------------

Operationalization

HR polic

all scale items used in the study).

Individual performance HR policy: Based on the principle of monito

individual performance a “Control” HR system was developed. Following Goo

related pay. This operationaliz

18

Collective alignment HR policy: This is based on the principle that employees have, as

stakeholders, control and return rights (Ben Ner & Jones, 1995). Where employees receive

coll d. It covers such

ment policy consists

of: (1) employee share option plans, and (2) profit sharing schemes.

an resources are an important

asse loped, where

thereby are enabled to

s, (2) performance

briefings, (3) written mission statement, (4) written employee communication policies, and

the items on the

cate participation

ke teamwork and

representative participation, as these neither tell us much about the actual participation in

ondition. Mutual information sharing is a

nec

ble: firm

s to define firm

performance. We included financial indicators: (1) gross revenue, (2) stock market performance,

and (3) profitability, as well as non-financial indicators: (4) innovation rate, (5) productivity, (6)

other

ective returns and co-ownership, an “Ownership” HR system is develope

practices as profit sharing and employee share ownership. Collective align

Commitment HR policy: Based on the principle that hum

t with tacit knowledge and skills, a “Commitment” HR system was deve

employees are informed about the business case, express their views and

make joint decisions. Commitment HR policy consists of: (1) strategy briefing

different ways in which employees express their views to management (5) through regular

workforce meetings, (6) team briefings, and (7) attitude surveys. Note that

commitment HR policy scale mainly cover information sharing and do not indi

in decision making. We did not include structural work organization features li

decision making, nor are they a necessary prec

essary precondition to cooperation and collaboration.5

Firm performance. Secondly, we operationalized our dependent varia

performance. Following Laursen & Foss (2003), we adopted multiple indicator

service quality, and (7) time to market. The performance measure is relative to

5 Unlike Wood and Fenton-O’Creevy (2005) we did not emphasize in our analyses the structures for commitment. We approached the issue of commitment from the angle of the use of commitment policy by management regardless of the channels they may use. However, we checked any association in our dataset between commitment policy on the one hand and the existence of works councils and the recognition of trade unions by management and both relationships were positive.

19

organizations in the firm’s sector. The use of perceptual measures of firm performance is

consistent with prior research in Strategic HR (e.g. Delaney & Huselid, 1996; Jap, 2001;

irm performance, we

Wood, Sheehan, Clegg & West, 2004). The advantage of this subjective measure is that it is not

tivation,

ator.

bles: (a) institutional factors:

country and unionization, and (b) non-institutional factors: industry and firm size. The country

n (Mean: 40.8%;

nstruction, (2)

d (6) Other. Firm

size was measured as the logarithm of the number of reported employees (Median: 450

yees).

iple indicators

nonparametric latent trait model (Mokken & Lewis, 1982; Molenaar & Sijtsma, 2000). We used

caling approach,

determine the degree

to which the prevalence of a set of HR-practices in firms can be explained by a cumulative latent

Stavrou, 2005).6 While we employed a subjective operationalization of f

did not compromise convergent, discriminant and construct validity (Wall, Michie, Patterson,

distorted by taxation differences and earnings management influences. In addition, the overall

performance measure better reflects the possible impact of human capital, mo

commitment and social capital than a single “objective” financial indic

Control Variables. We used two types of control varia

factor specified twelve member states of the European Union (EU) in 1999. Unionization was

measured as the percentage of the workforce that was a member of a labor unio

SD: 33.6%). The industry factor indicated six basic industries: (1) Co

Transportation, (3) Banking & Finance, (4) Chemicals, (5) Manufacturing, an

emplo

Scaling

Based on the survey, we constructed scales for each HR-policy, based on mult

using Cronbach’s alpha (for reliability) and the more restrictive scaling procedure of Mokken’s

the “Mokken Scaling Program” (MSP; Molenaar & Sijtsma, 2000). Mokken’s s

i.e. a probabilistic version of the deterministic Guttman model, was used to

6 For a detailed argumentation for the use of perceptual measures of firm performance in international HR research, see: Stavrou (2005).

20

trait of these firms. A cumulative latent trait can be inferred when the probability of a positive

response to an item increases monotonically as the latent trait of the respondent also increases.

also make use of

sumes uni-

dimensionality, Mokken’s approach assesses the uni-dimensionality of a pair of items and the

of the observed data

n Guttman’s

dered a set of items as a

“weak” scale if 0.3 <= H < 0.4, whereas “reasonable” scalability is reached if 0.4 <= H < 0.5,

lable.

