Strategy, core competence, and HR involvement as determinants of HR effectiveness and refinery performance

Introduction

The increasingly global nature of competitionrequires that firms utilize all of their availableresources in order to survive and succeed. Thishas resulted in an emphasis on the alignmentof all functional activities of the firm (e.g., fi-nance, marketing, operations, etc.) toward theachievement of strategic objectives. One con-sequence of this trend is that many have calledfor a new strategic role for the HR function(Dyer, 1984; Martell & Carroll, 1995; Schuler,1992; Ulrich, 1991). This role entails two ma-jor aspects. First, the HR executive shouldprovide input into the firm’s strategy in orderto ensure that the firm has the human re-source capabilities to implement it. Second,the HR function needs to ensure that the HR

programs and practices are in place to effec-tively implement the strategy (Truss & Grat-ton, 1994; Wright & McMahan, 1992).

One impediment to effectively performingthis role, however, has been the fact that theHR function has been neither traditionallyviewed nor empirically demonstrated to con-tribute to firm performance, and, therefore,neither important nor effective (Carroll, 1991;Thornburg, 1991; Walker & Bechet, 1991).This results in a vicious circle such that ifstrategic decision makers believe that the HRfunction does not contribute to firm perfor-mance or is not effective, they will fail to in-vite HR executives into the strategic decision-making process. Because HR executives haveno input into strategy, they may be unable tomaximally contribute to performance. The

Human Resource Management, Spring 1998, Vol. 37, No. 1, Pp. 17–29Q 1998 John Wiley & Sons, Inc. CCC 0090-4848/98/010017-13

STRATEGY, CORE COMPETENCE, AND HRINVOLVEMENT AS DETERMINANTS OF HREFFECTIVENESS AND REFINERY PERFORMANCE

Patrick M. Wright, Gary C. McMahan, Blaine McCormick, and W. Scott Sherman1

This study examines the impact of strategy, core competence, and involvement of HR

executives in strategic decision making on the refinery managers’ evaluation of the ef-

fectiveness of HR and on refinery performance among 86 U.S. petrochemical refiner-

ies. Survey results indicated that higher involvement of HR in organizational strategy

was strongly related to perceptions of HR effectiveness, and that the relationship was

strongest to the extent that refineries pursued a product innovation strategy and viewed

skilled employees as their core competence. HR involvement was unrelated to refinery

performance but was actually negatively related when refineries emphasized efficient

production as their core competence. © 1998 John Wiley & Sons, Inc.

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purpose of this article is to examine how thetypes of strategies used and how the involve-ment of the HR executive impact managers’evaluations of the effectiveness of the HRfunction and of operating unit performance inpetrochemical refineries.

In order to examine this relationship, wefocused on the integration of HR and strategyin the operations of petrochemical refineries.Much of the research on the strategic involve-ment of HR has focused on examining in-volvement at the corporate level (e.g., Huselid,1993; Martell & Carroll, 1995). We believe,however, that this ignores the valuable strate-gic contributions of HR executives in the man-agement of actual operating units. As a result,the purpose of our study was to examine theimpact of HR involvement in strategic man-agement at the level of the operating unit.

Strategic Involvement of HR Executives

An increasing number of studies have at-tempted to assess the linkage of HR and strat-egy processes. In an early study in the area,Golden and Ramanujam (1985) examined thelink between HR and strategic decision mak-ing in ten firms. They posited four levels oflinkage based on their analysis of these firms.The first level, which they labeled as the “Ad-ministrative Linkage,” consists of performingthe administrative duties such as maintainingpayroll, record keeping, and processing bene-fits claims. A second level of linkage, called the“One Way Linkage,” concentrates on HR play-ing a role in strategy implementation but hav-ing no impact on formulation of firm strate-gies. The “Two Way Linkage,” the third levelof linkage, entailed the HR function con-tributing to both the strategy formulation and

strategy implementation processes: The HRdepartment provides input to strategic deci-sion makers regarding the strengths, weak-nesses, opportunities, and threats pertainingto the firm’s human resources, and the strate-gic decision-making team uses this informa-tion in formulating the strategy. Based on theselected strategy, the HR function seeks to de-velop and align HR policies, programs, andpractices in ways that support the implemen-tation of the strategy. The most extensive lev-el of linkage, which Golden and Ramanujam

termed the “Integrative Linkage,” is found ina few firms where the HR executive is a mem-ber of the strategic decision-making team, par-ticipating throughout the strategy formulationprocess, and playing an integral role in thefirm’s competitive advantage.

