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High Performance Work Practices: One best-way or no best-way
Article in IOSR Journal of Business and Management · June 2014
DOI: 10.9790/487X-16610814
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IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 16, Issue 6. Ver. I (Jun. 2014), PP 08-14
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High Performance Work Practices: One best-way or no best-way
A.J. Timiyo
(PhD Candidate) The Business School, University of Huddersfield, United Kingdom
Part Time Lecturer, Liverpool Hope University, United Kingdom
Abstract: This paper explored the vast literature on high performance work practices and their impact on
organizations’ performance. It aims to determine whether high performance work practices (or best practices)
are indeed one best-way of ensuring employee productivity in organizations or not. Although, there is unanimity
among authors that high performance work practices have significant impact on organizations’ performance
but, the exact combination of these practices differs among authors. The findings revealed that “best practices”
exist whereas; the Contingency and Configurational proponents believe that they are obtainable only in theory
and definitely not in practice. The paper also showed the interplay of environmental factors in shaping authors’
viewpoints in the Universalist-Contingency/Configurational debate. Studies conducted in US gave credence to
“best practices” while those conducted in Europe supported the Contingency and Configurational claims that
any human resource practice can produce desired results if aligned correctly to the particular organization’s
culture, context and structure. The paper argued that the debate on “best practices” is inconclusive thus;
portraying the concept as another management fad.
Keywords: configurational view, contingency, HPWPs, organizational performance, universalist view
I. Introduction
In order to achieve a more productive workforce, management scholars and practitioners ought to give
more attention to employees than ever before. This is because well trained, motivated and encouraged
employees would ordinarily want to perform optimally in the same way a well-greased machine works in a
production process. Emphasizing on people was what actually gave birth to personnel management as a separate
business function. Personnel management involves the management of people in the workplace. Though, the
personnel function is very critical and pervasive throughout the organization as no department can possibly exist
without people but, the sole responsibility of dealing with all employee-related issues rests on the personnel
department. Personnel management gained recognition in management literature immediately after the Second
World War in 1945. Management realized that employees‘ productivity can best be optimized through the
provision of effective employment policies (CIPD, 2012). Thus, the role of personnel managers then was in
ensuring strict adherence to established rules and regulations by all employees. This was essential since what
was paramount for management after the war was that of achieving large scale production thus, the process was
characterized by bureaucracy (CIPD, 2012). Rules were used as tools to enforce commitment and order in the
workplace which of course became too burdensome for HR managers and their employees to bear.
Managing people is a difficult task especially in this era of intense market competition and increase in
market share globally. This means that the 21st century human resources (HR) manager in a multinational
company is likely to be confronted with the dilemma of manning vacant positions with the right people.
Companies need employees who can work in different cultural settings; which is a prerequisite for pursuing
global strategies. Globalizing is necessary to overcoming the pressures from the present economic crisis
(Hossain et al., 2011) that is shaking the foundations of the world‘s most powerful economies. High
performance work practices (HPWPs) is one way of ensuring that employees are managed effectively to become
highly productive in the workplace. HPWPs have been the subject of philosophical debate in most human
resources management literature for quite some time. Thus, the aim of this paper is to examine the nature, types
and efficacy of HPWPs in a business organization using both previous and extant literature with the hope of
divulging fresh insights about the concept. The knowledge and understanding gained from this exploration
would undoubtedly aid the 21st century HR manager to make informed decisions concerning employees in
organizations. The paper is therefore divided into the following main headings:
High Performance Work Practices: An overview
Empirical studies: The efficacy of HPWPs
Findings/Implications
Conclusion
Areas for further research
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II. High Performance Work Practices: An Overview
HPWPs is not a new paradigm in human resources management (HRM) because, the idea of managing
people effectively existed long ago. Apparently, till date there is no precise definition of what high performance
work practices are, and the specific components that make up the practices remains questionable (Lloyd and
Payne, 2004). This led to the conclusion drawn by some scholars that ―the precise definition of HPWPs is
subject to continuous debate‖ (Sung et al., 2005 p. 4). In spite of these widely held opinions, the term HPWPs
has the same meanings with what some authors like Huselid and Rau (1997), Ramsay et al. (2000), Patel and
Conklin (2012) refer to as high performance work systems (HPWS), others like Purcell (2006) refer to it as high
commitment management (HCM) while, Delaney and Huselid (1996) use progressive HRM practices
(PHRMP). A good number of scholars (Kalleberg et al., 2006) also use the term high-performance work
organizations (HPWOs).
