Thursday, August 28, 2008

Real world value of strategic HRM practices

In my last post I talked about two articles from the most recent issue of Personnel Psychology (August, 2008) that had to do with adverse impact.

In today's post I'd like to talk about three of the other articles in that issue that all have to do with strategic human resource management (SHRM; not that SHRM) practices and their bottom-line impact. These studies don't directly reflect recruitment or selection practices but will interest anyone with a broader interest in HR.

The first study (by Birdi, et al.) compared several common SHRM practices (empowerment, training, and teamwork) with several more operational-style initiatives (TQM, JIT, AMT, and SCP) and looked at their effect on company productivity. The authors had access to a great database that included data from 308 companies over 22 years (!).

So what did they find? Out of the SHRM practices and the operational-style initiatives, only two--both SHRM practices--had significant effects on productivity. Specifically, the effects of employee empowerment and extensive training represented a gain of approximately 7% and 6%, respectively, in terms of value added per employee. Interestingly, it took both empowerment and training a couple years to impact productivity.

The second study by Nishii et al. looked at the attributions employees make about the reasons why management adopts certain HR practices and how these impact attitudes, organizational citizenship behaviors (OCBs) and customer satisfaction. Data from over 5,000 employees of a supermarket chain were analyzed.

So what did they find? A significant and positive correlation between employee attitudes and an attribution to the employer that the adoption of HR practices was based on a concern for customer service quality or employee well-being. In turn, employee attitudes were significantly (although less so) positively correlated with OCBs. Finally, the OCB of helping behavior was significantly correlated with customer satisfaction. In other words, when employees felt HR practices were implemented with an eye toward improving service quality or their own well-being, this improved their attitudes, which in turn increased the likelihood they would demonstrate helping behavior toward coworkers, which increased customer satisfaction. On the other hand, when employees attributed HR practices to keeping costs down, getting the most work out of employees, or complying with union requirements, there was no impact on employee attitudes.

The third study looked at how changes in team leadership impacted customer satisfaction in branches of a regional bank. Walker et al. examined data from 68 branch managers over a four-year period. The authors performed two tests--one of the mean differences between time periods and a residual analysis.

Why does that matter? Because the first type of test (called a t-test) simply looked at whether managers improved their team leadership scores and whether customer satisfaction ratings, on average, went up during that period. The answer to these questions was no. But the residual analysis looked at whether specific managers who improved (or worsened) their team leadership scores saw parallel improvement (or declines) in customer satisfaction ratings. The answer to THAT question was yes--in two of the three time periods (r=.21 and .31, respectively).

So what does all this mean? These studies certainly suggest that strategic HRM initiatives such as empowerment, communication, and extensive training (for both leaders and subordinates) can have significant, practical impacts on outcomes important to the organization.


io_pyscho said...

"In other words, when employees felt HR practices were implemented with an eye toward improving service quality or their own well-being, this improved their attitudes...."

I hate to be Mr. Rigor here, but your post implies causation for Study #2. I'm not familiar with the article yet, but the correlation data is subject to the usual x->y, y->x, z->x&y argument (i.e. positive attitudes leading to positive attributions about the company or financial success explaining both.) Needs some temporal precedence and internal control, but of course you knew that.

Love the blog. Please keep it up.

BryanB said...

You're absolutely right. Unlike studies 1 and 3, study 2 was not longitudinal.