Buller (1988), in a follow-up to the Gold-en and Ramanujam study, examined thestrategic involvement of the HR function instrategy among 8 firms. He found that none ofthe firms exhibited the administrative linkage;3 firms were at the one-way linkage level; 3 ofthe firms demonstrated the two-way linkage;and 2 firms displayed the integrative linkage.In addition, he found the integration of strate-gic planning and human resources was moredifficult among diversified firms, and theHR–strategic planning link was often decen-tralized to the operating units.

In addition to understanding the level ofHR involvement in strategic planning, a moreimportant set of questions is the impact onoutcomes such as line managers’ evaluationsof HR effectiveness and organizational perfor-mance. The research results have been mixed.An early study by A. T. Kearney, Inc. com-pared the strategic HR linkages of 16 compa-nies having above average financial perfor-mance with 24 average performers in thoseindustries (Gitzendanner, Misa, & Stein,1983). The results indicated much greaterlinkages between HR and strategy among thehigher performers. Another study of 13 largecorporations found that higher performingfirms made much greater efforts to involve HRexecutives in the planning and decision-mak-ing processes (Glass, 1988). Huselid’s (1995)study of over a thousand firms found evidenceof a tie between the use of various strategicHRM components and firm financial perfor-mance.

Some less supportive results have alsobeen observed. Martell and Carroll (1995)surveyed general managers of 115 single busi-ness units of 89 Fortune 500 companies re-garding the extent to which HR was linked tothe firm’s strategy. They found that HRM andthe strategic planning process were linked in arange of 44% to 69% of the companies, andthat while the HR function was viewed as im-portant to implementing business strategy, itwas not valued as highly as other functions.They also found that the integration of HRM

18 • HUMAN RESOURCE MANAGEMENT, Spring 1998

. . . the purposeof our study wasto examine theimpact of HRinvolvementin strategicmanagementat the level ofthe operatingunit.

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Numerousauthors havecalled forincreasing theextent to whichHR managersare involved inthe strategicmanagement ofthe firm, yet verylittle data existconfirming theeffectiveness of it.

and strategy processes was not related to thebusiness unit’s short-term performance.

Finally, Bennett, Ketchen, & Schultz(1995) examined the antecedents and conse-quences of strategic integration of HR among148 manufacturing firms in Louisiana. Theseauthors found that firms classified as Analyz-ers exhibited a greater level of strategic inte-gration than did either Defenders or Prospec-tors. They also found that the integration ofHR and strategy was greater when top man-agers viewed employees as a strategic re-source. Regarding the consequences of strate-gic integration, they observed that it waspositively related to turnover, negatively relat-ed to top managers’ evaluations of the effec-tiveness of the HR function, and unrelated tosales per employee and perceived profitability.

Based on this literature, it appears thatvery little is known regarding how the level ofstrategic involvement of the HR function is re-lated to the perceived effectiveness of thatfunction. Numerous authors have called forincreasing the extent to which HR managersare involved in the strategic management ofthe firm, yet very little data exist confirmingthe effectiveness of it. It may be necessary toexamine if, in fact, line managers perceive thatstrategic involvement of HR is associated withthe effectiveness of the function.

In addition to potential problems with theperception of effectiveness, involvement ofthe HR executive in refinery strategy manage-ment should be related to the refinery’s per-formance. The HR executive should havedetailed knowledge regarding the human re-source capabilities. This knowledge serves asan input into the viability and desirability ofvarious strategic alternatives. In addition, theHR executive should have specific knowledgeof which HR issues directly impact refineryperformance for each strategic choice. His/herinvolvement in the strategic management ofthe refinery should ensure that these issuesare adequately recognized and dealt with inways that enable the refinery to perform bet-ter than refineries where these issues are notproperly considered. This leads to the follow-ing research question—a1: Is HR involve-

ment positively related to both operations man-

agers’ perceptions of the effectiveness of the HR

function and the refinery’s financial perfor-

mance?

Strategy, HR Involvement, and HR Effectiveness

HR involvement in the strategic managementprocess has been thought to be effective in allcases. Its effectiveness, however, may varywith firm strategies. For example, as discussedabove, Bennett et al. (1995) found that strate-gic involvement was greater when top man-agers viewed people as a strategic resource.This relationship between the view of employ-ees as a strategic resource and the strategic in-volvement of the HR function may stem fromdiffering required levels of involvement de-pending upon the strategy. For the sake of this study, we operationalized the refinerystrategy in terms of its product/market strate-gy and assessed the extent to which the refin-ery emphasized product/customer breadth(i.e, focusing on large but stable product vari-ety and wide bases of customers) and productinnovation (meeting fast-changing customerneeds through frequent product and processinnovations).

