Journal of Operations Management 21 (2003) 1943

The impact of human resource management practices on operational performance: recognizing country and industry differences
Sohel Ahmad a, , Roger G. Schroeder b,1
b a Department of Management, St. Cloud State University, 720 Fourth Avenue South, St. Cloud, MN 56301-4498, USA Department of Operations and Management Science, Donaldson Chair in Operations Management University of Minnesota, Carlson School of Management, 3-140 CarlSMgmt Building, 321-19th Avenue South, Minneapolis, MN 55455, USA

Received 17 August 2000; accepted 14 January 2002

Abstract The interest in strategic human resource management (HRM) has spawned a number of empirical research studies that investigated the impact of HRM practices on organizational performance. However, very little attention has been paid to address the impact of HRM practices on operations management and to generalize the ndings across countries and industries. Success of some business decisions (e.g. globalization and merger and acquisition) necessitates recognition and reconciliation of the differences among HRM practices in different countries and industries. This study attempts to generalize the efcacy of seven HRM practices proposed by Pfeffer in the context of country and industry, focusing primarily on the effects of these practices on operations. The ndings provide overall support for Pfeffers seven HRM practices and empirically validate an ideal-type HRM system for manufacturing plants. 2002 Elsevier Science B.V. All rights reserved.
Keywords: Human resource/OM interface; Strategic human resource management; Stafng; Operational performance improvement

1. Introduction Human resources are considered the most important asset of an organization, but very few organizations are able to fully harness its potential. Lado and Wilson (1994, p. 701) dene a human resource system . . . as a set of distinct but interrelated activities, functions, and processes that are directed at attracting, developing, and maintaining (or disposing
Corresponding author. Tel.: +1-320-255-2994; fax: +1-320-255-3986. E-mail addresses: ahmad@stcloudstate.edu (S. Ahmad), rschroeder@csom.umn.edu (R.G. Schroeder). 1 Tel: +1-612-624-9544; fax: +1-612-624-8804.

of) a rms human resources. Traditionally, management of this system has gained more attention from service organizations than from manufacturing organizations. However, to enhance operational performance, effectively managing this system is equally important in both types of organizations. Needless to say, sophisticated technologies and innovative manufacturing practices alone can do very little to enhance operational performance unless the requisite human resource management (HRM) practices are in place to form a consistent socio-technical system. For this reason, manufacturing organizations need to carefully evaluate their existing HRM practices and modify them, if needed, so that employees can effectively contribute to operational performance improvement.

0272-6963/02/$ see front matter 2002 Elsevier Science B.V. All rights reserved. PII: S 0 2 7 2 - 6 9 6 3 ( 0 2 ) 0 0 0 5 6 - 6

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Several studies in the HR literature investigated the impact of HR practices on organizational performance. Although some studies related to HR practices can be found in the operations management literature (Jayaram et al., 1999; Kathuria and Partovi, 1999; Youndt et al., 1996; Kinnie and Staughton, 1991), this discipline has tended to address structural issues and analytical questions, and has paid little attention to human resources issues. A review of empirical articles published between 1986 and 1995 in 13 OM research outlets revealed that less than ve percent of these articles fell into the HRM for operations category (Scudder and Hill, 1998). This lack of attention is surprising when one considers human resources critical role in achieving superior performance in competitive priorities, such as low cost, quality, delivery, exibility, and innovation. Over the years, researchers have suggested many HRM practices that have the potential to improve and sustain organizational performance. These practices include emphasis on employee selection based on t with the companys culture, emphasis on behavior, attitude, and necessary technical skills required by the job, compensation contingent on performance, and employee empowerment to foster team work, among others. Pfeffer (1998) has proposed seven HRM practices that are expected to enhance organizational performance. The practices proposed by Pfeffer (1998, p. 96) are: 1. Employment security. 2. Selective hiring of new personnel. 3. Self-managed teams and decentralization of decision making as the basic principles of organizational design. 4. Comparatively high compensation contingent on organizational performance. 5. Extensive training. 6. Reduced status distinctions and barriers, including dress, language, ofce arrangements, and wage differences across levels. 7. Extensive sharing of nancial and performance information throughout the organization. There are several objectives of the present study based on these practices. First, we investigate whether manufacturing plants use of these seven practices differs by country or industry. Next, we assess the impact of each of these practices on organizational

performance which includes (1) operational performance measures: unit cost, quality, delivery, exibility, and speed of new product introduction and (2) an intangible performance measure: organizational commitment. Lastly, we examine whether these seven practices can form a synergistic HR bundle to represent an ideal HRM system for manufacturing plants and check the efcacy of this ideal system. Since the manufacturing plant is the unit of analysis for this study, we will be testing the HRM theory at the plant or operations level of the organization.

2. Theoretical background and hypotheses Organizations can internalize as well as externalize employment (Lepak and Snell, 1999). Internalization of employment involves building an employee skill base inside the organization, while externalization of employment means outsourcing human resource needs to market-based agents (Rousseau, 1995). Each alternative has its own costs. According to the transaction cost theory (Williamson, 1975), the decision to internalize or externalize a part or all of an operations human resource needs should be based on the transactional costs involved. Arriving at a HR outsourcing decision in such a manner is myopic as it overlooks the strategic consequences. For example, outsourcing human resource needs can minimize bureaucratic costs and complexities. However, an operations continued dependence on external sources may inhibit its ability to develop core skills and capabilities vital for longterm survival in the marketplace (Lei and Hitt, 1995). The human capital theory recognizes employee skills, experience, and knowledge as assets with the potential to generate economic rent (Coff, 1997). However, this theory evaluates human resources through productivity gains. It falls short of attaching strategic value to causal ambiguity and tacit knowledge embedded within an organizations human resource system. In recent years, researchers and practitioners have realized that HRM systems can be used as strategic levers to focus on value creation that goes beyond traditionally emphasized cost reduction (Becker and Gerhart, 1996). Drawing on a behavioral psychology perspective, researchers have highlighted the strategic aspect of HRM practices and argued about why these practices can lead to competitive advantage (Schuler

