The Impact of High Performance Work on Industry-Level Outcomes

Abstract

Organizations today face an increasingly competitive and rapidly changing environment. A variety of factors including globalization, technological breakthroughs, rapid innovation, and deregulation have eliminated competitive barriers and forced many organizations to fundamentally reformulate how they attain competitive advantage on a level playing field. In an era of leaner and meaner organizations, success depends on continually improving performance by reducing costs, improving/creating new products and processes, enhancing quality and productivity, and increasing speed to market. As such, all aspects of the organization must demonstrate their ability to positively impact performance (Becker and Gerhart, 1996; King et al., 2001). One area that has received increased attention in terms of its ability to impact organizational performance is the effective management of resources (Gelade and Ivery, 2003; Guthrie, 2001; Wright and Snell, 1998). The resource management (HRM) approach postulates that investing in and improving the capabilities of organizational members will generate increased knowledge, motivation, synergy, and commitment, resulting in a source of sustained competitive advantage for the firm (Becker et al., 2001; Harter et al., 2002). This human capital perspective will be explored in this study. In specific, the article will first review prior relevant research which has demonstrated a clear linkage between a system of generically labeled resource management High Performance Work Practices (HPWP) and organizational performance. Second, we will outline why the study and application of HPWP seems particularly germane for the rural electric utility industry. Next, an empirical analysis concerning the study's main hypothesis that rural electric distribution utilities which engage in higher levels of HPWP will also demonstrate higher levels of performance will be reviewed. Finally, a discussion concerning the results, limitations, and directions for future research shall be provided. STRATEGIC HUMAN RESOURCE MANAGEMENT AND HIGH PERFORMANCE WORK PRACTICES It is important to note that acceptance of the human capital approach is increasingly impacting the resource management (HRM) field. The HRM function has evolved from being regarded as a record-keeping, hiring/firing, maintenance function to being seen as a strategic partner and value-added contributor to the overall effectiveness of the organization. The accepted approach now is that HRM should contribute to the work climate, performance, and overall effectiveness of the organization and these criteria should be used for evaluation (Becker et al., 2001; Cascio, 2003; Gelade and Ivery, 2003; Ramlall, 2003). Instead of focusing on the effects of individual resource management policies and practices on individual outcomes, it has become necessary to explore the impact-specific configurations, or systems, of resource management on organizational-level outcomes (Arthur, 1994; Guthrie, 2001; Huselid et al., 1997). The strategic view that HRM should contribute to organizational performance has become an increasingly popular research stream (Stroh and Caligiuri, 1998). This growing body of work has argued that implementation of a system of HRM policies and practices can have positive results for an organization (MacDuffie, 1995; Perry-Smith and Blum, 2000). Probably one of the most visible works connecting HRM and bottom-line results is Huselid's (1995) research concerning the impact of High Performance Work Practices on organizational performance. This study found the strategic impact of HPWP--those activities that improve employees' knowledge, skills and abilities (e.g., comprehensive recruitment and selection procedures, job design, training and participation programs) and those that address employee motivation (e.g., performance appraisal systems closely linked to compensation)--to be significantly associated with firm performance. …

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