New

Models
of
High Performance
Work Systems
The Business Case for Strategic HRM, Partnership
and Diversity and Equality Systems

Equality The Equality Authority National Centre for

Partnership and Performance
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 New Models of
High Performance
Work Systems
The Business Case for Strategic
HRM, Partnership and Diversity
and Equality Systems

January 2008

Dublin City University Kansas University University of Limerick

Patrick C. Flood James P. Guthrie Wenchuan Liu
Thaddeus Mkamwa Claire Armstrong
Cathal O’Regan Sarah MacCurtain
First published January 2008 by

The Equality Authority

2 Clonmel Street
Dublin 2

National Centre for

Partnership & Performance
16 Parnell Square
Dublin 1

© 2008 Equality Authority and

National Centre for Partnership & Performance

ISBN 13: 978-1-905628-72-8

The views expressed in this report are those of the authors and do not necessarily represent
those of the Equality Authority or the National Centre for Partnership and Performance.
Contents

Foreword 5

Authors’ Acknowledgements 8

Executive Summary 10

Part 1
The Search for High Performance

1.1 Introduction 13

1.2 Organisation of report 14

1.3 Expanding the definition of HPWS 14

Part 2
Research Approach

2.1 Methodology 16

2.2 Sampling 17

2.3 Profile of Respondents 15

2.4 Industry and Company Profile 15

Part 3
A Descriptive Overview of Workplace
Policies and Practices in Irish Industry

3.1 Introduction 17

3.2 Strategic Human Resource Management

(SHRM) 20

3.3 Workplace Partnership 25

3.4 Diversity and Equality 29

3.5 Flexible Working 33

 Part 4
Exploring New Models of High Performance
Work Systems

4.1 Introduction 37

4.2 Outcome measures 37

4.3 HPWS Model 1 –

High Performance Through Strategic
Human Resource Management 38

4.4 HPWS Model 2 –

High Performance Through SHRM
and Partnership 38

4.5 HPWS Model 3 –

High Performance Through DES and FWS 40

4.6 HPWS Model 4 –

> High Performance Through SHRM,

Partnership, DES and FWS 41

Part 5
Conclusions 41

Part 6
References 45
Foreword

Irish-based manufacturing and services This analysis of High Performance Work

companies operate in an environment of Systems (HPWS) examines some of the
intense globalised competition, where many key components of the ‘Workplace of the
external factors impact on the viability of Future’, as set out in the National Workplace
their enterprises. In this challenging climate, Strategy (2005). These include approaches
time and again we see inspirational examples to workplace partnership (or employee
of companies safeguarding their future involvement and participation systems),
through successful innovation – not only and proactive management of diversity (or
in the design and implementation of new equality and diversity systems). The research
products and services, but in workplace allows us to move beyond the realm of
innovation – improving the processes and expert opinion and case study, to firmly and
systems for organising and managing work. quantifiably establish the business case for
HPWS. The results highlight that the gains in
It is increasingly apparent that one of the
productivity and innovation levels associated
keys to successful organisational performance
with HPWS represent far more than merely
is the people within the organisation, and
interesting statistical findings: in stark
the management systems that harness their
economic terms, the order of magnitude
talents and capabilities. New Models of
can, for many companies, be the difference
High Performance Work Systems breaks new <
between success and failure.
ground in our quest to understand the nature
of high-performing organisations, focussing This research helps us to understand more
on key elements of workplace innovation fully the nature of the differences between
– employee involvement and participation high-performing and average-performing
and equality and diversity systems. companies. The report reveals that high-
Drawing on a detailed survey of 132 medium performing companies in Ireland are
to large companies in Ireland, the research concerned with managing a range of issues
explores how the management policies and that include the management of employee
practices that are found in both multinational involvement and participation, and of
and indigenous Irish firms are related to diversity and equality systems. The research
organisational performance. The findings once establishes the quantifiable and positive
again underscore the fact that companies impact of equality and diversity strategies and
with higher levels of productivity, innovation of employee involvement and participation
and employee retention manage their on labour productivity, workforce innovation
organisations in ways that are demonstrably and employee turnover. These findings
different from the average company. clearly reinforce the business imperative for
 new models of high performance
work systems

managing employee involvement and par- where strategic HRM is integrated into,
ticipation, and implementing diversity and and balanced with, systems for managing
equality strategies, as legitimate concerns for employee involvement and participation,
organisational strategy in their own right. diversity and equality, and flexible working.

The findings demonstrate the powerful and The findings have important implications
synergistic effect of a multi-dimensional on a number of levels, not just for those
model of HPWS, where the net impact with leadership or management responsi-
of combining strategic human resource bilities at enterprise level, but for public
management (HRM) with employee policy makers and for the academic research
involvement and participation systems, community. The findings reaffirm the organi-
equality and diversity systems and flexible sational development framework set out
working systems, significantly exceeds the in the National Workplace Strategy, which
impact of any of these systems in isolation. sees the Workplace of the Future being
In economic terms, the median-sized shaped by concerns including employee
company in this sample (270 employees) involvement and participation, and equality
employing the multi-dimensional model of and diversity strategies. The findings should
HPWS would have performance advantages encourage researchers, practitioners and
> including almost €12,000,000 (or €44,399 the public policy community alike to
per employee) in labour productivity, and confidently redefine the scope of HPWS, and
€556,200 (or €2,061 per employee) in to focus attention on the need for employee
workforce innovation. Such findings mean, involvement and participation, equality and
in other words, that we can only begin to diversity strategies and flexible working
fully understand management systems systems to emerge as mainstream concerns
in high performance companies when we in defining better ways forward for the
think of them as sophisticated systems Irish economy.
 foreword

New Models of High Performance Work We are grateful to Professor Flood and
Systems is part of an ongoing joint the research consortium from Dublin City
programme of work by the Equality Authority University, University of Limerick and Kansas
and the National Centre for Partnership University for the quality and expertise of
and Performance to explore the business their work on this research project. We are
case for workplace innovation strategies. also grateful to the team that managed the
It further underpins a business imperative project on behalf of the sponsors – Laurence
for employers to implement employee Bond at the Equality Authority, and Larry
involvement and participation strategies and O’Connell, Cathal O’Regan, Conor Leeson
equality and diversity strategies across all and Julia Kelly at the National Centre for
sectors of the economy. Such strategies could Partnership and Performance.
usefully be supported by public policy and
the further development of the resources and
support infrastructure available to businesses.

<

Lucy Fallon-Byrne Niall Crowley

Director Chief Executive Officer
National Centre for Partnership Equality Authority
and Performance
 Authors’ Acknowledgements

The authors wish to acknowledge the About the Authors

financial support of the National Centre for
Patrick C. Flood, Ph.D. received his doctorate
Partnership and Performance (NCPP) and
from the London School of Economics. He
the Equality Authority. We would also like
is currently Professor of Organisational
to thank Lucy Fallon Byrne and Dr. Larry
Behaviour at Dublin City University. Previous
O’Connell at the NCPP together with
appointments include Professor at the
Niall Crowley and Laurence Bond at the
University of Limerick (where he directed the
Equality Authority.
Strategic Leadership Research Programme
and the High Performance Research
Group), the Australian Graduate School
of Management, London Business School,
Irish Management Institute, the R.H. Smith
School of Business, University of Maryland
at College Park and the London School
of Economics. He was recently appointed
Honorary Professor at Northeastern
University China. He is a former Fulbright
> Scholar, and has published and taught
extensively on the topics on human resource
strategy, top management teams and organi-
sational effectiveness.