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and Jackson, 1987; Schuler and MacMillan, 1984). The resource-based view of the rm further advanced this argument by stressing that the tacit knowledge embedded in rm-specic human resources is hard to imitate because of its attributes, such as asset specicity, social complexity, path dependency, and causal ambiguity (Russell, 1997; Collis and Montgomery, 1995; Barney, 1991). The seven practices suggested by Pfeffer (1998) are expected to foster such inimitable attributes in human resources and, thereby help an organization attain competitive advantage. Several researchers (Delery and Doty, 1996; Huselid, 1995; Arthur, 1994; Osterman, 1994) including Pfeffer (1998) have argued why these practices are expected to enhance organizational performance. The impact of HRM practices on organizational performance has been the subject of much attention over the years. However, empirical validation of the ndings in operations across countries and/or industries is nearly non-existent and very limited at best. Recent trends toward globalization and mergers and acquisitions in the business world make the study of HRM practices in the context of country and industry a necessity (Legare, 1998). The literature has emphasized the need for generalizability of the relationship between HRM practices and organizational performance. For example, Delery and Doty (1996, p. 829) raise concern that the results of their study of HRM practices on organizational performance in the banking industry may not be valid in other industries. These authors urge that . . . the current ndings need to be validated in other industries to rule out industry as an important contingency factor. Similar cautions can be made for country effects. The impact of HRM practices on organizational performance as proposed by Pfeffer (1998) and others can be generalized across manufacturing plants operating in different industries and countries if we nd support for the set of hypotheses below. H1. After controlling for the industry and country effects, organizational performance will be positively related to each of the following seven HRM practices: (a) employment security (alternatively, employment insecurity is negatively related to organizational performance); (b) selective hiring; (c) use of self-managed teams and decentralization; (d) use of compensation contingent on organizational performance; (e) the ex-

tent of training; (f) reduced status distinctions and (g) sharing of information. Much of the previous research on the relationship between HRM practices and organizational performance has concentrated on a single HR practice, such as compensation, selection, etc. (Gerhart and Milkovich, 1990). However, a growing number of researchers have argued for instituting complementary bundles of HRM practices to enhance organizational performance (Ichniowski et al., 1993; Osterman, 1994). Human resource practices are said to be bundled when they occur in fairly complete, mutually reinforcing or synergistic sets (Dyer and Reeves, 1995, p. 657). Pfeffers seven HRM practices are internally consistent with one another. For example, an organization promising employment security needs to pay close attention to selective hiring of new personnel. Employees cannot be retained for a long time unless their attitudes, values, and behavior t with those of the organization. Therefore, identifying these qualities should be an integral part of the hiring process. Effectively operating self-managing teams and decentralizing decision making require in-depth understanding of aptitudes, abilities, temperaments, idiosyncrasies, and personal traits of fellow employees. Mutual understanding among employees usually develops when they work together for a long time as occurs in organizations that provide employment security. Also, when an organization institutes performance contingent compensation, the employees are motivated to focus on long-term organizational performance rather than short-term gains if the employers provide employment security. Organizations emphasizing employment security intend to keep employees longer; therefore, it makes sense to invest more in training these employees. Under a longer time horizon, training related expenditures should be strategically evaluated and considered an investment toward human capital rather than merely a cost of doing business. Organizations need to make extra efforts to reduce status distinctions, if they intend to keep employees loyal to them. Sharing information on organizational strategy, goals, and performance with employees conveys that they are trusted. Information sharing also empowers the employees and fosters organizational transparency which are crucial if the employees are to have long tenures in the organization.

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S. Ahmad, R.G. Schroeder / Journal of Operations Management 21 (2003) 1943 Table 1 Number of plants by country and industry Electronic Germany Italy Japan USA Total 5 8 13 6 32 Machinery 10 13 12 5 40 Automobile 9 7 14 5 35 Total 24 28 39 17 107

As explained above, employment security is internally consistent with other HRM practices. Similar arguments can be made about each of the remaining six HRM practices. Therefore, these HRM practices are internally consistent with one another and qualify as a synergistic set. A bundle of internally consistent practices is more effective than the sum of the effects of the individual practices due to their mutually reinforcing support (MacDufe, 1995). The resource-based view also supports this notion by stressing that individual practices have a limited ability to generate competitive advantage in isolation. However, in combination, these complementary resources can help a rm attain greater competitive advantage (Barney, 1995). Every organization differs in how much effort it puts into harnessing each of the seven HRM practices. An ideal situation may be one in which each of these HRM practices is explored and exploited to its highest potential, typically when an organization exerts the maximum effort possible to develop, institute, and implement each of these seven practices. Such a HRM system may be termed an ideal-type HRM system. This ideal-type HRM system is expected to yield the highest organizational performance. The more similar an organizations HRM system is to the ideal-type HRM system, the better the organizations performance. Moreover, if bundling invokes synergy among HRM practices as previously argued, then an organization with a HRM system similar to the ideal-type HRM system will explain signicantly more variation in organizational performance than any of the individual HRM practices or any combination thereof. From the above discussion, we draw the following hypothesis. H2. After controlling for the industry and country effects, the degree of dissimilarity (measured as mist) between an organizations existing HRM system and the ideal-type HRM system will be negatively related to the organizational performance.

3. Data collection We use world class manufacturing (WCM) project data to test the hypotheses. The focus of the WCM project is to examine differences in manufacturing

practices across plants in different countries and industries (Flynn et al., 1996). The response rate for this project was about 60%. We use a part of this projects database that addresses HRM issues; it includes 107 manufacturing plants (see Table 1) after eliminating responses with missing data. These plants employ 1153 employees on average, including both salaried and hourly workers. The mean age of these plants is about 37 years. The average facility size (production and warehouse) is 160,701 ft2 , with 32 product lines manufactured on average. Data collected from plants operating in four countries and three industries are used for the empirical analyses. The countries are Germany, Italy, Japan, and the USA. The four countries were selected to represent the major industrial regions of the world, North America, Asia and Europe. In each of these countries, plants were randomly selected from three industries: automobile, electronics, and machinery. The three industries were selected because the literature suggests that they have been implementing various WCM approaches, such as total quality management (TQM), just-in-time (JIT), and employee involvement (EI). We wanted industries that had been threatened by global competition and thus were seeking improvements. Face validity of the questionnaires was insured by having three different researchers develop items for the scales. The three researchers then reviewed all of the items for content validity. Whenever possible, scales were selected from the existing literature. The data collection instrument was pre-tested using 10 industry experts and academics. After the pilot testing, some of the items were claried or changed to be more representative of the intended constructs. The reliability and validity of the constructs were formally tested using data from over 800 respondents in a prior round of data collection in 43 US plants. As a result of these tests,

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some of the scales were signicantly revised. The US instrument was subsequently translated into German, Italian and Japanese. The foreign language version was then translated back into English by another individual and compared for accuracy. Any discrepancies were resolved. Plant managers were contacted by a member of the WCM team and asked for their voluntary participation in exchange for detailed feedback regarding their manufacturing practices in comparison to the industry. About 60% of the plants contacted participated in the study. Interested plant managers appointed plant research coordinators who maintained contact with the research team. These plant research coordinators were managers who had at least 3 years of experience in the plants and were knowledgeable about the major responsibilities of the employees working in the plant. The research team consulted with the plant research coordinators to identify the right respondents in the plant who had pertinent knowledge, experience, and ability to provide accurate and unbiased answers to the questions in the survey. The questionnaires were collected in sealed envelopes to maintain anonymity of responses. Managers, engineers, supervisors and workers responded to these questionnaires. We used responses from different people for the dependent (organizational performance) and independent (HRM practices) variables to avoid common respondent bias.