-------------- about here --------------

Table 2 summarizes the scalability and reliability of the HR-policy scales. The significant

t, and the

ty (respectively 0.41,

ho coefficient

(respectively 0.86, 0.88, and 0.78). Additional analyses of the internal consistency of the scales

show encouragingly high levels of internal consistency (Cronbach’s alpha respectively: 0.80,

three scales

respectively 0.29, 0.40, and 0.22) indicate satisfying levels of common variance between the

items and the remaining items with each scale. Although one item of the Commitment HR policy

That means that firms applying more “difficult” HR-practices are expected to

easier or more common HR-practices. In contrast to reliability analysis that as

scale directly by calculating an internal scaling criterion, or so called: “Loevinger’s H-

coefficient”. The Loevinger’s H-coefficient (H) signifies the deviation

structure of the scale from the perfect scalogram structure as incorporated i

approach. Following Mokken (1971), Molenaar & Sijtsma (2000) consi

and “strong” scalability is considered if 0.5 < = H < 1.0. A set of items with H < 0.3 was

considered to be unsca

-----------------Insert Table 2-----------------

Loevinger’s H-coefficients for the individual performance, collective alignmen

commitment HR policies scale indicate a medium to almost strong scalabili

0.52 and 0.43) which is supported by a direct estimation of reliability by the R

0.84, and 0.80). Also the R-squares and average inter-item correlations (for the

21

scale referring to the existence of written employee policies (i.e. COMcpe) contributes relatively

less to the scale score as indicated by their relative low R-squares (0.18). Overall, these results

In Table 2, the dichotomous items of the three scales are ordered on basis of their prevalence, i.e.

. The observed

licy range

ent levels appear to be

alignment scale, practices appeared to be ranked according to the type of collective incentive

roportions of the

being part of the

ion for these HR

practices related to this policy ranged between 0.15 and 0.40. A commitment HR policy focusing

e less common

Note that all HR-

egories of personnel are

variations in the degree of use of HR policies. Within each scheme, practices appeared to be

.

In Table 3, the dichotomous items of the firm performance scale are ordered on the basis

of their observed proportions (i.e. the proportion of firms outperforming other firms in the

support the existence of reliable, uni-dimensional scales for the HR-policies.

the observed proportion of firms employing the HR-practice described by the item

proportions of the HR-practices belonging to the individual performance HR po

between 0.31 and 0.73 in which the individual rewards items at the differ

less popular in firms than the practices concerning performance appraisals. Within the collective

scheme, i.e. the employee share options schemes were less common overall and the profit

sharing schemes were the most common collective alignment schemes. The p

commitment HR practices ranged between 0.34 and 0.96. The HR-practices

collective alignment HR policy were overall less common; the mean proport

on more operational hierarchical levels, (i.e. manual and clerical) appeared to b

than those focusing on more strategic levels (i.e. professional and managerial).

scales included a coverage dimension: the higher the score, the more cat

covered by the system of practices. This makes the scales very useful for our analysis of

most commonly adopted for higher hierarchical levels than for lower ones

22

industry). The significant Loevinger’s H-coefficient of homogeneity for the firm performance

scale indicates a medium scalability (0.42). The analysis of the internal consistency showed

ommon variance

s Alpha of this scale

shows satisfactory high levels of internal consistency (0.68) beside the satisfying scalability

------- Insert Table 3 about here

--------------

RESULTS

es

d in Table 4. For

ing dichotomous

the sum of the 10

dichotomous items indicating different control practices in a firm (Range: 0-10, Mean: 5.36, SD:

2.88). The collective alignment HR-policy scale (CC) is based on the 8 dichotomous items,

icy (Range: 0-8,

ted as the sum of the

n: 8.82, SD:

2.94). The firm performance scale (BP) is the sum of seven firm performance indicators (Range:

0-7, Mean: 5.06, SD: 1.67). In absolute terms, firms implemented –on average – mostly an

ative to the scale

maximum, firms generally appeared to be most active on commitment HR-policy. In both

absolute and relative terms, the number of firms that implemented the collective alignment

satisfying R-squares and average inter-item correlations (0.27) indicating a c

between the items and the remaining items with each scale. The Cronbach’

based on the Loevinger’s H-coefficient of the scale reported earlier.