James P. Guthrie, Ph.D. is the William and

Judy Docking Professor with the School of
Business at the University of Kansas. He
received his B.A. and M.B.A. from the State
University of New York at Buffalo and his
PhD from the University of Maryland. He
was Visiting Professor with the Kemmy
Business School, University of Limerick. He
has previously held visiting faculty appoint-
ments with the University of Waikato in
New Zealand and with the Consortium
of Universities for International Business
Studies in Italy. He has published widely on
the impact of HR policies and practices on
firm performance.
 acknowledgements

Wenchuan Liu, Ph.D. is Postdoctoral Thaddeus Mkamwa is a registered doctoral

Fellow at the University of Limerick. He student at Dublin City University Business
previously worked as an Assistant Professor School. His research topic is on HPWS and
at Northeastern University, China. He gained diversity management in Irish workplaces. He
his PhD from the Kemmy Business School, received his STB from Pontifical University
University of Limerick for a study of the Urbaniana at St.Paul’s, Tanzania. He also
economic impact of high performance work graduated with BA and MS from Elmira
systems in Irish industry. College, New York. He has also lectured
on Development Studies at St. Augustine
Claire Armstrong, Ph.D. is a Research
University of Tanzania.
Scholar at the Kemmy Business School,
University of Limerick. She received her PhD Cathal O’Regan is Head of Workplace
from the University of Limerick in 2004. Strategy at the National Centre for
She has conducted research and published Partnership and Performance. He is a
internationally on organisational justice, registered doctoral student at Dublin City
the psychological contract, absenteeism, University Business School investigating
continuing professional education, and the relationship between partnership and
health services management. business performance.
<
Sarah MacCurtain, Ph.D. is a Lecturer with
the Kemmy Business School, University of
Limerick. She received her PhD from Aston
University. She is co-author of Effective
Top Teams (2001, Blackhall) and Managing
Knowledge Based Organisations (2002,
Blackhall).
 Executive Summary

This report highlights the findings of The research was jointly commissioned by
the National Centre for Partnership and
a detailed survey of medium to large
Performance and the Equality Authority, and
companies in the manufacturing and was carried out during 2006 by a research
consortium from University of Limerick and
services industries in Ireland. The research University of Kansas. Detailed survey data
set out to examine the nature of was gathered from a total of 132 companies,
using two survey instruments targeting both
management and workplace practices in the CEO (or MD) and the HR director in the
sample companies.
Irish-based private sector companies, and
The researchers conducted sophisticated
to explore how such practices are related
multiple regression analyses on the data to
to business performance outcomes. explore a number of alternative models of

Table 0.1
Summary of Multivariate Modelling of High Performance Work Systems
10 >
MODEL 1 MODEL 2

u Strategic HRM u S trategic HRM

u Partnership

Labour Productivity uG
 reater use of SHRM associated with uG
 reater use of SHRM and Partnership
increased labour productivity. SHRM associated with increased productivity.
accounts for 12.4% variance (p<.01)
u S HRM accounts for 10% variance
uS
 tatistically significant (p<.01)
u Partnership accounts for 3.9% variance
positive relationship between change
of HPWS and change of labour uS
 HRM partially mediates between Partnership
productivity (based on comparison of and labour productivity
2004 and 2006 panel data)

Workforce Innovation uS
 HRM associated with greater uS
 HRM associated with greater workforce
workforce innovation innovation (5% of variance)

uS
 HRM also mediates relationship between
partnership and workforce innovation.
Partnership does not have a direct
association, but companies with partnership
are likely to have greater levels of SHRM

Employee Turnover uS
 HRM associated with decreased uS
 trategic HRM associated with decreased
employee turnover employee turnover (4% of variance, p<.01)

uS
 HRM also mediates relationship between
partnership and employee turnover.
 executive summary

High Performance Work Systems (HPWS). The practices are clearly associated with
initial model explored the standard set of business performance outcomes, including
factors associated with HPWS, which relate labour productivity, innovation levels, and
to strategic human resource management employee wellbeing. The more novel findings
in the company. However, the researchers relate to the discovery that other factors,
then expanded their analysis to examine including diversity and equality systems, and
factors beyond strategic HRM, including workplace partnership systems, are positively
workplace partnership, diversity and equality and synergistically associated with signifi-
management, and flexible working systems. cantly higher levels of labour productivity,
workforce innovation, and reduced employee
The results of the initial model of HPWS
turnover.
reconfirm what previous research by
the NCPP and others has shown – that The key findings from four alternative models
strategic human resource management of HPWS are highlighted in Table 0.1 below.

< 11
MODEL 3 MODEL 4

u Diversity and Equality Systems u S trategic HRM

u Flexible Work Systems u Partnership

u D iversity and Equality Systems

u F lexible Work Systems

uD
 iversity and Equality system u F our elements together (SHRM, Partnership, DES,
accounted for 6.5% of variance FWS) account for 14.8% of variance in labour
in labour productivity productivity. While only SHRM is significant, other
three variables are in a positive direction. Total
uN
 o significant association
economic value in this sample equates to e44,399 per
between FWS and labour
employee, or almost e12,000,000 in the median sized
productivity
company with 270 employees.

uD
 ES accounts for 7.9% of u F our elements together (SHRM, Partnership, DES,
variance (p<.01) FWS) account for 12.2% of variance in workforce
innovation. SHRM and DES are significant, while
uN
 o significant association
Partnership and FWS affects in positive direction.
between FWS and workforce
Total economic value in this sample equates to
innovation
€2,061 per employee, or €556,200 in the median-
sized company with 270 employees.

uD
 ES accounts for 4.4% variance u F our elements together (SHRM, Partnership, DES,
in employee turnover (p<.01) FWS) account for 7.7% of variance in employee
turnover. Partnership is significant at 4% of variance
uN
 o significant association
explained. Total economic value in this sample
between FWS and employee
equates to retention of up to 2 additional employees
turnover
in the median-size company.
 new models of high performance
work systems

In this sample of companies, a broad These results challenge public policy makers,
model of HPWS (incorporating strategic researchers, and management practition-
HRM, workplace partnership, diversity and ers to think of high performance work
equality systems and flexible work systems) systems in a more expansive way than has
was found to be associated with 14.8% of been the norm until now. While strategic
variance in labour productivity, 12.2% of human resource management will clearly
variance in workforce innovation, and 7.7% remain a core concern in terms of best
of variance in employee turnover. practices approaches to the management
of companies, it is becoming increas-
While the analyses do not suggest a causal
ingly clear that companies may find
relationship between HPWS and business
competitive advantage through more
performance outcomes, they do make
effective approaches to managing employee
important reading for any company that
involvement and participation, and diversity
is seeking to build competitive advantage
and equality in the workplace. Such issues
through workplace innovation. They
should no longer be considered as issues
demonstrate a strong business case for
to be managed only for the purposes of
building management systems that deal
regulatory compliance, but as organisa-
effectively with issues including strategic
tional factors that can impact significantly
12 > human resource management, employee
on productivity and innovation levels in the
involvement and participation, diversity and
company.
equality management, and flexible working.
Where companies are found to manage these
issues more extensively, higher levels of
business performance can be demonstrated.
Where companies are found to manage
these issues in a more cohesive management
system, even greater effects are found in
terms of business performance.
Part 1

The Search for High Performance

1.1 Introduction Over recent years, a clear view has emerged

in terms of public policy in Ireland, which
Economic and social indicators have adopts the perspective that sustainable
improvements in organisational performance
for some time now charted Ireland’s will be determined by the interaction of a
progressive emergence as a knowledge- wide range of factors within the workplace.
The National Workplace Strategy (2005)
based society. The changing structure of articulated a comprehensive workplace
development framework that encompassed
the economy and increasingly globalised
nine organisational characteristics: agile,
competition has exposed Irish-based customer-centred, networked, highly
productive, responsive to employee needs,
companies to greater levels of competition
knowledge-based, continuously learning,
from across the globe. Across the involved and participatory, and proactively
diverse.
economies of the OECD, companies are
For several decades, researchers have been
pursuing strategies for building competitive
developing increasingly effective approaches
advantage through higher productivity to examining how behaviours and practices < 13
within organisations relate to business
levels and better product and service performance. The general proposition
innovation. In this search for competitive underlying much of this research is that
high-performing companies that compete
advantage, organisational or workplace successfully on the basis of productiv-

innovation is widely seen as being a key ity and innovation levels also tend to have
more sophisticated, extensive and effective
factor in allowing companies to design and management systems. In examining this
proposition, the concept of High Performance
implement workplace policies and practices
Work Systems (HPWS) provides a useful
that support higher levels of productivity means of describing and explaining the
observed differences in workplace behaviours
and innovation.
between high-performing organisations and
average-performing organisations. Put simply,
HPWS are bundles of work practices and
policies that are found more extensively in
high performing organisations.