4. Measures 4.1. The seven HRM practices Table 2 summarizes the variables used and the methods employed to measure the seven HRM practices. While most of these HRM practices are measured using one variable, some are measured using multiple variables as determined by the scope of the HRM practice and limitations of the WCM database. For details on the measurement refer to Appendix A and Table 3. Most of the variables were measured using perceptual scales with a few exceptions where objective measures were used. The list of scales includes: MFGHRFIT, BEHAVIOR, TEAMS, INTERACT, INCENTOB, JOBSKILL, MULTFUN, STRATCOM, and FEEDBACK. These scales closely approxi-

mate the denition of the seven HR practices being measured. A set of Likert scales was used to measure pertinent constructs. Each item of a construct was answered using the following ve-point scale: strongly agree (5), agree (4), neutral (3), disagree (2), and strongly disagree (1). As mentioned earlier, the content validity of a construct was ensured through pre-testing of the questionnaires and structured interviews with the managers and academic experts in the eld. Each scale was evaluated for its reliability and unidimensionality. A value of Cronbachs alpha of 0.7 or more was used as a criterion for a reliable scale (Nunnally, 1978). We removed an item if it did not contribute strongly to the alpha value and if its content was not essential for the construct. After purifying a scale, we averaged all of the items in that scale, which became the value of the variable representing the construct. Therefore, any variable measured by the scale can range in value from one to ve, where ve is the most desirable value. The remaining three variables in Table 2 were measured using objective measures. See Table 3 for details. The variable INSECURE was measured as a percentage of employees laid off during the past 5 years. This variable measures job insecurity rather than job security; as such, the most desirable value of this variable is 0. The variable CONTCOMP is a composite of two binary measures. The value of this variable can range from 2 to 4. A value of 2 indicates that the plant does not use any group incentive or prot sharing plans, while a value of 4 indicates that the plant uses both. Therefore, the most desirable value for this variable is 4. Similarly, the variable STATDIFF is a composite of four binary measures, and its value can range from 4 to 8. The higher the value of the variable STATDIFF, the higher the status differences. Hence, the most desirable value for this variable is 4. The last column of Table 2 lists the most desirable value for each variable. 4.2. Organizational performance Past empirical research has mostly investigated the effects of HRM practices on nancial performance (cf. Delery and Doty, 1996) and some on efciency and employee turnover (cf. Huselid, 1995). However, very few studies have examined the impact of HRM practices on operational performance measures, such

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Table 2 Summary of measurements of the seven HRM practices Practice Employment insecurity Variable INSECURE Scales/measurement Employment insecurity Description of measurements (The number of employees who have been laid off during the past 5 years/number of employees in the organization)100 A scale of six items measuring the degree of cooperation between manufacturing and human resources in designing job descriptions and stafng activities A scale of ve items measuring the importance given to a prospective employees attitudes and behavior toward teamwork and problem solving during the selection process A scale of ve items used to assess the effective use of teams on the shop oor A scale of three items that measures the extent to which supervisors encourage and facilitate workers to work as a team This measure checks whether group incentive plans (Y/N) and prot sharing plans (Y/N) are used in the organization. Y=Yes=2 and N=No=1 A scale of four items to measure whether the plants reward system is consistent with manufacturing objectives and goals A scale of three items to measure if employees on the job skills and knowledge are being upgraded in order to maintain a work force with cutting edge skills and abilities A scale of ve items to measure the extent to which employees receive cross training so that they can perform multiple tasks or jobs Four questions were asked to judge the use of symbols that indicate status differentials among various employees in terms of the following: the use of assigned parking spots (Y/N); the use of uniforms by workers only (Y/N); access restriction to cafeteria for some employees (Y/N); and the use of separate rest-rooms (Y/N) for different employees in the plant A scale of three items to measure the efforts made by management to communicate the plants competitive strategy to all employees A scale of ve items to measure the extent to which management provides shop oor personnel with information regarding their performance in a timely and useful manner Ideal prole 0

Selective hiring

MFGHRFIT

Manufacturing and human resources t

BEHAVIOR

Behavior and attitude

Use of teams and decentralization

TEAMS INTERACT

Team activities Interaction facilitation

5 5

Compensation/incentive contingent on performance

CONTCOMP

Contingent compensation

INCENTOB

Incentives to meet objectives Training on job skills

Extensive training

JOBSKILL

MULTFUN

Training in multiple functions Existing status differences

Status differences

STATDIFF

Sharing information

STRATCOM

Communication of strategy

FEEDBACK

Feedback on performance

S. Ahmad, R.G. Schroeder / Journal of Operations Management 21 (2003) 1943 Table 3 HRM practices measured using objective measures

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as quality, cost or delivery (cf. MacDufe, 1995) or intangible performance measures, such as organizational commitment (cf. Kalleberg and Moody, 1994). The appropriate dependent variable will vary with the level of analysis, but in each case the focus should be on variables that have inherent meaning for a particular context (Becker and Gerhart, 1996, p. 791). Because the unit of analysis for this study is a manufacturing plant, we argue that HRM practices will impact the operational performance measures at the plant level. Also, the strategic implications of HRM practices make tracking intangible performance measures important. We, therefore, investigate the impact of HRM practices on operational performance

measures as well as the intangible performance measure dened below. 4.2.1. Operational performance measures Researchers (Wheelwright, 1978; Schmenner, 1981; Hayes and Wheelwright, 1984; Hill, 1989) have proposed a wide variety of operational performance measures for manufacturing facilities. These include cost, quality, delivery, and exibility. Lately, the rate of new product introduction has also been included in this list (Vickery et al., 1997). We performed factor analysis to check if these ve operational performance measures formed different groups. The factor analysis revealed that all of these measures loaded on

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Table 4 Operational performance measures (PERFORM) COST Unit cost of manufacturing QUALITY Quality of product conformance DELIVERY On-time delivery performance FLEXBLTY Flexibility to change volume NPDSPEED Speed of new product introduction PERFORM = COST + QUALITY + DELIVERY + FLEXBLTY + NPDSPEED Please circle the number which indicates your opinion about how your plant compares to its competition in your industry. The number 5: superior or better than average; 4: better than average; 3: average or equal to the competition; 2: below average; 1: poor or low end of the industry.