In spite of this confusion, the underlying objectives and principles behind these terminologies are the
same. Therefore, HPWPs can be defined as those practices which Human Resources (HR) managers adopt in
order to improve employees‘ performance in organizations (Aston and Sung, 2002). Tamkin (2004) defined
HPWPs as those formalized procedures used to test the efficacy of human resources on firms‘ performance.
While, in the views of Sung et al. (2005) HPWPs are ―a set of complementary work practices covering three
broad categories which include; high employee involvement practices, human resource practices, reward and
commitment practices‖ (Sung et al., 2005 p. 4) in a business organization. Patel and Conklin (2012) described
high performance work practices as those ―set of employee management practices that positively affect
employees‘ attitudes, motivation, and performance‖ (Patel and Conklin, 2012 p. 210 citing Sels et al., 2006).
The implications of these definitions suggest that HPWPs are those set of HR practices that are either capable of
improving workers‘ skills or motivating them to become more productive (Huselid, 1995).
2.1. Types of high performance work practices
Different types of HPWPs are identified by scholars from a Universalist, Contingency and the
Configurational points of view (Delery and Doty, 1996; Guest et al., 2004). The Universalist view suggests that
some HR practices (or best practices) are likely to produce maximum results when adopted irrespective of the
nature and type of organizations and/or people. While the Contingency supporters believe that a combination of
HR practices will only work best if applied within specific organizational setting or within a specific group of
workers. Proponents of the Universalist view such as Wood (1995) believe that HPWPs or ―best practices‖ can
be adopted to improve employees‘ performance in organizations all over the world. Although, this can only be
made possible if companies are able to identify the bundles of best fit and be able to diffuse such bundles
effectively throughout the organization as argued by Purcell (2006). Guest et al. (2004) conducted a study aimed
at helping HR managers to address inherent problems associated with trying to identify the right bundle or
combination of HPWPs which are capable of yielding superior performance. 1308 senior personnel managers
were sampled and the study showed that the use of sequential tree analysis was able to prioritize lists of HR
practices to show unique combinations of bundles which produce the highest outcome. Though, this study was
able to resolve part of Purcell‘s argument but, the problem of diffusing the HR bundles remained unresolved.
The Contingency theorists believe that it is not the combination of right bundles that produces the
needed outcome but rather, the extent to which the practices align with each other and the context in which they
are applied (Tamkin, 2004). Whilst the Configurational view describes those ―structures, relationships and
boundaries through which an organization operates‖ (Armstrong, 2009 p.33 citing Huczynski and Buchanan,
2007). Whether from a Universalist, Contingency or Configurational points of view, the basic HPWPs as
identified by scholars are closely related and tend to address specific areas in employment relationships. Huselid
(1995) categorized HPWPs into two dimensions; workers skills and workers motivation while Delery and Doty
(1996) identified seven HPWPs from their study which are; profit sharing, employee participation, appraisals,
training, career opportunities, job security and job description. Youndt et al. (1996) classified HPWPs into two
groups namely; human capital enhancing system and the administrative human resource system. Phil and
MacDuffie (1996) identified five basic HR practices namely; online teamwork, job rotation, problem solving
skills, employee involvement practices, and decentralization of effort and suggestion programs. Whereas,
Pfeffer (1998) identified seven key HPWPs which are; employment security, minimal status distinction, sharing
financial and performance information, hiring selectively, self-managed teams/decentralization, relatively high
rewards and extensive training.