This report examines HPWS found in

manufacturing and services companies
operating in Ireland, and describes how these
practices are related to labour productiv-
ity, product and service innovation, and
 new models of high performance
work systems

employee well-being. Commissioned jointly 1.2 Organisation of the Report

by the National Centre for Partnership and
The report is presented in five parts:
Performance and the Equality Authority,
the report builds on previous research by p Part 1 describes the origins of the report,
the NCPP1 that examined the relationship highlighting the rationale and research
between management practices and business objectives, and examining some of what
performance outcomes. is already known about high performance
work systems
The rationale for conducting this further
research was to develop a more expansive p Part 2 details the research design and
view of what HPWS entails in an Irish methodology, the response rate and the
context. Specifically, the research focuses profile of survey respondents
beyond the traditional model of HPWS
p Part 3 presents the descriptive results
that is dominated by human resource
from the survey, illustrating the range and
management concerns, to look at
prevalence of management practices found
management practices including workplace
in the survey sample, and highlighting lon-
partnership, diversity and equality systems,
gitudinal trends in management practices
and flexible working systems. Such issues
14 > based on comparisons with a previous
have historically been regarded, at least in
survey conducted in 2004
some quarters, as issues of compliance rather
than as potential sources of competitive p Part 4 looks at how HPWS is associated
advantage. with high performance, and presents a
number of HPWS models that will be of
However, international and domestic
interest both to practitioners of organisa-
research2 continues to strengthen the
tional change (including managers, trade
business case for partnership, diversity and
union representatives and employees
equality. This report examines both the
generally) and to policy makers
stand-alone and synergistic effects of these
management issues in high performing Irish- p Part 5 presents the conclusions of the
based manufacturing and service companies. report, and considers the implications
The report findings support the case for of this analysis for both the theoretical
an expanded concept of High Performance treatment of management systems and
Work Systems, which raises some important the practical challenges for those at the
considerations for policy makers, academics enterprise level engaged in the search for
and for people in leadership positions at greater competitiveness
enterprise level.

1 Flood, P., Guthrie, J.P., Liu, W., and MacCurtain, S. (2005). High Performance Work Systems in Ireland – The Economic Case.
National Centre for Partnership and Performance.
2 Including research from the National Centre for Partnership and Performance and the Equality Authority.
 the search for high performance

1.3 Expanding the definition of HPWS The growing body of research on HPWS
enables us to develop a more useful under-
A growing body of research suggests that
standing of the nature of the relation-
the use of a set of HR practices, including
ship between business performance and
comprehensive employee recruitment
management systems. Researchers have
and selection procedures, compensation
examined a range of configurations of
and performance management systems,
HPWS to better understand the relative
information sharing, and extensive employee
importance and synergistic effect of different
involvement and training, can improve the
management and workplace practices.
acquisition, development and retention of
This approach establishes the context
a talented and motivated workforce3. These
for the present report, which sets out to
HR practices are usually referred to as high
develop new conceptual insights into what
involvement4, high commitment 5, or high
constitutes high performance work systems
performance6 work systems.
by looking beyond the prevalent HRM-
Much of the analysis of HPWS originates centred model. The current research seeks to
from the study of strategic human resource examine the business case for new models of
management (SHRM), where researchers HPWS, using empirical evidence to explore
have examined the impact of “bundles” of how a broad set of management practices
< 15
HR practices on organisational outcomes. which includes strategic human resource
The idea that a system of HR practices management, workplace partnership,
may be more than the sum of the parts diversity and equality management, and
gives rise to debate as to the specific con- flexible working might relate to high
figuration of practices constituting a high performing organisations.
performance system. Some work suggests
“universal” HPWS effects7, while other work
suggests that HPWS effects may depend on
conditions such as competitive strategy or
industry8. One way or another, a system or
set of management practices is considered to
be more difficult for competitors to imitate
than individual practices.

3 E.g. Arthur, 1994; Batt, 2002; Becker and Gerhart, 1996; Datta et al., 2005; Guthrie, 2001; Huselid, 1995;
Huselid and Becker, 1996; Jones and Wright, 1992; MacDuffie, 1995; United States Department of Labour, 1993.
4 E.g. Guthrie, 2001.
5 Arthur, 1994.
6 Datta et al., 2005; Pfeffer, 1994, Huselid, 1995.
7 E.g. Huselid, 1995.
8 E.g. Datta et al., 2005.
 Part 2

Research Approach

2.1 Methodology The surveys elicited descriptions of four

discrete elements of High Performance Work
The methodology adopted draws on Systems, including:

previous research including NCPP p S trategic Human Resource Management

(SHRM), including management practices
(2003, 2004), Flood et al. (2005); Guthrie, in the areas of communication and par-
(2001); Guthrie, Spell & Nyamori (2002); ticipation; training and development;
staffing and recruitment; performance
Datta et al. (2005). management and remuneration

p E mployee Involvement and Participation /

Two survey instruments, designed
Workplace Partnership System (WPS)
according to the Total Design Method ,
p D iversity and Equality System (DES)
were issued. The first, the “HRM survey”,
p F lexible Working System (FWS)
targeted the senior HR manager, and
Three business performance variables were
solicited information on the management
16 > measured by the surveys, including:
policies and practices in the organisation.
p L abour productivity
The second, the “GM survey”, targeted
p Workforce innovation
the General Manager or CEO, and
p E mployee turnover
solicited measures of competitive

strategy and entrepreneurial orientation

of the organisation, as well as business

performance metrics.

9 See http://www.businessworld.ie.
 research approach

2.2 Sampling 2.4 Industry and Company Profile

The survey sample was drawn from “The The profile of participating companies is
Irish Times Top 1000 Companies” database,
9
commensurate with the general profile of
which is a representative, multi-industry larger industry in Ireland. Figure 2.1 shows
set of Irish-based operations. The sample approximately one third are in manufactur-
includes both indigenous Irish companies and ing, 27% are in service industries (finance,
foreign-owned companies with operations personal, recreational, health and other
in Ireland. 1005 companies were contacted services) while less than 4% of companies
to participate in the survey, of which 241 are from energy or water industry. As shown
companies responded. Data was utilised in Figure 2.2, 50% of the companies were
from the 132 companies that completed indigenous Irish-owned companies, with the
both the HR and GM surveys, resulting in remaining 50% being subsidiaries of foreign
an overall response rate of 13.2%. This companies, including USA (25.8%), Germany
response rate is in line with typical response (6.8%), and UK (5.3%). Unions represented
rates for research of this nature, ranging 33.7% of participating companies’
from 6% to 20%. employees. The average company had been
established for about 37 years, and the
2.3 Profile of Respondents median number of employees was 270. The < 17
companies were at the higher end of R&D
For the HRM survey, 70% of respondents
activity in Irish terms, with average R&D
were from the HR function, 20% were other
investment equating to 3.89% of annual
senior executives (e.g. Managing Director /
turnover.
CEO), and 10% were other executives (e.g.
Financial Officer, Operating Officer). For
the GM survey, 70% of respondents were
Senior Executives (e.g. Managing Director,
CEO), while the remaining 30% were other
Executives (e.g. HR Officer, Financial Officer,
Operating Officer).
 new models of high performance
work systems

Figure 2.1
Industry distribution of participating companies

Other mfg. 24.24%

Retail & distribution 13.64%

Banking, finance services 12.12%

Building & civil engineering 7.58%

Other services 7.58%

Transport & communication 6.82%

Metal mfg. 6.82%

Chemical products 6.82%

Agriculture/Forestry/fishing 4.55%

Energy & water 3.79%

Health services 3.03%

Personal, recreational services 3.03%

0 5 10 15 20 25
18 >

Figure 2.2
Country of ownership of participating companies

Frequency

70 66

60
50
40 34

30
20 16
9 7
10
0

Ireland USA Germany UK Other

Country of Ownership
Part 3

A Descriptive Overview of Workplace Policies

and Practices in Irish Industry

3.1 Introduction The analysis is structured around

four themes:
This section examines the research
p Strategic HRM (SHRM)
findings to describe the workplace
p Partnership
policies and practices reported by survey p Diversity and Equality
respondents. The analysis in this section
p Flexible Working
is aimed primarily at understanding how
These themes also provide the basis
extensively these practices are found
for more advanced analyses later
across different types of companies.
in the report, where the index scores
The analysis relies heavily (though
are again utilised to explore new
not exclusively) on the use of index
models of HPWS.
scores, which provide a reliable and

effective way of measuring variation < 19

between companies. While an index

score represents a proxy indicator of

difference between companies,

it does not represent a full audit of

practices within these companies.