to one factor. Additionally, the reliability analysis of these measures yielded a value of Cronbachs alpha of 0.71, justifying summing up these measures to form a single performance index (PERFORM). This composite measure represents a plants aggregate achievement in all ve areas of performance mentioned above compared to competitors. See Table 4 for details. 4.2.2. Intangible performance measure Researchers have yet to reach a consensus about how best to dene strategic HRM. However, Huselid et al. (1997, p. 172) attest that there is broad agreement in the literature that strategic HRM . . . involves designing and implementing a set of internally consistent policies and practices that ensure a rms human capital contributes to the achievement of its business objectives. Snell and Dean (1992) further stress that a rm invests in employees to strengthen its human capital, but the rm does not actually own this human capital. The rm has very little control over this human capital as employees may leave the rm or, even if they do not leave, they may not be inspired to put forward their best efforts. Snell and Dean (1992) recommend that a rm devise methods to ensure that individuals act in the rms best interest over time. HRM practices that fail to elicit specic employee attitudes, such as organizational commitment are less likely to have strategic impact (Arthur, 1994). Furthermore, an employee with strong organizational commitment will be highly motivated to expend energy on organizational tasks (Anderson et al., 1994). Even highly skilled and knowledgeable employees who are

uncommitted may not contribute discretionary efforts and will thereby minimize their potential in the organization. Organizational commitment is an indicator that testies to whether the HRM practices employed in an organization are able to foster psychological links between organizational and employee goals. This is an intangible outcome of a HRM system and is important to retaining employees and exploiting their potential to the fullest extent over time. We, therefore, identify organizational commitment as an intangible performance measure and measure it using a scale. We conducted reliability and unidimensionality analyses for this scale. Items were dropped to obtain a reliable and unidimensional scale. The remaining items were then averaged to obtain a score for the scale (COMMIT) corresponding to each plant. See Appendix B for details. 4.3. Measure of mist In context of this paper, mist represents the dissimilarity between an ideal HRM prole and a plants existing HRM prole. We identied a theoretical ideal prole by choosing the most desirable values of the variables representing the seven HRM practices shown in the last column of Table 2. This prole represents the ideal-type HRM system that has been theorized to yield the highest organizational performance. Mathematically, mist is the Euclidean distance between a point dened in a multidimensional space by the ideal prole (i.e. the ideal-type HRM system) and a point representing an experimental unit. In this study, the experimental unit is a plants existing HRM system as measured by the variables representing the seven HRM practices shown in Table 2. Accordingly, we use the following general formula to calculate MISFIT.
n

MISFITi =
k =1

(Xk Xik )2

(1)

where MISFITi is the distance between the existing HRM system of a particular plant i and the ideal-type HRM system; Xik the score of the kth variable of the existing HRM system of a particular plant i; Xk the score of the kth variable of the ideal-type HRM system; k the number of variables representing the HRM

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system 1, . . . , n; for this study, k varies from 1 to 12 and i varies from 1 to 107. More specically, for this study, MISFIT is calculated as follows:

5. Analyses and results In this part of the paper, we rst present the descriptive statistics. Next, we conduct statistical

MISFITi = STD{(0 INSECUREi )2 } [STD{(5 MFGHRFITi )2 } + STD{(5 BEHAVIORi )2 }] + 2 2 [STD{(5 TEAMSi ) } + STD{(5 INTERACTi )2 }] + 2 [STD{(4 CONTCOMPi )2 } + STD{(5 INCENTOBi )2 }] + 2 [STD{(5 JOBSKILLi )2 + STD{(5 MULTIFUNi )2 }] + 2 + STD{(4 STATDIFFi )2 } [STD{(5 STRATCOMi )2 } + STD{(5 FEEDBACK i )2 }] + 2 As mentioned earlier, the ranges of the variables in the above equation are not the same. This can disproportionately inate some variables contribution to the MISFIT calculation. We have, therefore, standardized (STD) the squared differences (between the ideal-type HRM system and the existing HRM system of a plant) before adding them together to avoid this problem. 4.4. Control variables Since we intend to identify impacts of HRM practices on organizational performance that can be generalized across countries and industries, the effects of country and industry need to be removed prior to evaluating the relationship between HRM practices and organizational performance. We, therefore, included the following control variables (indicator variables) in the regression analyses. Three country control variables, GERMANY (Germany compared to USA), ITALY (Italy compared to USA), and JAPAN (Japan compared to USA), are used to represent the four countries. Similarly, two industry control variables, MACHINE (machinery industry compared to electronics industry) and AUTOMOBL (automobile industry compared to electronics industry), are used to represent the three industries from which the data were collected. analysis to determine if the extent to which plants use the seven HRM practices differs by country and/or industry. Lastly, empirical analyses are performed to test the hypotheses stated earlier. Table 5 shows means, standard deviations, and correlations, which allow for some interesting observations. For example, high variance of the variable INSECURE indicates that plants employee layoff rates vary widely. Employment insecurity (INSECURE) is negatively related to many of the HRM practices which implies that a plant with a high employee layoff rate is less likely to foster growth in other HRM practices listed in Table 5. The variable that measures status difference (STATDIFF) shows similar results. A higher status difference in a plant is associated with lower efforts in other HRM practices. That is, it is unlikely that the HRM practices will ourish in a plant where high status difference exists. Furthermore, a plant with high status difference is expected to have high employment insecurity (i.e. higher employee layoff rate) since STATDIFF and INSECURE are positively correlated. Positive correlations among different HRM practices show that when a plant increases its efforts in one of the HRM practices, it is also more likely to increase efforts in other practices. Canonical correlation analysis is often used to investigate the relationship between two sets of variables. This analysis is primarily descriptive, although

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it can be used for predictive purposes. We, therefore, use this method to identify the relationship between HRM practices variables and operational performance measures. As suggested by Hair et al. (1998), three criteria were considered when determining the number of important canonical pairs: (1) level of statistical signicance of the function, (2) magnitude of the canonical correlation, and (3) measure of redundancy for the percentage of variance accounted for by the two sets of variables. Only the rst canonical pair was statistically signicant (see Table 6). The canonical correlation (0.56) was moderate. The redundancy index was found to be 0.1128, which is quite low. Although there are no guidelines about the minimum acceptable value for the redundancy index, generally the higher the value of the index the better. Traditionally, canonical pairs have been interpreted by examining the sign and the magnitude of the canonical weights. However, these weights are subject to considerable instability due to slight changes in sample size, particularly where the variables are highly correlated. Canonical cross-loadings have been suggested

