Influence of the sector and the environment on human resource practices' effectiveness

Abstract

The aim of this work is to examine the effect that human resource practice has on performance. From a database made up of 250 companies in Spain and by means of a regression analysis, we test empirically whether human resource practices generate positive results under any circumstance or if their effectiveness depends on certain contexts. In this respect, focusing the study on the activity sector and the environment, we analyse whether high levels of competition in the environment and service companies constitute more attractive contexts for the adoption of high involvement practices.

Keywords:

• Human resource management
• environment
• activity sector
• competition
• performance

Acknowledgements

Mónica Ordiz wishes to acknowledge the support of the Spanish Ministry of Science and Technology through the SEC2003-05238/ECO project.

Notes

 1 In this work we use the term ‘high-involvement practices’ to refer to what in the literature goes by names like progressive HR management paradigm (Godard, 1991), innovative work practices (Osterman, 1994; Ichniowski et al., 1996), high performance work practices (Huselid, 1995), progressive practices (Delaney and Huselid, 1996), strategic HR practices (Delery and Doty, 1996), high involvement work practices (Pil and MacDuffie, 1996), strategic approach to HRM (Guest, 1997), high commitment management (Wood and Menezes, 1998), best practices (Marchington and Grugulis, 2000) and innovative HRM activities (Kamoche, 2001).

 2 In an analysis about manufacturing companies, they observed that, out of seventeen practices considered, 25 per cent of the companies analysed used five or fewer, 50 per cent applied between six and ten and only 5 per cent applied more than fourteen practices.

 3 See Schuler and Jackson (1987), Lengnick-Hall and Lengnick-Hall (1988), Cappelli and Singh (1992), Terpstra and Rozell (1993), Dyer and Reeves (1995), Wright et al. (1994), Baron and Kreps (1999) and Schuler (2001), among others.

 4 For a more comprehensive reference concerning the differences between services and manufacture, as well as their implications for human resource management, see Frenkel (2000).

 5 The indicators were current profit, benefit growth, sales in the last five years and the sum of the standardized coefficients of the previous three indicators.

 6 For a more comprehensive analysis, see among others, Golden and Ramanujam (1985), Schuler and Jackson (1987), Lengnick-Hall and Lengnick-Hall (1988), Cappelli and Singh (1992), Thakur and Calingo (1992), Terpstra and Rozell (1993), Wright et al. (1995), Boxall (1996), Boudreau and Ramstad (1997), Gomez-Mejia et al. (1998) and Schuler (2001).

 7 For a more detailed study, see Hendry and Pettigrew (1979), Lawrence and Lorsch (1987), Sheridan (1992), Erez (1995), Hartnett (1996) and Verburg et al. (1999).

 8 Specifically, he enumerates the following ten points, which he refers to as ‘practices and policies’: (1) environment's analysis, (2) organizational structure, design, strategy, values, mission and culture, (3) human resource planning, (4) job design and analysis, (5) recruitment, selection and orientation, (6) training, socialization and assimilation, (7) performance and career management, (8) remuneration, (9) employee's well-being and (10) communication.

9 We understand by such environments those where the competition is intense, the technological change is frequent and the barriers to current resource imitation are reduced.

10 In this respect, we must admit that it is possible that the environment may condition the adoption of so-called high-involvement practices and, also, their effectiveness may be conditioned by the coherence between them. Thus, we can consider that competition in the environment encourages the adoption of high-involvement practices and that, in addition, its characteristics may enhance the effectiveness, or observableness, of the results in comparison with other contexts. This double effect may overlap and bias any research result. In this respect, Kamoche (2001) warns that the results must be interpreted cautiously because we cannot be sure of having effectively isolated all the effects.

11 As in Osterman's study (1994), the sample was based on organizations included in Dun and Bradstreet. This list is recognised as one of the best sources from which to obtain data. Nevertheless, in this work, instead of selecting a sample of manufacturing companies, we have considered the list as a whole to avoid the bias inherent in such sampling and reach the greater possible generalization of the results.

12 With the aim of testing the reliability of the scales proposed to score the human resource practices, we proceeded to calculate the Cronbach alpha coefficient, obtaining a value higher than 0.55, this being generally accepted for exploratory studies. Although the criterion usually considered to denote strict internal consistency is a coefficient higher than 0.70, some writers, such as Van de Ven and Ferry (1979), argue that some moderate internal consistency exists if the coefficients are within the interval 0.55–0.70. Likewise, with the aim of verifying the one-dimensionality of the scale proposed, the corresponding exploratory factorial analysis was carried out, with the result that in both cases the items included in the scale are summarized in only one factor, which indicates that such items are related to each other or interrelated.

13 The eleven dimensions obtained were the following: (1) quality of products, services or programmes, (2) development of new products, services or programmes, (3) ability to attract talented personnel, (4) ability to retain talented personnel, (5) consumer and customer satisfaction, (6) relation management/employees, (7) relation among employees, (8) marketing, (9) increase in sales, (10) productivity and (11) market share.