the impact of strategic human resource management on firm performance and hr professionals'...

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The impact of strategic human resource managementon firm performance and HR professionals' workattitude and work performanceKenneth W. Green a , Cindy Wu b , Dwayne Whitten c & Bobby Medlin da School of Business, , Henderson State University , Box 7762, Arkadelphia, AR, 71999 Phone:870-230-5018 E-mail:b Baylor University, Hankamer School of Business, Management and EntrepreneurshipDepartment , Box 98006, Waco, Texas, 76798 Phone: 254-710-7672 E-mail:c Baylor University, Hankamer School of Business, Management and EntrepreneurshipDepartment , Box 98005, Waco, Texas, 76798 Phone: tel: 254-710-6106 E-mail:d School of Business , Henderson State University , Box 7832, Arkadelphia, AR, 71999 Phone:tel: 870-230-5114 E-mail:Published online: 16 Feb 2011.

To cite this article: Kenneth W. Green , Cindy Wu , Dwayne Whitten & Bobby Medlin (2006) The impact of strategic humanresource management on firm performance and HR professionals' work attitude and work performance, The InternationalJournal of Human Resource Management, 17:4, 559-579, DOI: 10.1080/09585190600581279

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The impact of strategic human resourcemanagement on firm performance and HRprofessionals’ work attitude and workperformance

Kenneth W. Green, Cindy Wu, Dwayne Whitten and Bobby Medlin

Abstract The impact of strategic human resource management (SHRM) onorganizational performance is assessed. Additionally, the impact of a SHRM approachon the individual performance, organizational commitment and job satisfaction levelsof human resource professionals is investigated. An organization exhibits SHRMwhen thehuman resources function is vertically aligned with the mission and objectives ofthe organization and horizontally integrated with other organizational functions. Data froma national sample of 269 human resource professionals from large US manufacturing firmswere analyzed using structural equation modeling techniques. Results indicate that thedirect impact of SHRM on organizational performance is positive and significant, ashypothesized. Further, SHRM was found to directly and positively influence individualperformance, organizational commitment and job satisfaction. Top managers implement-ing a SHRM system can, therefore, expect improved organizational performance andimproved levels of individual performance, job satisfaction and organizationalcommitment from the organization’s human resource professionals.

Keywords Strategic human resource management; organizational performance;individual performance; organizational commitment; job satisfaction; structural equationmodelling.

Introduction

The area of strategic human resource management (SHRM) has attracted a great deal ofresearch attention over the past decade because of its potential impact on the ‘bottomline’ issues. Various studies have confirmed the positive impact of SHRM onorganizational performance (Huselid, 1995; Huselid and Becker, 1996; Huselid et al.,1997; MacDuffie, 1995). Recently, researchers have begun to examine the impact ofSHRM on HR effectiveness and have discovered an unexpected negative relationship

The International Journal of Human Resource Management

ISSN 0958-5192 print/ISSN 1466-4399 online q 2006 Taylor & Francis

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DOI: 10.1080/09585190600581279

Kenneth W. Green, Jr, School of Business, Henderson State University, Box 7762, Arkadelphia,

AR 71999 (tel: 870-230-5018; e-mail: [email protected]); Cindy Wu, Baylor University, Hankamer

School of Business, Management and Entrepreneurship Department, Box 98006, Waco, Texas

76798 (tel: 254-710-7672; e-mail: [email protected]); Dwayne Whitten, Baylor University,

Hankamer School of Business, Information Systems Department, Box 98005, Waco, Texas 76798

(tel: 254-710-6106; e-mail: [email protected]); Bobby Medlin, School of Business,

Henderson State University, Box 7832, Arkadelphia, AR 71999 (tel: 870-230-5114; e-mail:

[email protected]).

Int. J. of Human Resource Management 17:4 April 2006 559–579

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(Bennett et al., 1998). Organizational and departmental performance is composed ofindividual performance, which has been found to be related to individual work attitude(Judge et al., 2001). Thus, it is natural to ask how SHRM influences HR professionals’work attitudes and individual performance.

To date, little is known concerning how SHRM influences the work attitudes andindividual performance of the HR staff. This is understandable because of the differentlevels of analysis. That is, while SHRM research uses organizations as the unit ofanalysis, it largely ignores the differences in individual employees’ work attitudes andperformance. Rather, it aggregates them to form organizational outcomes. Much researchattention has been given to the relationships between SHRM and firm performance andbetween individual HR practices and individual performance (Wright and Boswell,2002), with the cross-level issues (e.g., influence of SHRM on individual performanceand individual HR practices on firm performance) largely ignored. Researchers haveparticularly called for studies that address cross-level research questions (Wright andBoswell, 2002).