Table 6 Results of canonical correlation analysis Canonical correlation 0.5603 Level of signicance 0.0064 Redundancy index 0.1128 Correlations between the operational performance measures and the rst canonical variable of the HRM practices COST 0.3912 QUALITY 0.4334 DELIVERY 0.3227 FLEXBLTY 0.0911 NPDSPEED 0.3328 Correlations between the HRM practices variables and the rst canonical variable of the operational performance measures INSECURE 0.1183 MFGHRFIT 0.3101 BEHAVIOR 0.3896 TEAMS 0.4121 INTERACT 0.4228 CONTCOMP 0.3153 INCENTOB 0.4047 JOBSKILL 0.4553 MULTFUN 0.4625 STATDIFF 0.2224 STRATCOM 0.4436 FEEDBACK 0.3785

as a preferable alternative to the canonical weights (Hair et al., 1998). The canonical cross-loadings show the correlations of each of the dependent variables with the independent canonical variate, and vice versa. Table 6 shows the canonical cross-loadings for the rst canonical pair. A loading of at least 0.31 is considered signicantly different from zero at a level of signicance of 0.05 (Graybill, 1961). According to this criterion, except for exibility to change volume (FLEXBLTY), each of the dependent variables is signicantly related to the independent canonical variate (canonical variate representing HRM practices). On the other hand, all independent variables (HRM practices) except for employment insecurity (INSECURE) and status differences (STATDIFF) are signicantly related to the dependent canonical variate (canonical variate representing operational performance measures). Researchers have argued that HRM practices can differ across countries and/or industries for several reasons including: cultural idiosyncrasy (Salk and Brannen, 2000), governmental regulations/policies (Morishima, 1995), competitive priorities (Boxall and Steeneveld, 1999), and adoption of managerial practices, such as JIT and quality management (Snell and Dean, 1992). Hofstede argues that national cultures impact the attitudes and behaviors of employees (Hofstede, 1980). In a single company study, he found that cultural values varied signicantly by country and region of the world. Most of the empirical studies related to HRM practices have been conducted using data collected in a single industry within one country (cf. Arthur, 1994). Some studies used data collected from multiple industries in one country (cf. Huselid, 1995), and some studies were conducted on data collected from a single industry in multiple countries (cf. MacDufe, 1995). However, the central foci of these studies were not to compare systematic differences that may have existed in HRM practices in the different countries and industries in which the organizations operated. Empirical examination of broad-based HRM practices across industries and/or countries is very limited in the literature (MacDufe and Kochan, 1995; Ichniowski and Shaw, 1999). Since we intend to identify generalizable impacts of HRM practices on organizational performance across countries and industries (H1), it is important to understand the differences that may exist

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Table 7 HRM practices across countries Practice Countries GER (1) INSECURE MFGHRFIT BEHAVIOR TEAMS INTERACT CONTCOMP INCENTOB JOBSKILL MULTFUN STATDIFF STRATCOM FEEDBACK 42.09 3.38 3.17 3.51 3.52 2.83 2.62 3.20 3.59 6.71 3.6 3.22 ITL (2) 1.41 3.29 3.10 3.38 3.11 2.32 2.44 3.25 3.30 5.5 2.88 2.70 JPN (3) 0.40 3.33 3.67 3.76 3.78 3.79 3.13 3.62 3.74 4.17 3.70 3.65 USA (4) 20.97 3.26 3.23 3.76 3.78 2.56 2.64 3.55 3.82 4.63 3.55 3.36 (1, 2)a, (1, 3) NS (3, 1) (3, 2) (3, 4) (3, 2) (4, 2) (1, 2) (3, 2) (4, 2) (1, 2) (3, 2) (3, 4) (3, 1) (3, 1) (3, 2) (3, 4) (3, 1) (4, 1)+ (3, 2) (1, 2) (3, 2) (4, 2) (1, 2) (1, 3) (1, 4) (2, 3) (2, 4) (1, 2) (3, 2) (4, 2) (1, 2) (3, 1)+ (3, 2) (4, 2) 7.77 0.25 21.20 5.41 14.13 41.98 10.54 7.16 11.57 71.40 16.87 13.19 0.00 0.86 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pairwise differences F-value Signicance

NS: not signicant; GER: German plants; ITL: Italian plants; JPN: Japanese plants; USA: American plants. a The average percentages of employees laid off in the past 5 years from the plants in Germany and Italy differ at a level of statistical signicance of P 0.01. + P 0.1. P 0.05. P 0.01.

in HRM practices in various countries and industries. We investigate these differences below. We use one-way ANOVA to identify differences in HRM practices among plants operating in four countries. The last two columns of Table 7 show the values of the F-statistics and their levels of signicance. F-statistics for all of the HRM practices are found to be highly signicant except for the scale representing manufacturing and human resources t (MFGHRFIT). That is, mean efforts expended by plants differed in all but one of the HRM practices in at least two countries. Statistical insignicance of the F-statistic for MFGHRFIT suggests that the level of cooperation between manufacturing and human resources in designing job descriptions and stafng activities did not differ signicantly by country. Next, we conducted the Scheffe pairwise comparison tests of mean differences to better understand how HRM practices differed between each pair of countries. This comparison revealed several important aspects of HRM practices as they are used in different countries. Employment insecurity is the highest in Germany and the lowest in Japan. The well known lifelong employment policy in Japan seems to be evident in this nding. Plants in Japan emphasized some HRM practices signicantly more than plants in other

countries. These practices are: behavior and attitude (BEHAVIOR), contingent compensation (CONTCOMP), and incentives to meet objectives (INCENTOB). Refer to Tables 2 and 3, and Appendix A for denition and measurement of these and other HRM practices. Compared to other countries in this sample, plants in Italy seem to be signicantly lacking in their efforts in several HRM practices. These HRM practices include team activities (TEAMS), interaction facilitation (INTERACT), training in multiple functions (MULTFUN), communication of strategy (STRATCOM), and feedback on performance (FEEDBACK). The training on job skills scale (JOBSKILL) measures if employees on-the-job skills and knowledge are considered important and whether these are upgraded on a regular basis to maintain a work force with cutting edge skills and abilities. Plants in Japan put signicantly more effort into training on the job skills, while plants in Germany lagged behind other countries in this HRM practice. We were surprised by this observation since Germany, under a national industrial and educational policy, offers apprenticeship training to secondary school students to facilitate the school-to-work transition (MacDufe and Kochan, 1995). Our expectation was that German plants would

S. Ahmad, R.G. Schroeder / Journal of Operations Management 21 (2003) 1943 Table 8 HRM practices across industries Practice Industries ELEC (1) INSECURE MFGHRFIT BEHAVIOR TEAMS INTERACT CONTCOMP INCENTOB JOBSKILL MULTFUN STATDIFF STRATCOM FEEDBACK 22.90 3.39 3.37 3.61 3.61 2.93 2.76 3.47 3.70 4.72 3.48 3.27 MACH (2) 11.57 3.29 3.32 3.48 3.35 2.90 2.74 3.36 3.46 5.50 3.29 2.96 AUTO (3) 5.85 3.29 3.35 3.73 3.71 3.20 2.78 3.43 3.67 5.17 3.57 3.59 NS NS NS (3, 2)a,+ (3, 2) NS NS NS (1, 2) (3, 2)+ (2, 1) NS (3, 2) 1.58 0.45 0.13 2.89 5.06 1.36 0.05 0.53 4.43 3.99 2.24 8.23 0.21 0.64 0.88 0.06 0.00 0.26 0.95 0.59 0.01 0.02 0.11 0.00 Pairwise differences F-value

31

Signicance

NS: not signicant; ELEC: electronics industry; MACH: machinery industry; AUTO: automobile industry. a The average levels of effort put in team activities (TEAMS) by the automobile and machinery industries differ at a level of statistical signicance of P 0.1. + P 0.1. P 0.05. P 0.01.

