HR flexibility and firm performance: analysis of a multi-level causal model

Human resource flexibility as a construct, how it develops, and its effect on firm performance have not received adequate attention in strategic HRM literature in spite of their obvious importance in today's dynamic competitive environment. Based on a study of 98 manufacturing and 103 service firms in India, this paper addresses these issues by developing and testing a multi-level model that attempts to explore the ‘black box’ of the interlinkages between the various components of HR flexibility and firm-level human, operational, and financial outcomes. The results suggest that a certain set of ambidextrous HR practices constitute a distinct dimension of HR flexibility, beyond the dimensions of flexibilities of skill, behaviour and HR practices as already identified in the existing literature. Evidences from both manufacturing and service sectors support the notion of HR value chain that suggests that HR system has a direct impact on firm-level HR outcomes which are most proximal, and its effects on increasingly more distal operational and financial outcomes are mediated by HR outcomes that it produces. Another important finding is that HR practices as a system have both direct and indirect (mediated by behavioural flexibility) effects on firm-level HR outcomes. Existence of significant direct effects highlights the important role that HR practices play as a structural mechanism in achieving superior firm performance.     

Applying real options theory to HRM: an empirical study of IT software firms in India

Environmental uncertainties can impact the market value of a firm's human assets both positively and negatively, and make return on human assets uncertain over time. However, the strategic human resource management (SHRM) literature has so far focused almost exclusively only on the upside value of human assets of a firm. Real options theory can provide the process heuristics as well as the economic logic for guiding investments in human assets to create sustainable market value for firms operating in uncertain environments. In spite of the growth in popularity of the real options approach, no meaningful progress, however, has been made towards application of this approach to HRM. This study, using data from 108 IT software development firms in India, seeks to address this gap and make three important contributions to the SHRM literature: (1) operationalise the concept of HR options by identifying the HR practices that possess option value; (2) investigate how use of HR options affects firm-level performance; and (3) develop and test a causal model that links the various types of HR options that firms use to exploit uncertainties faced by them with the firm-level operational and financial outcomes. The results support the central hypothesis of the article that use of HR options by firms operating in uncertain environments would have positive impact on their operational and financial performance. Significant differences were observed in the nature of linkages between different types of HR options used to address different types of uncertainties, and the operational and financial performance of the firm.     

HRM professionals and their perceptions of HRM and firm performance in the Philippines

This paper reports the findings of a study conducted in the Philippines that examines the extent of adoption of human capital-enhancing human resource (HR) and industrial relations (IR) practices. Differences between locally owned and other organizations in these practices and their relationship to firm performance were also investigated. Questionnaire responses were obtained from managers and union representatives from 128 organizations located in the Philippines. The results indicated that there was, on average, a fairly high level of adoption of practices consistent with a strategic approach to human resource management (HRM), with foreign-owned firms tending to show a slightly higher level of adoption of such practices. A scale representing the adoption of a more conciliatory and union-friendly IR approach was found to be a significant predictor of perceived firm performance. Surprisingly, the level of strategic integration between HRM and business planning and most human capital-enhancing HR practices were not significant predictors of perceived firm performance. Research and practical implications in relation to the role of HRM in enhancing firm performance are discussed.     

Configurations of human resource management practices: a model and test of internal fit

This study examined human resource management (HRM) configurations. A typology consisting of four bundles of aligned HRM practices (labelled the bureaucratic, market, professional and flexibility bundle) linked to organizational structures was developed. Support for the proposed ideal-typical bundles was found in an assessment by a panel of experts. Next, the distance between the ideal types and actual bundles of HR practices was assessed for 175 organizations. For each, senior HR managers' ratings of HRM practices and CEO ratings of outcomes were obtained. Support was found for two of the four proposed types and about one-third of the firms showed some fit with one of these two types. The ‘fit in general hypothesis’ (i.e. the closer an observed HR bundle resembles any of the ideal types, the higher organizational performance) did not receive support. However, fit with a specific type of bundle (the professional bundle) did relate positively to outcomes. Organizations with observed HRM practices fitting the professional bundle score significantly higher on measures of firm performance, employees' going beyond contract, and firm innovativeness.     

