discretionary and transactional human resource practices and employee outcomes: the role of...

DISCRETIONARY AND

TRANSACTIONAL HUMAN

RESOURCE PRACTICES AND

EMPLOYEE OUTCOMES:

THE ROLE OF PERCEIVED

ORGANIZATIONAL SUPPORT

M O N I C A C . G A V I N O , S A N D Y J . W AY N E , A N D B E R R I N E R D O G A N

Utilizing perceived organizational support (POS) as the mechanism linking HR practices to employee behaviors in the workplace, we examine a broad set of HR practices in order to understand the relative importance of each HR practice (i.e., those that explain incremental variance over other practices) in infl uencing employee behaviors. We differentiate between discretionary and transactional HR practices to test the discretionary investment requisite of POS theory. The results show that of the eight discretionary practices, only participation and decision making directly infl uenced the extra-role behaviors that employees exhibit, and only training and development directly impact-ed the customer-oriented behaviors. Furthermore, one of the transactional HR practices was found to have a direct effect on organizational citizenship behavior. Our fi ndings indicate that the performance management process, promotional opportunities, participation, and involvement in decision mak-ing affect how employees behave toward the customer and the extra-role behaviors they exhibit. Furthermore, this occurs through the view employees develop of the organization as a place to work. That is, these four HR prac-tices demonstrate to employees that they are valued, and, in turn, this feeling of being appreciated impacts their commitment to delivering high-quality service to the customer and going beyond their job responsibilities. Implica-tions for research and practice are discussed. © 2012 Wiley Periodicals, Inc.

Keywords: deci sion making, organizational citizenship behavior, perfor-mance management, training and development, employee participation

Correspondence to: Monica C. Gavino, Graham School of Management, Saint Xavier University, 3825 W. 103rd Street, Chicago, IL 60655, Phone: 773.298.3152, Fax: 773.298.3610, E-mail: [email protected]

Human Resource Management,Human Resource Management, September–October 2012, Vol. 51, No. 5. Pp. 665–686

© 2012 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21493

666 HUMAN RESOURCE MANAGEMENT, SEPTEMBER–OCTOBER 2012

Human Resource Management DOI: 10.1002/hrm

cares about their well-being and values their contributions, they will feel a sense of obliga-tion to return favorable treatment by engag-ing in behaviors that benefit the organiza-tion (Rhoades & Eisenberger, 2002; Wayne, Shore, & Liden, 1997). That is, to the degree to which HR practices signal to employees that the organization cares about them, HR practices would be instrumental in shaping the quality of the relationship between the employee and the organization, and thereby have an impact on employee behaviors. POS theory offers an interesting and useful per-spective as the explanatory mechanism for how HR practices influence employee behav-iors in the workplace.

While many studies have taken the per-spective that HR practices relate to employee behaviors through POS (Allen, Shore, & Griffeth, 2003; Hutchison & Garstka, 1996; Wayne et al., 1997; Wayne, Shore, Bommer, & Tetrick, 2002), past research tended to focus on a small number of HR practices in isola-tion, neglecting the reality that each HR prac-tice occurs in the presence of others. In fact, in our review of 33 studies published in the 20 years between 1990 and 2010 on HR prac-tices, POS, and employee outcomes, we found that the vast majority, or 80 percent, of this research includes only one or two HR prac-tices as antecedents of POS in a given study. This approach to examining a limited set of HR practices at the exclusion of others may lead to incorrect conclusions regarding the importance of a particular HR practice. Addi-tionally, these studies focus more extensively on attitudinal outcomes such as commitment, intentions to quit, job satisfaction, organiza-tional identity, and perceived safety (Allen et al., 2003; Guerrero & Herrbach, 2009; Rhoades, Eisenberger, & Armeli, 2001).

It is important to examine the relative ef-fects of HR practices on employee behaviors, as a key objective of HR practices is to align employee behaviors with outcomes associ-ated with organizational effectiveness. Em-ployee performance has been studied as an outcome in the past (Buch, Kuvaas, & Dysvik, 2010; Eisenberger, Rhoades, & Cameron, 1999; Wayne et al., 1997). However, what seems to be missing is the examination of

The American Society of Training and Development (ASTD) estimates that US organizations spent $125.88 billion on employee learning and development in 2009 (ASTD, 2010).

Related to talent acquisition, the Society for Human Resource Management (SHRM) reports that some large organizations have recruiting budgets that exceed $1 million (Gere, Scarborough, & Collison, 2002). While some might question the justification for this

level of spending on HR initia-tives, research supports the per-spective that HR practices are con-sidered the means through which employee perceptions, attitudes, and behaviors in the workplace are shaped (Wright, McMahan, & McWilliams, 1994), and in turn are associated with organizational outcomes through their influence on employee attitudes and behav-iors (Bowen & Ostroff, 2004; Huselid, 1995; Nishii & Wright, 2008; Wright et al., 1994; Wright, McCormick , Sherman, & McMahan, 1999). By investing in HR practices, organizations hope to shape and tailor employee be-haviors to the organization’s needs and develop a motivated and engaged workforce. From a p r a c t i t i o n e r p e r s p e c t i v e , it would seem important to determine which HR practice(s) to invest in for a more focused utili-zation of resources; from an aca-demic perspective, understanding how HR practices translate into effective work behaviors or the mechanism through which this occurs is an area of research that still requires attention.

A useful framework aiming to answer the question of how HR practices influence employee be-havioral outcomes is perceived or-

ganizational support (POS) theory (Eisenberger, Huntington, Hutchison, & Sowa, 1986; Gouldner, 1960). POS theory suggests that if employees perceive that the organization

From a practitioner

perspective, it would

seem important to

determine which

HR practice(s) to

invest in for a more

focused utilization

of resources;

from an academic

perspective,

understanding

how HR practices

translate into

effective work

behaviors or the

mechanism through

which this occurs is

an area of research

that still requires

attention.

PRACTICES, POS, AND OUTCOMES 667


Given that resources

allocated to HR

practices tend to be

limited, especially

in the current

economic climate,

identifying the

unique contributions

and relative

impact of different

HR practices is

important.

two key behaviors: organizational citizenship behaviors and customer-oriented behaviors. There are currently no studies that relate a broad set of HR practices to organizational citizenship behaviors. Moreover, the one study that looks at employee service perfor-mance in relation to a broad set of HR prac-tices (Liao, Toya, Lepak, & Hong, 2009) ag-gregated all the HR practices to create a unidimensional construct.