------------------------

-----------------

Descriptiv

The descriptive statistics of the HR-policies and firm performance are reporte

each scale, an un-weighted scale score was calculated on basis of the correspond

items (see Tables 2 and 3). The individual performance HR policy scale (IC) is

indicating the level at which firms implemented a collective alignment HR pol

Mean: 1.97, SD: 2.32). The commitment HR policy scale, (COM) is calcula

13 dichotomous items, measuring the commitment practices (Range: 0-13, Mea

individual performance HR-policy, followed by a commitment policy. Rel

23

policy was small. The results in Table 4 demonstrate that all three HR policies were, on a

bivariate level, positively related to firm performance.

--------------------- Multilevel regression anal

ression analysis (using STATA-SE 10.1) to take into account the

were sampled by

have resulted in

of independent

observation would have been violated (Snijders & Bosker, 1999). Two levels were distinguished

erence; secondly

ects were added,

lts are reported in

table 5.

-2 log likelihood

rcept-only model

n indication that

ecessary. The second model reporting the effects of the control

variables is presented in Table 5.

Controls.

------------------------------- Insert Table 4 about here ----------

yses

We conducted a multilevel reg

two-stage sampling design of the multi-country CRANET dataset, i.e. firms

country. If these data had been analyzed using OLS-regression, this would

unreliable standard deviations and hypothesis testing, because the assumption

in the analysis: the first level is the level of the firm, the second is the level of the country. The

variables were entered in four steps. Firstly, we estimated a null-model for ref

the control variables were entered. In the third step, the generic HR-policy eff

and finally the synergic HR-policy effects were included in the model. The resu

We studied the model fit with the variance analysis by comparing the

values (based on full maximum likelihood estimation). The variance of the inte

or null-model is significant (0.075; s.e. = 0.042 for level of country), which is a

random intercept analysis is n

24

When we compare the fit of the null model with the model of the control variables, we find a

significant improvement in the model (LR-test Chi–square (df=7): 42.97, p<0.001). Table 5

untries, the fixed

a selective effect

on firm performance. Compared to manufacturing industry, which is the reference category,

ural logarithm of

.176, p < .001).

.006, p < .001).

------------- about here --------------

ests.

The third model tested includes the hypothesized generic effects of HR-policies. The -2 log

gnificantly compared to the model with the controls only

(L

performance for

each HR-policy. Testing these main effects (Table 5, model 3), the results confirm the positive

generic performance effects of an individual performance HR policy (IC), as well as of the

collective alignment HR policy (CC), and the commitment HR policy (COM). Based on their b-

coefficients, HR-practices that focus on collective alignment HR-policy (i.e. share options and

(model 2) reports, in addition to the variance component of the level of EU-co

effects of the controls on firm performance at the level of the firm. Industry has

construction firms and service firms (from the “other industries” category) have on average a

significantly lower level of firm performance. Firm size (expressed by the nat

the firm’s size: LNSIZE) affects firm performance positively (B_lnsize: 0

Unionization has a negative effect on the performance of businesses (B_union: -

------------------Insert Table 5-----------------

Hypotheses t

likelihood of this model improved si

R-test Chi-square (df=3): 84.21, p<0.001).

The first three hypotheses predicted a positive generic effect on the firm

25

profit sharing) affect the firm performance most (Beta_CC: 6,85, compared to Beta_COM: 2.82)

and Beta_IC: 2.45. The results fully confirmed the generic hypotheses.

of HR-policies are entered. The -2 log

likelihood of this model improves significantly compared to the model with the controls only

plementarity effects

t HR policies.

erformance HR, and

Results confirm

the predicted complementarity effect of a commitment HR policy on the performance effects of

ance HR-

ement-workforce

< 0.014).

-------------- about here

-------------------------------

R-policy and control

llustrates the

combined effect of these HR-policies (see Aiken & West 1991). Figure 1 presents this graph.

The vertical axis of the figure shows the firm’s performance and the horizontal axis represents

ee lines, i.e. for

In the fourth model, the hypothesized synergic effects

(Chi-square difference(4): 9.91, p<0.042). Two hypotheses focus on the com

of a commitment HR policy in combination with the performance and alignmen

The two corresponding interaction effects of Commitment HR * Individual p

Commitment HR * Collective alignment HR are included in model 4 (Table 5).

an individual performance HR policy. Performance effects of individual perform

practices increase if combined with commitment practices emphasizing manag

joint decision making (B_COM*IC: 0.012, p

-----------------Insert Figure 1

To visually depict the interactive effect of the commitment H

HR-policy on firm performance, we created a two-dimensional graph7 that i

the commitment HR-policies. The individual performance HR is shown by thr

7 Graphing interactions of two continuous variables using postgr3 UCLA: Academic Technology Services, Statistical Consulting Group. See http://www.ats.ucla.edu/stat/stata/code/graph_concon_int.htm (accessed July 24, 2009).

