The last decade has seen a burgeoning research literature emerge investigating the link between high commitment work systems and organisational performance. Encouraged by numerous reports of a substantive statistical association between high commitment management (HCM) practices and enhanced organisational performance, HRM researchers have become increasingly assertive in their claims that HRM contributes to a firm's bottom line. However, despite the strong empirical evidence to support such claims, there remain significant gaps in our understanding of the HRM-performance relationship. In particular, the research leaves a number of questions unanswered in terms of when and how HR impacts on the performance of the firm. The current program of research investigated four such questions in particular: the potential for high commitment management to impact change in firm performance, the universal versus contingent conditions under which high commitment work systems impact firm performance, the mechanisms or processes through which high commitment work systems influence performance, and finally, the role that employees' shared perceptions of HRM play in HRM-outcome relations. To examine these extant issues, five empirical studies conducted at the organisational, group and individual levels of analysis were conducted, the results of which are presented in this thesis.
Study 1 investigated whether high commitment management practices are related to changes in firm performance in a sample of 275 Australian companies. The study used both subjective and objective indicators of proximal and distal outcome variables, as well as both cross-sectional and longitudinal data. Using objective indicators of performance, greater use of HCM was associated with lower labour turnover and higher labour productivity and firm profitability. The association between HCM and labour productivity remained statistically significant after controlling for prior years' productivity. Using subjective indicators of performance, HCM was associated with HR, organisational, and financial outcomes. Moreover, the pattern of results for both subjective and objective performance indicators support theoretical accounts of the HRM-firm performance causal chain in that HRM was most strongly related to proximal outcomes like labour turnover, next most related to intermediate outcomes like labour productivity, and least related to distal outcomes like firm profitability.
Study 2 investigated the potential moderating effects of a firm's capital structure on the relationship between high commitment work systems and firm performance in a sample of I 04 UK manufacturing firms. Hypotheses were drawn from a resource-based perspective on human resource management and a financial theory perspective on capital structure. Results show that a high commitment work system is significantly related to economic performance. However, this relationship was moderated by the firm's financing strategy. Firms obtained higher returns from a high commitment approach to employee management when pursing a low leveraging (debt) financing strategy, a finding consistent with modem finance theory notions that firm-specific strategic assets provide greatest value when financed primarily through equity as opposed to debt.
Study 3 was conducted to examine the mediating role of perceived organisational support in the relationships between nine high commitment work practices and employee commitment. Results obtained from a sample of 246 employees from a large Australian machinery supplier indicate that relationships between selectivity in hiring, teamworking, and information sharing, on the one hand, and organisational commitment on the other, were all fully mediated by perceived organisational support. The relationship between organisational commitment and participative decision making was partially mediated by perceived organisational support. The study indicates perceived organisational support may be an important explanatory mechanism in HCM-outcome relations.
Study 4 was conducted to examine a full model of the high commitment-employee outcomes relationship. Using a sample of 619 employees from a diverse range of organisations, it was found that perceived organisational support mediated the relationship between employees' perceptions of HCM practices and their affective organisational commitment. Affective commitment, in turn, mediated the relationship between perceived organisational support and employees' withdrawal intentions and proactive job performance. In terms of work performance, affective commitment was found to be predictive of proactive work performance but not in-role work performance, suggesting high commitment work practices may be particularly suited to those organisations who base their competitive strategy on a flexible and self-directed work force.
Study 5 was designed to assess work unit members' shared perceptions of their organisation's HRM system, or HRM climate, as well as the effects of these perceptions on members' aggregated outcomes. Results from a sample of 66 work units showed that a more favourable HRM climate was associated with higher levels of perceived organisational support, in-role performance and citizenship behaviour, and lower levels of quit intentions and workplace deviance. Moreover, the effects of climate level were moderated by climate strength, such that the influence of work units' climate on the criterion variables was most favourable under strong climate conditions. Additional analyses revealed that trust in management and leader informing behaviour were significant predictors of climate level, whilst leader informing behaviour was a significant predictor of climate strength.
Overall these findings add to our understanding of the high commitment approach to managing employees and its effect on employee outcomes and firm performance. Firstly, this research adds to what is in effect a small body of empirical research suggesting that HCM has a demonstrable effect on changes in financial performance as opposed to a simple bi-variate correlation alone. Secondly, whilst almost all research examining potential moderators of the HRM-firm performance relationship has relied upon the firm's business strategy as a key contingency variable, results of the current study suggest capital structure may be another important contingent variable in the HRM-firm performance relationship. Third, the results of this research exemplifies the need to delve into lower levels of the organisation to help explain how commitment enhancing approaches to human resource management may work to influence work outcomes. Through the use of employee surveys, employee reactions to high commitment work practices suggest such practices influence perceptions of perceived organisational support, which in turn influence employee commitment to the organisation, which ultimately influence organisationally beneficial outcomes like reduced employee propensity to quit the organisation and proactive performance. Finally, the present program of research expands on previous accounts of employee reactions to HRM by considering employees' collective experience, or climate for high commitment management practices. Findings indicate that climate for HCM can be conceptualised as a group level construct, and this construct has implications for aggregated work-unit outcomes.
At a practical level, the present program of research highlights some important considerations for those attempting to improve individual, group and organisational level outcomes through the high commitment approach to managing people. Research at the organisational level, for example, highlights the need for proposed HR interventions to be considered in the context of contingent variables that go beyond a business's competitive strategy alone. Rather, support is found for the argument that for a firm's human resource investments to be value-adding, they must be integrated with other organizational functions, such as marketing, production, R&D, and, based upon the results of the present program of research- the finance function. In addition, findings at the individual and group level of analysis suggest that HRM practices, apart from serving a functional role, also play a non-instrumental role of communicating to employees that they are valued by the organisation. In effect, this suggests that HRM practices might thus serve as one means by which organisations can demonstrate their support for, or commitment to, their employees and, in tum, foster reciprocated attachment from employees. Finally, investigations conducted at the work unit level of analysis provide evidence that organisations may benefit from considering employees' shared experience of HRM. Results suggest that organisations able to create stronger climate for HRM may be able to harness greater utility from their HRM policies and practices. In the present program of research, evidence was found to suggest that both leader informing behaviour and trust in management play important roles in influencing both the favourability of employees' perceptions of HRM, as well as the extent to which such perceptions are similar across employees. The more favourable and the more similar employees' perceptions of HRM are, then the more likely an organisation is able to harness positive attitudinal and behavioural responses from employees.