Typologies of manufacturing strategiesnote that some strategies such as cost strate-gies often seek to minimize the role of em-ployees through limiting their discretionarybehavior. A product breadth strategy de-em-phasizes the importance of employees, as thegoal is to produce a consistent but wide vari-ety of products at a low cost. Thus, the orien-tation is more toward manufacturing effi-ciency resulting in a more tightly coupledproduction process. The organizational logicbehind such a strategy is to design narrow jobsrequiring low skill levels, thus making em-ployees an easily replaceable component tothe production process (Hayes, Wheelwright,& Clark, 1988; MacDuffie, 1995; Snell &Dean, 1992). A strategy that de-emphasizesemployees’ contributions should not requirean extensive level of strategic HR involvement.The role of the HR function becomes primar-ily that of handling administrative matters re-lated to employment in this setting.

On the other hand, some strategies seek tomaximize the contribution of employeesthrough requiring high levels of discretionarybehavior (MacDuffie, 1995). Strategies suchas flexible production strive to minimizebuffers in the production process by minimiz-ing lead times and scaling production up and

Strategic HRM and Refinery Performance • 19

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down quickly (Womack, Jones, & Roos, 1990).This is similar to a product innovation strate-gy that seeks to quickly and frequently modifyproducts and procedures to adapt to changingcustomer needs. Dynamic product markets re-quire flexibility in redefining product strate-gies, reconfiguring chains of resources, andredeploying resources effectively (Sanchez,1995). Dynamic strategies entail focusing oncontinuous improvement and helping tech-nology to be used more effectively, i.e., “givingwisdom to the machine” (Monden, 1983).Thus, effective implementation of this strate-gy requires skilled and knowledgeable workerswho are motivated to contribute their discre-tionary effort toward the attainment of orga-nizational goals (MacDuffie, 1995). The dy-namic nature of the products and marketsrequires more frequent changes in HR prac-tices. Thus, relative to the product breadthstrategy, then, the integration of HR and strat-egy becomes significantly more important.When the HR executive is highly involved,s/he can provide input regarding employee ca-pabilities into the evaluations of proposedchanges and additionally will then have morespecific and detailed information regardingthe HR issues stemming from those changes.As a result, one would expect that the rela-tionship between HR involvement and bothoperations managers’ perceptions of HR ef-fectiveness and refinery performance shoulddiffer across the different strategies. Thisleads to the following research question—a2:Are the relationships between HR involvement

and both operations managers’ perceptions of

HR effectiveness and the refinery’s performance

dependent upon the refinery’s strategy?

Core Competence, HR Involvement, and HR Effectiveness

As opposed to the product/market strategy, thecore competence of a firm is a bundle of skillsand technologies that represents the sum oflearning across individual skill sets and indi-vidual organizational units. A core compe-tence provides a competitive advantagethrough being competitively unique and mak-ing a contribution to customer value or cost(Prahalad & Hamel, 1990). Long & Vickers-Koch (1995) expand the idea of core compe-

tences to core capabilities. They distinguishthese two by noting that “. . . competencies re-late to the skills, knowledge, and technologi-cal know-how that give a special advantage atspecific points of the value chain, which, incombination with the strategic processes thatlink the chain together, form core capabilities”(p. 12). In essence, the three core competen-cies we identified in this study refer to threedifferent points in the value chain.

In this study we identified 3 possible corecompetencies of petrochemical refineries: (1) skilled work force, (2) efficient production,and (3) new business development. Theskilled work force competence describes re-fineries in terms of the extent to which theycharacterized their core competence as at-tracting, retaining, and developing a skilled setof employees, or the input to the value chain.The efficient production competence charac-terizes the extent to which refineries achievedcompetitive advantage through developing anefficient production process staffed by a high-ly motivated set of employees, (i.e., thethroughput component of the value chain). Fi-nally, the new business development compe-tence describes the extent to which refineriescharacterize their ability to develop new prod-ucts, new markets, and new business con-tracts as a core competence, focusing on theoutput end of the value chain.