26

firms with an average score on this policy, one standard deviation below and one standard

deviation above the average score. Supporting hypothesis 3, this interaction effect shows that the

s with an average and

orm firms with a

low level of control policy at most levels of commitment HR. Only at very low levels of

eld better performance

orizontal line for

itment HR.

vidual performance

HR policy is conditional on a commitment HR policy as predicted by hypothesis 3. Hence, these

e interaction

4, p < .038). The

rmance effect of

commitment HR in combination with collective alignment HR. Figure 2, however, shows that

collective

for firms with an

the average score

core on collective

alignment policy profit most from an increase in commitment HR. Although still positive, the

at limited for firms with high levels of collective

alignment HR policy. The hypothesis 4 predicting a positive synergy effect of commitment HR

and collective alignment policy is therefore partly accepted.

beneficial effect of commitment HR on firm performance increase for firm

a higher level of individual performance HR-policy. That is, these firms outperf

commitment HR, firms with a low score on individual performance HR yi

than the firms with a high score on individual performance policy. The almost h

the latter firms indicates that these firms barely profit from an increase in comm

Overall, the interaction effect reveals that the performance effect of an indi

HR policies are indeed complementary. This enables us to accept hypothesis 3.

Remarkably, the commitment HR policy yields a significant negativ

effect in combination with collective alignment policy (B_COM*CC: -0.01

negative sign of the interaction effect indicates an overall detrimental perfo

firms appear to benefit from an increase in commitment HR at all three levels of

alignment policy. Figure 2 presents the commitment effect on firm performance

average score, one standard deviation below, and one standard deviation above

of collective alignment HR. Particularly, firms with a low level or an average s

beneficial impact of commitment HR is somewh

27

------------------------------- Insert Figure 2 about here -------------------------------

The decreasing itment on collective alignment suggests that

the benefits of providing additi

. via group

olicy that focus on

Although not hypothesized, the interaction effect of both sub-types of control HR

individual collective B_IC*CC: -.003, p < .664).

ted in Table 6.

-------------- about here

-------------------------------

Overall, these findings demonstrate that ideal type HR policies do indeed positively

policies showed

itment HR policy, in

olling effort) is

focused on individual employees. In combination with a collective alignment policy, however,

the positive effect of commitment HR policy somewhat decreases. Taken into account all the

effects (i.e. the generic and interaction effects) of the HR-policies, the results clearly points to an

overall beneficial effect of HR policy on the firm performance.

positive effect of comm

onal information for the workforce seems to be counterbalanced

by the costs of the free rider opportunities of a collective alignment policy (e.g

incentives). These latter costs do not bear on an individual performance p

incentives for individual employees.

policies (i.e. and ) appears to be insignificant (

An overview of the confirmed and rejected hypotheses is presen

-----------------Insert Table 6

impact on firm performance. Both commitment HR-policy and the control HR-

positive, generic effects. The predicted positive synergic effect of the comm

combination with a control HR policy is only robust if the latter (i.e. the contr

28

DISCUSSION

The present study presents two major findings. Firstly, we provide empirical evidence for

the configurational perspective on strategic HR (Delery & Doty, 1996). While many scholars

hav elaney &

,Huselid 1996; Delery & Doty 1996; Ahmad & Schroeder, 2003), and authors have concluded

ed to a “major need”

ould be made

lignment “ideal

type” HR policy did have a positive impact on firm performance. Secondly, our study

en defined as

ormance effects.

HR strategy, or

ore from this if it

is complemented by an individual performance HR policy. Although the effect of commitment

h collective alignment

osts seem to

of collective

ance effect of

these HR-policies. With these findings, this study substantiates the call in practice for a balanced

measures approach to manage organizational performance (U.S. Office of Personnel

Management, August, 1999).

e found a lack of relationships between HR systems and firm performance (D

that HR systems may be “unwarranted” (Godard, 2004), our study invigorates the field by its

focus on the policy level in designing HR Systems. As such, we have attend

for research that HR researchers have yet to address on how HR systems can/sh

internally consistent, (Rynes, Giluk & Brown, 2007: 1001). The collective a

demonstrates that multiple sub-systems of HR practices can co-exist in what has be