Strategic human resource management and its effects on firm performance: an implementation of the competing values framework

Based on the literature of the competing values framework, this paper develops a new HRM model and attempts to clarify what type of HRM (in terms of the orientation of the function) is linked with various aspects of firm performance. In order to acquire a better view of this much researched issue, three more factors that influence this relationship have been added to the equation: competitive strategy, external environment and organizational size. The empirical research was carried out in Greece among a sample of 104 organizations. The research findings show that when HRM is consistent with the competitive strategy it has significant effects on financial performance. Another important finding is that market performance is positively influenced by HRM flexibility and negatively influenced by HRM control, unless the external environment is complex, when the most successful combination is control-internal orientation.     

Job analysis: a strategic human resource management practice

This study examined the impact of job analysis on organizational performance among 148 companies based in the United Arab Emirates (UAE), a Gulf-region country. Survey results indicated that a practice of proactive job analysis was strongly related to organizational performance. This relationship was strongest to the extent that companies maintained HR information systems, accorded HR greater involvement in strategic planning and emphasized competency-based characteristics of employees in the job analysis approaches they used. The findings suggest that a company-wide policy of job analysis is an important source of competitive advantage in its own right, and merits due attention of HR professionals, line managers and top management. The study extends the findings of the HR–performance research pursued in Western countries to a non-Western context.     

Building manufacturing flexibility with strategic suppliers and contingent effect of product dynamism on customer satisfaction

A critical capability sought by an increasing number of firms is manufacturing flexibility, because it allows to effectively respond to dynamic markets. Grounded upon a supply chain perspective, this paper aims to assess antecedents of manufacturing flexibility that stem from the upstream relationships with strategic suppliers. Additionally, it is one of the first to analyze the contingent effect of product dynamism on the impact of manufacturing flexibility on downstream customer satisfaction. We apply structural equation modeling to a sample of 155 companies in order to analyze our hypotheses. Results strongly indicate that buyer-supplier collaboration facilitates inter-organizational learning that in turn allows organizations to develop manufacturing flexibility and increase customer satisfaction. Approaching manufacturing flexibility from a broader supply chain view thus pays off. Moreover, we apply multi-group confirmatory factor analysis to explore the contingent effect of product dynamism on the relationship between manufacturing flexibility and customer satisfaction. Results suggest a stronger impact of manufacturing flexibility on performance in the context of higher product dynamism in companies’ customer markets, confirming the importance of a contingency view to flexibility.     

Corporate governance, Sarbanes-Oxley, and small-cap firm performance

The recent debate on the onerous costs of compliance with the Sarbanes-Oxley Act has primarily focused on small firms. I study the effects of SOX compliance on such firms by comparing the performance of Canadian small-cap firms that are subject to SOX provisions with those that are not, while: (a) taking into account firms’ internal and external governance mechanisms, including the market for corporate control, and (b) accounting for the simultaneous interactions between alternative governance mechanisms and firm performance. Firms subject to Sarbanes-Oxley experienced an incremental increase in market valuation ranging between 15.7% and 34% depending on the measure of board independence used in the estimation. Some sub-optimal deployment of the endogenous governance mechanisms is observed, while the market for corporate control serves as a positive disciplining factor.     

Human resource involvement,job-related factors,and their relation with firm performance: experiences from Greece

A great deal of debate exists regarding the relationship between human resource (HR) practices and firm performance. The purpose of this paper is to examine the relationship between HR involvement in firm's strategic planning, job-related constructs (job characteristics, workplace characteristics, and satisfaction), and their impact on firm performance. A new research model is proposed exploring the above-mentioned relationships. The validity of this model is tested using data from 106 chief executive officers (CEOs), top managers, and managing directors of Greek small medium enterprises (SMEs)), using the structural equation modeling approach. The results indicate that job characteristics and workplace characteristics directly affect satisfaction and firm performance, while HR involvement has a direct impact on job characteristics and workplace characteristics and an indirect effect on satisfaction and firm performance. It is suggested that managers should emphasize on the HR involvement in the process of strategic planning which actually affects the job-related constructs, in order to improve employees' satisfaction and achieve higher firm performance levels.     

