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High Performance Work Systems and Organizational Performance: An

Empirical Study on Manufacturing and Service Organizations in Pakistan

Article in Public Organization Review · June 2015

DOI: 10.1007/s11115-015-0315-1

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Public Organiz Rev (2016) 16:421–442
DOI 10.1007/s11115-015-0315-1

High Performance Work Systems and Organizational

Performance: An Empirical Study on Manufacturing
and Service Organizations in Pakistan

Safa Riaz 1

Published online: 14 June 2015

# Springer Science+Business Media New York 2015

Abstract A two level analysis was conducted to examine the impact of High
Performance Work Systems (HPWS) on organizational performance by investigating
four most prevailing theories in HPWS literature i.e., human capital (Resource based
view), social exchange, relational coordination, employee attitudes and behaviours. It
was proposed that HPWS predicts improved organizational performance and this
relationship can be strengthened through intervention of human capital development,
degree of social exchange among organizations and its members and productive
relationships among employees. It was further argued that HPWS results into employee
motivation, job satisfaction and organizational citizenship behaviours, which ultimately
results into better organizational performance. Results from 17 manufacturing and
service organizations confirmed the significance of association of implemented and
perceived HPWS with managerial and employee rated organizational performance.
Mediation analysis confirmed the contribution of human capital, social exchange,
relational coordination and OCB towards organizational performance but no influence
was found for employee attitudes on HPWS-performance linkage.

Keywords HPWS . Social exchange theory . Relational coordination . Employee

attitudes and behaviours . Organizational performance

Introduction

Organizational performance always has been an essential construct in management

studies (Richard et al. 2009). Different approaches has been identified throughout the

* Safa Riaz
safariaz7@gmail.com

1
Muhammad Ali Jinnah University, Islamabad, Pakistan
422 S. Riaz

literature for creating organizations that result in maximum outcomes, such as ‘organi-
zational effectiveness approach’, ‘employee benefits approach’ and ‘psychologically
healthy workplace approach’ (Grawitch and Barber 2009). Later is associated with
bringing changes into the work systems benefiting both employees and organizations
through workforce involvement. Here emerges a challenge for researches about how to
deploy the potential of human resources existed in an organization to capture produc-
tivity, creativity and cost reduction (Liu et al. 2006). Youndt et al. (1996) and Wood
(1999) has identified human resource (HR) practices to enhance firm’s performance
while explaining this HRM- Performance link with the help of universal and contin-
gency approach. HR practices boosting up a firm’s performance are called High
Performance Work System ‘HPWS’ (Huselid 1995). A plethora of literature and
wisdom is available on impact of human resource (HR) practices on different organi-
zational outcomes such as Macduffie (1995); Guest (1997); Chang and Haung (2005);
Bowen and Ostroff (2004); Bae and Lawler (2000) and Collins and Smith (2006).
Despite of this fact that HR practices are strong predictor of organizational outcomes
and presence of large number of studies advocating positive outcomes of HPWS, there
is still an issue of ‘Black box’ which means that researchers are now focused on
understanding the exact phenomenon through which HR practices are transformed into
High performance work systems leading to organizational outcomes (Wright et al.
2003). Blackbox issue is associated with What, Why, How and When of HPWS
(Boxall 2012). Boselie et al. (2005), in order to unlock these mechanisms, reviewed
104 articles on high performance practices. He found multiple theories such as contin-
gency theory, resource based view (RBV) theory and AMO framework as building
blocks for High Performance but no consensus was made. This is going to be the main
focus of this study.
In present study, HRM literature attempting to identify the mechanisms linking HR
practices-Performance relationship is divided into different perspectives such as
Behavioural perspective (Ramsay et al. 2000 and Tsui et al. 1997), Resource Based
View perspective (Hitt et al. 2001; Lepak and Snell 1999), Social Exchange perspective
(Masterson et al. 2000; Pennings et al. 1998) and Relational perspective (Gittell et al.
2008; Adler et al. 2008). These perspectives are tested under managerial and employee
aspects, in order to identify whether which theory contributes more to the body of
HPWS literature in context of Pakistan. Same was the methodology adopted by Wright
and MacMahan (1992) in investigating the theoretical perspectives of strategic human
resource management.
As already established that organizational performance has always been remained an
issue for managers (Richard et al. 2009). The most important studies in this domain are
being conducted in developed countries as studies of McDuffie, Becker and Gerhart,
Youndt et al. and Huselid but contribution from the part of developing countries like
Pakistan is not that much significant. This study attempts to fill this contextual gap as
the results can be different because difference in cultures brings differences in man-
agement styles (Hofstede) which can vary the results. So, this is an exploration whether
same HPWS factors as those working in western countries, predict organizational
performance in Pakistan or not?
Recently, Savaneviciene and Stankeviciute (2010) identified that the mechanisms
about how, when and why these HR practices contribute to firm’s performance should
be the central focus of HRM researchers. This study can be a useful contribution
High Performance Work Systems and Organizational Performance... 423

towards ‘Blackbox’ literature investigating whether which of the four themes

(perspectives) is playing role thus helping the academicians in solving out mediating
mechanisms and policy makers as well in formulating and executing the right HR
practices in a right way at the right place.