As with the product/market strategies, onewould expect that the importance of HR in-volvement in strategy depends upon the per-ceived core competence of the facility. Theskilled work force core competence seems torequire that the HR function play an integralrole in the management of the core compe-tence. This core competence clearly has anHR orientation. Where a facility emphasizesthe skilled work force as its core competence,the involvement of the HR executive in strate-gic management should be strongly positivelyrelated to the operations manager’s perceptionof the function’s effectiveness relative to re-fineries that do not emphasize this compe-tence.

Refineries also seem to differ in the extentto which they emphasize an efficient pro-duction process as a core competence. Effi-cient production can be achieved largelythrough technology such as Computer-Assist-ed Design and Development (CADD), Com-


A corecompetenceprovides acompetitiveadvantagethrough beingcompetitivelyunique andmaking acontribution tocustomer valueor cost (Prahalad& Hamel, 1990).

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An alternativeapproach wouldbe to examine thelinkage betweenHR and strategyat the placewhere they areimplemented: thespecific site(MacDuffie,1995).

puter Integrated Manufacturing (CIM), andElectronic Data Integration (EDI) systems(Sanchez, 1995). This core competence seemsto have an engineering orientation; however,such systems also should require a motivatedwork force to control the processes, againrecognizing the role of the HR function inmanaging at least one aspect of this core com-petence. One would expect that HR involve-ment would be somewhat important in re-fineries emphasizing the efficient productionprocess.2 Thus, a weaker (relative to theskilled employee competence), but still posi-tive, relationship should be observed betweenHR involvement and both HR effectivenessand refinery performance in refineries em-phasizing the efficient production process rel-ative to those not emphasizing this as a corecompetence.

Finally, the new business developmentcompetence seems to emphasize a focus onthe customer, rather than a focus on opera-tions employees as a source of competitive ad-vantage. This core competence seems to havea marketing orientation. In such a situation,the importance of HR involvement should notdiffer based on the extent to which the refin-ery emphasizes this core competence. Thus,one would expect that the relationship be-tween HR involvement in strategy and bothHR effectiveness and refinery performanceshould not differ based on the extent to whichthe refinery emphasizes new business devel-opment. This leads to the following researchquestion—a3: Are the relationships between

HR involvement and both the operations man-

agers’ evaluation of HR effectiveness and the re-

finery’s performance dependent upon the core

competence of the refinery?

The relationships we expect with regard tothe three research questions are summarizedin Table I.

Method

Sample

As previously discussed, most of the work onthe relationship between HR and strategy hasbeen focused at the corporate level (Buller,1988; Golden & Ramanujam, 1985). Whileproviding useful information, most of thiswork often misses the ways in which HR cancontribute to organizational performance atthe level where production of a product or ser-vice takes place. An alternative approachwould be to examine the linkage between HRand strategy at the place where they are imple-mented: the specific site (MacDuffie, 1995).

Thus, our sample was drawn from thepopulation of petrochemical refineries in theUnited States. Surveys were mailed to bothoperations (refinery or operations managers)and human resources (HR manager or Em-ployment Coordinator) employees at all 194petroleum refineries in the United States aslisted by the Department of Energy’s EnergyInformation Administration as part of a largerstudy on the impact of HR practices on re-


Summary of Expected Relationships.

Expected Relationship Between HR Involvement and:

HR Effectiveness Refinery Performance

Overall Strong positive Positive

Product strategy

Innovation Strong positive Strong positive

Breadth Weak positive Weak positive

Core competence

Skilled employees Strong positive Strong positive

Efficient production Moderate positive Moderate positive

New business development Weak positive Weak positive

TABLE I

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finery performance (Wright, McCormick,Sherman, & McMahan, 1995). Four of the re-fineries had ceased operations, and the sur-veys were returned, resulting in a potentialsample of 190.

All of the results reported here are basedon the surveys of the operations managers.The survey asked respondents to reveal the re-finery strategy in terms of product mix, theirevaluation of the skills and motivation of theoperator work force, the involvement of theHR executive in the strategic management ofthe facility, their perception of the effective-ness of the HR function, and the refinery’sperformance in terms of profit margin during1993 as well as annual profit growth and an-nual sales growth over the 1988–1993 period.Surveys were returned from 86 refineries for aresponse rate of 45%.

Measures

All of the items for the measures reported hereare provided in Appendix A.

Product/Market Strategy. Product/Marketstrategy deals with the strategic choices madewith regard to the variety of products offeredand customers served by the refineries. We ex-amined two aspects of the strategy. (1) Prod-

uct Breadth Strategy focused on the breadth ofproducts that the refinery offered and numberof different customers served. (2) Product In-

novation Strategy focused on the extent towhich the facility frequently changes productsin response to changing customer needs.