Given that resources allocated to HR prac-tices tend to be limited, especially in the cur-rent economic climate, identifying the unique contributions and relative impact of different HR practices is important. We note this as a gap that exists in understanding the role of POS in the relationship between HR practices and employee behaviors that bene-fit the organization. As illustrated earlier, the cost associated with each HR practice is significant and knowing the value-added con-tribution of each HR practice would aid orga-nizations in their decisions on distribution of resources and determining how to invest in different HR practices. Furthermore, HR prac-tices are not an objective reality, and their presence or absence may be differentially per-ceived by employees. Knowing which HR practices are more strongly related to em-ployee behaviors, organizational decision makers can then motivate employees by em-phasizing their commitment to these key HR practices in their communications as well as interactions with employees.

We attempt to address this gap in the lit-erature, by examining a broad set of HR prac-tices in order to understand those that explain incremental variance over other prac-tices in influencing employee behaviors that benefit the organization, such as citizenship and customer-oriented behaviors as mediated by POS. We also introduce a conceptualiza-tion of HR practices that differentiates be-tween those that are of a discretionary nature and considered an investment in employees (Shore & Shore, 1995) and those that are transactional or administrative activities es-sential to meeting regulatory and compli-ance requirements (Beer, 1997; Boudreau & Ramstad, 2005; Bowen, Galang, & Pillai, 2002; Ulrich, 1997). By differentiating between

discretionary and transactional HR practices, we test the discretionary investment requisite of POS theory. We know of no studies that have examined the role of administrative HR practices in influencing employee behaviors.

Our study contributes to the literature in four specific ways. First, by focusing on a large number of discretionary and transac-tional HR practices, we aim to examine which of the HR practices are more influential in motivating employees to demonstrate behav-iors benefiting the organization. In contrast to past research that has tended to study only one or two HR practices or aggregated them into a one-dimensional construct, we will be able to identify the HR practices that are more critical for employee behaviors. Second, by differentiating be-tween the transactional and dis-cretionary HR practices, we are able to directly test whether onlyHR practices that require a discre-tionary investment on the organi-zation’s part contribute to POS; essentially we directly and explic-itly test an underlying assumption of POS theory.

Our third contribution is our focus on two behavioral outcomes that can ultimately impact organizational effectiveness—specifically, customer-oriented behavior and organizational citi-zenship behavior directed at the organization (OCBO). These out-comes are particularly important to understand in organizations that are service- and customer-focused, where employees interact frequently with customers and thus provide a service di-rectly to the customer. The customer experi-ence as delivered by the employee affects the viability of the organization through cus-tomer satisfaction, customer loyalty, and sales (Bowen & Schneider, 1988; Chuang & Liao, 2010). In the service industry, custom-ers often make decisions regarding whether to use an organization’s services in the future based on their interactions with frontline employees and their assessment of the qual-ity of service received. Furthermore, research



Our hope is that by

presenting an easy-

to-use scale with

high reliability and

validity, our study

may contribute to

stimulating future

research on the

relative importance

a broad set of HR

practices has on

outcomes.

on customer service and OCBO has shown that there is a positive relationship between OCBs, market share, sales growth, and profitability (Koys, 2001; P. M. Podsakoff & MacKenzie, 1994).

Finally, we develop a measure that assesses the quality of execution of both sets of HR practices from the employee’s perspec-tive. We have collected data from two inde-pendent samples and followed rigorous scale-development procedures. Thus, we ful-fill a gap in the literature by presenting a scale of HR practices that is publicly available and with acceptable psychometric properties. Our hope is that by presenting an easy-to-use scale with high reliability and validity, our

study may contribute to stimulat-ing future research on the relative importance a broad set of HR practices has on outcomes.

Discretionary HR Practices

There are several typologies of HR practices in the literature. These include high-performance work practices (Appelbaum, Bailey, Berg, & Kalleberg, 2000), high-commitment HR practices (Arthur, 1994), and high-involvement HR practices (Vandenberg, Richardson, & Eastman, 1999). High-performance work practicesare those that invest in the skills and abilities of employees, design work in a way that facilitates em-ployee collaboration in problem solving, and provide incentives to enhance motivation (Appelbaum

et al., 2000; Delery & Doty, 1996). High-commitment HR practices create conditions where employees become highly involved in the organization and work hard to accom-plish the organization’s goals (Arthur, 1994; Wood & de Menezes, 1998). High-involvement work practices are characterized as providing the power to make decisions; information about processes and business results; rewards that are tied to business results; and knowl-edge of the work system (Lawler, 1986, 1992, 1996; Lawler, Mohrman, & Ledford, 1995;

Vandenberg et al., 1999). The underlying theme of these three typologies is that these HR practices are viewed as investments in the human capital of an organization (Snell & Dean, 1992).

We suggest that it is also possible to cat-egorize HR practices as discretionary and transactional. Discretionary HR practices are practices that are considered an investment in the employees of an organization, non-mandatory, nonobligatory, and, therefore, not externally regulated (Shore & Shore, 1995). The investment organizations make to ensure that these employee-focused practices are implemented and executed well is discre-tionary and optional. Organizations are not required, for example, to enhance the quality of training and development, establish for-mal selective staffing practices, provide pro-motional and developmental opportunities, or facilitate employee involvement. On the other hand, transactional HR practices are administrative in nature and compliancefocused. Employers have no choice in imple-menting these practices, as compliance is required and regulated. Examples of these types of transactional activities include han-dling and processing of information related to employment such as benefits enrollment and employee personnel information, ensur-ing timely administration and accuracy of pay, processing medical leave requests, work-ers’ compensation, and unemployment information.