Literature Review

High Performance Work Systems (HPWS)

High performance work practices (HPWS), has been grabbing the interest of Human
Resource Management (HRM) researchers from last 10–15 years as a system of HR
practices that sheds spotlight on the core workers of an organization and makes its way
to superior performance (Boxall and Macky 2009; Qiao and Wang 2009). High
performance work systems can be supported equally by three strategic perspectives:
Universalistic, Contingency and Configurational perspectives with some levels of
variations to financial performance (Delery and Doty 1996).
Meta-analysis by Steigenberger (2013) confirms a strong impact of HPWS on value
creation, productivity and sustainable competitive advantage through strategic deploy-
ment of resources residing within and outside the premises of an organization.
Employees (unions) and HR managers are the main stakeholders with competing
interests in HPWS (Galang 1999), so this system benefits both managers and em-
ployees by incorporating work practices that rationally encourage them to work
together. HPWS has been known as a source of both positive psychological outcomes
e.g., employee well being and less burnout (Fan et al. 2014) as well as organizational
outcomes e.g., Social climate, Innovation and profitability (Razouk 2011; Zhang and Li
2009).
In literature, HPWS is found to be associated with employer-employees relationship
(Zhang et al. 2013), social identification (Bartram et al. 2014), employee attitudes
(Takeuchi et al. 2009), behaviours e.g., turnover intentions (Jensen et al. 2013), Social
structure (Evans and Davis 2005), human resources or capital (Beltran-Martin et al.
2008) and task interdependence (Ramamoorthy et al. 2005). All of these and other
important studies are categorized and collaged in a conceptual model and hypotheses
are developed and tested in this research study in order to investigate the mechanisms
working between HR practices – Performance linkages.

HPWS and Organizational Performance

HPWS has been proved as a source of enhancing labor productivity (Datta et al. 2005),
organizational performance (Liu et al. 2006), less turnover among employees (Arthur
1994) as well as low turnover and profit per employee (Guest et al. 2003). HR practices
systems organize work in such a way that ensures benefit to employer and employees
as well as increased labor efficiency, employee involvement and productivity (Cappelli
and Neumark 2001). Similarly, management of human resources was revealed to have a
prime impact on performance in manufacturing firms (Youndt et al. 1996). Important
studies by Delery and Doty (1996) and Black and Lynch (2001) advocate a positive
association between HRM practices and firm performance.
424 S. Riaz

High performance wok systems are investigated to be associated with organizational

performance in different industries such as Pharmaceutical industry (Zhang and Li
2009), Semiconductor design firms (Tsai 2006), hospital industry (Zhang et al. 2013;
Bonias et al. 2010) and Healthcare sector (Fan et al. 2014). Although HR systems are
proved to have strong potential for increasing a firm’s economic performance but no
agreement is still found among researchers about the exact mechanisms (Becker and
Gerhart 1996). The present study attempts to fill this gap and adds a contextual
contribution to HPWS literature by focusing on service and manufacturing organiza-
tions working in Pakistan. On the basis of above literature, following hypothesis was
developed:

H1 (a): Organizational level High Performance Work System (HPWS) will be

significantly associated with organizational performance in service and
manufacturing industries in Pakistan.
H1 (b): Perceived or employee level High Performance Work System (HPWS) will
be significantly associated with organizational performance in service and
manufacturing industries in Pakistan.

HPWS and Human Capital: Resource Based View (RBV)

Resource based view (RBV) has been a strong theoretical support for human resource
management (Wright et al. 2001a). VRIO (valuable, rare, inimitable and supported by
organization) frame-work helps to predict the resource’s potential for competitive
advantage (Barney and Wright 1997). In other words, it can be argued that human
resources are seen as a potential source of competitive advantage if they are valuable,
rare, inimitable and non-substitutable (Wright et al. 2001b). High performance work
systems generate such a capable human capital through different practices such as
recruitment, selection, research & development, performance management and apprais-
al that ultimately leads to the higher performance (Takeuchi et al. 2009). HR practices
should not only result in individual level outcomes but also on organizational level
(Macduffie 1995). HR practices develop human capital that is a source of innovation in
organization (De Clercq and Dakhli 2003). HPWS develops highly capable, committed
and motivated workforce by encouraging practices such as decision making, training
and information sharing leading to performance at higher levels (Zacarhotas et al.
2005). High involvement work systems are characterised by a high investment in
human capital (Guthrie 2001) and different levels of HR practices (Staffing, training,
performance appraisal and rewards) incorporates different levels of investment in
human capital leading to higher manufacturing performance (Snell and Dean 1992).
This study focuses on the mediating mechanism between HR practices –
Performance links. The reason for selecting resource based perspective is that it always
focuses on performance as a key outcome (Russo and Fouts 1997). HPWS stresses on
job tasks that provides learning opportunities and skill development for employees
(Takeuchi et al. 2009). On the basis of this literature, following hypotheses were drawn:

H2 (a): Organizational – level HPWS will be significantly associated with Human

Capital.
High Performance Work Systems and Organizational Performance... 425

H2 (b): Human Capital will positively mediate the relationship between organi-
zational – level HPWS and Organizational Performance.

HPWS and Social Exchange Perspective

Social exchange has always been a most important part of organizational behaviour
paradigm (Cropanzano and Mitchell 2005) and commitment of employees with their
employer is a signal of social exchange among them (Shore et al. 2006). As a result of
these social interactions between employee and employer, a mutual bond emerges
between them in the form of reciprocal obligations and these obligations are constitu-
ents of a psychological contract (Wikhamn and Hall 2012). Employee’s positive
perception towards HR practices and satisfaction with these practices predicts employ-
ee positive responses towards management such as employee engagement based on
social exchange theory (Jose and Mampilly 2012). Organizational behaviours demon-
strating that it cares for its workforce make feel employees indebted and obligated
towards their organizations, for example, ‘soft’ HR practices (Gould-Williams 2007).
Moreover in literature, selection, optimization and compensation (SOC) are found
significantly correlated with higher performance (Bajor & Baltes, 2003). Employer –
organization relationships influence the linkage between HR practices and outcomes
(Kuvaas, 2008). Thus, it was hypothesized that:

H3 (a): Perceived or Employee-level HPWS will be significantly associated with

Social Exchange.
H3 (b): Social Exchange will positively mediate the relationship between
Employee- level HPWS and Organizational performance.

HPWS and Relational Coordination

Relational coordination among employees has always been playing a major role in
achieving positive organizational outcomes (Gittell et al. 2008). Positive employee
relations are the best asset for attaining competitive advantage (Fulmer et al. 2003). HR
practices are revealed to ensure an employee’s future improved performance
(Kamphorst and Swank 2012) but these links of practices with performance are highly
mediated by social networks among employees. High performance work systems
(HPWS) incorporate such HR practices that encourage a helping and relational work-
place environment ultimately influencing the nature of relationships within an organi-
zation (Mossholder et al. 2011). These relational coordinations among employees
provide employees a psychological safety (Carmeli and Gittell 2009).
In presence of higher task interdependence, management should design HR practices
such as selection, training and reward in such a way that formulate strong working
relationships among employees as this process of coordination is an important contrib-
utor towards outcomes (Gittell 2002). Similarly, in highly interdependent teams
performance-based reward practices can be useful (Schippers et al. 2003) but distinc-
tion between task interdependence and job design should be in management’s mind
(Kiggundu 1983). Vogus, (2006) investigated that HR systems cultivate high-quality
426 S. Riaz

interactions which in turns predict high performance. All these important studies of,
Gittell 2000; 2002; Gittel et al. (2010); Collins and Clark 2003; Leana and Buren 1999,
related to relational perspective of HPWS, fosters the development of following
hypotheses:

H4 (a): Perceived or Employee-level HPWS will be significantly associated with

Relational coordination among employees.
H4 (b): Relational Coordination will positively mediate the relationship between
Employee-level HPWS and organizational performance.

HPWS – Attitudinal and Behavioural perspectives

When HR practices are perceived to be supportive by employees such as decision

making authority, learning opportunities and fair rewards, employees experience high
level of organizational commitment and job satisfaction (Allen et al. 2003; Whitner
2001) and organizational commitment is a strong predictor of organizational effective-
ness (Angel and Perry 1981; Sutanto 2004). Such employee outcomes positively
mediate the link between HPWS and organizational performance (Zhang and Morris
2014). Despite the fact that HR practices leads towards commitment but this link varies
among employee groups such as professionals, line managers and workers that’s why
managers face various challenges in designing HR practices resulting in high level of
commitment among employees (Kinnie, Hutchinson, Purcell, Rayton & Swart, 2005).
Compensation practices including both financial and non-financial packages are a
source of motivation (Dieleman et al. 2003). In the same way, other HR practices in
HPWS result in organizational citizenship behaviour (OCB), lowered turnover and
absenteeism (Nishii et al. 2008; Boxall and Macky 2009; Batt and Valcour 2003).
Harter et al. (2002) suggested that HRM practices results in high employee satisfaction
leading to consequential firm level outcomes. HPWS through the provision of its HR
practices such as information sharing, self-managed teams and compensation etc.,
produces an environment that sponsors organizational citizenship behaviours (OCB)
which in turns results in positive responses from the part of employees (Evans and
Davis 2005; Snape and Redman, 2010). Overall, it is argued that employee attitudes
and behaviours mediate the linkage between HR practices and firm outcomes (Wright,
Gardner and Moynihan, 2003). In the light of above literature, hypotheses were
developed as;