Business Strategy,HRM Practices and Organizational Performance: A Study of the Indian Software Industry

ABSTRACT

Human resources and human resources management system create competitive advantage in today's global market economy that provides wider access to technology, finance and other resources. HRM research has set a new trend with its linkage process with business strategy and organizational performance to find a place for the profession and add value to the organization. This paper intends to unveil the business strategic models, HRM practices and organizational performance in Indian software companies. The study has found that there is a significant difference among HR practices in software companies in India based on Miles and Snow's strategic types, viz., prospectors, defenders, analyzers and reactors. Although reactors showed their difference from other strategic types, no significant difference was found among three proactive strategic types, viz. prospector, defender and analyzer. With regard to performance analysis, it was found that prospectors have a comparative advantage over other strategic types in almost all performance parameters. Although incentives and stock options have a greater overall impact on performance parameters, there is a lot of difference among factors that influence organizational effectiveness in three proactive strategic types.     

Customer service-focused HRM systems and firm performance: evidence from the service industry in Taiwan

Abstract

This study adopts a resource-based view, attraction–selection–attrition theory and a focused approach to examine the link between service-focused human resource management (HRM) systems and firm performance. Internally, we examine employee competency as the ‘black box’ between service-focused HRM systems and firm performance. Externally, we examine the effect of the interplay of a service-focused strategy and service-focused HRM systems in predicting firm performance. We collect data from different sources (i.e. executives, human resource members, and line managers). Using a final sample included 2120 respondents from 175 firms in the service industry in Taiwan, the results show that customer service-focused employee competency transmitted 53% of the effect of customer service-focused HRM systems on firm performance. In addition, when a firm implements a less service-focused business strategy, service-focused HRM systems leads to significant improvement in firm performance. Implications for research are discussed.     

The strength of human resource practices and transformational leadership: impact on organisational performance

The Human resource (HR) strength concept (Bowen, D., and Ostroff, C. 2004, ‘Understanding HRM-Firm Performance Linkages: The Role of the “Strength” of the HRM System,’ Academy of Management Review, 29, 2, 203–221) reflects the capacity of an HR system to transmit messages characterised by high distinctiveness, consistency and consensus. HR systems are therefore affecting perceptions and interpretations of organisational realities, such as climate and culture. Furthermore, Bowen and Ostroff (2004) suggest that organisational climate mediates the relationship between HR strength and performance. The leadership literature advocates that leaders are people who are able to create a social context in which employees are guided towards a shared interpretation, understanding and perception of the organisational climate (Yukl, G.A. 1989, Leadership in Organizations, Englewood Cliffs, NJ: Prentice Hall). In summary, both HR strength and leadership are two environment dimensions shaping and moulding employees' perceptions and interpretations. The current study explores the relationships between HR strength, leadership, organisational climate and performance. 323 questionnaires were used to gather information from a company in the industrial sector. The results show a positive relationship between the variables; however, mediating effects of climate were only observed between leadership and performance.     

Gender diversity and firm performance: evidence from Dutch and Danish boardrooms

Drawing on the business case for gender diversity, this article examines whether board gender diversity has a positive effect on firm performance, based on evidence from the Netherlands and Denmark. We use empirical data on 186 listed firms observed in 2007. Almost 40% have at least one woman in the boardroom. Within boards, the average share of women is only 5.4%. To investigate the impact of board gender diversity, two-stage least-squares estimation is applied, using Tobin’s Q as a measure of performance. Our findings indicate that on the basis of this data-set, there is no relation between board diversity and firm performance.     