In order to select those discretionary HR practices to examine with respect to employee behaviors, we first identified all HR practices in the literature that were found to provide a return on an organization’s invest-ment. Drawing from the three contemporary typologies, we also identified four criteria that the HR practices had to meet in order to be included in our study: HR practices were regarded as discretionary if they met three of the following criteria: (a) geared toward the enhancement and acquisition of human cap-ital; (b) designed to enhance employee com-petencies; (c) empowered employees; and (d) encouraged employees to identify with the goals and objectives of the organization. The discretionary HR practices we examine in



our study along with the criteria each satisfies are shown in Table I and include training and development, pay for performance, performance management, selection and staffing practices, promotional opportunities, employee participation, and decision mak-ing. Finally, we confirmed that each of the practices met the discretionary requisite of POS, which suggests that only discretionary actions on the part of the organization con-tribute to high POS (Eisenberger et al., 1986; Eisenberger, Cummings, Armeli, & Lynch, 1997; Shore & Shore, 1995). These seven HR practices are not mandated and are consid-ered a discretionary investment by the organization.

HR Practices and Employee Behaviors

Researchers long predicted that there would be a positive relationship between organiza-tional HR practices and customer service. For example, Ulrich and colleagues contend that the way employees are treated creates an employee mind-set that leads employees to behave in ways that contribute to the cus-tomers’ mind-set (Ulrich, Halbrook, Meder, Stuchlik, & Thorpe, 1991). Studies examining a small number of HR practices (e.g., Tornow & Wiley, 1991) as well as using an aggregated

measure for HR practices provided support for this idea (Liao et al., 2009). Therefore, em-ployee commitment to customers is a likely outcome of organizational HR practices. What drives or supports customer-oriented behaviors by employees on the front lines is an area that requires research (Susskind, Kacmar, & Borchgrevink, 2003). Following past research, we propose that the invest-ment made in discretionary HR practices in-fluences the degree to which employees value the customer and are concerned about their needs. By investing in HR practices such as those that focus on employee growth and empowerment, organizations may develop a better relationship with their employees, which employees should in turn reciprocate by demonstrating higher levels of commit-ment to the organization’s customers. There-fore, we hypothesize that:

Hypothesis 1a: Discretionary HR practices are positively related to customer commitment.

Organizational citizenship behavior (OCB) is the second outcome we examine as poten-tially resulting from HR practices. OCB is defined as “individual behavior that is discre-tionary, not directly or explicitly recognizedby the formal reward system, and that in the aggregate promotes the effective functioning

T A B L E I Discretionary HR Practices: Criteria by Practice

Criteria

Training and

Development

Pay for

Performance

Performance

Management

Selection

and Staffi ng

Promotional

Opportunities Participation

Decision

Making

Enhancementor acquisition of human capital

• • • • •

Enhancementof employee competencies

• • • • • • •

Empower-ment of employees

• • •

Encouragesemployees to identify with goals of organization

• • • • • • •



of the organization” (Organ, 1988, p. 4). Em-pirical evidence supports the view that the social exchange relationship creates feelings of obligation to support the organization through behaviors such as OCBs (Masterson, Lewis, Goldman, & Taylor, 2000; Moorman, Blakely, & Niehoff, 1998). In their recent meta-analysis of the consequences of OCB, N. P. Podsakoff and colleagues reported OCBs to be related to organizational outcomes in-cluding productivity, efficiency, reduced costs, customer satisfaction, and turnover (N. P. Pod-sakoff, Whiting, Podsakoff, & Blume, 2009). Williams and Anderson (1991) distinguish be-tween behaviors directed toward the benefit of other individuals and refer to these as OCBI and behaviors aimed at benefiting the organi-zation, referred to as OCBO. OCBI behaviors generally include altruism, courtesy, peace-keeping, and cheerleading (N. P. Podsakoff et al., 2009), while OCBO behaviors include conscientiousness or compliance, civic vir-tue, and sportsmanship (Organ, 1988). Draw-ing from studies relating a small number of individual HR practices such as developmen-tal practices, promotions (Wayne et al., 1997), inclusion in decision making, and contin-gent rewards to OCBs (Wayne et al., 2002), we propose that the investments organiza-tions make in discretionary HR practices will influence employees’ behaviors aimed at benefitting the organization or OCBO.

Hypothesis 1b: Discretionary HR practices are positively related to OCBO.

In contrast to discretionary HR practices, transactional HR practices are purely admin-istrative requirements that involve activities typically related to compulsory and manda-tory regulations (Beer, 1997; Boudreau & Ramstad, 2005; Bowen et al., 2002; Ulrich, 1997). Examples of transactional practices in-clude timely administration and processing of pay, enrollment and administration of benefits, processing workers’ compensation claims, and fulfilling Family Medical Leave Act (FMLA) requests. HR professionals can spend as much as 65 to 80 percent of their time in this area (Wright, McMahan, Snell, & Gerhardt, 1998), yet these administrative

activities have largely been ignored in studies of HR practices. While day-to-day transac-tional activities may not be perceived as value-added practices, it is plausible that how well these employee services are delivered in-fluences the level of service employees pro-vide to the customer. For example, if a sales associate’s pay is constantly inaccurate, might this affect his/her behavior toward the cus-tomer? Or if customer service representatives benefit enrollment is not processed correctly, could the troubleshooting they have to en-gage in to have their benefits processed cor-rectly impact how they service the customer? It may be that the quality by which transac-tional HR practices are executed impacts the service climate that guides employee behavior.

Hypothesis 2a: Transactional HR practices are positively related to customer commitment.

Hypothesis 2b: Transactional HR practices are positively related to OCBO.

The Mediating Role of Perceived Organizational Support

Social exchange theory (Blau, 1964) provides a theoretical framework for the link between HR practices and employee outcomes. Cen-tral to social exchange theory is the norm of reciprocity (Gouldner, 1960). If an employee perceives that the organization cares about his/her well-being and values his/her contri-butions, the employee will feel a sense of ob-ligation to return the favorable treatment. According to social exchange theorists, the resources received from the organization are more highly valued if they are based on dis-cretionary choice versus being mandated (Shore & Shore, 1995). Discretionary choice implies an investment, whereas legislated or required actions are tied to costs rather than investments. This discretionary investment creates a sense of obligation on the part of employees to reciprocate with behavior that benefits the organization. Wayne and col-leagues (1997) argue that HR practices that make available resources and material re-wards should therefore influence employee perceptions of POS. With respect to specific



HR practices, empirical research has found participation in decision making (Witt, 1992), growth opportunities (Allen et al., 2003; Shore & Tetrick, 1991), developmental expe-riences (Cleveland & Shore, 1992; Wayne et al., 1997), goal setting and feedback (Hutchi-son & Garstka, 1996), inclusion (Wayne et al., 2002), and recognition (Eisenberger et al., 1997) influence the development of POS.