H5 (a): Perceived or Employee-level HPWS will be significantly associated with

employee attitudes (Motivation and job satisfaction) and behaviours
(Organizational citizenship behaviour).
H5 (b): For employee attitudes Motivation will positively mediate the relationship
between employee-level HPWS and organizational performance.
H5 (c): For employee attitudes job satisfaction will positively mediate the rela-
tionship between employee-level HPWS and organizational performance.
H5 (d): For employee behaviours, Organizational citizenship behaviour will
positively mediate the relationship between employee-level HPWS and organiza-
tional performance.
High Performance Work Systems and Organizational Performance... 427

Theoretical Framework

H2 (b)
H2 (a)
Human Capital
HPWS
HPWS (Managerial Ratings) H1 (a) Organizational
implemented Employee Reactions Performance

(Organizational level.. model 1)

H3 (b) (Individual level.. model 2)

H3 (a) Social Exchange

H4 (b)
Organizational
HPWS Relational Coordination
Perceived Performance
(Employee Ratings)
HPWS H5 (b)

H5 (a)

H1 (b)

Methodology

Both theoretical and empirical progress is required in HRM-performance literature

(Becker and Gerhart 1996). To empirically validate this study, a survey was
conducted. While selecting for the sample, lots of methodological issues were to
be treated. First, considering suggestions of Gerhart, Wright, MacMahan & Snell
(2000) regarding biasness generated when data is collected from single source,
responses were generated from organizational managers as well as employees.
Second, HRM system has multilevel impacts and employee and organizational
levels are collectively interlinked, present study was conducted on two levels i.e.,
individual level and organizational level. Wright & Nishii (2007) identified that HR
practices implemented by management results in employee’s perception about those
practices that ultimately generate employee reactions and only valid source for
providing information about an organization’s HR system are ‘employees’ (Gerhart
et al. 2000). Keeping in view these suggestions, study was conducted on multi-
levels and with multiple-respondents.
For this research, the theoretical frame work was divided into two models. Model 1
investigated managerial aspect of HPWS and Model 2 examined employee aspect of
HPWS. The items of HPWS and organizational performance were same for both
studies while the mediating variables were different for each study.12 organizations
has participated giving responses both for managers and employees. Self administered
questionnaires were distributed.

Model 1

This model was focused on the impact of HPWS on organizational performance at

managerial level keeping in view the resource based perspective in mind, with the
mediating role of human capital. The analysis of model 1 is based on responses of 81
managers.
428 S. Riaz

Measures

‘High performance work practices’ were measured by using 20 items after factor
analysis by Takeuchi et al. (2009). This measure has responses from organizational
level. The original scale was developed by Lepak and Snell (1999). For measuring
mediating variable ‘Human capital’, scale by Subramaniam and Youndt (2005) was
adopted. ‘Organizational performance’ was measured as an outcome to HR practices
(following Delaney and Huselid, 1996) and scale by Singh (2004) was adopted. All of
these items were measured on a five point likert scale (ranging from 1=strongly
disagree to 2=strongly agree). Control measures were age, gender, education
(qualification) and tenure in organization.

Analysis and Results in Model 1

To check reliability of interested variables, reliability test was used. Results showed
good carhonbach’s alpha for each variable. Table 1 represents Means, Standard devi-
ation and Correlation statistics among all variables included in study 1. High perfor-
mance work system (HPWS) is significantly related to organizational performance as
well as with mediator human capital.
Tables 2 and 3 shows results of regression analysis. These results lead to the
acceptance of hypothesis H1 (a) that organizational level HPWS is significantly asso-
ciated with organizational performance. Results also indicate that mediating variable
Human Capital has also significant association with HPWS, so hypothesis H2 (a) is
accepted that organizational level HPWS will be significantly associated with human
capital. Results of mediation shows that human capital becomes significant (β=0.312,
ΔR2 =0.053, p<0.05, significant) while independent variable HPWS is insignificant
(β=−0.002, ΔR2 =0.028, p<0.05, insignificant). These leads to the acceptance of H2 (b)
that Human Capital will positively mediate the relationship between organizational –
level HPWS and Organizational Performance.