 new models of high performance
work systems

3.2 S
 trategic Human Resource 3.2.2 Measuring SHRM
Management (SHRM)
In measuring SHRM practices, researchers
looked separately at two categories of
3.2.1 Overview
employees. Group A comprised production,
The first theme examined is strategic human maintenance, service and clerical employees,
resource management (SHRM). This has while Group B comprised executives,
been the traditional focus of HPWS research, managers, supervisors and professional/
and in many instances the term SHRM is technical employees.
used interchangeably with HPWS. SHRM
For this study, 18 survey items were
is generally understood as a set of inter-
compiled to create a SHRM Index,11 which
related HR practices that include staffing,
resulted in each company receiving a single
performance management and remuneration,
SHRM score on the index. The 18-item
training and development, communication
SHRM Index incorporated practices in areas
and participation. The common theme in the
including staffing, performance management
literature on SHRM is a set of practices that
and remuneration, training and development,
provide employees with skills, information,
and communication and employee partici-
motivation and latitude, resulting in a
20 > pation. Using the number of employees in
workforce that is a source of competitive
each occupational group, a weighted average
advantage. Huselid’s (1995) landmark study
for each practice was computed. The SHRM
examined the relationship between the
Index had a Cronbach’s alpha reliability
use of high performance work systems and
rating of 0.85, giving confidence that the
company performance. His main finding was
SHRM Index was a reliable indicator of the
that greater use of these types of SHRM
extent of its SHRM practices at the time
practices was associated with decreased
of the survey, and represents a state-of-
turnover and higher levels of productivity
the-art profile of SHRM in medium to large
and profitability. Similarly, Flood et al. (2005)
companies in Irish industry.
highlighted the economic benefits associated
with high performance work practices in Table 3.1 highlights the 18 items and their
people management, employee involvement, average score for each occupational group.
and training and development.10 The SHRM Index yields an average score
of 48.81% across all companies and both
occupational groups.

10 In their report, Flood et al. (2005) categorised the three main areas as four components in terms of staffing, performance
management and remuneration, training and development, and communication and participation.
11 Based on methodology employed previously by Huselid (1995), Guthrie (2001), Datta et al. (2005), and Flood et al. (2005)
 workplace policies and
practices in irish industry

Table 3.1
SHRM Systems in Irish Companies

STAFFING:
What proportion of your employees..... Score
 re administered one or more employment tests
A
(e.g., skills tests, aptitude tests, mental/cognitive ability tests) prior to hiring? 24.19%
Are hired on the basis of intensive/extensive recruiting efforts
resulting in many qualified applicants? 57.67%
Hold non-entry level jobs as a result of internal promotions
(as opposed to hired from outside of the organisation)? 34.37%
Hold non-entry level jobs due to promotions based upon merit or performance,
as opposed to seniority? 44.99%

TRAINING & DEVELOPMENT:

What proportion of your employees..…
Have been trained in a variety of jobs or skills (are “cross trained”) and/or
routinely perform more than one job (are “cross utilized”)? 53.72%
Have received intensive/extensive training in company-specific skills
(e.g., task or firm-specific training)? 73.58%
Have received intensive/extensive training in generic skills
< 21
(e.g. problem-solving, communication skills, etc.)? 37.23%

PERFORMANCE MANAGEMENT & REMUN E R AT I O N :

What proportion of your employees..…
Receive formal performance appraisals and feedback on a routine basis? 67.32%
Receive formal performance feedback from more than one source
(i.e., feedback from several individuals such as supervisors, peers etc.)? 20.57%
Receive compensation partially contingent on group performance
(e.g., profit-sharing, gainsharing, team-based)? 34.44%
Are paid primarily on the basis of a skill or knowledge-based pay system
(versus a job-based system)? That is, pay is primarily determined by a person’s skill
or knowledge level as opposed to the particular job that they hold 28.16%

COMMUNIC ATION & PARTICIPATION:

What proportion of your employees..…

 re involved in programmes designed to elicit participation and employee input

A
(e.g., quality circles, problem-solving or similar groups)? 36.88%
Are provided relevant operating performance information (e.g., quality, productivity, etc.) 72.22%
Are provided relevant financial performance information? 68.04%
Are provided relevant strategic information
(e.g., strategic mission, goals, tactics, competitor information, etc.) ? 67.41%
Are routinely administered attitude surveys to identify
and correct employee morale problems?. 37.63%
Have access to a formal grievance/complaint resolution procedure 96.17%
Are organized in self-directed work teams in performing a major part of their work roles? 36.09%
Average score

HPWS Index 48.81%

 new models of high performance
work systems

Figure 3.1 to Figure 3.4 illustrates some p The use of SHRM was linked with
interesting findings regarding SHRM: workforce size, with companies with more
than 500 employees being more likely to
p The use of SHRM varies significantly
use SHRM than companies with less than
depending on the nature of the industry.
500 employees (58.01% vs. 45%).
Companies in the personal services sector
reported most extensive use of SHRM p There is no significant difference between
(64.41%), while those working in health the levels of SHRM used in non-unionised
services have the least extensive use of companies and unionised companies.
SHRM (only 35.77%).
p Companies that have implemented a
p The use of SHRM appears to be much partnership policy are significantly more
more extensive in subsidiaries of likely to utilise SHRM.
foreign companies than Irish indigenous
companies (57.29% vs. 38.72%).

22 > Figure 3.1

Strategic HRM Usage x Type of Industry

All Firms 48.81

Personal Services 64.4

Chemical Products 63.56

Transport/Communications 61.35

Finance Services 56.49

Energy/Water 52.57

Metal Mfg. 47.89

Other Mfg. 47.02

Other Services 45.34

Agriculture/Forestry 44.98

Building 44.75

Retail & Distribution 38.02

Health Services 35.77

0 10 20 30 40 50 60 70 80 90 100

Extent of SHRM Usage

 workplace policies and
practices in irish industry

Figure 3.2
Strategic HRM x Country of Ownership

Country of Ownership

Indigenous Irish Companies 38.72

Multinational Corporations 57.29

0 10 20 30 40 50 60 70 80 90 100

Extent of SHRM Usage

Figure 3.3
Strategic HRM x No. of Employees

Company size
(no. of employees) < 23
Less than 100 44.92

100-500 45.88

500 plus 58.01

0 10 20 30 40 50 60 70 80 90 100

Extent of SHRM Usage

Figure 3.4
Strategic HRM x Level of Unionisation

Level of Unionisation

0% 44.92

>0% <70% 45.88

70%-100% 58.01

0 10 20 30 40 50 60 70 80 90 100

Extent of SHRM Usage

 new models of high performance
work systems

3.2.3 SHRM Trends 2004–2006 Other changes in the panel companies over
the same period included
The research included a sub-set of paired
(‘panel’) data from 48 companies that had p A significant increase of 11.2% in labour
previously responded to a 2004 survey productivity13
(Flood, P. et al., 2005). A comparison of
p I ncreased levels of R&D investment14
the 2004 and 2006 data on SHRM from
from an average of 3.23% in 2004 to
these companies shows a sizeable positive
3.29% in 2006
increase in the average SHRM Index score,
from 40.55% in 2004 to 45.64% in 2006, as p I ncreased employment growth, up on
illustrated in Figure 3.5, below. average by 11 employees per company

p I ncreased unionisation, with the number

of unionised employees in the panel of
companies up by 3.48%, up from 40.55%
in 2004 to 44.03% in 2006

Figure 3.5
SHRM Trends 2004–2006
24 >

Frequency

1.6

1.4

1.2 1.10
1.22

0.8

40 42 44 46

Strategic HRM
40.55 45.64

13 Labour productivity, calculated as the log of sales revenue per employee, increased from a score of 1.10 in 2004 to 1.22 in 2006. The analysis used the
mean of labour productivity scores from both HR and GM surveys.
14 R&D Investment – calculated as a percentage of annual turnover.
 workplace policies and
practices in irish industry

3.3 Workplace Partnership Guest and Peccei (2001) presented a

framework for the analysis of partnership,
3.3.1 Overview emphasizing the principles, practices and
outcomes of partnership. Using samples
The next theme considered is Partnership.
of 54 UK management and employee rep-
Guest and Peccei (2001) describe partnership
resentatives, they found a link between
as a concerted effort by owners and
partnership principles and practices and
managers to create an environment where
employee attitudes and behaviour. Their
employees take a significant psychologi-
findings support the thesis that mutual
cal stake in the success of the organisa-
gains are achievable in labour management
tion. This is achieved through building high
partnerships.
levels of attachment, commitment, and
involvement in the enterprise. A partnership
3.3.2 Measuring Partnership
philosophy relies on both employees and
management to focus on shared goals For this study, a Partnership Index was
and interests without being derailed by constructed using four survey items, which
potentially different positions on specific resulted in each company receiving a
issues (Guest & Peccei, 2001). As such, single score on the Partnership Index. The
partnership represents a philosophy of Partnership Index gauges variation between < 25
integration and mutuality, with a move away companies, and does not represent an
from conflicting positions and distinctions audit approach to measuring partnership
(Martinez Lucio & Stuart, 2002). McCartan at company level. Future research may well
discusses the primary values espoused by adopt alternative indices of partnership.
partnership philosophies including: mutual Table 2.2 describes these practices in the
trust and respect, a joint vision for the responding companies.
future, continuous information exchange,
employment security, and dispersed decision-
making (2002: p. 60).