show a similar proclivity toward developing job skills in plants. We also note that German plants exhibit the highest status differences (STATDIFF) among all of the countries; Italian plants are second. Again, we used one-way ANOVA to identify plants differences in HRM practices in the three industries. Table 8 shows that the F-statistics corresponding to most of the HRM practices are insignicant. The Scheffe pairwise comparison tests of mean differences revealed that plants operating in the machinery industry seem to put signicantly less effort into team activities (TEAMS), interaction facilitation (INTERACT), training in multiple functions (MULTFUN), and feedback on performance (FEEDBACK) than plants operating in the automobile industry (see Table 8). A closer look reveals that these HRM practices are often emphasized in plants that implement manufacturing practices, such as quality management and/or lean production. The automobile industry was at the forefront of the quality management and JIT manufacturing revolutions in past decades (Soderquist and Motwani, 1999; Womach et al., 1990). This well-known fact probably explains the difference in HRM practices. Also, the plants in the machinery industry exhibited signicantly higher status differences (STATDIFF) than those in the electronics industry.

The general perception of work environments in the machinery and electronic industries supports these ndings. In addition to conducting one-way ANOVA as discussed above, the two-way interaction effects were also tested using general linear models. Only the two-way interaction effect for the variable INSECURE was found to be statistically signicant. This is not surprising given our earlier ndings which revealed that this variable showed fairly high variance across countries and industries. In summary, we have found that HR practices vary widely by country and to some extent by industry. This is consistent with institutional theory when the institutions are taken to be country or industry. These institutions exhibit an important and pervasive inuence on the HR practices employed. National culture, industry competition and other factors may account for the differences we observed among the HR practices adopted in different countries and industries. 5.1. Hypothesis 1 This hypothesis is tested by hierarchical regression analyses using PERFORM (Table 9) and COMMIT (Table 10) as dependent variables. First, the country

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and industry control variables (GERMANY, ITALY, JAPAN, MACHINE, and AUTOMOBL) were entered. Next, the HRM practices were independently entered into the equation. For each of the dependent variables, the results show that most of the HRM practices explain a signicant incremental level of the variance, providing overall support for this hypothesis. Specifically, for the dependent variable PERFORM, all hypotheses are supported except for hypotheses (a) and (f). For the dependent variable COMMIT, hypotheses (b), (c), (e), and (g) are supported and hypothesis (d) is partially supported since the variable INCENTOB is found to be signicant but the variable CONTCOMP is not. In order for hypothesis (d) to be fully supported, both INCENTOB and CONTCOMP had to be significant. We, however, ask the reader to exercise caution while interpreting results related to Hypothesis 1 due to the possibility of omitted variable bias since the correlations between some pairs of HRM practices are quite high. Regression analyses show that employment insecurity (INSECURE) and status differences (STATDIFF) were not signicant for either of the two dependent variables. In the literature, empirical evidence shows that employment insecurity is associated with lower performance (Delery and Doty, 1996). Therefore, we were surprised that employment insecurity (INSECURE) was not signicant. However, the correlation matrix (Table 5) shows that employment insecurity is negatively related to several HRM practices. These HRM practices have positive associations with the dependent variables. Therefore, employment insecurity seems to hinder the development of other HRM practices, thereby minimizing the potential of the HRM practices as a whole. Status difference (STATDIFF) shows a similar relationship with other HRM practices. Additionally, contingent compensation (CONTCOMP) was not signicant for the intangible performance measure. The literature nds mixed impact of contingent compensation on intangible performance measure, such as organizational commitment. While contingent compensation can sometimes motivate workers to put forward their best efforts (cf. Henderson and Lee, 1992), it can sometimes de-motivate them (cf. Kohn, 1993a) because contingent compensation can be perceived by the employees as a management control mechanism. Here, the term control implies

managements attempt to ensure desired outcomes by trying to inuence employee behavior (Lawler and Rhode, 1976). Therefore, the more controlling the employees perceive the compensation system to be, the less organizational commitment it will engender (Deci, 1972; Ryan, 1982). This probably explains why we failed to observe a signicant relationship between contingent compensation (CONTCOMP) and the intangible performance measure. According to the behavioral approach to strategic HRM, the mechanism through which a HRM system contributes to operational performance is by eliciting behaviors required to accomplish operational goals. From that standpoint, the role of an intangible performance measure (i.e. organizational commitment) as a mediating variable in HRM systems inuence on operational performance is worth being investigated. This investigation is conducted as follows. A variable Z is said to be a mediator of a relationship between two variables X (independent variable) and Y (criterion variable), if the following are true (Baron and Kenny, 1986): (1) X signicantly affects Z, when Z is regressed on X; (2) X signicantly affects Y, when Y is regressed on X; (3) Z signicantly affects Y, when Y is regressed on both X and Z. Table 11 shows the results related to mediating effects of the intangible performance measure (organizational commitment). According to the criteria mentioned above, organizational commitment (COMMIT) acts as a mediating variable for MFGHRFIT, BEHAVIOR, TEAMS, INTERACT, INCENTOB, JOBSKILL, MULTFUN, STRATCOM, and FEEDBACK. Thus, the analyses conducted to test the direct impact of HRM practices on operational performance and the subsequent analyses for mediating effects reveal the following. INSECURE and STATDIFF seem to have no impact on operational performance, CONTCOMP inuences operational performance directly, and the rest of the HRM practices inuence operational performance indirectly through the mediating variable COMMIT. 5.2. Hypothesis 2 The prole deviation method (Drazin and Van de Ven, 1985) is used to test this hypothesis. There are three steps in this method: (1) identifying the ideal prole; (2) calculating mist; (3) linking mist with organizational performance. We completed the rst

S. Ahmad, R.G. Schroeder / Journal of Operations Management 21 (2003) 1943 Table 11 The mediating effect of organizational commitment (COMMIT) Independent variables Dependent variables COMMIT (coefcient) 0.00 0.41 0.76 0.53 0.51 0.06 0.49 0.68 0.78 0.01 0.43 0.24 PERFORM (coefcient) 0.01 1.36 2.22 2.04 1.41 0.85+ 1.08 2.16 2.90 0.19 1.90 1.43 PERFORM (coefcient) 0.00 2.67 0.31 2.55 0.22 2.62 0.86 2.25 0.01 2.73 0.69 2.65 0.40 3.06 0.60 2.29 1.29 2.07 0.23 2.74 0.97 2.14 0.88+ 2.32

35

INSECURE COMMIT MFGHRFIT COMMIT BEHAVIOR COMMIT TEAMS COMMIT INTERACT COMMIT CONTCOMP COMMIT INCENTOB COMMIT JOBSKILL COMMIT MULTFUN COMMIT STATDIFF COMMIT STRATCOM COMMIT FEEDBACK COMMIT
+

and second steps earlier, and the third step is completed here by linking MISFIT with organizational performance according to the following regression model. Hypothesis 2 will be supported by the regression model below if a signicant negative value of 6 is observed. ORG PERFi = 0 + 1 GERMANYi + 2 ITALYi +3 JAPANi + 4 MACHINEi +5 AUTOMOBLi + 6 MISFITi + i (2)