Model 2

The Model 2 of the theoretical framework investigated the relationship between

employee level HPWS and organizational performance and the mediating roles of
Social exchange, relational coordination, employee attitudes and behaviours.
Analysis of model 2 comprised of 113 responses from 113 employees.

Table 1 Means, standard deviation and intercorrelations among variables in Model 1 (N=81)

Variables M SD HPWS HC OP

HPWS 3.6006 3.6006 (0.872)

HC 3.7852 3.7852 0.617** (0.897)
OP 3.6605 3.6605 0.462** 0.482** (0.851)

HPWS high performance work systems, HC human capital, OP organizational performance

* p<.05, ** p<.01
High Performance Work Systems and Organizational Performance... 429

Table 2 Regression analysis for outcomes

Predictors Human Capital Organizational Performance

β R2 ΔR2 β R2 ΔR2

Main effects:
HPWS
Step 1 0.068 0.021
Control variables
Step 2 0.643*** 0.391 0.324*** 3.11** 0.102 0.081**
HPWS

N=86, Control variables are age, education, gender and tenure

**P<0.01, ***p<0.001

Measures

Same scales for HPWS and organizational performance were used in both studies. Scale by
Shore et al. (2006) was adopted to measure ‘Social Exchange’. ‘Relational coordination’
was measured using scale developed by Gittell et al. (2008). Attitudes and behaviours were
investigated by measuring job satisfaction and organizational citizenship behaviour (OCB)
respectively. Job satisfaction was measured by scale developed by Cammann, Fichman,
Jenkins and Klesh (1983) and for OCB scale by Smith, Organ and Near (1983) was
adopted. Control variables for this study were also gender, age, education and tenure.

Analysis and Results in Model 2

Table 4 shows Means, Standard deviation and correlation of variables along with the
reliability values of these variables. High performance work system is significantly
associated with organizational performance.

Table 3 Regression analysis for mediation

Predictors Organizational performance

β R2 ΔR2

Mediator analyses
Main effects: high performance work systems
Step 1
Control Variable 0.021
Step 2
Mediation: human capital
Human capital 0.312* 0.102 0.053*
Step 3
High performance work systems −0.002 0.049 0.028

N=86, Control variables are gender, age, education, experience

*p<.05
430 S. Riaz

Table 4 Means, standard deviation and correlation among variables

Variables M SD HPWS SE RC MOT JS OCB OP

HPWS 3.3579 0.73426 (0.879)

SE 3.4530 0.52496 0.573** (0.701)
RC 3.6238 0.50979 0.489** 0.466** (0.692)
**
MOT 3.9043 0.69815 0.397 0.506** 0.508** (0.661)
** **
JS 3.6040 0.70192 0.310 0.454 0.093* 0.359** (0.655)
OCB 3.9604 0.51558 −0.110 0.024* 0.237* 0.383** 0.038 (0.811)
** * * **
OP 3.4538 0.67459 0.322 0.179* 0.242 0.245 0.282 0.191** (0.774)

HPWS high performance work systems, SE social exchange, RC relational coordination, MOT motivation, JS
job satisfaction, OCB organizational citizenship behaviour, OP organizational performance. *p <0.05,
**p<0.01

Tables 5 and 6 shows simple regression results for outcomes. Results shows
significant association of employee level HPWS with social exchange, relational
coordination, employee attitudes (motivation and job satisfaction) and behaviour
(OCB). So the hypotheses H3 (a), H4 (a) and H5 (a) are accepted. Table 7 presents
the results of mediation analysis. It is found that when mediation for social exchange
(β=0.217, ΔR2 =0.038, p<0.05, significant), relational coordination (β=0.229, ΔR2 =
0.047, p<0.05, significant) and OCB (β=0.262, ΔR2 =0.075, p<0.01, significant) is
tested, the impact of HPWS on organizational performance becomes insignificant. So
the mediation hypotheses H3 (b), H4 (b) and H5 (d) are accepted. As for motivation
(β=0.136, insignificant) and job satisfaction (β=0.135, insignificant), the impact of
HPWS on organizational performance becomes significant, so the mediation hypoth-
eses H5 (b) and H5 (c) are rejected.

Comparison of Means for Organizational Level and Employee Level HPWS

and Performance

In order to find the difference between organizational and individual level HPWS and
performance, their means were compared. Two hypotheses were made.