Ashton and Sung (2002) categorized HPWPs into four groups namely; those that support employees‘
performance, employee involvement in decision making, knowledge and information sharing, and rewards.
While, Chow (2004) identified thirty HPWPs and categorized them into seven groups namely; employee
relations/participation, formalized HR system, compensation/benefits, training and development, strategic
orientation of HRM, recruitment and selection, and promotion and career development. Zhang and Li (2009)
identified a bundle of six HPWPs consisting of training, participation, well defined jobs, promotion,
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performance appraisal and equitable sharing of profits. While Champion et al. (2011) categorized their proposed
‗best practices‘ into three topical areas namely; analyzing competency information, organizing the information
and using the competency information. Thus, it can be observed that HPWPs are practices that address the
employment relationships (between employers and employees) and the HR policies guiding such relationships.
They cover the three broad areas of reward and commitment, high employee involvement and human resource
practices as stated by Sung et al. (2005). These are highlighted in figure 1 below.
III. Empirical Studies: The Efficacy Of Hpwps
Many inter-disciplinary studies have been conducted over the years on the impact of HPWPs and
organizational performance. Huselid (1995) in a national sample of 968 public companies in US attempted to
find out the impact of HPWPs on the companies‘ three key performance indicators; turnover, employee
productivity and finance. The data was collected with a structured questionnaire from senior HR executives
through their respective e-mail addresses. By holding a number of variables such as size of the firms, net sales
and industry/firms level constant, the study revealed that HPWPs reduces employee turnover while increasing in
their productivities and financial position. In a later study, Huselid and Rau (1997) adopted a longitudinal and
cross-sectional analysis to determine the factors affecting organizations‘ choice of adopting HPWS. High
performance work systems which were considered include employee motivation, skills and organizational
structure. While, environmental factors such as environmental dynamism, complexity and munificence were
used as the independent variables. Secondary data was collected from the US National Sample Survey of 1992,
1994 and 1996. A sample of 2410 firms was drawn from a commercial database known as Compact Disclosure
and the data was analyzed using descriptive statistical methods. And that environmental factors and
organizational characteristics are closely linked with HPWS. Another finding was that firms operating within
profitable industries are keener to apply incentives on HPWS than firms that are operating within dynamic
industries.
Huselid‘s study opened the door for many other researches on HPWPs and organizational performance.
One of such studies was conducted by Neumark and Cappelli (1999) who felt that previous researches on
HPWPs and firms‘ performance were mainly cross-sectional thus, had faulty methodologies. Thus, their study
aimed at determining the effect of HPWPs on firms‘ performance whilst addressing the problem of
methodology. But, instead of using HR managers like other researchers, they sampled heads of various
establishments. The data was collected at two time intervals in 1994 and 1997 from the United States Bureau of
the Census Standard Statistical Establishment List (SSEL). The sample size consisted of 5465 heads of
establishments within the manufacturing and non-manufacturing sectors. Some of the findings from Neumark
and Cappelli‘s (1999) study were inconsistent with previous researches. They discovered that HPWPs do
increase productivity but, the relationship is weak when statistically tested. Also, HPWPs were found to
improve employees‘ compensation while at the same time increasing their labor costs hence HPWPs failed to
produce clear effects on efficiency. So, while the findings suggested that adopting HPWPs can actually benefit
employees, it did not suggest whether or not HPWPs are good for employers as well. This discovery is rather a
confusing one because interestingly, it is employers who adopt HPWPs. It will be difficult for them to adopt
practices whose benefits they can hardly determine.
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Wright et al. (2003) undertook a study of 50 business units of a food company operating in US and
Canada to determine the effect of HPWPs on firms‘ profitability and performance. They used predictive design
to obtain data from a sample of 5635 employees who were delivery drivers, sales personnel or warehouse staffs.