Core Competencies. Core competencies dealwith the internal resources or capabilities of afirm that are competitively unique and addvalue to the firm. We examined three potentialcore competencies. (1) Skilled Employees de-scribed the extent to which a refinery viewedthe attraction, retaining, and development ofskilled employees as its source of competitiveadvantage. (2) Efficient Production describedthe extent to which the efficiency of the pro-duction process and the motivation of em-ployees provided a competitive advantage. (3)New Business Development described the ex-tent to which the refinery focused on the de-velopment of new market opportunities, busi-

ness contracts, and products as its source ofcompetitive advantage.

HR Involvement. The involvement of HR instrategic management of the refinery de-scribed the extent to which the top HR personin the facility engaged in activities such as pro-viding input into the long-range strategy anddeveloping HR systems to implement facilitystrategy.

HR Effectiveness. Based on the work of Tsui(1990), the effectiveness of the HR functionwas characterized as the extent to which theoperations manager felt that the departmentperformed well, met his or her expectations,and was a value added/bottom line contributorto the business.

Financial Performance. Finally, similar toTerpstra and Rozell (1993), financial perfor-mance of the refinery was defined as an indexof the profit margin during 1993 and profitand sales growth over the 1988–1993 time pe-riod, which was the 5-year period precedingthe survey.

Results

The descriptive statistics and correlations ofthe variables are reported in Table II.

The first research question was to exam-ine the relationship between the involvementof the HR executive and both the operationsmanager’s evaluation of the effectiveness ofthe HR function and the refinery’s perfor-mance. As can be seen in Table II, there is astrong relationship between HR involvementand line manager’s evaluation of the effective-ness of the function (r 5 .79; p , .001), butno relationship between involvement and re-finery performance (r 5 2.10; n.s.).

The second research question examinedwhether or not the relationship between HRinvolvement and both HR effectiveness andrefinery performance were dependent uponthe refinery’s strategy. These relationshipswere tested through a series of hierarchical re-gressions. As can be seen in Table III, theproduct innovation by involvement interac-tion explained a significant amount of vari-ance, but the product breadth by involvement


Thus, itappears thatthe relationshipbetween HRinvolvement andHR effectivenessis more positivewhen the refineryis emphasizinga productinnovationstrategy.

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interaction did not. Thus, it appears that the re-lationship between HR involvement and HReffectiveness is more positive when the refineryis emphasizing a product innovation strategy.

To determine if the relationship betweeninvolvement and refinery performance was de-pendent upon the refinery strategy, we con-ducted additional hierarchical regressionswith refinery performance as the dependentvariable. As can be seen in Table III, none ofthe strategy by involvement interactions ex-plained significant variance in refinery finan-cial performance. Thus, it appears that therelationship between HR involvement and re-finery performance was not dependent uponthe refinery’s strategy.

Finally, the third research question soughtto explore whether or not the relationship be-tween HR involvement and both HR effec-tiveness and refinery performance was depen-dent upon the refinery’s core competence. Ascan be seen in Table IV, only the skilled em-ployees by involvement interaction explainedany significant variance in HR effectiveness.Thus, it appears that the relationship betweenHR involvement and HR effectiveness wasstronger for refineries where skilled employeeswere perceived as the core competence.

Regarding the relationship with refineryperformance, again we computed three sepa-rate regression equations, each one regressingrefinery performance on HR involvement and


Table of Means, Standard Deviations, and Intercorrelations (Alphas in Parentheses).

Variable Mean SD 1 2 3 4 5 6 7 8

1. Breadth strategy 3.49 1.27 (72)

2. Innovation strategy 4.07 .95 41 (60)

3. Skilled employees 5.39 1.11 12 36 (69)

4. Efficient production 5.34 1.11 06 36 41 (70)

5. Business development 4.30 .99 23 43 29 26 (57)

6. HR involvement 27.51 10.72 22 30 37 36 28 (92)

7. HR effectiveness 16.06 4.90 21 31 39 39 25 79 (83)

8. Financial performance 2.85 1.44 207 09 217 05 05 210 210 (67)

r . 22, p , .05.

Decimal points have been omitted.

TABLE II

Regression Results, Regressing HR Effectiveness, and Refinery Performance on Strategy,

HR Involvement, and the Interaction.