Table 5 Regression analysis for outcomes social exchange, relational coordination and motivation (n=300)

Predictors Social Exchange Relational Coordination Motivation

Β R2 ΔR2 β R2 ΔR2 β R2 ΔR2

Main effects:
HPWS
Step 1 0.117 0.056 0.178
Control variables
Step 2 0.232*** 0.349 0.363*** 0.302*** 0.233 0.177*** 0.303*** 0.265 0.086***
HPWS

*p<.05, **p<0.01, ***p<0.001, Control variables are gender, age, education, experience, HPWS high
performance work system
High Performance Work Systems and Organizational Performance... 431

Table 6 Regression analysis for outcomes attitudes (motivation and job satisfaction), behaviours (OCB) and
organizational performance (n=300)

Predictors Job satisfaction OCB Organizational Performance

β R2 ΔR2 β R2 ΔR2 β R2 ΔR2

Main effects
Step 1 0.119 0.076 0.041
Control variables
Step 2 0.253** 0.178 0.060** 0.010* 0.096 0.020* 0.264** 0.117 0.076**
HPWS

*p<.05, **p<0.01,***p<0.001. Control variables are gender, age, education, experience, HPWS high
performance work system

HO: There is no difference between organizational and individual level HPWS and
performance.
H1: There is a difference between organizational and individual level HPWS and
performance.

Results lead to the rejection of Ho and acceptance of H1, as differences were found
between the means of HPWS and organizational performance for both managers and

Table 7 Results for mediation analysis

Predictors Organizational performance

β R2 ΔR2

Mediator Analyses
Main effects: High performance Work Systems
Step 1
Control Variable 0.041
Step 2
Mediation: social exchange, relational coordination, motivation, job satisfaction, OCB
Social Exchange 0.217* 0.123 0.038*
Relational Coordination 0.229* 0.122 0.047**
Motivation 0.136 0.089 0.045*
Job Satisfaction 0.135 0.081 0.040*
OCB 0.262** 0.135 0.075**
Step 3
HPWS→Social Exchange 0.128 0.085 0.045*
HPWS→Relational Coordination 0.115 0.076 0.035*
HPWS→Motivation 0.261** 0.155 0.066
HPWS→Job satisfaction 0.230** 0.134 0.054*
HPWS→OCB 0.177 0.060 0.019

N=113, Control variables are gender, age, education, experience.*p<.05, **p<0.01

432 S. Riaz

Table 8 Organizational and individual level HPWS and organziational performance

Status Mean Std.Deviation Std.Deviation Error

HPWS Employees 3.3075 0.73804 0.06943

Managers 3.6000 0.70415 0.07593
OP Employees 3.4115 0.66109 0.06219
Managers 3.6221 0.72780 0.07848

OP organizational performances N (Managers)=86, N (employees)=113

employees. Managers or the policy makers should try to keep this difference as low as
possible because employees perceptions to HPWS are more important Table 8.

Discussion and Conclusion

Managerial and employee aspects of HPWS and organizational performance

were investigated through the intervention of resource based view, social ex-
change, relational coordination, attitudinal and behavioural perspectives of
HPWS. Support was found for all the hypotheses except for the attitudinal
variables.
Consistent with RBV (Resource based view) theory, human capital was
found to significantly predict organizational performance as a result of HPWS
(Takeuchi et al. 2009). Exchange relationships between organizations and em-
ployees were noted to have a positive impact on organizational performance
deriving support social exchange theory. Positive perception of employees
towards organizational initiatives such as HR practices results in discretionary
efforts for organizational outcomes (Gould-Williams 2007). Relational coordi-
nation among employees was found to have relevance with performance related
outcomes (Gittell et al. 2008). Results provided no support for role of attitudes
(motivation and job satisfaction) predicting organizational performance. These
factors found not to be working in context of Pakistan. Results supported that
organizational citizenship behaviours (OCB) can result in better organizational
performance because such employees are more flexible and productive for an
organization (Evans and Davis 2005; Noor 2009).
During conducting interviews from employees, the responses revealed that
training & development is only limited to the written policies. HR practices such
as training, skill development, promotions were not implemented the way they were
intended to. So the reason for rejection of job satisfaction and motivation can be the
gap between intended and implemented practices. Secondly, employees cannot find
any career path for themselves as promotions in Pakistan are not according to
written policies.
Implication of these results can be seen for managers or the policy makers
that intend to implement HR practices in an organization. Importance of
High Performance Work Systems and Organizational Performance... 433