Research in this area suggests that POS provides an explanation for the process by which HR practices impact employee outcomes, and that HR practices are an important source of employee perceptions of organizational support. Empirical evidence supports the view that POS creates feelings of obligation to support the organization, and that this manifests itself in work-related atti-tudes and behaviors, including increased commitment, job satisfaction, performance and citizenship behaviors, and reduced inten-tions to leave (Rhoades & Eisenberger, 2002). We study employees’ customer-oriented be-havior and organizational citizenship behav-ior benefiting the organization as outcomes of discretionary and transactional HR prac-tices, as mediated by POS. If employees feel that the organization cares about their well-being and values their contribution, which is evidenced by their discretionary investment in HR practices that benefit the employees, they will be obligated to reciprocate with a higher level of service to the customer and engagement in extra-role behaviors.

Hypothesis 3a: POS mediates the relationship be-tween discretionary HR practices and customer commitment.

Hypothesis 3b: POS mediates the relationship be-tween discretionary HR practices and OCBO.

Research on POS suggests that those orga-nizational practices controlled by managementare important predictors of POS. In their study on organizational rewards and job con-ditions, Eisenberger and colleagues (1997) maintain that job conditions enhance POS, when employees believe they are discretion-ary and not required by government, laws, and so on. Discretionary HR practices focus

on enhancing the organization’s human capital as they are employer-driven and con-sidered an optional and discretionary invest-ment geared toward enhancing the skills and competencies of its employees.

In contrast, transactional HR practices are non-discretionary, administrative, and compliance-focused in nature and a require-ment of doing business. These types of prac-tices have regulatory requirements, and there is very little discretion as to whether to ex-tend or offer such programs. Shore and Shore (1995) suggest that only HR practices that imply an investment by the organization will be associated with POS. This would suggest that transactional, non-discretionary HR practices are not so highly valued as discre-tionary HR practices by employees, and, consequently, there is no direct relationship between non-discretionary, transactional HR practices and POS.

However, it is important to directly test the assumption that transactional practices would not be related to POS. Indeed, it is also plausible that transactional HR practices may in fact be related to POS. Shore and Shore (1995) note that employees’ global percep-tions concerning their valuation by the orga-nization are formed by the history of their treatment by agents of the organization. As such, how well the HR function handles transactional and compliance activities may impact employees’ perceptions of organiza-tional support. The HR function of an organi-zation is responsible for handling transactional activities that directly affect employees’ well-being, such as providing information to em-ployees on various employment-related is-sues, including but not limited to policies and procedures, benefits, and employee rela-tions. While the routine administrative tasks associated with the transactional practices are not considered an investment in employees, it is possible that the quality of the service received from the HR function on the admin-istration of these activities has a discretionary component, and thus may contribute to POS. For example, the manner in which the ben-efits information and pay administration are handled may impact employees’ perceptions of the organization. We contend that when



studying employee perceptions of the organi-zation, it is important to study both discre-tionary and transactional HR practices. Thus, we hypothesize the following.

Hypothesis 4a: POS mediates the relationship be-tween transactional HR practices and customer commitment.

Hypothesis 4b: POS mediates the relationship be-tween transactional HR practices and OCBO.

Method

Sample and ProcedureWe collected data from a retail company with 245 retail shops throughout the Midwest and East Coast of the United States. Surveys were sent to a random sample of 996 full-time sales associates. In order to reduce common method variance (Campbell & Fiske, 1959; P. M. Podsakoff, MacKenzie, Lee, & Podsakoff, 2003), managers were asked to complete the measures of the two outcomes of interest, customer commitment and organizational citizenship behaviors, for employees in their respective shops. Code numbers on the surveys

were used to match manager and employee surveys. Of the employee surveys mailed, 344, or 35 percent, were returned. The num-ber of matched employee surveys was 218, or 22 percent. After deleting cases with incom-plete data, the final sample size was 198 em-ployees and their corresponding managers. Demographic information is provided in Table II.

In order to test for nonresponse bias, re-spondents were compared with nonrespon-dents. This was done by comparing the manager-reported variables of customer com-mitment and OCBO for those employees who responded to the survey with those who did not respond to the employee survey. There were no significant differences between respondents and nonrespondents on cus-tomer commitment (t (706) � 1.81, p � .05) or OCBO (t (707) � �.32, p � .05).

MeasuresEstablished measures were used for POS, cus-tomer commitment, and OCBO. Items used to measure discretionary and transactional HR practices were developed in a pilot study.

T A B L E I I Demographic Breakdown

Employees Managers

Gender Female 94.8% 100.0%

Race White/Caucasian African American/Black Latino/Hispanic Asian/Pacifi c Islander Other Did Not Report

87.2% 2.7% 5.0% 1.0% 1.8% 2.3%

95.8% 2.1% 2.1% 0.0% 0.0% 0.0%

Education High School Degree Associate’s Degree Professional Training Program Bachelor’s Degree Graduate Degree No Degree Did Not Report

47.1%16.8%14.1%11.0% 0.0% 9.4% 1.6%

43.8% 14.6% 20.8% 16.7% 2.0% 2.1% 0.0%

Average Age 43 43

Average Organizational Tenure 6.8 years 7.5 years

Average Time in Position as Manager N/A 6.1 years



Employees and managers responded to all questions on a seven-point scale (1 � strongly disagree to 7 � strongly agree). Because a psy-chometrically valid measure of HR practices did not exist, we developed such a measure. The preliminary scale consisted of 75 items for the discretionary HR practices and 37 items for the transactional HR practices. These items were developed based on input from several HR executives and items from the strategic human resource management and POS literature. We administered these items to 346 upper-level undergraduate and graduate management students of a large Midwest university located in a large metro-politan area. In order to ensure anonymity for the student sample, demographic infor-mation was not available. However, the average work experience for the student pop-ulation for this university is five years. Percent and the business students’ demo-graphics are as follows: undergraduate students were 45 percent female; 47 percent Caucasian/white, 7 percent African American/black, 14 percent Latino/Hispanic, 24 percent Asian/Pacific Islander, and 8 percent un-known; the graduate students’ demographics were: 35 percent female; 60 percent Caucasian/white, 5 percent African American/black, 5 percent Latino/Hispanic, 10 percent Asian/Pacific Islander, and 20 percent unknown.