From the study, four key HPWPs were identified which are; remuneration, training, selection and employee
participatory practices. While six indicators of performance namely; profitability, shrinkage, expenses, quality,
productivity and compensation were used to measure the performance of the business units. The study revealed
that even at the business unit level, HPWPs leads to employee commitment and also had significant impacts on
firms‘ profitability. In a survey of 248 firms adopting the same type of HR practices in Hong Kong, Chow
(2004) sought to determine whether the implementation of complementary HPWPs affect the firms‘
performance or not. Primary data was collected through a well-designed questionnaire which was administered
to HR managers of these firms by e-mail. Six key indicators of performance were used to measure the firms‘
performance which is; recruitment, net profit, retention, sales turnover, employee morale and product/service
innovation. The findings revealed that the adoption of coherent or complementary HPWPs can actually lead to
increase in employees‘ productivity and firms‘ performance.
In a later study of 45 business units of a food corporation with branches in Canada and US, Wright et
al. (2005) further re-examined the relationship between HPWPs and organizational performance using the same
performance indicators which they used in their previous study in 2003. The data was collected from 1998 to
2000. They discovered that HPWPs usually derived from effective HRM practices have a positive impact in
improving workers‘ skills and competences. But, they argued that good HR practices such as effective work
design/structure, motivation, training and development will definitely influence employees‘ behavior positively.
And that, this will in turn cause a dramatic change in organizations‘ overall performance in the form of increase
in sales volume and profits. Kalleberg et al. (2006) also examined how the adoption of HPWPs in US differs
among profit-making, non-profit making and within the public sector. The survey data was derived from the
1996 National Organizations‘ Study which was collected from 1996 to 1997. While, a sample of 40 companies
was drawn from Dun and Bradstreet database which contains lists of establishments in United States. The study
used four sets of HPWPs namely; multiskilling, teamwork, committees and reward incentives as against
flexibility, innovation, and high quality as performance indicators. It was found that differences exist in the
adoption of HPWPs among the three types of firms.
And that teamwork and committees were mostly adopted in non-profit organizations while training and
job rotation were commonly found among profit making organizations. Thus, the findings supported the
Contingency claim that there are no best practices anywhere that could possibly increase firms‘ performance.
So, instead of pursuing a one-best way of organizing works; the firms adopt those practices that have an internal
and external-fit with their organizations. This means that, employers would adopt practices which align with
their organizations‘ structure, culture, strategy, technology and other external constraints. Thang et al. (2010)
used a theoretical framework to analyze the relationship between HPWP and firms‘ performance, using training
as a major tool of HPWPs. The aim was to determine the effect of training on workers‘ performance. Secondary
data was collected from various journals concerning previous researches on training and firms‘ performance
over a sixteen years period (from 1991-2007). A total of 66 researches were collated from the different journals,
52 used large data while 14 were mainly case studies. Both financial and non-financial indicators were used to
measure firms‘ performance.
The findings revealed that training has a positive effect on both financial (return on investment, market
share, profits) and non-financial (job satisfaction, turnover) performance of organizations. They added that, the
positive relationship between training and organizations‘ performance is duly reinforced by certain HR
practices. These HR outcomes are the end products of the training exercise which is supposed to cause a
behavioral change among employees. Notably among these HR outcomes were abilities, skills, knowledge,
motivation, behavior and attitude of trainees as identified by Thang et al. (2010). And the HR outcomes acted as
mediators linking employees‘ capabilities to organizational performance. In a cross-cultural study of companies
operating in US and China, Liang et al. (2012) confirmed the existence of a positive relationship between
HPWPs and the performance of companies that are operating in China. They discovered that the cost/benefit
analysis of adopting HPWPs in China differs from that of the US. The differences were as a result of differences
in the socio-cultural, economic and political variables of each country. Thus, culture seems to play a very crucial
role in shaping the HPWPs of organizations operating in different countries. Patel and Conklin (2012) undertook
a cross-sectional study of examining the effect of HPWPs and group culture on employees‘ productivity and
retention among small enterprises operating in UK. The data was collected from Dunn and Bradstreet (D&B)
database.