“HR policies” and that these HR policies can even reinforce each other’s perf

More specifically: our findings indicate that HR directors who design their

“architecture” (Colbert, 2004) around a commitment HR policy will benefit m

policy is positive, its impact is reduced somewhat in combination wit

policy. Because of its collective nature of this control policy, free rider c

counterbalance the initial positive impact of commitment HR at high levels

alignment policy. Overall, the results of this study point at a beneficial perform

29

From a theoretical perspective, these findings should guide researchers seeking “ideal

types” of HR systems leading to superior performance. Whereas the search for these ideal types

app rs to move beyond

between HR

policies and firm performance. The systems of attributes view of organizations ought to inspire

s,” HR

t managerial

es, but in some cases are

The finding that control and commitment policies are complementary, strikes a balance

hich

ose which only

rity in strategic

itment HR policy

in chorus challenges managers to engage in simultaneous “exploitation” and – in addition –

positive

eted as an HR principle

ers could, for

itment) and

transactional (i.e. control) employment relationship and the implications for the functioning of

ership literature have

also pointed in this direction, by suggesting interaction effects between transactional and

transformational leadership (e.g. MacKenzie, et al., 2001). Moreover, research in strategic

ears logical from the configurational perspective, we call upon researche

the configurational perspective and further explore potential interaction effects

researchers on HR Systems. Instead of seeking to compose a system of “best practice

Systems should be designed to develop a “best system.” Hence, an importan

implication is that managers do not always have to strive for best practic

better off by going for “second best” plans (Ichniowski & Shaw, 2003).

between two different schools of thought in HR. Our data reveals that organizations w

employ both control and informative collaboration policies outperform th

implement one of these policies; this supports the notion of ambidexte

management literature (Jansen et al., 2006). Implementing a control and comm

“exploration” of the workforce. Harvey et al. (2007) found a similar effect with

outcomes for workers in nursing. This ambidextrous HR could be interpr

(Colbert, 2004), and could be a fruitful avenue for future research. Research

instance, investigate the implications of our findings for the relational (i.e. comm

the “psychological contract” (e.g. Robinson, 1996). Recent insights in lead

30

management has pointed in this direction by showing that relational governance and formal

contracting are complementary (Poppo & Zenger, 2002). Consequently, whereas researchers in

ally align HR

urther research on

how these constructs can be strategically aligned.

work is becoming more and more a fact of

org of Gooderham et al.

t HR policy.

t predict performance

in combination with an HR policy of participation (Hypothesis 4). This finding calls for more

es. For HR

teractions” could

R policies from a

up (e.g. between

different segments of the workforce) perspective.

the effects of HR

mposite of

rate. We would

of firm performance. This could yield a more subtle insight into the link between HR systems

heir HR policies.

In addition, our operationalization of a commitment HR policy is not intended to measure true

“employee participation” by employees (Cotton et al., 1988). Our conception of a commitment

HR (e.g. Arthur, 1994) have long argued that practitioners should strategic

practices to form HPWS that are either control or collaborative, we advocate f

As we move into an economy where team

anizational life, our study analyzed HR systems beyond the two policies

(1999) and conceptualized a third “ideal type” HR policy: a collective alignmen

While this HR policy had a significant effect on firm performance, it did no

empirical research on the multi-level implications of collective incentive schem

systems research, this could imply that study designs exploring “cross-level in

yield valuable insights. Scholars could for instance investigate the effects of H

within-group (e.g. between individual employees), as well as a between-gro

In the tradition of strategic HR literature, we investigated

variables on firm performance. In the present study, we operationalized as a co

multiple underlying facets, such as productivity, service quality and innovation

like to call upon researchers to investigate differential effects of HR policies on different aspects

and performance, allowing managers to better craft, and subsequently refine, t

31

policy primarily relates to the distribution of information (i.e. various types of briefings, written

policy employees). Our study was designed around the most senior HR officer as a key

e would like to

term when there is none

has proved unfounded.” (Evans, 1985: 313). The synergic effects of HR policies on firm

effects of HR policies,

e this issue was

uture research.

fferently adopted and

diffused across geographical and industrial contexts. Further research could explore these

ce effects of HR

ght have synergic

cies will lead to

superior firm performance (and some combinations might even produce negative synergy), we

oposes that

have according to

centives, and that they

therefore perform better, when they are better informed by management.

the configurational

perspective. Our study was conceptually and empirically designed to test direct and moderating

effects of HR policies on firm performance. However, in addition to these effects, mediators

informant. Though we acknowledge this as a limitation of our study design, w

point out that “The fears that correlated error might create an interaction

performance remain robust. While our study focused on the performance

the determinants of HR policies also remain an interesting research area. Whil

pioneered by Gooderham et al. (1999), it offers interesting opportunities for f

Gooderham et al. (1999) and Poutsma et al. (2006) show HR systems are di

differences, e.g. through an international, comparative examination of the effects of unionization.