Given the large number of items relative to the sample size, there was not an adequate number of subjects to conduct an exploratory factor analysis (EFA) with both discretionary and transactional practices (Pedhazur & Schmelkin, 1991). Therefore, we conducted separate EFAs for the discretionary HR prac-tices and transactional HR practices. Using the results of an exploratory factor analysis, we eliminated items with low factor loadings (below .40) as well as items with high cross-loadings on other factors (.40 or greater). For the discretionary HR practices, eight factors emerged with Eigenvalues greater than 1.0, explaining 67.5 percent of the variance. The resulting solution indicated 45 items loading on these 8 factors. The breakdown of the items on factors include: training, pay for performance, performance management, se-lective staffing, promotional opportunities,

developmental opportunities, decision mak-ing, and participation. For the transactional HR practices, four factors emerged with Ei-genvalues greater than 1.0, explaining 74 percent of the variance. The resulting solu-tion indicated 22 items loading on four fac-tors: benefits enrollment, information pro-vided by HR, pay accuracy, and processing of new-hire paperwork. In order to ensure that the scale length did not impose an undue burden on respondents, we selected the highest-loading three to four items to serve as the measure for each HR practice. The final items used for the discretionary and transactional HR practices are provided in Tables III and IV.

Perceived Organizational Support (POS)

POS was assessed with the nine-item measure developed by Eisenberger et al. (1986).

Customer Commitment

Managers were asked to report the degree to which the employee demonstrates commit-ment to the customer. The five-item measure was developed by Rogg, Schmidt, Shull, and Schmitt (2001).

Organizational Citizenship Behavior

Managers were asked to report the degree to which the employee engaged in OCBO. OCBO was measured using four items from Podsakoff and MacKenzie (1989), which mea-sures conscientiousness.

Control Variables

We considered a number of different demo-graphic variables as potential control variables. Based on Becker’s (2005) recommendation, we chose not to include gender, education, or time in position as manager as control vari-ables because they were not correlated with any of our dependent variables. Both age and organizational tenure showed significant cor-relations with the dependent variables, but age and tenure were also highly correlated (r � .53, p � .01), and inclusion of both could



result in biased path estimates. As a result, we included only organizational tenure in our analyses, given that organizational tenure has been shown to be a significant correlate of

POS (Wayne et al., 1997) and organizational commitment (Mathieu & Zajac, 1990), and a stronger correlate of turnover compared to age (Griffeth, Hom, & Gaertner, 2000).

T A B L E I I I Items for Discretionary HR Practices

Training

My company has provided me with ongoing training, which enables me to do my job better (Vandenberg, Richardson, & Eastman, 1999).At my company, extensive training programs are provided for individuals in this job. Overall, I am satisfi ed with my training opportunities (Vandenberg, Richardson, & Eastman, 1999).There are formal training programs to teach new hires the skills they need to perform their jobs (Delery & Doty, 1996).

Pay for Performance

There is a link between how well I perform my job and the likelihood of my receiving a raise in pay (Vandenberg, Richardson, & Eastman, 1999).Pay raises for employees in this job are based on job performance (Gardner, Moynihan, & Wright, 2002).My pay is tied to my performance (Snell & Dean, 1992).In my company, raises and promotions are tied to performance (Snell & Dean, 1992).

Performance Management

I often agree with my manager on my performance evaluation. During my performance appraisal session, I am allowed a high degree of infl uence in the determination of my work objectives (Hutchison & Garstka, 1996). I have frequent discussions with my manager about my performance.I understand what my performance will be based on.

Promotional Opportunities

I am in a dead-end job (Price & Mueller, 1985).I have the opportunity for advancement in my company (Price & Mueller, 1985).In my company there is a good opportunity for advancement (Price & Mueller, 1985).I have a good chance to get ahead in my company (Price & Mueller, 1985).

Selective Staffi ng

As best as possible, my company makes sure that the right person is hired for the job.My company places great importance on hiring the right person.At my company, there is emphasis on hiring the right person for the job.There is more emphasis on hiring someone quickly than selecting the right person for the job.

Developmental Opportunities

In the positions that I have held with my company, I have often been given additional challenging assignments (Wayne, Shore, & Liden, 1997).In the positions that I have held with my company, I have often been assigned projects that enabled me to develop and strengthen new skills (Vandenberg, Richardson, & Eastman, 1999).Besides formal training and development opportunities, I have developed my skills with the challenging job assignments provided to me (Wayne, Shore, & Liden, 1997).

Decision Making

In my job, I am allowed to make many decisions (Delery & Doty, 1996).In my job, I am often asked to participate in decisions (Delery & Doty, 1996).In my job, I am provided the opportunity to suggest improvements in the way things are done (Delery & Doty, 1996).

Participation

I have participated in the selection of new employees.I have participated in the training of new employees.I have been involved in interviewing candidates before they are hired in my company.



Results

Before we tested our hypotheses using the field sample, we conducted a confirmatory factor analysis (CFA) of the discretionary and transactional HR practices. The model fit the data well (x2 � 1,239.22, df � 794, CFI � .95, RMSEA � .04), and all items had significant loadings on their latent variables. Next, we tested alternative models to exam-ine the discriminant validity of the individ-ual scales. We performed this analysis by setting the correlation between theoretically overlapping pairs of latent variables to 1. A significantly worse model fit would provide evidence for the discriminant validity of the constructs (Anderson & Gerbing, 1988). The theoretically overlapping pairs of variables were as follows: (1) training and develop-mental opportunities, (2) participation and decision making, and (3) benefits enroll-ment and information provided by HR. When we set the correlation between train-ing and developmental opportunities to 1, the model fit was not significantly worse, sup-porting the more parsimonious model under which training and development are treated as falling under the same latent variable

(��2 � .36, df � 1, p � .05). Thus, we com-bined these two factors as “training and de-velopment.” When we set the correlation between decision making and participation to 1, the model fit was significantly worse: (��2 � 7.27, df � 1, p � .01), indicating that decision making and participation should be treated as separate variables. Finally, when we set the correlation between bene-fits and information provided by HR to 1, the model fit was not significantly worse (��2 � 3.28, df � 1, p � .05), supporting the more parsimonious model. Thus, we com-bined benefits and information provided by HR to form a variable labeled “benefits administration.”