Corporate environmental performance evaluation: a measurement model and a new concept

While many third‐party organizations are practically evaluating corporate environmental performance (CEP), few academic studies have paid attention to third‐party environmental performance evaluation (EPE). To answer the question of what should be measured for third‐party EPE, we develop an environmental performance measurement (EPM) model consisting of environmental management performance (EMP) and environmental operational performance (EOP), and hypothesize that EMP be measured by four management performance indicators (MPIs: organizational system, stakeholder relations, operational countermeasures and environmental tracking) and EOP be measured by two operational performance indicators (OPIs: inputs and outputs). Further, to answer the question of how to enable third‐party EPE comparable across companies from different (sub‐)sectors, we propose to use the environmental intensity change index (EICI) as a measure of OPIs. Empirical tests confirm that the EICI and the evaluation based on it are comparable across companies from different sub‐sectors. Empirical tests also support the existence of the MPIs and OPIs and the two‐dimensioned constructs of CEP. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

The effects of slack resource of R&D professionals on firm performance: evidence from traditional manufacturing firms in an emerging economy

Abstract

As an important component of organizational human resource slack (HR slack), the slack of research-and-development (R&D) professionals has been studied by several authors. However, it remains unclear whether and how this small component of general HR slack, i.e. the slack of research-and-development professionals (RHR slack), may affect overall firm performance in an emerging economy without much R&D tradition or pro-R&D institutions. Based on two organizational theories, i.e. institutional theory and the resource-based view of the firm (RBV), we propose competing hypotheses on the relationship between RHR slack and firms’ accounting performance. We also examine whether the relationship between RHR slack and firm performance should be linear or curvilinear. Finally, we also test the relationship between RHR slack and other dimensions of firm performance. Several interesting findings have been obtained. For instance, neither the perspective based on institutional theory nor that based on RBV can fully predict all types of RHR slack-performance relationships, be these relationships linear or curvilinear.     

Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model

This paper introduces collective bargaining at the firm and at the sector level into the heterogeneous firm model of Melitz and Ottaviano (Melitz, M. J., Ottaviano, G. I. P., 2008. Market size, trade, and productivity. Review of Economic Studies 75 (1), 295-316). It then analyses how the two bargaining regimes change aggregate industry productivity and firm performance relative to a competitive labour market. While sector-level bargaining forces the least productive firms to exit and thus increases average productivity relative to the competitive benchmark, firm-level bargaining allows less productive firms to stay in the market and thus reduces average productivity. Sector-level bargaining also results in higher average output and profit levels than either firm-level bargaining or a competitive labour market. The paper also shows that the choice between sector- and firm-level bargaining can involve a trade-off between product variety and product prices: Not only the average price level but also product variety tends to be lower under sector-level bargaining than under firm-level bargaining.     

Agile manufacturing: Relation to JIT, operational performance and firm performance

A structural model incorporating agile manufacturing as the focal construct is theorized and tested. The model includes the primary components of JIT (JIT-purchasing and JIT-production) as antecedents and operational performance and firm performance as consequences to agile manufacturing. Using data collected from production and operations managers working for large U.S. manufacturers, the model is assessed following a structural equation modeling methodology. The results indicate that JIT-purchasing has a direct positive relationship with agile manufacturing while the positive relationship between JIT-production and agile manufacturing is mediated by JIT-purchasing. The results also indicate that agile manufacturing has a direct positive relationship with the operational performance of the firm, that the operational performance of the firm has a direct positive relationship with the marketing performance of the firm, and that the positive relationship between the operational performance of the firm and the financial performance of the firm is mediated by the marketing performance of the firm.     

Human resource management and organizational performance of small and medium enterprises (SMEs) in Nigeria

The link between human resource management (HRM) and firm performance of organizations has received significant research attention, generally focused on large firms from developed countries to the omission of studies focused on small and medium enterprises (SMEs) and those from developing countries. This study partially addresses this gap in the literature. We investigated the relationship between HRM practices and the financial (FIN) and non-financial performance (NONFIN) of SMEs in Nigeria. A survey design with 236 respondents was used to test the hypotheses. Multiple regression results showed that human capital development and occupational health and safety had a direct relationship with NONFIN, and employee performance management and NONFIN on FIN performance. HRM practices as a group accounted for 16% of the variance in NONFIN and 12% of the variance in FIN. Regression analyses controlled for size and age of the firm. This study partially supports a model of positive relationships between certain HRM practices and firm performance.