R2 Change B-Weight R2 Change B-Weight

HR Effectivenessa Refinery Performanceb

Step 1 .62*** .01

Product innovation strategy 21.22 .19

HR involvement .07 .02

Step 2 .02* .00

Innovation 3 involvement .06* 2.01

Step 1 .62*** .03

Product breadth strategy 2.69 .42


Step 2 .01 .00

Breadth 3 involvement .03 2.01

aN 5 86. bN 5 78.

*p , .05. **p , .01. ***p , .001.

TABLE III

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each core competence factor (skilled employ-ees, efficient production, and new businessdevelopment) in the first step, and the HR in-volvement by core competence interaction inthe second step. As can be seen in Table III,only the efficient production by involvementinteraction explained significant variance, butthis relationship indicated that HR involve-ment was negatively related to the perfor-mance of refineries with this core compe-tence.

Discussion

Although many researchers have called for theincreased involvement of HR executives instrategic management (Dyer, 1984; Schuler,1992; Snow & Snell, 1992; Truss & Gratton,1994; Wright, McMahan, & McWilliams,1994), very little research has examined theconsequences of such involvement. The re-sults of this study indicate that such involve-ment is strongly positively related to line man-agers’ perceptions of the effectiveness of theHR function, but not necessarily to the finan-cial performance of the firm.

Operations managers among petrochemi-cal refineries perceive value in having the HRexecutive involved in the strategy of the refin-ery. In contrast to the results observed by Ben-nett et al. (1995), who found a negative rela-tionship between HR involvement and HReffectiveness, the strong correlation betweenHR involvement and perceptions of HR effec-tiveness in this study points to the fact that op-erations managers highly evaluate the HRfunction when the HR executive is heavily in-volved in strategic decision making.

Additionally, the relationship between HRinvolvement and HR effectiveness is evenstronger when refineries are pursuing productinnovation strategies and when managers per-ceive skilled employees as the core compe-tence. As previously discussed, frequent inno-vations in product offerings require morehuman input, thus creating greater potentialfor value added from employees. The same isobserved with regard to firms that view skilledemployees as one of their core competences.These organizations obviously perceive thatcompetitive advantage is created through peo-ple, and attempt to develop and exploit suchadvantages. In both cases, line managers seem


Regression Results Regressing HR Effectiveness and Financial Performance on Core

Competences, HR Involvement, and the Interaction.

R2 Change B-Weight R2 Change B-Weight

HR Effectivenessa Refinery Performanceb

Step 1 .63** .03

Skilled employees competence 21.11 .20

HR involvement 2.01 .08

Step 2 .03** .01

Skilled employees 3 involvement .06** 2.01

Step 1 .63** .02

Efficient production competence 2.17 .72*


Step 2 .01 .06*

Efficient production 3 involvement .03 2.02*

Step 1 .62** .02

New business development competence 2.64 .86*


Step 2 .00 .04

New business 3 involvement .03 2.03

aN 5 86. bN 5 78.

*p < .05; **p < .01.

TABLE IV

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Both Martell &Carroll (1995)and Bennett etal. (1995) foundno relationshipbetween theinvolvement ofthe HR executivein strategicmanagement andbusiness unitperformance.

Consistent withmuch of theliterature onstrategic HRM,our resultsindicate that linemanagers reactpositively to, andeven expect HRmanagers tobe involved in,the strategicmanagement ofthe business.

to value HR executives’ involvement in thestrategic management of the refinery.

Less optimistic results are observed, how-ever, when examining refinery financial per-formance as the dependent variable. BothMartell & Carroll (1995) and Bennett et al.(1995) found no relationship between the in-volvement of the HR executive in strategicmanagement and business unit performance.The results observed in this study are similar-ly troubling. Involvement of the HR executivewas unrelated to refinery performance in a bi-variate sense. In addition, under the engineer-ing-oriented efficient production core compe-tence, high involvement of the HR executivewas negatively related to refinery perfor-mance.

We offer two possible reasons for this re-sult. First, similar to the explanation offeredby Bennett et al. (1995), this negative rela-tionship may stem from HR executives beingthrown into a strategic role for which theymight not have yet developed the necessaryskills. The implications of this will be exploredin the next section. A second explanation forthis result may have to do with the focus onpast financial performance of the refinery in apurely cross-sectional study. It may be thatpoorly performing refineries are presently rec-ognizing the need to involve HR in strategicdecision making. Thus, a refinery that per-formed poorly over the past 3 years might nowallow or even encourage input from the HRmanager. On the other hand, refineries thathave been performing well through emphasiz-ing the efficient production competencemight not yet sense the need for such HR in-volvement (i.e., “If it ain’t broke, don’t fix it”).If so, then our results are not at all surprising.Thus, these results should be interpreted withcaution, and future research should attemptto tease out the true causal relationships.