In order to provide further evidence of discriminant validity of the measures, we conducted the Fornell and Larcker’s (1981) test. According to this test, if the average amount of variance accounted for in each in-dicator by its latent construct is greater than the amount of variance the construct shares with other constructs, evidence for discrimi-nant validity exists. The average variances extracted in the latent variables ranged be-tween .56 and .76, and for each latent vari-able, these numbers were greater than the

T A B L E I V Items for Transactional HR Practices

Benefi ts Enrollment

My enrollment in the benefi ts program was handled accurately.My enrollment in the benefi ts programs was handled timely.My enrollment in the benefi ts program was handled properly.My benefi ts questions are answered in a timely manner.

Information Provided by HR

The Human Resources Department will get back to me within a reasonable amount of time when I have a question. The information I receive from the Human Resources Department is clear (Allen, Shore, & Griffeth, 2003).The information I receive from the Human Resources Department is timely (Allen, Shore, & Griffeth, 2003).The information I receive from the Human Resources Department is accurate.

Pay Accuracy

Corrections to my paycheck are processed accurately.Corrections to my paycheck are processed right away.Deductions from my paycheck for benefi ts are always correct.

Processing of New-Hire Paperwork

My hire paperwork was processed in a timely manner.My hire paperwork was processed accurately.I received my fi rst paycheck on time.



intercorrelation with other variables. These results provided support for the discriminant validity of our measures.

Means, standard deviations, and inter-correlations among variables are displayed in Table V. The Cronbach’s alpha for each scale is reported on the diagonal. Hypotheses 1–4 were tested using structural equation model-ing via LISREL (Jöreskog & Sörbom, 1996). Due to the large number of parameters to be estimated, we utilized a single-indicator ap-proach for each of our latent variables. We corrected for measurement error by setting lambdas to the square root of the reliability. Moreover, we set the error variances to the scale va riance multiplied by 1.0 minus the re-liability (Hayduk, 1987).

The results for our overall hypothesized model are presented in Figure 1. While we controlled for organizational tenure in all analyses, this variable was excluded from the figure to achieve clarity. The hypothe-sized, fully mediated model fit the data well (�2 � 37.15, df � 20, p � .01, CFI � .97, RMSEA � .06).

Hypotheses 1a and 1b predicted that dis-cretionary HR practices would be positively related to customer commitment and OCBO. To test these hypotheses, we specified direct paths from the discretionary HR practices to the outcome variables. Three of these paths were significant. Specifically, participation was negatively related to OCBO (g � �.19, t � �2.28, p � .01), and decision making was

FIGURE 1. Standardized Path Coeffi cients

Italicized practices are the transactional practices.n � 198. ** p � .01.

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An examination of the

magnitude of indirect

effects suggested

that performance

management,

participation,

promotion

opportunities, and

decision making had

significant indirect

effects on both

OCBO and customer

commitment,

providing partial

support for

Hypotheses 3a

and 3b.

positively related to OCBO (� � .23, t � 2.16, p � .01). Finally, training and development had unique effects on customer commitment (� � .24, t � 2.28, p � .01). None of the other discretionary practices were directly related to the outco me variables.

Hypotheses 2a and 2b predicted a direct relationship between transactional HR prac-tices and outcomes. In order to test this hy-pothesis, we specified direct paths from the transactional HR practices to the two out-come variables. Only one of these paths was significant: pay accuracy was negatively re-lated to OCBO (g� �.23, t � �2.43, p � .01).

Hypotheses 3a and 3b predicted that the relationship between discretionary HR prac-

tices and customer commitment and OCBO would be mediated by POS. Following Shrout and Bolger (2002), we did not expect predic-tors to be directly related to outcome variables as a test of me-diation. Instead, we examined the paths between HR practices and POS, and the relationship be-tween POS and the outcome vari-ables, in our tests of mediation. Four of the discretionary HR prac-tices had significant effects on POS: Performance management (g � .34, t � 4.59, p � .01), pro-motional opportunities (g � .14, t � 2.11, p � .01), participation (g � �.17, t � �2.90, p � .01), and decision making (g � .24, t � 3.33, p � .01). Moreover, POS was related to both outcomes. An examination of the magnitude of indirect effects suggested that per-formance management, participa-tion, promotion opportunities, and decision making had signifi-cant indirect effects on both OCBO and customer commit-ment, providing partial support for Hypotheses 3a and 3b.

Finally, Hypotheses 4a and 4b predicted that POS would be the

mediator of the relationship between transac-tional HR practices and outcomes. As pre-sented in the figure, none of the transactional

HR practices were related to POS. Further-more, an examination of the indirect effects suggested that none of the transactional HR practices had significant indirect effects on OCBO and customer commitment, providing no support for these hypotheses.

We also compared our original model to alternative models. First, we examined the possibility that the observed fully mediated effects of performance management, promo-tional opportunities, participation, and deci-sion making could be partially, as opposed to fully, mediated by POS. For this reason, we added paths from these four variables to the outcome variables. The resulting model had significantly better fit to our data compared to our original model (��2 (6) � 21.21, p � .01). Two of these paths were significant: decision making had a positive path to OCBO, while participation had a negative path. We have retained these two paths.

Finally, we also compared our revised model to an alternative model where we added paths from training and development to customer commitment, and from pay ac-curacy to OCBO, because these paths had emerged as significant in our tests of Hypoth-eses 1 and 2. While this alternative model had significantly better model fit (��2 (2) �

5.93, p � .01), the added paths were not sig-nificant. Therefore, we retained our partially revised model as presented in Figure 1. The resulting structural model explained 61 per-cent of the variance in POS, 4 percent of the variance in customer commitment, and 17 percent of the variance in OCBO.