The purpose of this study, therefore, is to examine how SHRM impacts organizationaland individual work performance and attitude. Specifically, we attempt to answer thefollowing research questions:

1 What is the impact of SHRM on organizational performance?2 What is the impact of SHRM on HR professionals’ individual work attitudes?3 What is the influence of SHRM on HR professionals’ individual work performance?

To achieve this aim, we conducted a national survey of human resource managersworking in the US manufacturing sector. SHRM, organizational performance, individualperformance, job satisfaction and organizational commitment were measured in thesurvey. The following section incorporates a review of the literature and developsthe study’s hypotheses. The results section includes a description of the methodologyemployed to test the hypotheses, a description of the sample, assessment of the reliabilityand validity of the study scales, and a presentation of the structural equation modellingresults. Finally, a conclusions section is provided, which summarizes results of the study,describes the limitations of the study and the need for future research, and discusses theimplications of the results for theory as well as practicing managers.

Literature review

A hypothesized model is presented in Figure 1. In this model, SHRM is depicted aspositively impacting organizational performance, HR professionals’ job satisfaction,organizational commitment, and individual performance. In addition, HR professionals’job satisfaction is hypothesized to be positively associated with organizationalcommitment.

SHRM and firm performance

SHRM researchers have adapted theories from the strategy literature to argue that humanresources can help build sustained competitive advantages (Wright, Dunford and Snell,2001; Wright and McMahan, 1992). More specifically, a resource-based view of businessstrategy states that, in order to build a sustained competitive advantage, the resource thatis intended to build a competitive advantage must add value, be unique and rare, beimperfectly imitable, and not be substitutable with another resource by competing firms(Barney, 1991). Given these characteristics, Wright and McMahan (1992) contend that

560 The International Journal of Human Resource Management

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human resources, if properly aligned with corporate strategy, could serve as the basis for

such competitive advantage. Aligning HR practices to support business objectives

generally requires implementation of a SHRM approach (Delery, 1998; Huselid et al.,

1997; McMahan et al., 1998; Wright, Dunford and Snell, 2001).In order to support different business strategies, both vertical fit and horizontal fit

between HR practices and business strategies have been proposed in the SHRM literature

(Delery, 1998). Horizontal fit, often referred to as ‘HR bundles’ (Delery and Doty, 1996;

MacDuffie, 1995), is the degree to which specific human resource practices are

orchestrated in a coherent and consistent manner to best support one another and to

integrate with other departments. Vertical fit, on the other hand, refers to the alignment of

human resource practices to the organizational context in order to support specific

organizational objectives. Following previous research, we also define SHRM as both

horizontal fit of HR practices and vertical fit between HR practices and business

strategies.Although researchers have found that SHRM is positively related to firm performance,

SHRM in these studies is usually operationalized and measured as the existence or the

effectiveness of a variety of sets of HR practices that are assumed to be universally

effective (e.g., Bae and Lawler, 2000; Delaney and Huselid, 1996; Guthrie, 2001;

Huselid, 1995; MacDuffie, 1995). With limited empirical research on the fit issue of

SHRM, whether fit is necessary is indefinite. In fact, Delery (1998) even contends that

simultaneous horizontal fit and vertical fit may not be necessary or beneficial. We attempt

to address this research gap by empirically testing the vertical and horizontal fit of SHRM

and its relationship with firm performance.Findings of SHRMstudies that have taken a configurational approachmay shed light on

the issues of fit. A configurational perspective takes an approach similar to horizontal fit

that examines human resource practices as a bundle as opposed to discussing each specific

HR practice and its effect on organizational outcomes. Dyer and Reeves (1995) argue that

different organizational environments require different types of employees andbehaviours

and that different human resource strategies should also produce different types of

employees and behaviours from employees. Therefore, human resource strategies should

Figure 1 SHRM outcomes model with hypotheses

Green et al.: The impact of SHRM on attitude and performance 561

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be based on the organizational context, which points toward the importance of both thehorizontal fit and vertical fit of SHRM. Recent empirical research provides modestsupport for this notion. Lepak and Snell (2002), in their investigation of 206 executives,HR managers and line managers from 148 firms with different employment modes(knowledge-based employment, job-based employment, contract work and alliance/partnership), found that different HR configurations are associated with differentemployment modes. Specifically, they found that job-based employment is significantlyassociated with productivity-based HR configuration, contractual work arrangement issignificantly associated with compliance-based HR configuration, and alliance/partnership is significantly associated with collaborative-based HR configurations.These findings suggest that in implementing SHRM, firms tend to bundle their HRpractices in a coherent manner in order to support their unique organizational context.This also points out the importance of both types of fit. We adopt the definition ofSHRM as both horizontal fit and vertical fit and hypothesize, based on theresource-based view of SHRM, that:

Hypothesis 1: SHRM has a direct, positive impact on organizational performance.