Implications for HR Executives

Consistent with much of the literature onstrategic HRM, our results indicate that linemanagers react positively to, and even expectHR managers to be involved in, the strategicmanagement of the business. This implies thatin all situations HR executives need to be true

strategic business partners if they desire to beperceived as effective by their line colleagues.

The opportunity for and importance ofHR involvement is especially pronounced infirms emphasizing innovation and/or viewingskilled employees as a core competence. Fromthe standpoint of line managers, it seems es-pecially important for HR executives workingin environments where products are frequent-ly changed to be involved in the strategic man-agement process. Through this involvementthey can identify the HRM practices neededand develop the necessary human capital tosuccessfully implement such changes.

Line executives also seem to perceive thatHR executives in such firms have a specialresponsibility to be heavily involved in thestrategic management process due to theirunique knowledge regarding how HRM prac-tices can maximally contribute to gainingcompetitive advantage through employees. Infact, it is entirely possible that in our samplethe refineries that emphasize skilled employ-ees as a core competence do so because theHR managers in those refineries have beenquite effective in convincing line managers ofthe importance of people to competitive ad-vantage. This exemplifies the role of a truestrategic HR manager who both impacts strat-egy formulation and develops programs toeffectively address strategic business needs.Thus, overall, the results seem to demonstratesupport for the increasingly strategic role ofHR executives in petrochemical refineries.

Also consistent with some of the pastresearch, this invitation to come to the tableof strategic planning also requires a new skillset for the HR executive. Ulrich and Yeung(1989) identified four sets of skills required byHR executives to effectively perform theirstrategic partner role: business competence,integration competence, professional/techni-cal knowledge, and ability to manage change.Recent research has indicated that HR execu-tives perceive weaknesses in certain strategicskills among the HR professionals comprisingtheir firms. In fact, Mohrman, Lawler, &McMahan (1996) found that HR executivesindicated the lowest satisfaction withthe cross-functional experience, leadership/management skills, consultation skills, andbusiness understanding of their HR staffs.


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These skills are critical to effectively playingthe role of a strategic partner.

In addition, anecdotal data seem to sup-port this idea in industries other than petro-chemical refineries. A higher-level HR execu-tive at Johnson and Johnson commented onour results by stating, “That’s not surprising.HR people have been asking to come to thetable, and now that they are there, they arefinding that they have not developed the skillsnecessary to make a contribution. That is thechallenge for HR in the future.” Similarly, ahigh level HR executive at Continental Air-lines lamented that the biggest weakness hesees among HR people today is a lack of goodanalytical skills necessary to make a contribu-tion to the business. It may be that HR exec-utives are finally being provided the op-portunity to participate in the strategic man-agement of refineries, but because they havenot yet developed the knowledge and skills re-garding the HR needs associated with and HRpractices necessary to implement these strate-gies, the refinery’s performance suffers. Thisis not surprising given the fact that calls forthis role are barely more than 10 years old andthat, to date, very little empirical research ex-ists regarding exactly how HR practices can beeffectively aligned with strategy.

In an ongoing research project, we arefinding that line executives want HR execu-tives to engage in more proactive input intoidentifying potential HR related strategic op-portunities and threats, as well as potentialways to manage them. They require, however,that the HR executives possess expertise inboth the focal business as well as the general

business world, without which this inputmight be detrimental to the firm. In fact, inone firm a line executive was calling for moreproactive input from HR executives but thenstated, “However, the one time they did take avery proactive stand by developing a plan tooutsource a section of the business, it provedto be disastrous, both to morale and to the bot-tom line!” It is not simply involvement thatmakes HR executive business partners, butquality input grounded in business expertise.

In conclusion, this study demonstratesthat in petrochemical refineries where HR ex-ecutives are highly involved in strategic man-agement, operations managers tend to evalu-ate the HR function more positively. Theimpact of such involvement on refinery per-formance, however, is less clear. In light ofother research that has failed to demonstratea positive relationship between HR involve-ment and business unit performance (Bennettet al., 1995; Martell & Carroll, 1995), it ap-pears that many HR executives currently lackthe skills necessary to fulfill their role as astrategic partner. We believe that these resultsare quite consistent with what many HR exec-utives seem to know: that HR managers are fi-nally being invited to the strategic planningtable, and their input is both desired and ex-pected by line managers. This invitation, how-ever, highlights the need for these HR execu-tives to come to the table with the true skillsof a business partner in order that HR’s po-tential contribution to firm performancemight be fully realized.