human capital for an organization has been increased. From some past years
policy makers are facing the issue of ‘skill drought’, brain drain, dysfunctional
career opportunities (Mahroum 2000). Multinational companies are more likely
to invest their operations in organizations and countries that put more emphasis
on development of human skills and resources (Noorbakhsh and Paloni 2001).
Managers should focus on advancement of their human capital to increase their
attractiveness, if they want to expand their businesses. Low development of
human capital may result into a ‘brain drain’ (Beine et al. 2008) and managers
can retain this intellect for their organizations by providing them a career path
through HR policies. Managers should implement HR practices for developing
competitive human assets as such organizations are hard to imitate by com-
petitors (Wright and Nishii, 2007). Social exchange and relational coordination
are pivot point of success of HPWS as HR practices are not successful until
and unless employee perceives them to be useful. According to Norm of
reciprocity (Gouldner, 1960) individuals usually favour those who favour them.
Managers should be investing more on employees making them feel worthy
and valued, this will result into more employee engagement.
When organizations introduce HR policies that make employees come closer to one
another in a functional way, they view themselves in a ‘family’ and exert more efforts
for its prosperity. In addition, it should be taken into account by policy makers that
effective relationship among individuals leads to creativity and problem sharing ulti-
mately leading to better quality (Gittell 2002). In present era of high competition,
having employees with greater OCB is a fundamental part of organizational strategy.
Managers should promote policies to make their employees indulged in extra role
behaviours, working sbeyond the call of duty and so on because it is evident from
empirical testing that OCB do results in increased performance (Podsakoff et al. 2000).
No investment from organizations in the form of training and innovative task
assignments was made thus leading to dissatisfied and demotivated employees.
Employees were found to be more likely to leave their jobs if they find a good
alternative. These are the serious issues for policy makers to ensure the right imple-
mentation of right practices.

Limitations and Future Directions

This study can be an important contextual contribution as not much of work is

done focusing on high performance work system in Pakistan. Certain limitations
are also associated such as reaching the lower level employees. To target
employees that were at the lowest level of organisations couldn’t be accessed
because of policy issues of organizations. They don’t give full access to those
working in actual fields. Another major issue is the cross sectional nature of the
study. HPWS need research in full depth. This study is based on subjective
organizational performance, it would be more appropriate to use objective
measures of organizational performance such as operational measures (ROI,
ROA, ROE, profitability) that can give a more detailed analysis of an organi-
zations growth.
434 S. Riaz

Appendix

Questionnaire: (To be filled by MANAGERS)

Section A:
Demographics:
• Gender:
• Age (write age in years):
• Education (write in years):
• Tenure in this organization (in years or months):

Section B:
Choose the option that you feel for following questions.
1= strongly disagree 2= disagree 3= neutral 4= agree 5= strongly agree

1) High Performance Work System

1. Employees are involved in job rotation. 1 2 3 4 5

2. Employees are empowered to make decisions. 1 2 3 4 5

3. Jobs are designed according to employee skills and capabilities. 1 2 3 4 5

4. Selection is comprehensive (uses interviews, tests, etc.). 1 2 3 4 5

5. Selection emphasizes their ability to join forces and work in teams. 1 2 3 4 5

6. Selection involves screening job candidates. 1 2 3 4 5

7. Selection focuses on selecting the best candidate, regardless of the specific job. 1 2 3 4 5

8. Selection emphasizes promotion. 1 2 3 4 5

9. Selection places main concern on their potential to learn (e.g., aptitude). 1 2 3 4 5

10. Training is on regular basis. 1 2 3 4 5

11. Training programs are comprehensive. 1 2 3 4 5

12. Training programs are to develop firm-specific skills and knowledge. 1 2 3 4 5

13. The training programs emphasize on-the-job expe riences. 1 2 3 4 5

14. Performance is based on objective, quantifiable results. 1 2 3 4 5

15. Performance appraisals include feedback. 1 2 3 4 5

16. Incentives are based on team performance. 1 2 3 4 5

17. Compensation packages include an extensive benefits package. 1 2 3 4 5

18. Our compensations include high wages. 1 2 3 4 5

19. The incentive system is associated to skill-based pay. 1 2 3 4 5

20. Our compensation is related to performance. 1 2 3 4 5

High Performance Work Systems and Organizational Performance... 435

Human Capital:

Our employees are:

1. Highly skilled. 1 2 3 4 5

2. Widely considered to be best. 1 2 3 4 5

3. Creative and bright. 1 2 3 4 5

4. Experts in their particular jobs and functions. 1 2 3 4 5

5. Develop new ideas and knowledge. 1 2 3 4 5

Organizational Performance:

1. In my organization, return on investment is greater than last year. 1 2 3 4 5

2. In my organization, average productivity per employee is greater than last year 1 2 3 4 5

3. In my organization, time to market for products and services is less than last year. 1 2 3 4 5

4. In my organization, response time for customer complaints is better than last year. 1 2 3 4 5

5. In my organization, market share is greater than last year. 1 2 3 4 5

6. In my organization, the cost per business transaction is less than last year. 1 2 3 4 5

7. In my organization, customer satisfaction is greater than last year 1 2 3 4 5

8. In my organization, the number of suggestions implemented is greater than last year. 1 2 3 4 5

9. In my organization, the number of new products or services is greater than last year. 1 2 3 4 5

10. In my organization, the percentage of skilled workers compared to the total 1 2 3 4 5

workforce is greater than last year.