SHRM and HR professionals’ work attitudes

SHRM may enhance HR professionals’ work commitment and satisfaction because theirjob is structured as intrinsically motivating. An organization that implements SHRMincludes the HR professionals as business partners by involving them in the strategicplanning process (Ulrich and Beatty, 2001). This allows them to use a variety of skills tofulfil their daily job responsibilities. Specifically, horizontal fit allows HR professionalsto coordinate various HR activities into a coherent HR system (Delery, 1998), whichsignifies task identity by facilitating the integration of tasks and avoiding segmentingthem. Vertical alignment links HR practices to firm strategy (Delery, 1998), which offersthe chance for HR professionals to evaluate their HR work from the organizationalperspective. This link helps HR professionals to realize the significance of their workbecause it supports the accomplishment of company objectives and facilitatesorganizational change (Hoogervorst et al., 2002). It also ties HR activities andeffectiveness to organizational performance, providing additional work feedback to HRprofessionals. In practice, horizontal and vertical fit require that HR professionalscoordinate both inside and outside the HR department so that HR activities cancorrespond with each other and with other department activities. This empowers HRprofessionals to make decisions and, as a result, elevates the level of task autonomy.

As stated above, a HR professional’s job at an organization that implements SHRM,defined as vertical fit and horizontal fit, could be depicted as having skill variety, taskidentity, task significance, feedback and autonomy. The job characteristics modelsuggests that when a task is significant, requires skill variety, possesses task identity, andprovides autonomy and task feedback, employees will experience higher levels ofintrinsic motivation through such critical psychological conditions as experiencedmeaningfulness, experienced responsibility, and knowledge of results (Hackman andOldham, 1976). These job characteristics lead to higher levels of organizationalcommitment (Eby and Freeman, 1999; Glisson and Durick, 1988; Thatcher et al., 2002)and job satisfaction (Eby and Freeman, 1999; Glisson and Durick, 1988). BecauseSHRM is more likely to offer these characteristics in an HR professional’s job, wepropose:


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Hypothesis 2: SHRM has a direct, positive impact on the organizational commitmentof human resource professionals.

Hypothesis 3: SHRM has a direct, positive impact on the job satisfaction of humanresource professionals.

SHRM and HR professionals’ work performance

SHRM may also enhance the performance of HR professionals because it fulfils theexpectation of an ideal HR professional’s role. There has been an increasing recognitionthat HR professionals are expected to be ‘business partners’ who have the power toinfluence the business outcomes (Ulrich, 1997). For example, in a semi-structured in-depth interview, HR professionals report that they believe their most important roles inbusiness are as advisors and change agents (Caldwell, 2003), both of which relate tostrategic issues but differ in how much they are allowed to intervene in strategy planning(Storey, 1992). Ulrich and Beatty (2001) also suggest that HR professionals viewthemselves as coaches to the stakeholders, architects who design the HR systems andorganizational structure, and builders who implement the blueprints sketched in thearchitecture stage, facilitators who ensure the smooth teamwork and the right person–jobfit, leaders who manage the HR department like a business unit, and as gatekeepers whoensure that HR decisions are made in an ethical fashion.

In practice, an organization where the HR function is horizontally and verticallyaligned with business strategy is likely to offer to fulfil the aforementioned roleexpectations. Specifically, horizontal fit allows the HR professionals to view the specificHR activities as a coherent system that supports the business strategy. HR professionalsare also empowered to offer suggestions to other departments in such a way that the HRfunction is integrated with other organizational functions. Furthermore, verticalalignment allows HR professionals to become strategic partners in the strategic planningand implementation process by offering advice to management executives so that theyare ‘playing in the game’, rather than ‘playing at the game’ (Ulrich and Beatty, 2001).This suggests that an organization that implements SHRM will entrust theHR professionals with a high-level strategic role, which not only supports the HRprofessionals’ mission but also offers to meet the role expectations in their minds.