Partnership has been argued to increase

productivity, boost quality, provide a more
motivated workforce, and precipitate drops
in absenteeism and turnover (Roscow &
Casner-Lotto, 1998), likely resulting in
higher degrees of collaboration and
knowledge sharing, which ultimately builds
social capital.
 new models of high performance
work systems

Table 3.2
Partnership in Irish Companies

Item Scale Score

There is a high level of trust between Strongly disagree (1) …

management and employees Strongly agree (5) 3.61

Employees are well informed on the views Strongly disagree (1) …

and concerns of company management Strongly agree (5) 3.80

Company management are well informed Strongly disagree (1) …

on the views and concerns of employees Strongly agree (5) 3.72

Workplace partnership is… 0 (Non-existent);

1 (Largely confined to a few key individuals);

2 (Largely confined within formal partnership structures);

3 (Evident in at least certain parts);

4 (Evident across most of it);

5 (Now the norm for working). 3.95

26 > Average score

Partnership 3.80
 workplace policies and
practices in irish industry

Figure 3.6 to Figure 3.9 shows the use of In terms of company size, companies with
partnership as a function of organisational employee numbers greater than 100 are
type. In terms of country of origin, the more likely use partnership than smaller
subsidiaries of foreign companies reported companies. In general, the effect of unioni-
slightly higher adoption of partnership than sation on the use of partnership is not
Irish indigenous companies (3.94 vs. 3.67). significant.

Figure 3.6
Partnership Usage x Type of Industry

All Firms 3,8

Energy/Water 4,55

Health Services 4,5

Other Services 4,05

Finance Services 3,98 < 27

Building 3,93

Transport/Communication 3,87

Metal Mfg. 3,75

Chemical Products 3,75

Other Mfg. 3,68

Personal Services 3,56

Retail & Distribution 3,51

Agriculture/Foresty 3,46

0 1 2 3 4 5

Extent of SHRM Usage

 new models of high performance
work systems

Figure 3.7
Partnership Usage x Country of Ownership

Country
of Ownership

Indigenous Irish
Companies 3.67

Multinational 3.94
Corporations
0 1 2 3 4 5

Extent of Partnership Usage

Figure 3.8
Partnership Usage x No. of Employees

Company size
(no. of employees)
28 >
Less than 100 3.65

100-500 3.93

500 plus 3.95

0 1 2 3 4 5

Extent of Partnership Usage

Figure 3.9
Partnership Usage x Level of Unionisation

Level of
Unionisation

0% 44.92

>0% <70% 45.88

70%-100% 58.01

0 1 2 3 4 5

Extent of Partnership Usage

 workplace policies and
practices in irish industry

3.4 Diversity and Equality 3.4.2 Measuring Diversity and Equality

For this report, 17 survey items15 were

3.4.1 Overview
selected and compiled16 to create the
Both at public policy level and at the level DES Index, providing a single score rep-
of the enterprise, policies that promote resentation of DES. The DES Index had a
equality of opportunity and accommodate Cronbach’s alpha reliability rating of 0.823.
diversity are understood to have a key role Table 2.3 describes these practices and
in mobilising an increasingly diverse labour their percentage usage in the responding
force. This is a particularly important issue companies.
in contemporary Ireland, where the labour
force has developed an unprecedented level 3.4.3 D
 iversity and Equality
of diversity stemming from a significant (DES) Findings
increase in the participation rate of women,
Overview of Workforce Profile
as well as record levels of inward migration
Among the sample of respondent companies,
from both non-EU states and EU Member
states. p Women account for 35.8% of their
workforce
O’Connell and Russell (2005) report that, < 29
as well as the direct benefits to employees p E mployees age 50 or greater account for
(for example, through reduced work-related 12.4% of their workforce
stress), diversity and equality policies can
p N on-Irish employees account for 17.7%
also benefit the organisation in terms of
of their workforce. Of the non-Irish
increased job satisfaction and greater organi-
employees, 38.8% are from Western
sational commitment among employees.
Europe, 41.2% are from Eastern Europe,
Kochan et al. (2002) and Yasbek (2004),
and 6.0% are from Asia.
among others, found that gender diversity
has positive effects on performance. Monks Further analysis of the data revealed some
(2007) identified a range of business and potentially interesting trends. Organisations
employee benefits associated with diversity that reported having a diverse workforce
and equality systems, including reduced tended to be Irish companies rather
absenteeism and staff turnover, improved than multinationals, to be more recently
employee relations and workplace innovation established, and to have low rates of unioni-
and creativity. Importantly, Monks found sation and employee partnership. They also
that the success of equality and diversity tended to operate in the financial services,
initiatives depends greatly on the extent building and civil engineering and retail and
of their integration into an organisation’s distribution sectors. The companies were
strategy and culture, so that they shape the unlikely to operate in the chemical industry.
way in which the organisation’s business is
conducted and its individual employees work.

15 Most of these practices are legislative contents of The Employment Act 1998 and 2004. Note that, when monitoring these matters,
companies must ensure that monitoring is done in a manner that ensures that any information gathered cannot be used to discriminate.
16 Since some items had different response scales, the DES index was calculated as the average Z-score of the 17 items.
 new models of high performance
work systems

Table 3.3
Diversity and Equality Practices in Irish Companies

Item Score

What proportion of your total employees receive equality/diversity training? 25.32%

To what extent is equality and diversity integrated into overall corporate strategy? 51.49%

Has a senior manager been designated to champion equality and diversity in your organisation? 37.69%

Does this workplace have a formal written policy on equal opportunities? 84.73%

Does this workplace have a formal written policy on managing diversity? 40.00%

Do you monitor recruitment and selection by gender? 20.76%

Do you monitor recruitment and selection by ethnic background? 11.63%

Do you monitor recruitment and selection by disability? 10.85%

Do you monitor recruitment and selection by age? 12.40%

Do you monitor promotions by gender? 13.08%

Do you monitor promotions by ethnic background? 5.38%

Do you monitor promotions by disability? 2.31%

30 >
Do you monitor promotions by age? 3.85%

Do you monitor relative pay rates by gender? 5.34%

Do you monitor relative pay rates by ethnic background? 3.05%

Do you monitor relative pay rates by disability? 2.29%

Do you monitor relative pay rates by age? 3.05%

Average score

DES 19.35%
 workplace policies and
practices in irish industry

Interestingly, the financial services sector reported higher adoption of DES than Irish
appears to have a preference for employing indigenous companies (21.92% vs. 16.74%).
Western but not Eastern Europeans. The The use of DES was linked with workforce
retail and distribution sector appears to have size, with companies with more than 500
a preference for employing Asians and the employees being more likely to use DES than
building and civil engineering sector appears companies with less than 500 employees. In
to have a preference for employing Eastern addition, unionisation has a positive impact
Europeans. on the use of DES, with unionised companies
more likely to use DES than those without
Organisational Characteristics
unions (21% vs. 16%).
Figure 3.10 to Figure 3.13 shows the use
of DES in relation to organisational char- Companies whose diversity and equality
acteristics. While the average of use of DES policies are integrated into overall corporate
is 19.35%, there appears to be consider- strategy tend to be larger multinationals,
able variation depending on the sector that rather than indigenous Irish companies. They
the company is in. In terms of country of also tend to be making a more significant
origin, the subsidiaries of foreign companies investment in R&D, and use employee
partnership practices more extensively.
< 31

Figure 3.10
Diversity and Equality Systems x Type of Industry

All Firms 19,35

Energy/Water 39,91

Health Services 31,62

Other Services 26,62

Finance Services 25,92

Building 25,07

Transport/Communication 20,71

Metal Mfg. 16,43

Chemical Products 15,72

Other Mfg. 15,53

Personal Services 15,81

Retail & Distribution 14,71

Agriculture/Foresty 14,12

0 10 20 30 40 50 60 70 80 90 100

% of Diversity and Equality Usage

 new models of high performance
work systems

Figure 3.11
Diversity and Equality Systems x Country of Ownership

Country
of Ownership

Indigenous Irish
Companies 16.74

Multinational 21.92
Corporations
0 10 20 30 40 50 60 70 80 90 100

Extent of DES Usage

Figure 3.12
Diversity and Equality Systems x No. of Employees

Company size
32 > (no. of employees)