They discovered that group culture acts to mediate the effect of labor turnover. Although,
organizational culture produces a dual effect on firms‘ performance, it may also act as a predominant factor in
either trying to facilitate or hinder small business enterprises from gaining competitive advantage in their
respective industries. In a recent study in Europe, Ferreira et al. (2012) took a rigorous approach in determining
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High Performance Work Practices: One best-way or no best-way
Europeans viewpoint on HPWPs and, also to know the effect of HPWPs on European companies‘ performance.
The sample was drawn from 30 countries in the ECS (European Company Survey) in 2009. A sample size of
11,221 employers was used mainly from the production industries and HPWPs from previous researches were
used. These include; teamwork, reward and training. The findings revealed five bundles of HPWPs which are
adopted by European companies which are; representation of employees and training, rewards on profit sharing,
teamwork, ownership rewards, and communication. Ferreira et al. (2012) suggested that indeed there is a
European approach towards the adoption of HPWPs as opposed to the Universalists paradigm. And, that there
was an absence of a positive effect between HPWPs and firms‘ performance. While, teamwork, communication
and training had positive effects on firms‘ performance, employee representation on the other hand had negative
effects on firms‘ performance.
IV. Findings/Implications
The empirical studies revealed that the concept of HPWPs has truly come a long way. Thus, it borders
one to ask how effective HPWPs or best practices are and, are there any human resources practices that can be
referred to as ―best practices‖. The answers to these questions can be found at the two opposing sides of the
debate between the Universalist and Contingency views of HPWPs. From a Universalist point of view, yes ―best
practices‖ do exist and their impact on firms‘ performance cannot be denied. Although, most proponents of the
Universalists view like Neumark and Cappelli (1999), Huselid and Rau (1997) and Wright et al. (2005) are still
in a dilemma to determine the effect of high performance work practices on firms‘ performance. This is because,
some of the Universalist researches could not directly determine any positive relationship between HPWPs and
firms‘ performance yet; there is the general notion that HPWPs improves firms‘ performance.
Suffice to say then that, HPWPs is an elusive concept which might as well be another management
gimmicks. But, from the Contingency side of the debate it can be argued that best practices only exist in theory
and not in practice. What is rather obtainable is a ―best fit‖ model which emphasizes aligning HR practices to
suit the structure and context of organizations (Armstrong, 2009). Supporters of this stance (Godard, 2004;
Kalleberg et al., 2006; Ferreira et al., 2012) claimed that there are no universally accepted HR practices which
are capable of providing superior performance in organizations. In as much as ―there is room for differences of
emphasis within the literature on HPWS‖ (Ramsay et al., 2000 p. 503), the findings from this paper imply that:
i. Environmental factors cannot be overlooked in the adoption of HPWPs. The review showed that only those
researches that were conducted in the United States gave credence to the acceptance of a Universalism
stance. Studies that were conducted in Europe did not accept the existence of best practices. This was due to
differences in some key contextual and environmental variables such as socio-cultural, political and other
demographic factors which were found in the European business environment. This probably urged Ferreira
et al. (2012) to address the dialogue between HPWPs and firms‘ performance from a European point of
view. And, they confirmed that the types of HPWPs adopted by Europeans organizations and the adoption
processes are quite different from those practiced by the American firms. If this is anything to go by, then
the Universalist approach cannot hold true meaning that HPWP is just another management fad.