The theory of psychological contract suggests that employees have certain beliefsconcerning the nature of the exchange agreement between the employee and theorganization (Rousseau, 1989). When employees perceive a negative imbalance whereemployees’ expectations of their organization are not met, employees will takecounterbalancing actions, which, in turn, leads to reduced satisfaction with theorganization (Porter et al., 1998), reduced commitment (Robinson and Morrison, 1995;Rousseau and Parks, 1993), reduced job satisfaction (Robinson and Morrison, 1995;Turnley and Feldman, 2000), and higher cynicism (Robinson and Morrison, 1995). Onthe other hand, the fulfilment of such expectations results in employees’ reciprocation byincreasing their effort in work, which consequently leads to higher in-role and extra-rolejob performance (Turnley et al., 2003). Because an organization where SHRM isvertically and horizontally aligned is more likely to bring an HR professional’s job rolecloser to the expected role, we propose:

Hypothesis 4: SHRM has a direct, positive impact on the individual performance ofhuman resource professionals.


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Job satisfaction and organizational commitment

In addition to the relationships between SHRM and HR professionals’ job attitudes, thetwo job attitudes, job satisfaction and organizational commitment, may also correlatewith each other. Organizational commitment refers to an individual’s attachment, loyaltyand identification with the organization (Meyer and Allen, 1984). Porter et al. (1974)contend that satisfaction is an unstable and immediate affective response to the workenvironment, while organizational commitment is viewed as a long-term, slower-developing attitude. They therefore posit that satisfaction is an antecedent tocommitment. Extensive research findings suggest that job satisfaction is a precursorto organizational commitment (DeCotiis and Summers, 1987; Lok and Crawford, 2001;Mathieu and Hamel, 1989; Wasti, 2003; Williams and Hazer, 1986).

Using two different samples from different organizations, Williams and Hazer (1986)find that job satisfaction mediates the influence of personal characteristics and workenvironment on organizational commitment. Testing a model that hypothesizes theantecedents and consequences of job satisfaction using retail salespeople asthe respondents, Brashear et al., (2003) also found that satisfaction precedescommitment. Similar results are found in different settings, including marketing(Brown and Peterson, 1993), blue-collar workers (Iverson and Roy, 1994) andinformation technology (Thatcher et al., 2002). Although some researchers suggest thatorganizational commitment precedes job satisfaction (e.g., Bateman and Strasser, 1984),Mathieu’s (1991) non-recursive model indicates that satisfaction has a stronger influenceon commitment than vice versa. Given the extensive and well-established previousresearch findings, we hypothesize a positive relationship between job satisfaction andorganizational commitment:

Hypothesis 5: Job satisfaction has a direct, positive impact on the organizationalcommitment of human resource professionals.

Methodology

To test the stated hypotheses, a two-wave mail survey of human resource professionalsfor large US manufacturing companies was conducted. Since budget and time constraintsdid not allow more that two mailings, several measures were taken to improve theresponse rate. The focus of the study (SHRM) was believed to be of significant interest toHR professionals and a relatively short (front and back of one legal-sized sheet)questionnaire was used. The accompanying letter was personalized, assured anonymity,and offered an executive summary to respondents. The survey packet included a self-addressed, metered return envelope and was sent through first-class mail. The HRprofessionals were asked to complete and return a survey form containing scales thatmeasure SHRM, organizational performance, individual performance, job satisfactionand organizational commitment.

The paper will proceed with a description of the sample along with an assessment ofthe effectiveness of the sample which includes discussion of the response rate, itemcompletion rate, and an assessment of the impact of non-response bias. The results of athorough assessment of the unidimensionality, reliability and validity of all scales areprovided along with an assessment of the impact of potential common method bias.Descriptive statistics for the study variables and a correlation matrix are also provided.Finally, the results of the structural equation modelling analysis of the hypothesizedmodel are described.


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Survey effectiveness

Initial and follow-up requests for participation were sent to 1,750 individuals holdinghuman resource management related positions within US manufacturing organizations.The 1,750 names and addresses were randomly chosen from almost 8,000 listed in adatabase provided by Manufacturer’s News, Inc. The database included information onUS manufacturers with 250 or more employees. The data collection focused on largemanufacturers because those organizations are likely to have well-established HRfunctions managed by experienced HR professionals.

Completed survey instruments were received from 269 individuals representingmanufacturing firms for a gross response rate of 15.4 per cent. The response rate isrelatively high for research that draws from manufacturing sample frames. Harmon et al.(2002) note that low response rates are not untypical in industrial research and report a10.8 per cent response rate from a traditional two wave mail methodology. Dwyer andWelsh (1985) report a somewhat lower 6.3 per cent rate under similar circumstances.Additionally, Nahm et al. (2003a, 2003b) report receiving 224 responses from a survey of3,000 manufacturers for an effective response rate of 7.5 per cent. Additionally, Tan et al.(2002) report a 6.7 per cent response rate from a survey of purchasing managers within amanufacturing setting.