We recommend researchers to not only further explore the performan

policies but also to go beyond this and develop combinations of policies that mi

effects. While we must acknowledge that not all combinations of HR poli

call upon scholars to be inspired by agency theory (Eisenhardt, 1989), which pr

information is a critical factor in increasing the likelihood that “agents” will be

a control system. Translating this to HR practice, we found that individual employees’ behavior

tends to be more affected by active measures to motivate them through in

Finally, our study focused on the HR-performance relationship from

32

could play a substantive role. Scholars have, for instance, proposed that variables such as

“strength of the HR system” (Bowen & Ostroff, 2004), or “involvement of the HR function”

uture research testing (Buyens & de Vos, 2001) could mediate between HR and performance. F

these mediating effects could enrich the field.

33

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39

TABLE 1

Sample Descriptives

Explanatory factors\categories Number of FirmsEU-country Finland 91

Sweden 119

Denmark 164

Netherlands 48

Germany 248

Belgium 86

Austria 75

France 114

Italy 36

Spain 103

Greece 27

United Kingdom ( ce category)referen 381

Industry Construction 75

Transportation 74

Banking and finance 110

Chemicals 131

Other industries (e.g. services) 348

Manufacturing (reference category) 754

N 1492

Unionization Mean percentage 40.81 (SD: 33.55)

Firm Size Median 450(mean lnsize) 6.31 (SD: 1.12)

40

41

TABLE 2

Scalability and Reliability of the Scales for HR-policies (n=1492)