It is not simplyinvolvementthat makes HRexecutivebusiness partners,but quality inputgrounded inbusiness expertise.

Patrick M. Wright is Associate Professor of Human Resource Studies in the School of

Industrial and Labor Relations, Cornell University. Prior to joining Cornell, he held posi-

tions as Associate Professor and Coordinator of the Master of Science in Human Resource

Management program at Texas A&M. He holds a BA from Wheaton College, and an

M.B.A. and a Ph.D. from Michigan State University. Professor Wright teaches, conducts

research, and consults in the area of Strategic Human Resource Management, particu-

larly focusing on how firms use people as a source of competitive advantage. He has pub-

lished over 50 research articles, monographs, and book chapters and has co-authored two

textbooks.

Gary C. McMahan is Assistant Professor of Management in the College of Business Ad-

ministration at the University of Texas at Arlington. He has published over 20 articles and

book chapters in the areas of strategic human resource management, employee motiva-

tion and involvement, and organization change and development. Dr. McMahan has con-

sulted or conducted research in over 30 organizations. He received his Ph.D. from Texas

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Strategic Involvement of HR

1. Provide input into the facility’s long-rangestrategic planning.

2. Meet with the facility manager to discuss HRissues.

3. Meet with the facility manager to discuss howHR can support the facility’s long-range strategy.

4. Propose innovative HR programs to enhancecompetitiveness.

5. Identify future HR issues that could help or hin-der future competitiveness.

6. Develop HR systems to implement facilitystrategies.

7. Revise existing HR systems to be supportive offacility strategies.

Facility Strategy

Product Breadth.

1. Our facility offers a narrow range of products(R).

2. The characteristics of our products differ a greatdeal from one another.

3. Our firm sells to a wide variety of customers.

4. The needs of our customers are very similar toone another (R).

5. Our firm offers many different products to cus-tomers.

Product Innovation.

1. Our facility establishes and maintains a stableproduct market posture (R).

2. Our firm is at the forefront of innovation and de-velopment.

3. Our business procedures have changed severaltimes in past years.

4. The characteristics of our products are modifiedfrequently.

5. The needs of our customers vary quite a bit fromone year to the next.

Core Competence

Skilled Employees.

1. Attracting and retaining competent employees.

2. Developing necessary skills among employees.

Efficient Production.

1. Developing efficient production processes.

2. Improving employee motivation and morale.

New Business Development.

1. Securing new business contracts.

2. Perceiving new market opportunities and threats.

3. Developing new products.


A&M University in 1993. His interests continue to be on the changing role of the human

resource function and the theoretical development of the field of strategic human resource

management.

Blaine McCormick is currently an Assistant Professor of Management at the Seaver Col-

lege of Arts and Letters at Pepperdine University. He is a former human resource man-

agement professional who received his doctorate at Texas A&M University in 1996. His

research interests include staffing, strategic human resource management, and religious

discrimination and harassment.

W. Scott Sherman is an Assistant Professor of Management at the George L. Graziadio

School of Business and Management at Pepperdine University. He received his Ph.D. in

Management from Texas A&M University in 1997 and his areas of academic interest in-

clude strategy, organizational learning, and organizational level human resource issues. His

dissertation focused on differences in the strategic value of control-oriented and learning-

oriented quality management initiatives. He is a former newspaper executive and remains

active in a consultative role in the newspaper industry.

Appendix A

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Effectiveness of HR

1. Overall, to what extent do you feel your HR de-partment is performing its job the way youwould like it to be performed?

2. To what extent has this department met your ex-pectations in its human resource managementroles and responsibilities?

3. If you had your way, to what extent would youchange the manner in which the HR depart-ment does its job?

4. To what extent is the HR function a valueadded/bottom line contributor to the business?


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ENDNOTES

1. The authors wish to thank Randall S. Schuler, Scott A. Snell,

and Nate Bennett for their comments on a previous version

of this article.

2. It is important to note that the efficient production compe-

tence should be related to a cost strategy which is viewed as

downplaying the importance of employees via narrow job de-

scriptions, low skill requirements, low wages, etc. However,

the role of the HR executive should still be relatively impor-

tant because of the need to align the HR practices discussed

above to support the core competence.

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Documents

Strategy, core competence, and HR involvement as determinants of HR effectiveness and refinery performance