In addition to the survey response rate, item completion rate can be used as anothermeasure of survey effectiveness (Klassen and Jacobs, 2001). Klassen and Jacobs (2001:717) define item completion rate as ‘the proportion of survey items answered relative toall applicable items.’ The item completion rate for this study is a relatively high 99per cent, suggesting adequate survey effectiveness.

Assessment of non-response bias

Testing for non-response bias is important to identify any potential bias due to the failureof members of the sample to respond. Although Hunt (1990) argues that otherwise-credible research should not be rejected solely on the basis of potential non-responsebias, the potential for such bias is always a concern when conducting mail surveys. Non-respondents have been found to descriptively resemble late respondents (Armstrong andOverton 1977), thus it is important to determine if the early and late responders aresimilar. Lambert and Harrington (1990: 21) describe a common approach to assessmentby comparing the first and second waves and assuming that ‘non-response bias isnonexistent if no differences exist on the survey variables.’

Following this common approach, respondents were categorized as responding toeither the initial or follow-up requests sent approximately three weeks later. Thoseresponding to the initial requests were classified as early responders; those responding tothe follow-up requests were classified as late responders. Of the respondents, 71 per cent(191) were categorized as early responders and 29 per cent (78) were categorized as lateresponders.

A comparison of the means of the descriptive variables and the strategic humanresource, organizational performance, individual performance, organizational commit-ment and job satisfaction scale-item responses for the two groups was conducted usingone-way ANOVA. None of the comparisons resulted in differences statisticallysignificant at the .01 level. Because non-respondents have been found to descriptivelyresemble late respondents, this finding of general equality between early and laterespondents lends some support to a conclusion that non-response bias has not negativelyimpacted the assembled data set.


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A more precise assessment of bias requires the use of more than two waves and a finalmailing of a condensed questionnaire to non-respondents (Lambert and Harrington1990). Teitler et al. (2003) note that budget and time constraints limit the number ofpossible mailings. Such was the case in this study. Budgetary and time constraints onlyallowed for two mailings to the 1,750 identified human resource professionals.

Sample description

All respondents held human resource related positions. Fifty-one per cent identifiedthemselves specifically as human resource managers and an additional 32 per cent ashuman resource directors. Respondents averaged 7.8 years in their current positions.Mean sales for the firms included in the sample were $2.14 billion, and the mean numberof employees per firm was 6,852. Eighteen specific manufacturing SIC codes wereidentified. Respondents represented 40 different states.

Measures

Measures of SHRM, organizational performance, individual performance, jobsatisfaction, and organizational commitment were necessary to assess the direct andindirect impact of a SHRM approach on organizational performance. We considered HRprofessionals to be particularly knowledgeable of SHRM, individual performance, jobsatisfaction and organizational commitment. Some concern was noted, however, relatedto the knowledge of such professionals related to overall organizational performance. Webelieve that both HR directors and managers are sufficiently knowledgeable oforganizational performance since both are intimately involved in budgeting, work forcelevel determination, and the processes related to compensation management that dependheavily on the overall success of the organization.

The 6-item SHRM scale incorporates the use of 7-point Likert scales anchored with‘strongly disagree’ and ‘strongly agree’. This scale was developed and assessed forvalidity and reliability by Green et al. (2001). The scale incorporates two factorsreflecting the vertical-alignment and horizontal-integration components of the SHRMdefinition.

The 7-item organizational performance scale was also used and assessed by Greenet al. (2001). Respondents were asked to assess the financial and marketing performanceof their organizations over the past three years as compared to the industry average. Thescale includes seven items and incorporates 7-point Likert scales with ‘well below’ and‘well above’ anchors. Items 1 to 4 relate to financial performance and were originallydeveloped by Claycomb et al. (1999). Green et al. (2001) developed the three additionalitems related to marketing performance based upon performance criteria described byKohli and Jaworski (1990).

The 5-item individual performance scale was developed for this study. The 9-itemversion of the organizational commitment scale developed and assessed byMowday et al.(1979) and the 19-item job satisfaction scale developed and assessed by Brayfield andRothke (1951) were incorporated in the survey. The individual performance, jobsatisfaction and organizational commitment scales used 7-point Likert scales anchoredwith ‘strongly disagree’ and ‘strongly agree’. All study scales are presented in theAppendix.

Prior to assessing the study hypotheses, it is necessary to ensure that the scales arereliable and valid measures of the intended constructs. Specifically, measurement scalesmust exhibit content validity, unidimensionality, reliability, discriminant validity,convergent validity and predictive validity.