MSP* Reliability analysis**

Scales items Observed Loevinger’s Inter item R2 Cronbach’s

proportion Hwgt Correlation Alpha

Scale Individual_Performance Control 0.41 ; Rho .86 Average: .29 0.80

ICrml Individual rewards: manual 0.31 0.31 0.31 0.20 0.80

ICrc Individual rewards: clerc 0.35 0.48 0.51 0.40 0.78

ICrp Individual rewards: prof 0.44 0.44 0.54 0.43 0.78

ICrm Individual rewards: mngt 0.49 0.35 0.44 0.33 0.79

ICtl Formal evaluation training: some 0.51 0.31 0.39 0.29 0.80

ICaml Performance appraisals: manuals 0.55 0.34 0.43 0.32 0.79

ICti Formal evaluation training: immediate 0.62 0.36 0.44 0.32 0.79

ICac Performance appraisals: clerical 0.66 0.49 0.59 0.48 0.77

ICap Performance appraisals: professionals 0.72 0.55 0.62 0.51 0.77

ICam Performance appraisals: managers 0.73 0.49 0.53 0.41 0.78

Scale Collective_Alignment 0.52 ho .89 ; R Average: .40 0.84

CCsoml Employee share options: manuals 0.15 0.55 0.57 0.44 0.82

CCsoc Employee share options: clerical 0.16 0.53 0.57 0.45 0.82

CCsop Employee share options: professionals 0.18 0.52 0.57 0.46 0.82

CCpsml Profit Sharing: manual 0.24 0.52 0.62 0.52 0.81

CCpsc Profit Sharing: clerc 0.26 0.54 0.65 0.57 0.81

CCsom Employee share options: managers 0.29 0.42 0.49 0.39 0.83

CCpsp Profit Sharing: prof 0.30 0.55 0.64 0.56 0.81

CCpsm Profit Sharing: mngt 0.40 0.52 0.48 0.40 0.83

Scale Commitment .4 ho .79 3 ; R Avera 22 ge: . 0.80

comsml Strategy briefing: manual 0.34 0.59 0.57 0.45 0.77

comcpe Written communication policy emplo yees 0.40 0.27 0.28 0.18 0.80

comsc Strategy briefing: clerical 0.41 0.55 0.60 0.49 0.77

E2Mas Change through Attitude Survey 0.58 0.30 0.36 0.25 0.79

compml Performance briefing: manual 0.58 0.47 0.58 0.47 0.77

comsp Strategy briefing: professionals 0.60 0.43 0.52 0.41 0.77

compc Performance briefing: clerical 0.68 0.51 0.60 0.48 0.77

comms Written mission statement 0.75 0.37 0.40 0.27 0.79

compp Performance briefing: professionals 0.79 0.48 0.50 0.36 0.78

E2Mwm Change through Workforce meetings 0.89 0.31 0.25 0.12 0.80

E2Mtb Change through Team Briefings 0.88 0.40 0.34 0.19 0.79

compm Performance briefing: managers 0.95 0.36 0.22 0.08 0.80

comsm Strategy briefing: managers 0.96 0.48 0.29 0.12 0.79

*MSP: Mokken Scaling Program; mean is the mean of the dichotomized items; Hwgt: Loevinger’s coefficient of homogeneity, weighted. All H-coefficients are significantly different from zero at the 0.001 level.

**Reliability analysis: Corr. is the corrected item-scale correlation; R2 is the squared multiple correlation between the item and the remaining items; Alpha is the Cronbach’s Alpha for the scale and for each item the scale Alpha without that item.

TABLE 3 Scalability and Reliability of the Business Performance Scale (n=1492)

MSP* Reliability

analysis**

Loevinger’s Inter itemScales items Observed R2 Cronbach’s

proportion Hwgt Correl ation Alpha

Scale Business_performance .42 ; Rho .72 Average: .27 0.68

0.31 0.52 0.30 BP_smpe stock 0.30 0.67

0.67 0.40 0.44 BP_mati market 0.43 0.63 BP_inno innovation 0.70 0.40 0.45 0.43 0.63 BP_prof profitability 0.74 0.46 0.53 0.50 0.60

rev grossrevenue 0.82 0.34 0.35 BP_g 0.30 0.65 BP_prod productivity 0.86 0.39 0.37 0.29 0.65 BP_serv service 0.94 0.46 0.29 0.18 0.67

42

TABLE 4

Intercorrelations between Study Variables (N = 1492) Variables Mean SD 1 2 3

erformance Scale score 5.36 2.88 - 1 IC Individual p

2 CC Collective alignment Scale score 1.97 2.32 .21** -

3 COM Commitment Scale score 8 .82 2 .94 . ** 30 .14** -

4 BP Business Performance Scale score 5.06 1.67 . ** 13 .17** .13** * nt at t 1 leve ailed).

* Pearson correlation is significa he 0.0 l (2-t

43

TABLE 5

Multilevel Regression Analysis to explain Business Performance (N=1492) Null-model (model 1): -2 LL= 5728.18

Model 2 with cont

variables only Model 3 with control variables and generic

Model 4 with control variables, generic and

synergic HRM-policy effects Ha

rol

HRM-policy effects

.Err.)sig Coefficient (Std.Err.)sig

Industry

Construction 0 200) 553 ( 0. (0.190)**

Transportation -0.188 ( -0.130 (0. -0 41 (0.190)

inance ( 0.318 -0 97 (0.170) †

micals 1 ( * -0.322 ( -0 21 (0.150)*

rvices) 0 ( ** 0.314 ( -0 20 (0.110)** Manufa ference

tegory) . . .

0.176 ( *** 0.109 (0. ** 0. 7 (0.038)**

ization ( *** 0.006 ( *** -0 06 (0.002)***

HRM-Policies

fects

0.049 ( ** 0. 6 (0.017)** 1a(+)

ent HR .137 ( *** 0. 4 (0.021)*** 1b(+)

ent HR 0.048 ( ** 0. 5 (0.016)*** 2(+)

In *

0.012 (0.005)* 3(+)

* ent HR -0 14 (0.007)* 4(+)

ent HR 0. 3 (0.007)

* Individual perform

ollective alignment HR -0 01 (0.002)

( *** 3. (0 )*** 3. 0 (0.310)***

Varia lev (0.057)* .21 ( .22 (0.106)*

Varia m level 2 (0.096)*** 2.45 *** 2.44 (0.090)*** -2 lihood

Im 2

5685.21

df=10

5601.00

84.21*** (df=3)

df=13

5591.08

9.91* (df=4)

df=17

Coefficient (Std.Err.)sig Coefficient (Std

-

-0.627 ( . *** -0. 0.190)** 566

0.200) 190) .1

Banking. F -0.202 0.170) - (0.170) † .2

Che -0.31 0.150) 0.150)* .3

Other (e.g., se -0.30 0.110) - 0.110)** .3cturing (re

ca . . .

