Human Resource Management and Labor Productivity: Does Industry Matter?

The article under analysis Human Resource Management and Labor Productivity: Does Industry Matter? is written by a group of authors from University of Texas at Arlington and Cornell University. The researchers examine the problem of organizational effectiveness and its correlation with HRM, labor productivity, industry growth and dynamism. The aim of the research is to identify and analyze the impact of industry characteristics on the effectiveness of high-performance work systems.

The authors paid a special attention to previous studies and fields of research, their practical and theoretical advantageous and limitations. They underlined the important role and contribution of Pfeffer, Kochan & Osterman, Lawler, Levine to analysis of organizational effectiveness and industry context. Also, they analyzed historical roots and perspectives of the issue, current developments and existing data in this field. Critical analysis, discussion and evaluation of the existing theories were used as a theoretical frame for further research and analysis. The first hypothesis claimed that there was a correlation between industry capital intensity and high-performance and labor productivity. The second hypothesis stated that there was a close link between industry growth and high-performance work systems. In the third hypothesis, the researchers stated that there was dependence between industry product differentiation, high-performance and labor productivity. The forth hypothesis claimed that industry dynamism influenced the relationship between high-performance and labor productivity. Then, the authors described a sample size and methods used for analysis. The results proved the hypothesis that competitiveness of companies could be increased by high-performance work systems which had a great impact on labor productivity (Datta et al 2005).

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The objectives of the study were to test the hypotheses exploring the role of capital intensity, market growth, industry differentiation and dynamics. Also, the researchers tried to prove the impact of human capital and human element on labor productivity and high-performance work systems. The researchers (Gliner et al 2000) stated that when considering how to integrate business and HR strategies, managers should remember that business and HR issues influenced each other and in turn influenced corporate and business unit strategies. It was also necessary to note that in establishing these links, account had to be taken of the fact that strategies for change had also to be integrated with changes in the external and internal environments.

The analysis used by the authors was based on the main steps and procedures typical for any empirical research. They identified a sample size and methodologies, tools and data collection methods. The sample size covered publicly traded firms in the manufacturing sector. This type of organizations represented the main interest for researchers because it was easy to identify and examine industry characteristics, identify their type, number of employees and size according to two-digit SIC code. The sample included 132 responses or 15 % of response rate. Pilot testing ensured that each and every member of the population under consideration had an equal chance of being selected as part of the sample (Gliner et al, 2000). The information gathered from a sample gave a good indication of the measurements, facts and opinions of the population from which it was drawn.

Taking into account objectives of the study, the researchers developed special measures and criteria for the main factors: labor productivity, high-performance work systems, industry capital intensity and control variables. This part correlated with the objectives of the study and helped the researchers to test hypothesis and identify possible limitations of their studies. Once the criteria and indicators were agreed upon and quantified, data on the research units was collected and an efficiency analysis was performed. (Benz and Newman, 1998).

Also, role def­initions covered the behavioral aspects of work – the compe­tences required to achieve acceptable levels of performance and contribution – in addition to the tasks to be carried out and the results to be attained. They emphasized the need for flexi­bility and multi-skilling, and for adapting to the different demands that were made on people in organizations under analysis. The focus of the research analysis was on the system rather than on a hierarchical structure.

The hypotheses were tested separately according to measures and a point scale developed for analysis. The main criteria were based on the research questions and objectives stipulated by the authors.  Thus, the systems perspective provided decision makers with a broad and complete picture of an entire situation. Further­more, the systems perspective emphasized the relationships between the various system components. Without considering these relationships, the authors would not be able to measure high-performance work systems in relation to industry characteristics as the main factor of a successful research (Schwab, 2005). So, industry characteristics moderated the effectiveness of high-performance work systems when one part of the system was improved to the detriment of other parts of the system, and per­haps the organization as a whole. The point of this example was that decisions needed to be evaluated in terms of their effect on the entire system, not simply in terms of how they would af­fect one component of the system

It is possible to say that the research objectives were achieved, because the research was based on two different approaches which ensured research objectivity and impartiality. Following Benz and Newman (1998): “Multiple methods may enhance the quality of a research study” (86). A universal approach and a contingency approach were used to link HRM and firm effectiveness. The authors underlined that a number of research studies had attempted to examine the relationship between specific industry characteristics and high-performance but failed. Although, almost inevitably, there were some contrary findings, the majority of evidence suggested strong support for the theory, and its effects on high-performance. The data was quantified using appropriate analytical tools.

Another important element of the research was the analysis of practical significance of results. “Following the advice and previous practice of SHRM scholars, we [the researchers] estimated the practical significance of our results by calculating the impact of a one-standard-deviation increase in the use of the high-performance work systems scale on labor productivity” (Datta, 2005). This tool helped to identify the increase in labor productivity for the average-sized company. Also, a special attention was paid to different industry conditions and their impact on results.

In sum, to test the research questions and achieve objectives, the researchers used different research methods and tools which ensured objectivity and added scientific value to the study. The analysis applied by the authors helped to achieve objective, but created new areas of discussion and further research. Following Diesing (1991): “it would be better to admit all kinds of statements, both verifiable and falsifiable, into the realm of potential scientific investigation” (cited Benz and Newman, 1998, p. 13). The researchers did not use this strategy which limited the scientific values of the results and the research procedures. In general, the analysis shows the uncertainty of the situation where a pluralist and unitary approach can be seen to exist side by side. The main reservations of the analysis are that it was based on one type of companies only. Following the same structure of the research, it would be possible to examine service sector organizations and compare these results with publicly traded firms in the manufacturing sectors. This analysis would show significant changes in the competitive environment of most com­panies and place a greater emphasis on the need to innovate, the need to improve the quality and productivity and above all the need to be more cost-effective in their use of labor. In other words, researchers must look to explain the impact of HRM as a concept in its own right taking into account different business sectors and industrial contexts.

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