Less than 100 15.41

100-500 18.97

500 plus 26.08

0 10 20 30 40 50 60 70 80 90 100

% of Diversity and Equality Systems

Figure 3.13
Diversity and Equality Systems x Level of Unionisation

Level of
Unionisation

0% 16.35

>0% <70% 21.05

70%-100% 21.66

0 20 40 60 80 100

% of Diversity and Equality Systems

 workplace policies and
practices in irish industry

Diversity and Equality Policies Diversity and Equality Training

The majority of companies (84.73%) The data reveals that 25.3% of employees
reported having formal written policies on received diversity/equality training. Further
equal opportunities. Significantly fewer analysis reveals that these tended to be
companies (40%) reported having a formal larger multinational organisations rather
written policy on managing diversity. than Irish indigenous companies, pursuing a
Taking the two issues together, 51.49% product differentiation rather than low cost
of companies reported that the issues are strategy, investing significant amounts in
integrated into overall corporate strategy, R&D, and with an emphasis on partnership
with 37.69% of companies reporting that with employees.
they have a designated senior manager
to champion equality and diversity in the 3.5 Flexible Working
organisation.
3.5.1 Overview
Diversity and Equality monitoring Flexible working practices are generally
Generally, across all monitoring issues considered to entail benefits including
(recruitment and selection, promotion, pay increased employee satisfaction, improved
rates), more companies appear to monitor staff retention and reduced turnover,
< 33
gender than ethnic background, disability increased employee productivity and
and age. enhanced organisational reputation. Dex and
Smith (2002) provide a useful review of the
In the recruitment and selection of
literature on the effects of family-friendly
employees, 20.8% of companies monitor
working arrangements in the UK. They found
it with respect to employee gender, with
that the provision of family-friendly polices
fewer companies monitoring it with respect
relating to working at home and childcare
to ethnic background (11.6%), disability
was associated with greater employee
(10.85%) and age (12.4%).
commitment. Shepard et al. (1996) also
In relation to the promotion of employees, found that flexible working practices led to
13.10% of companies monitor it with an increase in productivity.
respect to gender, again with fewer
companies monitoring it with respect to 3.5.2 F lexible Working Systems
ethnic background (5.28%), disability (2.31$) (FWS) Index
and age (3.85%). For this report, five survey items were
selected and compiled to create the FWS
In relation to the monitoring of pay rates
Index, providing a single score representation
with respect to gender, ethnic background,
of FWS. The FWS Index had a Cronbach’s
disability, and age, the proportion of
alpha reliability rating of 0.712. The average
companies engaged in any form of
score of FWS across all companies is 16.55%.
monitoring was universally low, though still
Table 2.4 describes these practices and
slightly higher in relation to gender pay
their percentage usage in the responding
differences (3.45%).
companies.
 new models of high performance
work systems

Table 3.4
Flexible Working Practices in Irish Companies

Item Score

What proportion of your total employees are afforded the opportunity

to reduce working hours? 20.85%

What proportion of your total employees are afforded the opportunity

to increase working hours? 25.05%

What proportion of your total employees are afforded job sharing schemes? 11.00%

What proportion of your total employees are afforded flexi-time? 14.59%

What proportion of your total employees are afforded ability to change shift patterns? 20.35%

Average score

FWS 16.55%

3.5.3 F lexible Working Systems indigenous Irish companies, tend to place

34 > Findings an emphasis on workplace partnership and
employee involvement, and tend to pursue
Characteristics of FWS organisations
a product differentiation rather than low
Figure 3.14 to Figure 3.17 reveal some
cost strategy.
interesting results regarding the frequency
with which flexible working systems are In terms of country of origin, the subsidiar-
found in the survey sample. While the ies of foreign companies reported slightly
average usage of FWS is 16.55%, there is higher adoption of FWS than Irish indigenous
significant variation between companies companies (18.92% vs. 14.31%). The use of
depending on the sector that they operate FWS was linked with workforce size, with
in. Companies in the personal services companies with more than 500 employees
industry reported the most use of FWS being more likely to use FWS than
(41.67%), while those working in the manu- companies with less than 500 employees.
facturing sector, and the services sector
Table 3.5 presents an overview of the
(excl. personal services, finance services,
frequency with which flexible working
and health services) are least likely to use
practices are found in the sample of
FWS (8.25%).
companies surveyed.
Those organisations that afford employees
opportunities to increase or decrease 3.5.4 Additional flexible work practices
working hours tend to be in the services
This section highlights information on a
sector rather than the manufacturing sector,
number of flexible work practices additional
tend to be larger multinationals rather than
to those included in the FWS Index.
 workplace policies and
practices in irish industry

Figure 3.14
Flexible Work Systems x Type of Industry

All Firms 16.55

Personal Services 41.67

Transport/Communications 31.1

Chemical Products 29.51

Energy/Water 21.3

Finance Service 20.4

Retail & Distribution 16.75

Agriculture/Forestry 15

Building 12.45

Agriculture/Forestry 10.67

Metal Mfg. 10.59

Other Mfg. 9.17

Other Services 8.25 < 35

0 10 20 30 40 50 60 70 80 90 100

% of Flexible Work Systems

Table 3.5
Flexible Working Arrangements

Practice Percentage of Companies

Ability to increase working hours 25.05%

Ability to reduce working hours 20.85%

Ability to change shift 20.35%

Flexi-time 14.59%

Job sharing schemes 11%

Night working 9.35%

Working compressed hours 5.23%

Working at home 4.88%

 new models of high performance
work systems

Figure 3.15
Flexible Work Systems x Country of Ownership

Country of Ownership

Indigenous Irish-owned 14.31

Foreign MNCs 18.92

0 10 20 30 40 50 60 70 80 90 100

% of Flexible Work Systems

Figure 3.16
Flexible Work Systems x No. of Employees

Company size
36 > (no. of employees)

Less than 100 12.88

100-500 13.26

500 plus 25.53

0 10 20 30 40 50 60 70 80 90 100

% of Flexible Work Systems

Figure 3.17
Flexible Work Systems x Level of Unionisation

Level of Unionisation

0% 44.92

>0% <70% 45.88

70%-100% 58.01

0 10 20 30 40 50 60 70 80 90 100

% of Flexible Work Systems

Part 4

Exploring New Models of High

Performance Work Systems

4.1 Introduction 4.2 Outcome Measures

Labour productivity is generally defined as

This section examines how management
“total output divided by labour inputs”. It
practices are associated with business indicates the extent to which a company’s
human capital is efficiently creating output.
performance. Using three important In this research, revenue per employee was
outcome measures (labour productivity, used as a measure of labour productivity.
Data on the most recent estimates of total
workforce innovation and employee sales and total employment were collected

turnover), we examine the unique and via the GM and HR questionnaires.18

Workforce Innovation is a useful way to

synergistic effects of a broad range of
measure workforce performance, in terms
management policies and practices, of the company’s ability to efficiently
generate revenue through the introduction
across four thematic areas (strategic
of new products and services. Workforce
HRM, workplace partnership, equality and innovation was operationalized using data
on number of employees, sales revenue and < 37
diversity, and flexible working).17
responses to the question: “What proportion
of your organisation’s total sales (turnover)
comes from products or services introduced
within the previous 12 months?” The
response to this question was multiplied
by total sales to yield an estimate of sales
revenue generated by new sales. This sales
figure was then divided by the number
of employees to obtain our measure of
workforce innovation – an indication of
per capita sales derived from recently
introduced products or services.