P 0.1. P 0.05. P 0.01.

where ORG PERFi is the organizational performance of plant i, which represents PERFORMi or COMMITi as a dependent variable, one at a time. GERMANYi , ITALYi , and JAPANi are three indicator variables representing four countries. MACHINEi and AUTOMOBLi are two indicator variables representing three industries. MISFITi is the value of the variable MISFIT for plant i. Table 12 shows the results of the hierarchical regression analyses. The country and industry control variables are entered in the rst step (Eq. (1)). Next, MISFIT is entered into the Eq. (2). Two sets of equations correspond to each dependent variable. Table 12 shows that Eq. (2) for each of the two equations is signicant and the coefcient of MISFIT ( 6 ) is negative and signicant, thus providing support for Hypothesis 2. The variable MISFIT is found to be negatively

Table 12 Results of hierarchical regression analysis of MISFIT on PERFORM and COMMIT Variables PERFORM Eq. (1) (coefcient) Constant GERMANY ITALY JAPAN MACHINE AUTOMOBL MISFIT R2 F Adjusted R2
+

COMMIT Eq. (2) (coefcient) 17.49 1.14 0.56 0.47 0.02 0.38 0.33 0.21 4.53 0.17 Eq. (1) (coefcient) 3.58 0.21 0.04 0.30 0.06 0.17+ 0.13 3.06 0.09 Eq. (2) (coefcient) 3.48 0.06 0.36 0.47 0.14+ 0.13+ 0.08 0.49 16.05 0.46

17.88 0.07 0.71 1.17 0.34 0.52 0.09 1.97+ 0.04

P 0.1. P 0.05. P 0.01.

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related to the performance measures which implies that as a plants HRM system deviates from the ideal-type HRM system its performance suffers. Additionally, this relationship between MISFIT and organizational performance was observed after controlling for country and industry effects. We can, therefore, conclude that this ideal-type HRM system is valid for a plant regardless of the country or industry in which it operates. This nding indicates that management choices concerning HR practices do indeed make a difference even after accounting for country and industry factors.

6. Discussion Traditionally, the focus of a HRM system has been short-term, and the system has been used as a bureaucratic control mechanism to enhance efciency (Kalleberg and Moody, 1994). Now, practitioners and researchers agree that human resources can be a source of competitive advantage and should be managed strategically. However, organizations are discovering this is easier said than done. Results of the present study show that differences in HRM practices exist in plants operating in different countries. Although this was previously implied in the literature, comparison of a comprehensive list of HRM practices among countries was lacking. We obtained mixed results when the HRM practices were compared across three industries. While the majority of HRM practices used by plants did not differ by industry, we did nd several HRM practices that differed signicantly among the three industries. Particularly, the extent to which some HRM practices are used in plants operating in the machinery industry consistently laged behind that found in plants operating in the automobile industry. We nd overall support for Hypothesis 1 as most of the relationships specied in Hypothesis 1 are found to be signicant. Hypotheses (a) and (f), however, were not supported for any of the two dependent variables. Therefore, the proposed direct relationship between employment insecurity and organizational performance, and between status difference and organizational performance, cannot be empirically validated. However, as mentioned earlier, employment insecurity and status difference seem to hinder development of other HRM practices, and thereby inuence

the work environment and minimize the potential of HRM practices as a whole. The mediating effect analysis revealed that most of HRM practices impact operational performance indirectly through organizational commitment. This nding is important as it renes our understanding of the nature of relationship between HRM practices and operational performance. Also, this nding suggests that a manager intending to enhance operational performance should create a conducive organizational climate that fosters employees commitment to the organization. The ndings of the present study also offer important implications for several distinct trends observed in the business world today. Many organizations are going through globalization to take advantage of proximity to suppliers, customers, and critical resources, such as human resources. Another noticeable trend has been mergers and acquisitions among companies. Several of these mergers and acquisitions are occurring between organizations operating in different countries (e.g. Daimler-Benz and Chrysler Corporation) and industries (e.g. Time Warner and America Online). These trends pose a unique challenge for HRM (Legare, 1998; Lubatkin et al., 1999). Researchers and practitioners have strongly emphasized that M&A provide a window of opportunity for restructuring HRM practices in the combined (new) organization (Galpin and Herndon, 2000). Organizations involved in mergers and acquisitions should take this opportunity to evaluate their existing set of HRM practices and make necessary changes to facilitate post-merger integration. This is particularly important if organizations involved in M&A are following different HRM practices. Our analyses show that plants operating in different industries and/or countries use and emphasize HRM practices differently. Therefore, which HRM practices should a combined (new) organization choose when M&A is taking place between organizations operating in different industries and/or countries? By controlling for country and industry in our analyses, we were able to empirically validate those HRM practices that are expected to yield higher performance regardless of the country and industry in which the plant operates. Therefore, one choice may be to institute these HRM practices for the combined (new) organization, ne-tuning them according to the strategic intent of the

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new organization. Thus, the ndings of our study provide general directions for managers to achieve better operational performance through HRM systems integration in cross-country and/or cross-industry mergers or acquisitions. Earlier attempts to empirically validate ideal-type HRM systems have received mixed conrmation (Delery and Doty, 1996). Although support for Hypothesis 2 in our study empirically validates an ideal-type HRM system, it failed to show the expected level of variation explained. This is explained as follows: by denition an HR bundle is a set of interrelated and internally consistent HR practices that are expected to create mutually reinforcing and synergistic impacts on performance (MacDufe, 1995). Therefore, the variation in organizational performance explained by a HR bundle should be signicantly greater than that explained by an individual HR practice in that bundle. However, results of our study failed to show signicant increments in variation explained (R2 ) for the HR bundle. Nonetheless, our results empirically validate the proposed ideal-type HRM system because as a plants HRM system deviates from the ideal-type HRM system, the plants performance decreases, and this relationship is statistically significant (the coefcient of MISFIT ( 6 ) is negative and signicant).