Discussion

Organizations spend billions of dollars in HR activities, including training, development, selective staffing, and performance manage-ment. One of the purposes of this investment in HR practices is to align employee behav-iors with corporate objectives by motivating employees to display behaviors that benefit the organization as well as customer-oriented behaviors. From a resource and investment perspective, knowing which of the many HR practices in place contributes most to employee behaviors that benefit the



Our rationale for

focusing on both

discretionary and

transactional HR

practices was to

examine which

HR practices are

more influential

in motivating

employees to

demonstrate

behaviors benefiting

the organization,

and to test the

discretionary

investment requisite

of POS theory.

organization is vital. For example, providing the tools for employees to deliver quality ser-vice to the customer is critical in service orga-nizations especially as we continue to shift toward becoming a service economy. Further-more, understanding how the investment translates into such behavior helps provide evidence to organizations that indeed their investments influence how employees view their organizations as a place to work, and ul-timately that view affects how the employees behave toward the customer and organiza-tion. In order to contribute to the HR research, one main objective of our study was to exam-ine the relationship between a broad set of HR practices and employee behaviors aimed at benefiting the organization, as mediated by POS. Our rationale for focusing on both dis-cretionary and transactional HR practices was to examine which HR practices are more in-fluential in motivating employees to demon-strate behaviors benefiting the organization, and to test the discretionary investment requisite of POS theory. Additionally, before testing these relationships, we developed a measure that assesses the quality of both sets of HR practices from the employee’s perspective.

Main Findings Our study contributes to the human resource management literature by providing research to support the notion that all HR practices are not equally effective in influencing em-ployee behaviors. We found that the HR prac-tices that had a positive relationship with customer commitment and employee citi-zenship behaviors were performance man-agement, promotional opportunities, and employee decision making. Performance management and promotional opportunities had effects that were fully mediated by POS, while decision making had partially medi-ated, positive effects on employee behaviors. In other words, these HR practices seem more salient to employees in their assessment of the extent to which they receive support from the organization.

Our second contribution builds on the POS literature by focusing on the role of POS related to both the discretionary and transactional

HR practices. None of the transactional prac-tices were related to POS, and POS was mainly a function of the discretionary HR practices. Our findings indicate that the performance management process, promotional opportu-nities, participation in activities such as training and selection of new employees, and involvement in decision making affect how employees behave toward the customer and the extra-role behaviors they exhibit; and that this occurs through the belief the employees develop of the organization as a good place to work. That is to say, the three HR practices that have positive relations with outcomes demonstrate to employees that they are valued, and, in turn, this feeling of being appreciated im-pacts their commitment to deliv-ering high service to the customer and going beyond their job responsibilities. In this service organization where serving the customer is a priority, the perfor-mance management process was found to have the highest level of impact on customer-oriented behaviors. In fact, the results sug-gest that the performance man-agement practices have a stronger effect on POS than promotional opportunities, being involved in decision making, or participating in training and selection of new employees.

Since performance manage-ment is the means by which an organization aligns its workforce around organizational goals, per-formance management in organizations is critical to the execution of business objec-tives. Therefore, the importance of setting goals, providing feedback, and evaluating performance cannot be understated. This is an important finding, in that the perfor-mance evaluation process implies that the organization is willing to recognize high performance and is interested in improving employees’ future performance, which con-tributes to the organization’s success.



To the degree that

employees felt

participation was

an activity that

solely benefited

the organization as

opposed to their

own well-being,

they may have felt

that the degree

of participation

reflected a low level

of organizational

support.

Promotional opportunities also impacted the two outcomes through the view employ-ees have of the organization. Wayne and col-leagues (1997) suggest that employees view promotional opportunities as a positive eval-uation of them by the organization, and found that individuals who received more promotions during a five-year time span re-ported higher levels of POS. According to the WorkUSA®2006/2007 survey conducted by Watson Wyatt (2007), promotional opportu-nities is one of the main reasons why top per-formers stay in an organization. Therefore, retaining talent should continue to be a

priority for organizations, and providing opportunities for career advancement appears to have a significant impact on employees’ view of the organization as a place to work. This, in turn, affects their commitment to delivering a high level of customer service and en-gaging in discretionary efforts that benefit the organization.

With regard to employee in-volvement practices, our findings suggest that engaging in activities that tap into employee ideas posi-tively affects the view employees have of the organization, which influences how committed em-ployees are to the customer and the level of discretionary effort employees put forth. However, this relationship is only partially mediated by POS, as there is a direct relationship from involve-ment in decision making and par-ticipation to the outcomes. With respect to participation, which

was found to be negatively related to POS in this study, we reviewed tolerance and the variance inflation factor (VIF) statistics to de-termine if this was a statistical artifact. VIF statistics for all variables were below 2, and the lowest tolerance statistic was .50, indicat-ing that multicollinearity may not have been a serious problem. One explanation for this may be the focus of our measure. The ques-tions for the participation dimension specifi-cally focused on involvement in selection

and training of new employees. It appears that employees who have participated in the selection process and training of new em-ployees have a lower perception of the orga-nization’s support. This may be due to having to perform additional work above and be-yond their normal job duties during their peak season. In this retail organization, em-ployees were asked to interview and select employees without formal training, and this level of participation may have been per-ceived as burdensome. To the degree that em-ployees felt participation was an activity that solely benefited the organization as opposed to their own well-being, they may have felt that the degree of participation reflected a low level of organizational support. This may also explain the direct effect of participation on OCBO.

Neither selection nor pay for performance was found to influence the view of the orga-nization or the employee outcomes. One pos-sible explanation may be that selection is more salient when employees join but less salient after they have been with the com-pany for a while. Employees have already ex-perienced the selection process, so how the company selects new hires may not necessar-ily affect their relationship with the company. Another possible explanation to consider is the other HR practices such as per-formance management, participation, and decision making may be viewed by the em-ployee as an investment in him-herself, whereas selection is not. While selection practices may still be viewed as an invest-ment, they are not necessarily viewed as an investment in the individual employee. As a result, selection practices may not impact each employee enough to influence behav-iors that benefit the organization.