Firm Size 0.039) 038) 10

Union -0.006 0.002) - 0.002) .0

Main ef

Individual performance HR 0.020) 05

Collective alignm 0 0.020) 14

Commitm 0.017) 04

teraction effects Commitment HR

Individual performance HR

Commitment HRCollective alignm .0

Ind* Collective alignm

Commitment HR

ividual performance HR 00

ance HR * C

.0

Constant 4.41 0.270) 93 .300 9

nce EU-countries el 0.11 0.099)*

nce fir .61 (0.090) log like

prov nt LR teseme t Chi

42.97*** (df=7)

† p < .10 * p < .05 ** p < .01 *** p < .001 a. This column reports the number of the hypothesis and the predicted direction

44

TABLE 6

Overview of Hypothesized Effects and Results

Confirmed/ Hypothesized effect of HR policies on Firm performance Result Rejected Direct effects H1a. Individual performance HR policy has a positive effect on firm performance H1b. Collective alignment HR policy has a positive effect on firm performance H2. Commitment HR policy has a positive effect on firm performance

+ confirmed + +

confirmed confirmed

Indirect effects H3. The effectiveness of an individual performance HR policy on firm performance is

increased by a commitment HR policy H4. The effectiveness of a collective alignment HR policy on firm performance is increased

by a commitment HR policy

+ confirmed - partly rejected

45

FIGURE 1:

The positive interaction between Individual HR policy and Commitment HR policy on Firm Performance

+ 1.sd

- 1.sd

44.

55

5.5

6

Bus

ines

s_P

erfo

rman

ce

-10 -7.5 -5 -2.5 0 2.5 5Commitment_HR

1 sd below mean IC mean Individal Control 1 sd above mean IC

46

FIGURE 2:

The negative interaction between Collective HR policy and Commitment HR policy on Firm Performance

+ 1.sd

- 1.sd

44.

55

5.5

6

Bus

ines

s_P

erfo

rman

ce

-10 -7.5 -5 -2.5 0 2.5 5Commitment_HR

1 sd below mean CC mean Collective Control 1 sd above mean CC

47

48

APPENDIX A: Scale Items Used in the Study

nitor th2. If yes, how often is

ly after training

n operation for any of the following staff categories?

the following incentive schemes for any of the following staff categories?

chnical trative

Policy

staff categories? 1. ptions

hnical ative

ual g

hnical al/administrative

4. Manual

Policy egories are formally briefed about strategy?

agement b. Professional/Technical c. Clerical/administrative d. Manual

1. Control HR Policy1. Do you mo e effectiveness of your training?

formal evaluation used? a. Immediateb. Some months after training

3. Do you have an appraisal system ia. Management b. Professional/Technical

administrative c. Clerical/d. Manual

4. Do you offer any of Performance related pay 1. Management

nal/Te2. Professio3. Clerical/adminis4. Manual

2. Collective alignment HRMDo you offer any of the following incentive schemes for any of the following

Employee share o1. Management

/Tec2. Professionall/administr3. Clerica

4. Man5. Profit sharin

1. Management 2. Pro3. Cleric

fessional/Tec

3. Commitment HRM1. Which employee cat

a. Man

49

2. Which employee categories are formally briefed about financial performance? a. Management b. Professional/Technical c. Clerical/administrative

ion have a policy for the following personnel/human resource areas?

Employee communication

tion have a Mission Statement?

l y e co municate their views to management in the past three years? (yes if increased / same, no if decreased / not used)

• Firm performance

e past years has

f sts

k e en

our sector, where would you rate the performance of n relation to the following?

iv y

ime

E. Rate of innovation

4. Unionization portion of the total number of employees in your organization are members of a trade

Please indicate the main sector of industry or services in which you operate?

6. Firm Size Approximately how many people are employed by your organization?

d. Manual 3. Does your organizat

4. Does y our organiza 5. Has there been a change in the way emp o e s m

A Through regular workforce meetings B Team briefings C Attitude surveys

1. If you are a private organization, would you say the gross revenue over th

been: A. Well in excess o coB. Sufficient to make a small profit C. Enough to brea vD. Insufficient to cover costE. So low as to produce large losses

s

2. Compared to other organizations in y

your organizatio inA. Servic ie qual tyB. Level of product itC. Profitability D. Product to market T

F. Stock market Performance

What prounion? 5. Industry

50