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Content validity Content validity results from developing scale items based upon thetheory described in the associated literature and upon expert opinions of knowledgeableresearchers and practitioners (Shin et al., 2000). Green et al. (2001) derived a 19-itemstrategic human resource management scale from a careful review of the literature. Theyassessed the scale with both exploratory and confirmatory samples, ultimately reducingthe scale to nine items. Of the nine items, three measured the vertical alignment of theHR function, three represented horizontal integration of the HR function, and the finalthree represented impact of the function on performance. Prior to use in this study, the9-item scale was reviewed by a group of practising HR professionals. This groupdetermined that the scale developed by Green et al. (2001) should be shortened from 9 to6 items, removing 3 items related to the impact of the HR function on performance.

The organizational performance scale adopted from Green et al. (2001) includes boththe items related to financial performance originally developed by Claycomb et al.(1999) and additional items related to marketing performance. These additional itemsspecifically relate to market share, sales volume and sales performance and wereidentified by Kohli and Jaworski (1990) as measures of marketing performance. Sincethe SHRM, organizational performance, organizational commitment and job satisfactionscales have been carefully developed and thoroughly assessed in previous researchefforts (Brayfield and Rothke, 1951; Green et al., 2001; Mowday et al., 1979), contentvalidity is assumed. The five items in the individual performance scale were developedby the current researchers and reviewed by a group of practising human resourcemanagers in an effort to ensure content validity.

Unidimensionality Confirmatory factor analysis based upon the covariance matrixfacilitates the test for unidimensionality (Dunn et al. 1994). Raykov and Marcoulides(2000) point out that decisions related to goodness of fit should be based on a review ofmultiple indices. Goodness-of-fit (GFI), non-normed-fit (NNFI) and comparative-fit(CFI) indices greater than .90 and root-mean-squared-approximation-of-error (RMSEA)values between .05 and .08 support a claim of unidimensionality (Ahire et al., 1996;Garver and Mentzer, 1999). Byrne (1998) noted that RMSEA values between .08 and .10indicate mediocre rather than good fit. Statistically significant (at the .05 level) parameterestimates of the expected sign and values greater than .70 also provide strong evidence ofunidimensionality (Garver and Mentzer, 1999).

Confirmatory factor analysis for the SHRM scale with two dimensions returned GFI(.95), NNFI (.93) and CFI (.96) values greater than the recommended .90 level but anRMSEA (.12) higher than the recommended maximum of .08. When the errorcovariances for items 4 and 6 were allowed to correlate, as suggested by a modificationindex, the RMSEA dropped to .08. All of the parameter estimates were significant at the.01 level and five of the six estimates were greater than .70.

It was necessary to re-specify the organizational performance scale by removing item2 to achieve unidimensionality. Analysis of the organizational performance scale withtwo dimensions returned GFI (.95), NNFI (.97) and CFI (.99) values greater than therecommended .90 level but a RMSEA (.12) higher than the recommended maximum of.08. When the error covariances for items 4 and 6 were allowed to correlate, as suggestedby a modification index, the RMSEA dropped to .04. All of the parameter estimates weresignificant at the .01 level and greater than .70.

It was necessary to re-specify the individual performance scale by removing item 5 toachieve unidimensionality. Following the re-specification, the confirmatory analysisreturned GFI (.98), NNFI (.91) and CFI (.97) values greater than the recommended .90level. The RMSEA (.13) exceeded the recommended limit of .08. When the error


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covariances for items 2 and 4 were allowed to correlate, as suggested by a modificationindex, the RMSEA dropped to .00. All of the parameter estimates were significant at the.01 level and three of the four were greater than .70.

The organizational commitment scales returned NNFI (.89) and GFI (.88) values thatapproached but did not exceed the recommended .90. The CFI (.92) did exceed the .90level. The RMSEA (.12) exceeded the .08 limit. Allowing the error covariances for items2 and 6, 1 and 13, 1 and 2, and 3 and 7 to correlate as recommended by modificationindices reduced the RMSEA to .10. All of the parameter estimates were significant at the.01 level and six of the nine were greater than .70. Because the commitment scale is sowell established in the literature, no attempt at re-specification was made.

The job satisfaction scale is also well established, and no attempt at re-specificationwas made. The confirmatory analysis returned GFI (.83), NNFI (.82) and CFI (.84) valuesthat approached but did not exceed the recommended .90 level. The RMSEA (.10) fallsoutside the recommended range of .05 to .08 for good fit. Allowing the error covariancesfor items 13 and 16 and 14 and 18 to correlate as recommended by modification indicesreduced the RMSEA to .08. All but one of the 19 parameter estimates were significant atthe .01 level and eight of the 19 were greater than .70.