With respect to pay for performance, it is possible that employees may be more inter-ested in how pay decisions are made, rather than the outcome. The justice literature shows that procedural justice is more impor-tant to employees compared to distributive justice when outcomes such as POS are being considered (Fasolo, 1995; Wayne et al., 2002). Similarly, performance management, promo-tional opportunities, participation, and



Involving employees

in the decision-

making process

requires training

in problem solving,

critical thinking, and

decision making,

as well as an

established process

for reviewing

decisions.

decision making may be viewed as more pro-cedural and thus more salient to employees, compared to pay for performance, which is a more distributive justice/outcome issue.

Managerial ImplicationsHR practitioners continue to have a difficult time placing a tangible return on investment (dollar amount) on HR practices. The results of this study provide insight to practitioners of the potential impact of HR practices on both POS and employee outcomes, which, in turn, may impact organizational performance. This allows HR practitioners to both substantiate funding requirements for discretionary HR practices as well as to prioritize the utilization of resources. It is evident from the results of this study that performance management, promotional opportunities, and decision making influence the view employees have of the organization over other practices. This, in turn, affects employee commitment to the customers and their level of discretionary ef-fort. It is not feasible or realistic to expect or-ganizations to make substantial investments in all discretionary HR practices at any given time, particularly during an economic downturn.

Based on our findings, we recommend and encourage organizations to consider fo-cusing their investments to enhance practices in these three areas. This approach will help prioritize their investment dollars and ulti-mately influence important employee out-comes. Organizations that deliver services to customers should recognize the importance of performance management practices on employee customer commitment. Establish-ing a formal process for setting objectives, providing feedback, and evaluating perfor-mance as well as providing training for both managers and employees on how to navigate through the process is crucial. Placing em-phasis on the effectiveness of the perfor-mance management process can impact the achievement of organizational outcomes. HR and organizational leaders should communi-cate career-promotion criteria and alterna-tives clearly so that employees understand and appreciate the options and opportunities

available to them. Formal discussions about organizational goals and professional career goals provide employees a clear line of sight between their development goals and how their current and future work adds value to the organization.

Organizations need to continue to pro-mote decision-making practices at all levels. Involving employees in the decision-making process requires training in problem solving, critical thinking, and decision making, as well as an established process for reviewing decisions. Not only will employees feel more confident in their decision-making skills, but the quality of decisions they make will also be enhanced. At the same time, organizations are cautioned to limit employee involvement to decisions actually benefiting them or affecting them. Employee involvement may also increase the workload of workers and therefore create a feeling that the organiza-tion is taking advantage of them. Therefore, choosing areas of in-volvement carefully and focusing on areas that have the potential to benefit employees is advised.

Potential Limitations and Future Research Opportunities One drawback of this research is the cross-sectional nature of the study. There is a need to test the overall model by conducting a simultaneous examination of the relationships between the discretionary HR practices, POS, and the out-comes over time in order to make causal inferences relative to both antecedents and outcomes. Also, the use of self-report ques-tionnaires to collect the data on the HR prac-tices and POS may have influenced the results. Although managers reported on the outcome variables regarding their employees, the HR practices and POS were collected from employees.

Another limitation is that the sample of students who participated in the pilot study is less experienced than is typical for the



Further investigation

of WLBPs, diversity

practices, and their

inclusion in HR

practices research

and typologies is

an opportunity for

future research and

a limitation of our

study.

workforce. While the average number of years of work experience for students attending this university is five years, it is still less than the average for the organizational sample.

We feel that the exclusion of work-life balance policies (WLBPs) and diversity prac-tices limits our efforts to examine the effects of a complete set of HR practices on employee attitudes and behaviors. While we had both theoretical and practical reasons for not in-cluding them in our study, we believe theyshould be included in HR practices frame-works in future research. Theoretically, we drew directly from the strategic human re-source management literature to develop the framework for identifying the discretionary

HR practices. Within these litera-tures, we found that the focus and inclusion of WLBPs and diversity practices was limited (Batt, 2002; Batt & Valcour, 2003). Our second reason was practical. The organi-zation that participated in this study was one of many that did not have formal or informal WLBPs or diversity practices in place. As a result, studying these practices in this organization would likely not allow us to see the real effects WLBPs and diver-sity practices may have on em-ployee attitudes and behaviors. Further investigation of WLBPs, diversity practices, and their in-clusion in HR practices research

and typologies is an opportunity for future research and a limitation of our study.

Studying the role of the manager relative to the impact of HR practices on POS pro-vides yet another opportunity for further study. For example, studies have found that POS and leader member exchange (LMX) are distinct and are differentially related to em-ployee attitudes and behaviors (Masterson et al., 2000; Settoon, Bennett, & Liden, 1996; Wayne et al., 1997). It is possible that the role a manager plays in the implementation

and support of the discretionary HR prac-tices influences the exchange relationship with the leader as well as the organization. Studying the set of HR practices, POS, LMX, and outcomes simultaneously would allow us to determine if any of the HR practices are more strongly related to LMX compared to POS.

Another limitation is generalizability of the findings. In this organization, women represented over 90 percent of the employ-ees. This is high, and some studies have found that employee gender is associated with POS (Johlke, Stamper, & Shoemaker, 2002). This organization is in one of many retail specialty markets that primarily attract female employ-ees; however, it does not adequately repre-sent the overall retail or labor market. Before results are generalized to other samples, it seems important to extend our study to more diverse samples. Finally, following the work of MacDuffie (1995) and his concept of a “bundle” of HR practices, there is yet another opportunity to explore the impact of a subset or bundle of discretionary HR practices to de-termine if some combination of the practices has advantages above each of the discretion-ary HR practices we have examined or a com-bination of others.

In conclusion, as organizations continue to invest in HR practices in an effort to influ-ence employee behaviors that will ultimately benefit the organization, our findings suggest that it is not a one size fits all. Performance management, promotional opportunities, de-cision making, and participation seemed to have a greater impact on the quality of the exchange between the organization and em-ployees, which in turn predicted customer commitment and citizenship behaviors. By investing in HR practices selectively, organi-zations may target their investments by getting the highest return from their HR prac-tices in terms of employee attitudes and behaviors. The results indicate the impor-tance of studying a more comprehensive set of HR practices within one study.



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