Effects of Human Resource Systems on Manufacturing Performance and Turnover

Topics: Human resources, Human resource management, Organizational studies and human resource management Pages: 30 (6779 words) Published: September 4, 2011
* Academy o/ Managetnenl Journal 1994, Vol. 37. No. 3. 670-687.

EFFECTS OF HUMAN RESOURCE SYSTEMS ON MANUFACTURING PERFORMANCE AND TURNOVER JEFFREY B. ARTHUR Purdue University
Using an empirical taxonomy identifying two types of human resource systems, "control" and "commitmeni," this study tested the strategic human resource proposition that specific combinations of policies and practices are useful in predicting differences in performance and turnover across steel "minimills." The mills with commitment systems had higher productivity, lower scrap rates, and lower employee turnover than those with control systems. In addition, human resource system moderated the relationship between turnover and manufacturing performance.

Long a concern among organizational contingency theory researchers, the concept of the congruence, or fit, between diverse sets of organizational policies and practices has recently emerged as an important subject of study for human resources management researchers. This new strategic, macro, human resource management perspective differs markedly from the more traditional approach focusing on the effects of separate human resource practices on individual-level outcomes (Butler, Ferris, & Napier, 1991; Jackson, Schuler, & Rivero, 1989; Mahoney & Deckup, 1986; Snell, 1992). In contrast, the strategic human resource management perspective integrates macro-level theories and concepts to explore the impact of specific configurations, or systems, of human resource activities on organization-level performance outcomes (Dyer & Holder, 1988; Fisher, 1989; Wright & McMahan, 1992). Dohbins, Cardy, and Carson pointed out that although a macro approach to studying human resource issues appears promising and conceptually very rich, "the validity of its propositions is ultimately an empirical question" (1991: 33). Empirical evidence demonstrating the predictive value of the strategic human resource perspective, however, has not heen forthcoming. Conceptual typologies ahound in this literature, hut empirically hased taxonomies of human resource strategies are rare. As a result, hasic hypotheses concerning the implications for firm performance that flow from the strategic human resource perspective have generally not been tested. A recent I would like to thank Steven G. Green, Margaret L. Williams. Michael A. Campion, Chris J. Berger, Harry G. Katz. and three anonymous reviewers for helpful comments on previous drafts of this article. 670

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review of strategic human resource management, for example, concluded that "there is little empirical evidence to suggest that strategic HR directly influences organizational performance or competitive advantage" (Lengnick-Hall & Lengnick-Hall, 1988: 468). In this study, I addressed this important gap in the existing literature by empirically testing specific organizational performance hypotheses flowing from a strategic human resource management perspective. To accomplish this, I drew on the results of a previous study that used a cluster analysis technique to empirically identify two types of human resource systems, labeled "control" and "commitment" systems, in a sample of steel minimills (Arthur, 1992).^ I developed and tested propositions regarding the utility of this human resource system taxonomy for predicting both manufacturing performance, measured as labor efficiency and scrap rate, and the level of employee turnover in steel minimills. In addition, I tested the proposition that the relationship between turnover and manufacturing performance differs significantly across the two systems. THEORETICAL DEVELOPMENT AND HYPOTHESES

Testing the strategic human resource perspective first requires categorizing organizations into a meaningful typology of human resource systems. Using the strategic perspective, a number of authors have suggested typologies (e.g.. Dyer & Holder, 1988; Miles & Snow. 1984; Osterman. 1987; Schuler & Jackson. 1987;...

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Porter. M. E, 1980. Competitive strategy. New York: Free Press. Schuler, R. S. 1992. Strategic human resource management: Linking people with the strategic needs of the business. Organizational Dynamics, 21(1): 18-31. Schuler, R. S., & Jackson, S. E. 1987. Linking competitive strategies with human resource management practices. Academy of fanagement Executive, 1(3): 207-219. Schwab, D. P. 1991, Contextual variables in employee performance-tumovBr relationships. Academy of Management Journal, 34: 966-975. Snell, S. A. 1992. Control theory in strategic human resource management: The mediating role of administrative information. Academy of Management fournal, 35: 292-327. Snell. S. A., & Dean. J. W. 1992. Integrated manufacturing and human resource management: A human capital perspective. Academy of Management fournal, 35: 467-504. Staw, B. M. 1980. The consequences of turnover, fournal of Occupational Behaviour, 1: 253273. Thomas. K. W., & Velthouse. B. A. 1990. Cognitive elements of empowerment: An ' 'interpretive" model of intrinsic task motivation. Academy of Management Review, 15: 666-681. Walton. R. A. 1985. From control to commitment in the workplace. Harvard Business Review, 63(2): 77-84. Wright. P. M.. & McMahan, G. C. 1992. Theoretical perspectives for strategic human resource management. Journal of Management, 18: 295-320. Jeffrey B. Arthur is an assistant professor of management at the Krannert Graduate School of Management. Purdue University. He received his Ph.D. degree in industrial relations from Cornell University. His current research interests include strategic human resource management and industrial relations patterns and transformations.
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