Reliability Garver and Mentzer (1999) recommend computing Cronbach’s coefficientalpha and the SEM construct-reliability and variance-extracted measures to assess scalereliability. They indicate that alpha and construct-reliability values greater than or equalto .70 and a variance-extracted measure of .50 or greater indicate sufficient reliability.The SHRM scale includes vertical-alignment and horizontal-integration dimensions.Reliability assessment of the vertical-alignment subscale returned alpha (.85),construct-reliability (.87) and variance-extracted (.70) values that exceed therecommended minimum levels. The alpha (.76), construct-reliability (.84) andvariance-extracted (.64) coefficients for the horizontal-integration subscale alsoexceeded the minimums.

The organizational performance scale also includes two dimensions: financialperformance and marketing performance. The alpha (.94), construct-reliability (.95) andvariance-extracted (.84) values for the financial-performance subscale exceed therecommend levels. The alpha (.94), construct-reliability (.96) and variance-extracted(.88) coefficients for the marketing-performance subscale also exceed the minimums.

Reliability analysis for the individual performance scale returned alpha (.79),construct-reliability (.81) and variance-extracted (.51) values that meet or exceed therecommended levels. The alpha (.88), construct-reliability (.92) and variance-extracted(.56) values for the organizational commitment exceed the recommended minimums. Forthe job satisfaction scale only the alpha (.87) coefficient exceeds the recommendedminimum; the construct-reliability (.50) and variance-extracted (.40) coefficients,however, do not.

Convergent validity Ahire et al. (1996) recommend assessing convergent validityusing the normed-fit index (NFI) coefficient, with values greater than .9 indicating strongvalidity. Garver and Mentzer (1999) recommend reviewing the magnitude of theparameter estimates for the individual measurement items to assess convergent validity.Statistical significance of an estimate indicates a weak condition of validity and anestimate greater than .7 indicates a strong condition. The NFI for the two-dimensionalSHRM scale is .95. All associated parameter estimates are statistically significant, andfive of the six estimates are greater than .70. For the two-dimensional organizationalperformance scale, the NFI is .97, and all parameter estimates are statistically significant


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and greater than .70. The NFI for the individual performance scale is .97, with allestimates statistically significant and three of four estimates greater than .70. The NFI forthe organizational commitment scale is .90, with all estimates statistically significant andsix of nine greater than .70. The NFI for the job satisfaction scale is .79, with 18 of 19estimates significant and eight of 19 greater than .70.

Discriminant validity Ahire et al. (1996) recommend that scales be tested for discriminantvalidity using a chi-square difference test for each pair of scales under consideration.Confirmatory factor analysis is first run on the pair of scales allowing for correlation betweenthe constructs and then run a second time fixing the correlation to one (Ahire et al., 1996).The difference between chi-squares from the two factor analyses is computed and tested forsignificance (Ahire et al., 1996).A statistically significant difference in chi-squares indicatesdiscriminant validity (Ahire et al., 1996).Chi-squaredifference testswere runonall possiblepairs of study scales and subscales. The chi-square differences ranged from 237.94 to6,460.89 with one degree of freedom. All differences are significant at the .01 level.

Predictive validity Both Ahire et al. (1996) and Garver and Mentzer (1999)recommend assessing predictive validity by determining whether the scales of interestcorrelate as expected with other measures. Values for each of the scales were computedby averaging across scale items. Table 1 displays the correlation matrix for the scaleaverages. With three exceptions all correlation coefficients are positive and significant, asexpected. The SHRM horizontal-integration variable did not correlate with eitherfinancial or marketing performance and financial performance did not correlate with jobsatisfaction.

The SHRM, organizational performance, individual-performance and organizational-commitment scales exhibit content validity, unidimensionality, reliability, convergentvalidity, discriminant validity and predictive validity. It should be noted, however, thatunidimensionality as measured by the RMSEA was achieved only when the errorcovariances of certain item pairs within each scale were allowed to correlate. Minordeficiencies in terms of reliability, unidimensionality and convergent validity were notedfor the job satisfaction scale. Since all coefficients and indices approached the desiredlevels, the deficiencies are not considered significant enough to preclude use of the jobsatisfaction data.

Assessment for common method bias

When data for the independent and dependent variables are collected from singleinformants, common method bias may lead to inflated estimates of the relationshipsbetween the variables (Podsakoff and Organ, 1986). Podsakoff and Organ (1986)describe scale reordering as a procedural option for minimizing common methodvariance. This option requires that the measurement items related to the independentvariable precede the items for the dependent variable on the survey instrument. Thesurvey instrument used was structured such that the SHRM related items precededthe organizational performance, individual performance, organizational commitment andjob satisfaction measurement items.