17 Tables detailing the multivariate regression analyses are available, on request, from the authors.
18 A log of average of labour productivity from GM and HR surveys was used as the dependent variable in the multiple regression analysis.
 new models of high performance
work systems

Employee Turnover rates can be considered A still more compelling correlation emerges
a useful proxy indicator of employee well- through the analysis of panel data19 from
being in the company. In this research, the the 2004 and 2006 surveys. The panel data,
measure of employee turnover rates was drawn from companies which responded
taken from responses to the following survey to the surveys in both 2004 and 2006,
question: “Please estimate your annual allows for a more extensive exploration of
voluntary employee turnover rate (percent the role of SHRM as a factor in company
who voluntarily departed your organisa- performance, by examining the impact of
tion).” This question was asked separately change in HPWS on change in labour produc-
for both categories of employees (Group A tivity. Using multivariate statistical models
comprised production, maintenance, service to control for a range of variables20, the data
and clerical employees; Group B comprised reveals a statistically significant, positive
executives, managers, supervisors and pro- relationship (p<.01) between increased levels
fessional/technical employees). A weighted of HPWS and increased labour productivity.21
average of these separate estimates was
computed to represent the overall average 4.4 HPWS Model 2 –
rate of employee turnover for each company. High Performance through SHRM
and Partnership
38 >
4.3 HPWS Model 1 – In previous studies of partnership, no
High Performance through Strategic
evidence has shown if the observed rela-
Human Resource Management
tionship between partnership and business
The first High Performance Work Systems performance levels (either positive or
model examined is the SHRM model. negative) is based on an environment with
NCPP research data from 2004 has already SHRM practices. Likewise, previous studies
established the association between SHRM of SHRM (and research generally on HPWS),
and outcome measures including profit- have paid very little attention to partnership.
ability, innovation, labour productivity and
As discussed by O’Connell (2003), high-
employee turnover.
involvement or high-performance HR
Similar analyses on the current data again practices are central to the notion of
demonstrate the association between SHRM “partnership”. Partnership denotes a
and higher labour productivity and workforce philosophy of collaboration or mutuality
innovation and lower employee turnover between management and employees for the
rates, with greater use of SHRM accounting purpose of organisational problem-solving
for 12.4% variance in labour productivity and functioning. According to O’Connell,
(p<.01). partnership indicates an “employee-centred”

19 Described perviously in Section 3.2.3

20 Including Firm size; Firm age; Industry sector; Country of ownership; R&D intensity; Partnership philosophy;
Differentiation/ Low cost firm strategy; Voluntary employee turnover; Absenteeism rates.
21 This finding is particularly impressive given the relatively small panel data size (48 companies), which would make it more difficult to establish
statistically significant results. It provides further evidence, if this were needed, that the use of SHRM is closely related to business performance
levels, and is a key component of high performance work systems.
 exploring new models of high
performance work systems

organisation design. One way to think Partnership was entered first and accounts
of high-performance HR practices is as for 3.9% of variance in labour productiv-
an operationalisation or implementation ity (p<.01). SHRM was entered second and
of the partnership philosophy. Similar to explained an additional 10% of variance,
O’Connell’s description, authors in the SHRM (p<.001). This result shows that greater use
literature (e.g., Guthrie, 2001) also describe of partnership and SHRM is associated with
companies utilising high-performance HR increased labour productivity.
practices as employee-centred organisations.
If we conceive of SHRM as an operationa-
This is because information and decision-
tionalization of a partnership philosophy, this
making power is dispersed throughout the
implies a mediating relationship where the
organisation with employees at all levels
effect of partnership on productivity may
taking on greater responsibility for the
be partially due to the increased likelihood
operation and success of the organisation.
that “partnering” companies will more likely
Clearly, “partnership” and “high performance use SHRM. A formal test confirms that SHRM
HR practices” are closely linked. Research in partially mediates the relationship between
international settings has suggested that, partnership and productivity (Sobel test
as a form of partnership, high performance statistic = 1.649; p =.049, one-tailed).
HR practices can help create and sustain < 39
competitive advantage. This second model 4.4.2 HPWS Model 2
of HPWS examines SHRM practices together (SHRM and Partnership) and
with partnership in relation to labour Workforce innovation
productivity, workforce innovation and After controlling for company age, company
employee turnover. size, R&D investment, unionisation, dif-
ferentiation/ low cost company strategy,
4.4.1 HPWS Model 2
country of ownership, and industry sector,
(SHRM and Partnership) and
our regression analysis shows that greater
Labour productivity
use of SHRM is associated with greater
A multivariate regression analysis was workforce innovation. Partnership is not
conducted to examine the association found to have a direct association here with
between HPWS Model 2 (SHRM and workforce innovation, but does play a role
partnership) and labour productivity. After in that companies that have higher levels of
controlling for company age, company size, partnership will likely have higher levels of
R&D investment, unionisation, differentia- SHRM, which is shown to be associated with
tion / low cost company strategy, country of higher levels of innovation.
ownership, and industry sector, the analysis
showed that greater use of Partnership and
SHRM is associated with increased labour
productivity.
 new models of high performance
work systems

Partnership was entered first and accounts 4.5 HPWS Model 3 –

for 1.4% of variance in workforce innovation High Performance through DES and FWS
(p< .10). SHRM was entered second and
Diversity and equality systems and flexible
explained another 5% of variance (p< .01)
work practices can motivate employees
and reduces the influence of partnership
through an improved sense of equality in
to non-significance. However, a partnership
the workplace and the achievement of a
philosophy does affect innovation since it
positive work-life balance. There is evidence
leads to an increased probability of SHRM
that a sense of equality and work-life
use which, in turn, is associated with higher
balance influences a number of attitudes
levels of innovation. A formal test confirms
and behaviours of both personal and organi-
that SHRM mediates the relationship
sational relevance (Siegel et al., 2005).
between partnership and innovation (Sobel
The more that employees perceive limited
test statistic = 1.450; p = .074, one-tailed).
work-life balance practices and programmes
in their organisation, the more they will
4.4.3. HPWS Model 2
display negative attitudes and dissatisfac-
(SHRM and Partnership) and
Employee turnover tion towards the organisation (Osterman,
1995; Lambert, 2000). On the other hand,
After controlling for company age, company
40 > the more that employees perceive that
size, R&D investment, unionisation, differen-
the organisation is providing them with a
tiation/ low cost company strategy, country
working environment where social benefits
of ownership, and industry sector, our
and a sense of equality are important, the
regression analysis shows that greater use
more motivated they will be to provide their
of SHRM, but not partnership, is associated
organisation with non-discretionary effort in
with decreased employee turnover.
return for the extra benefits they received
Partnership was entered first and accounts (Lambert, 2000).
for 4% of variance in employee turnover
This third model of HPWS examines DES
(p< .01). SHRM was entered second and
and FWS in relation to labour productivity,
explained an additional 2% of variance
workforce innovation and employee turnover.
(p< .10) and reduced the influence of
partnership. This suggests that SRHM may
mediate the partnership – employee turnover
association.
 exploring new models of high
performance work systems

4.5.1 HPWS Model 3 4.6 HPWS Model 4 –

(DES and FWS) and Labour productivity High Performance through SHRM,
After controlling for company size, R&D Partnership, DES and FWS
investment, unionisation, differentiation/ The final model explored the broadest
low cost strategy, country of ownership, and perspective on high performance work
industry sector, the analysis showed that systems, including all four elements
DES accounted for 6.5% of variance in labour (Strategic HRM, Partnership, Diversity and
productivity (p<.01). No direct effect was Equality Systems, Flexible Working Systems)
found between FWS and labour productivity. in a 2-step multiple regression analysis.
All control variables were entered first,
4.5.2 HPWS Model 3 including company age, company size, R&D
(DES and FWS) and Workforce investment, unionisation, differentiation/ low
innovation cost company strategy, country of ownership,
After controlling for company age, company and industry sector. The four variables
size, R&D investment, unionisation, differen- (SHRM, Partnership, DES, and FWS) were
tiation/ low cost company strategy, country entered second.
of ownership, and industry sector, the
analysis showed that DES accounts for 7.9% < 41
4.6.1 HPWS Model 4
of variance, (p<.01). Once again, no similar (SHRM, Partnership, DES, FWS)
relationship between FWS and workforce and Labour productivity
innovation was found. Our analysis shows that SHRM, Partnership,
DES, and FWS together can account for
4.5.3 HPWS Model 3 14.8% of variance of labour productivity.
(DES and FWS) and Employee turnover Only SHRM is significant, while the effects of
After controlling for company age, company other three variables on labour productivity
size, R&D investment, unionisation, differen- are also in a positive direction (positive Beta
tiation/ low cost company strategy, country value). Therefore, the increased use of HPWS,
of ownership, and industry sector, the partnership, DES and FWS is positively
analysis shows that DES accounts for 4.4% associated with greater labour productivity.
of variance in employee turnover (p< .01).
This finding, which is very robust, translates
into economic terms as follows:

In the particular sample of companies

surveyed here (larger companies with
significant turnover levels), productivity
levels averaged d299,992 per employee. As
noted, the four elements (SHRM, Partnership,
 new models of high performance
work systems