In addition to this, the Universalist supporters cannot undermine the impact of environmental factors in
shaping HR practices across the globe. These key issues must be critically addressed considering the fact that
business organizations do not operate in a vacuum. They function within a wider network of societal, political
and economic factors which managers do not have absolute control of. Thus, ―organizations are dynamic and
complex, and typically operate in multiple product markets‖ (Machington and Grugulis, 2000 p. 1116) which
cannot be readily predicted. So, it is hard to tell whether HPWPs contribute to or benefit from organizational
performance (Machington and Grugulis, 2000) especially when one considers the constant environmental
changes.
ii. No much empirical evidences were found to support the Universalist claim. This is because HRM activities
can only affect firms‘ performance by realizing two objectives; either by improving firms‘ efficiency and/or
increasing their profit level (Becker and Gerhart, 1996). Efficiency is defined in terms of minimizing firms‘
operational cost while at the same time making profits. Universalists researches failed to determine how
HPWPs can directly achieve these two objectives. They lack concrete testable proofs to back their claim as
argued by Ferreira et al. (2012). Some of the empirical studies (Neumark and Cappelli, 1999; Ferreira et al.,
2012) rather revealed a negative, weak or no effect between high performance work practices and
organizations‘ performance. Part of this could have been as a result of the inconsistencies surrounding
HPWPs both in theory and in practice.
Thus, it is crystal clear that high performance work practices adopted by companies differ from
company to company as was analyzed from the empirical studies. And it means that practices that work in one
organization may not necessarily work in others. For example, Primark‘s HR policy is like a three-legged stool
because it addresses three broad areas concerning employees‘ welfare which are; training and development,
rewards and benefits, and, value and diversity (Primark Stores Limited, 2012). The three areas have are
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High Performance Work Practices: One best-way or no best-way
diagrammatically presented in figure 2 below. While, the HR practices of Royal Mail Group covers seven core
areas concerning employees‘ relationship with unions, safety, recognition, equality/diversity and fairness,
internal communication, training and modernization (Royal Mail Group, 2012).
Figure 2: Primark‘s HR activities
V. Conclusion
From the discussions so far, this paper concludes that the debate on HPWPs and organizations‘
performance is inconclusive and confusing therefore, examining the effectiveness of HPWPs is difficult.
Furthermore, existing literature failed to determine how much more employees ought to be productive in order
to attain the optimum level of effectiveness and efficiency. Part of the confusion arose from the fact that, most
HR practices adopted by organizations differ from company to company and from country to country. Another
unresolved issue is the contextual, usability and applicability of the concept of high performance work practice.
For any management concept to be accepted universally, it must be universally applicable both in theory and in
practice as emphasized by the ―Universality of management‖ principle. This means that all managerial functions
are the same everywhere. But, HPWPs failed to meet this ―Universality‖ criterion thus; it is unjustifiable to
make any generalized statements about it.
Nevertheless, there is no doubting the fact that a significant relationship exist ―between bundles of
‗best‘ HRM practices and organizational performance‖ (Gold and Bratton, 2003 p. 3 citing Baker, 1999). This is
true only in organizations operating in Canada and US but, researchers are yet to take a stand on whether the
relationship is significantly positive or negative. American companies believe that no single HRM practices can
achieve the ultimate goal of optimizing employees‘ competences hence a combination of practices is needed to
achieve this aim. Even at that, the challenge still remains on how individual organizations can define what their
bundle of best practices will constitute and how to effectively diffuse the bundle throughout the organization.
Nevertheless, the effectiveness of HPWPs depends on the companies‘ culture, structure, type of employees and
other environmental factors.
Areas for Further Research
Since the problem of identifying the bundle of ―best practice‖ was addressed extensively by Guest et al.
(2004) using the sequential tree analysis, this paper suggests that further research be conducted on how HR
managers can effectively diffuse the bundle of ―best practices‖ throughout the organization. Another area is on
how to determine the right number of practices that are supposed to make up the right combination or bundle of
the so called ―best practices‖. This is necessary because, from the discussions so far it can be plausibly argued
that scholars are yet to agree on the minimum and/or maximum numbers of HPWPs suitable for companies to
practice.
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