High Performance Work Practices and Human Resource Management Effectiveness: Substitutes or Complements?

By Richard, Orlando C.; Johnson, Nancy Brown | Journal of Business Strategies, Fall 2004 | Go to article overview

High Performance Work Practices and Human Resource Management Effectiveness: Substitutes or Complements?


Richard, Orlando C., Johnson, Nancy Brown, Journal of Business Strategies


Abstract

The human resource management literature has implicitly treated high performance work practices (HPWPs) and human resources management (HRM) effectiveness as substitutes for one another with respect to their relationship with firm performance. We contend that HPWPs and HRM effectiveness act both as substitutes and as complements. Main effects reveal that only human resource management effectiveness affects market performance and that HPWPs affect innovation. However, interacting HPWPs with HRM effectiveness positively relates to both market performance and innovation in support of our hypothesis. The results suggest that effective HRM can offset HPWP's expense and that HPWPs can enhance the flexibility of effective HRM systems.

**********

High performance work practices (HPWPs), through significant investment in employees, have been touted as a way to make organizations more flexible and effective. Often HPWPs are viewed as an alternative to traditional productions systems that are firmly rooted in Fredrick Taylor's scientific management and subsequent Fordist principles. However, we contend that having effective human resource structures (HRM effectiveness) can enhance the return on HPWPs because HPWPs require a heavy investment in human capital, that is lost if the firm cannot attract and retain quality employees. Conversely, effective HRM systems can benefit from the innovative capabilities of HPWP that enhance the organization's ability to adapt and change. Hence, we address the question, "Are HPWPs and effective HRM systems complements or substitutes?" We empirically test this question using data from the banking industry. First, we review the literature that supports these predictions.

Literature Review and Hypotheses

High Performance Work Practices

No one has consistently defined, or even uniformly named HPWPs (Baker, 1999; Becket & Gerhart, 1996; Delaney & Goddard, 1997; Wood, 1999). They have been called "high performance work systems," "alternate work practices," and "flexible work practices" (Delaney & Goddard, 2001). Despite the name variances, many of these programs share common elements including rigorous recruitment and selection procedures, incentives based upon performance, and extensive training programs focused on the needs of the business (Becker, Huselid, Pickhus, & Spratt, 1997). Essentially HPWPs require heavy investment in human capital that is intended to enhance employee skills, knowledge, motivation, and flexibility with the expectation that the employer is providing employees the ability and the opportunity to provide input into workplace decisions (Van Buren, & Werner, 1996). Companies expect this empowerment to enable employees to adapt quickly and readily to rapidly changing product and labor market conditions, and to improve operational efficiency and firm performance (Becker & Huselid, 1998; Cappelli & Neumark, 1999).

Although high performance work practices (HPWPs) have often been touted as being good for both employers and employees, these practices require significant investments in human capital via training, coordination of initiatives, and time for managerial and employee input. Because of the large investment in human capital, the value of these practices may be lost if the investment is not offset by increased efficiency and effectiveness. Among others, Cappelli and Neumark's (1999) review of the literature (Delaney & Goddard, 2001; Kling, 1995; U.S. Department of Labor, 1993) suggests, on average, that HPWPs are associated with increased productivity. However, Cappelli and Neumark (1999) caution that by examining only productivity effects, researchers ignore the cost side of the equation. Despite this caution, numerous other studies also find a strong relationship between HPWPs and firm performance - studies that do consider both the costs and the benefits of HPWPs (Huselid, 1995; MacDuffie (1995). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

High Performance Work Practices and Human Resource Management Effectiveness: Substitutes or Complements?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.