DES and DWS) in Model 4 account for 14.8% 4.6.3 HPWS Model 4
of this productivity, or d44,399 per capita. (SHRM, Partnership, DES, FWS)
Extrapolating this value to the median and Employee turnover
company in our sample (270 employees), Our analysis shows that SHRM, Partnership,
would amount to a total annual economic DES, and FWS together can account for
value of d11,987,730 in productivity attrib- 7.7% of variance of employee turnover.
utable to these four management systems. Partnership accounted for 4% of variance in
employee turnover (p< .01). SHRM explained
4.6.2 HPWS Model 4 an additional 1.9% of variance (p< .10), but
(SHRM, Partnership, DES, FWS) does not significantly mediate (alter the
and Workforce innovation impact of) partnership on voluntary turnover.
Our analysis shows that that SHRM, Partnership and DES are also significant, as
Partnership, DES, and FWS together can are Partnership and FWS. Therefore, greater
account for 12.2% of variance of workforce use of SHRM, Partnership, DES, and FWS
innovation. SHRM and DES are significant, is associated with decreased employee
while the effects of Partnership and FWS on turnover.
workforce innovation are also in a positive Average voluntary turnover rates of 5.4%
42 > direction. Therefore, greater workforce suggest that the median sample company
innovation is associated with greater use of from this sample loses approximately 15
SHRM, Partnership, DES and FWS. employees each year. The aggregate affect of
Again, in addition to being statistically the above four practices would lead to the
significant, these results have important retention of an additional 1 – 2 employees
economic benefits for companies. Sample per year. Recent work suggests that
companies (132 larger, high turnover voluntary turnover has substantial negative
companies) generated on average d16,893 in implications for company performance, often
revenue from new products and services per costing as much as 150% of the departing
employee per annum. The combined effects employee’s annual salary (Cascio, 2006).
of SHRM, Partnership, DES and DWS (12.2%
of variance) equates to d2,061 per employee.
Extrapolating this to the median-sized
company in our sample, this would amount
to d556,200 in sales from new products and
services. Since these offerings are new to the
product or service life cycle, this understates
the economic effect since future returns will
also be substantial.
Part 5

Conclusions

Our analysis examined the association Our results clearly indicate that the adoption
of high performance work systems differs
between a range of workplace and between companies depending on factors
management practices (including strategic such as type of industry, country of
ownership, company size and unionisation
human resource management, partnership, rate. To summarise, we found that a
broad management approach involving
diversity and equality systems, and
SHRM, DES, FWS and Partnership is more
flexible working systems) and business extensively used in larger companies, and
more extensively in multinational rather
performance outcomes including labour
than indigenous Irish companies. There is
productivity, workforce innovation and no significant difference between unionised
companies and non-unionised companies
employee turnover.
in terms of their use of strategic HRM and
partnership. On the other hand, unionised
companies do have more extensive diversity
and equality systems. The results for flexible
working systems are mixed. The data will
< 43
require secondary analysis to further explore
the effects of variables such as unionisation
level on business performance outcomes.

The research approach and analytical

techniques adopted in this research offer
powerful insights into the nature of high
performing companies. While the statistical
analyses establish clear correlations between
management policies and practices and
business performance outcomes, they do not
purport to establish a causal relationship
between the two. Nevertheless, the research
has unearthed extensive evidence that
high performance companies with higher
levels of labour productivity and workforce
innovation, and lower levels of employee
turnover, are managing their organisa-
tions in ways that are distinctly different
from average performing companies. The
 strength of these correlations must represent of strategic HRM, partnership, diversity and
a compelling business case to any company equality, and flexible working on business
seeking to enhance its performance through performance. The combined effect of these
improved productivity, innovation or quality of as four elements of a broad model of high
working life. performance work systems equates to 14.8%
of variance of labour productivity, 12.2%
The results also confirm that we need to
of variance of workforce innovation and
continue thinking about high performance
7.7% of variance of employee turnover. This
work systems in a sophisticated way, where we
suggests that the synergistic effects of imple-
recognise the individual and synergistic effects
menting certain work practices are strongly
associated with organisational performance
and value creation.

Table 5.1
Summary of Multivariate Modelling of High Performance Work Systems

44 >

MODEL 1 MODEL 2

u Strategic HRM u S trategic HRM

u Partnership

Labour Productivity uG
 reater use of SHRM associated with uG
 reater use of SHRM and Partnership
increased labour productivity. SHRM associated with increased productivity.
accounts for 12.4% variance (p<.01)
u S HRM accounts for 10% variance
uS
 tatistically significant (p<.01)
u Partnership accounts for 3.9% variance
positive relationship between change
of HPWS and change of labour uS
 HRM partially mediates between Partnership
productivity (based on comparison of and labour productivity
2004 and 2006 panel data)

Workforce Innovation uS
 HRM associated with greater uS
 HRM associated with greater workforce
workforce innovation innovation (5% of variance)

uS
 HRM also mediates relationship between
partnership and workforce innovation.
Partnership does not have a direct
association, but companies with partnership
are likely to have greater levels of SHRM

Employee Turnover uS
 HRM associated with decreased uS
 trategic HRM associated with decreased
employee turnover employee turnover (4% of variance, p<.01)

uS
 HRM also mediates relationship between
partnership and employee turnover.
 conclusions

Table 5.1 summarises the key findings from positive results serve to further corroborate
each of the four models of HPWS examined the importance of HPWS and their
using multivariate regression analysis. association with important organisational
outcomes.
Findings from the analysis of panel data
based on 48 companies that responded to The findings of this research have important
the surveys both in 2004 and 2006 reveals implications for policy makers, managers,
a significant increase in SHRM since 2004. unions, employees, and researchers.
In the same period, labour productivity in
p Work organisation, management policies
these companies also increased by 11%,
and management practices are strongly
while investment in R&D as a percentage of
correlated with business performance
turnover grew from 3.23% to 3.29%. Such

< 45

MODEL 3 MODEL 4

u Diversity and Equality Systems u S trategic HRM

u Flexible Work Systems u Partnership

u D iversity and Equality Systems

u F lexible Work Systems

uD
 iversity and Equality system u F our elements together (SHRM, Partnership, DES,
accounted for 6.5% of variance FWS) account for 14.8% of variance in labour
in labour productivity productivity. While only SHRM is significant, other
three variables are in a positive direction. Total
uN
 o significant association
economic value in this sample equates to e44,399 per
between FWS and labour
employee, or almost e12,000,000 in the median-sized
productivity
company with 270 employees.

uD
 ES accounts for 7.9% of u F our elements together (SHRM, Partnership, DES,
variance (p<.01) FWS) account for 12.2% of variance in workforce
innovation. SHRM and DES are significant, while
uN
 o significant association
Partnership and FWS affects in positive direction.
between FWS and workforce
Total economic value in this sample equates to
innovation
e2,061 per employee, or e556,200 in the median-
sized company with 270 employees.

uD
 ES accounts for 4.4% variance u F our elements together (SHRM, Partnership, DES,
in employee turnover (p<.01) FWS) account for 7.7% of variance in employee
turnover. Partnership is significant at 4% of variance
uN
 o significant association
explained. Total economic value in this sample
between FWS and employee
equates to retention of up to 2 additional employees
turnover
in the median-sized company.
 new models of high performance
work systems

outcomes. Any public policy or company p The advocacy case for best practice
strategy that seeks to develop competi- approaches to workplace partnership,
tiveness in Irish industry through improved diversity and equality, and flexible working
productivity, improved innovation or has a strong economic argument as well as
improved quality of working life must having a legislative and humanitarian basis.
recognise the importance of organisational The economic argument puts forward clear
factors including management policies and business performance benefits for both
practices. employers and employees.

p There is a strong imperative to develop p I n view of the synergistic effects on

a better capacity within Irish companies business performance of Strategic HRM,
for high performance work systems partnership and Diversity and Equality
that include strategic human resource Systems, we propose that the current
management, partnership, diversity and research agenda on high performance work
equality systems, and flexible working. systems and workplace factors underpin-
ning competitiveness should be expanded
to take a more comprehensive perspective
on the issues that require examination.
46 >
 this is the section name

Part 6

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 New
Models
of
High Performance
Work Systems
The Business Case for Strategic HRM, Partnership
and Diversity and Equality Systems

Equality The Equality Authority National Centre for

Partnership and Performance
Research 2 Clonmel Street, Dublin 2
16 Parnell Square, Dublin 1
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