7. Limitations, future research, and conclusions An important threat to the validity of our ndings is the distribution of the number of plants in our sample. Ideally, we would have liked to use data from the same number of plants for each country-industry combination. However, this was not possible due to missing observations. Although the number of plants did not vary greatly among the three industries, the number of plants varied quite a bit among the four countries (see Table 1). For example, we have useful data from more than twice as many plants operating in Japan (39) than in the USA (17). Therefore, our results may be more representative of Japanese plants than American plants. Another noteworthy concern is that we used perceptual measures to gauge organizational performance. Although the use of perceptual measures is quite prevalent in the literature, the use of objective mea-

sures is generally preferred. While the intangible performance measure (COMMIT) is inherently perceptual, the operational performance measure (PERFORM) could be measured using objective data. Future studies can use objective performance measures at the plant level to check the robustness of our ndings. We empirically showed which HRM practices are expected to enhance performance. However, since we used cross-sectional data, we could suggest little regarding the process of implementation of these practices or the causal relationship between use of these HRM practices and organizational performance. Two organizations may correctly identify which HRM practices to implement, yet only one may successfully attain higher organizational performance because of differences in the implementation process. Implementing these HRM practices is not an easy task (Pfeffer, 1994); hence, a future longitudinal study could focus on the dynamic nature of the HRM practices and uncover the challenges of the implementation process at the plant level. A well-designed research study using longitudinal or panel data can also better address the issue of causality. Contingent compensation (CONTCOMP) was found to be insignicant for the intangible performance measure. Based on the literature, we speculated that employees might have perceived that they were being controlled by this HRM practice. As a result, while contingent compensation (CONTCOMP) was found to be signicant for the operational performance measure, it was not signicant for the intangible performance measure. Future research can investigate when and why employees perceive contingent compensation as controlling rather than motivating and how this ill effect can be minimized. Existing literature suggests that the level of trust and type of relationship between superior and subordinate may determine whether or not an incentive will be perceived as controlling by the subordinate (Kohn, 1993b; Taylor, 1989). Due to the limitations of our data, we did not investigate the impact of organizational strategy on these HRM practices. Further research is needed to understand how an organizations strategic context inuences the choice of HRM practices and its impact on performance. Also, whether these ndings are generalizable across country and/or industry needs

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to be investigated. Despite the compelling theoretical argument, our study failed to show that HR practices are synergistic. Delery and Doty (1996) have also reported similar results. Future study may shed some light on this matter by theoretically deriving and empirically testing several context specic ideal-type HRM systems. Traditionally, the operations management literature has paid little attention to human resources issues. The present study brings some of these issues into focus in the context of manufacturing plants operating in different countries and industries. These issues cannot be resolved by isolated efforts made by operations managers or human resource managers. Their combined and synchronized efforts are needed. Our study provides empirical validation for the efcacy of the seven HRM practices proposed by Pfeffer (1998). Although this was the focal research issue, the ndings and implications of our study go beyond just testing the potency of Pfeffers seven HRM practices. Appendix A Scales used to measure HRM practices Variable MFGHRFIT, = 0.80 Scales Manufacturing and human resources t

Specically, the present study investigates the mediating effect of organizational commitment which helps us better understand the nature of the relationship between HRM practices and organizational performance. This study also evaluates HRM practices taking into account country and industry contexts, thus making the ndings generalizable across countries and industries. Lastly, we empirically validate an ideal-type HRM system for a manufacturing plant. The ndings of this study are expected to help operations and human resource managers recognize the potential of these seven HRM practices and assist them in designing HRM systems at the plant level to gain superior performance.

Acknowledgements The rst author appreciates the faculty research grant provided by the St. Cloud State University.

Item questions The human resources department communicates closely with manufacturing when writing job descriptions Job design at this plant is closely coordinated with manufacturing The human resources department has a close and positive working relationship with manufacturing Stafng, training and development of employees is closely coordinated with manufacturing Manufacturing works well with human resources staff when changes take place in the manufacturing process Human resources staff knows what manufacturing considers important in the training of employees for new skills We use attitude/desire to work in a team as a criterion in employee selection We use problem-solving aptitude as a criterion in employee selection We use work values and behavioral attitudes as a criterion in employee selection We select employees who can provide ideas to improve the manufacturing process

BEHAVIOR, = 0.89

Behavior and attitude

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Appendix A (Continued ) Variable Scales Item questions We select employees who are able to work well in small groups TEAMS, = 0.91 Team activities During problem solving sessions, we make an effort to get all team members opinions and ideas before making a decision Our plant forms teams to solve problems In the past 3 years, many problems have been solved through small group sessions Problem solving teams have helped improve manufacturing processes at this plant Employee teams are encouraged to try to solve their problems as much as possible Supervisors encourage the persons who work for them to work as a team Supervisors encourage people who work for them to exchange opinions and ideas Supervisors frequently hold group meetings where the people who work for them can really discuss things together Our incentive system encourages us to vigorously pursue plant objectives The incentive system at this plant is fair at rewarding people who accomplish plant objectives Our reward system really recognizes the people who contribute the most to our plant Our incentive system at this plant encourages us to reach plant goals Our incentive system is at odds with our plant goalsb Persons (and/or teams) who achieve plant goals are rewarded the same as those who do not achieve plant goalsb Our plant has a low skill level compared with our industryb At this plant, some employees lack important skillsb Plant employees receive training and development in work-place skills on a regular basis The management at this plant believes that continual training and upgrading of employees skills is important Employees at this plant have skills that are above average in this industry

INTERACTa , = 0.89

Interaction facilitation

INCENTOB, = 0.92

Incentives to meet objectives

JOBSKILL, = 0.78

Training on job skills

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Appendix A (Continued ) Variable MULTFUN, = 0.85 Scales Training in multiple functions Item questions Employees receive training to perform multiple tasks Employees at this plant learn how to perform a variety of tasks/jobs The longer an employee has been at this plant, the more tasks or jobs that employee learns to perform Employees are cross trained at this plant so that they can ll in for others if necessary At this plant, employees only learn how to do one job/taskb At this plant, employees are encouraged to learn skills in depth, rather than develop a broad skill baseb In our plant, goals, objectives and strategies are communicated to me Strategies and goals are communicated primarily to managersb I know how we are planning to be competitive at this plant I understand the long-run competitive strategy of this plant Charts showing defect rates are posted on the shop oor Charts showing schedule compliance are posted on the shop oor Charts plotting the frequency of machine breakdowns are posted on the shop oor I am never told whether I am doing a good jobb Information on quality performance is readily available to employees Information on productivity is readily available to employees My manager never comments about the quality of my workb

STRATCOM, = 0.92

Communication of strategy

FEEDBACK, = 0.88

Feedback on performance

= Cronbachs alpha. a Taylor and Bowers (1972). b Indicates a reversed scale question. All scale questions use a ve-point Likert response scale, where 1: I strongly disagree and 5: I strongly agree.

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Appendix B Intangible performance measure Variable COMMITa , = 0.89 Scales Organizational commitment Item questions I am willing to put in a great deal of effort beyond that normally expected in order to help this organization be successful I talk up this organization to my friends as a great organization to work for I would accept almost any type of job assignment in order to keep working for this organization I nd that my values and the organizations values are very similar I am proud to tell others that I am part of this organization This organization really inspires the best in me in the way of job performance I am extremely glad that I chose this organization to work for over others I was considering at the time I joined I really care about the fate of this organization For me, this is the best of all organizations for which to work

= Cronbachs alpha. a Mowday and Steers (1979). References

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