11. In my organization, the percentage of total spending devoted to technology and 1 2 3 4 5

information processing is greater than last year.

12. In my organization, the number of individuals learning new skills is greater than last 1 2 3 4 5
Year.
436 S. Riaz

Questionnaire: (To be filled by EMPLOYEES)

Section A:
Demographics:
• Gender:
• Age:
• Education (in years):
• Tenure in this organization (in years or months):

Section B:
Choose the option that you feel for following questions.
1= strongly disagree 2= disagree 3= neutral 4= agree 5= strongly agree

High Performance Work Systems:

1. Employees are involved in job rotation. 1 2 3 4 5

2. Employees are empowered to make decisions. 1 2 3 4 5

3. Jobs are designed according to employee skills a nd capabilities. 1 2 3 4 5

4. Selection is comprehensive (uses interviews, tests, etc.). 1 2 3 4 5

5. Selection emphasizes their ability to join forces and work in teams. 1 2 3 4 5

6. Selection involves screening job candidates. 1 2 3 4 5

7. Selection focuses on selecting the best candidate, regardless of the specific job. 1 2 3 4 5

8. Selection emphasizes promotion. 1 2 3 4 5

9. Selection places main concern on their potential to learn (e.g., aptitude). 1 2 3 4 5

10. Training is on regular basis. 1 2 3 4 5

11. Training programs are comprehensive. 1 2 3 4 5

12. Training programs are to develop firm-specific skills and knowledge. 1 2 3 4 5

13. The training programs emphasize on-the-job experiences. 1 2 3 4 5

14. Performance is based on objective, quantifiable results. 1 2 3 4 5

15. Performance appraisals include feedback. 1 2 3 4 5

16. Incentives are based on team performance. 1 2 3 4 5

17. Compensation packages include an extensive benefits package. 1 2 3 4 5

18. Our compensations include high wages. 1 2 3 4 5

19. The incentive system is associated to skill-based pay. 1 2 3 4 5

20. Our compensation is related to performance. 1 2 3 4 5

High Performance Work Systems and Organizational Performance... 437

Social Exchange:

1. My organization has made a significant investment in me. 1 2 3 4 5

2. The things I do on the job today will benefit my standing in this organization in the long 1 2 3 4 5
run.

3. There is a lot of give and take in my relationship with my organization. 1 2 3 4 5

4. I worry that all my efforts on behalf of my organization will never be rewarded.[R] 1 2 3 4 5

5. I don’t mind working hard today – I know I will eventually be rewarded by my 1 2 3 4 5

organization.

6. My relationship with my organization is based on mutual trust. 1 2 3 4 5

7. I try to look out for the best interest of the organization because I can rely on my 1 2 3 4 5
organization to take care of me.

8. Even though I may not always receive the recognition from my organization I deserve, I 1 2 3 4 5
know my efforts will be rewarded in the future.

Relational Coordination:

1. I frequently communicate with other employees in group about the work to be done. 1 2 3 4 5

2. Employees in my groups communicate with me in a timely way about the work to be 1 2 3 4 5

done.

3. Employees in my groups communicate with me accurately about the work to be done 1 2 3 4 5

4. In case of a mistake, employees in my group blame each other rather than sharing 1 2 3 4 5
responsibility.

5. Other employees in my group share my goals for the accomplishment of task. 1 2 3 4 5

6. My group members know about the work I do in joint task. 1 2 3 4 5

7. Employees in my group respect me and my work I do in group task. 1 2 3 4 5

Employee Attitude:

(a) Motivation:

1. I always behave in a way that helps our Company’s performance. 1 2 3 4 5

2. I am always contributing in positive ways to The Company’s performance. 1 2 3 4 5

3. As compared to our competitors my organization has a highly motivated group of 1 2 3 4 5

employees.

(b) Job Satisfaction

1. All in all, I am satisfied with my job. 1 2 3 4 5

2. In general I do not like my job. (R) 1 2 3 4 5

3. In general, I like working here. 1 2 3 4 5

438 S. Riaz

Employee Behaviours:

(a) Organizational Citizenship Behaviour:

I help my colleagues who have been absent from work. 1 2 3 4 5

I remain punctual. 1 2 3 4 5

I guide new people on job. 1 2 3 4 5

I help others who have heavy workloads. 1 2 3 4 5

I do not take extra breaks. 1 2 3 4 5

I assist supervisor with his or her work. 1 2 3 4 5

I make suggestions to improve my department. 1 2 3 4 5

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Safa Riaz Student at Muhammad Ali Jinnah University, Islamabad.

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