Additionally, as Podsakoff and Organ (1986) recommend, Harman’s one-factor testwas used post hoc to examine the extent of the potential bias. As prescribed by Harman’stest, all variables were entered into a principal components factor analysis. According toPodsakoff and Organ (1986), substantial common method variance is signalled by theemergence of either a single factor or one ‘general’ factor that explains a majority of the


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Table

1D

escr

ipti

vest

ati

stic

s(A

)a

nd

corr

ela

tio

nm

atr

ix(B

)

A.Descriptivestatistics

(n¼

269)

Mea

nS

tan

da

rdd

evia

tio

n

SHRM:vertical-alignment

4.97

1.34

SHRM:horizontal-integration

6.00

.88

Financial

perform

ance

4.75

1.28

Marketingperform

ance

4.74

1.32

Individual

perform

ance

6.08

.69

Organizational

commitment

5.44

.97

Jobsatisfaction

5.26

.68

B.Correlationmatrix(n

¼269)

12

34

56

78

9

1SHRM:vertical-alignment

1.000

2SHRM:horizontal-integration

.419**

1.000

3Financial

perform

ance

.194**

.117

1.000

4Marketingperform

ance

.203**

.096

.829**

1.000

5Individual

perform

ance

.315**

.417**

.131*

.145*

1.000

6Organizational

commitment

.399**

.247**

.170**

.220**

.357**

1.000

7Jobsatisfaction

.337**

.222**

.091

.137*

.407**

.641**

1.000

8Number

ofem

ployees

.050

2.029

.031

.009

.049

2.033

2.020

1.00

9Annual

revenues

.074

2.008

.041

.011

.027

2.032

2.034

.883**

1.00

Note

s

**Correlationissignificantat

the0.01level

(2-tailed),*Correlationissignificantat

the0.05level

(2-tailed)


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total variance. Results of the factor analysis revealed 10 factors with eigenvalues greaterthan one, which combined to account for 65 per cent of the total variance. While the firstfactor accounted for 25 per cent of the total variance, it did not account for a majority ofthe variance. Based upon these results of Harman’s one-factor test, problems associatedwith common method bias are not considered significant (Podsakoff and Organ, 1986).

Results

The structural equation modelling capabilities of LISREL 8.5 software were employed toassess the SHRM outcomes model illustrated in Figure 1. Summary values for each of theseven study constructs were computed by averaging across the items in the measurementscales. SHRM and organizational performance are second-order constructs each with twounderlying dimensions. Descriptive statistics and the correlation matrix for the summaryvariables are presented in Table 1. To assess the need to control for firm size in thesubsequent structural analysis, both the number of employees and annual revenues wereincluded in the correlation matrix. Since neither measure of size is significantlycorrelated with the study variables, neither was incorporated in the structural analysis.

The structural model fits the data well. Figure 2 illustrates the SHRM outcomes modelas structurally assessed. The relative chi-square (chi-square/degrees of freedom) valueof 2.27 is less than 3.00 as recommended by Kline (1998). The root mean square error ofapproximation (.07) falls below the recommended maximum of .08 (Schumacker andLomax, 1996), and values for NFI (.96), GFI (.97) and adjusted GFI (.93) all exceed therecommended .90 level, indicating good fit (Schumacker and Lomax, 1996).

Results from the structural equation modelling analysis provide the informationnecessary to evaluate the study hypotheses. The significant path identified from SHRM toorganizational performance exhibits a standardized estimate of 0.28 with an associatedt-value of 3.42 and supports hypothesis 1. Thus, SHRM directly and positively impactsorganizational performance. The link from SHRM to organizational commitment is alsosignificant with a standardized estimate of 0.31 and a t-value of 4.31, supporting

Figure 2 Structural STHRM outcomes model with standardized estimates and (t-values)


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hypothesis 2. SHRM directly and positively impacts organizational commitment. Theestimate for the SHRM to job satisfaction link is 0.53 with a t-value of 7.59 indicatingsignificance and support for hypothesis 3. Hypothesis 4 is also supported. The estimate(0.62) and t-value (9.16) indicate that SHRM directly and positively impacts individualperformance. Finally, the results also support hypothesis 5 that job satisfaction positivelyimpacts organizational commitment. The estimate for the satisfaction to commitmentlink is 0.48 with a t-value of 7.91.

Hair et al. (1998) recommend a competing models approach to structural equationmodelling when alternative formulations are suggested by the underlying theory. Recentstudies have reported a positive relationship between job satisfaction and individualperformance (Judge et al., 2001). Therefore, an alternative model incorporating theadditional pathwas assessed. The estimate for the job satisfaction to individual performancelink is 0.20 with a t-value of 3.05. The overall fit did improve (relative chi-square ¼ 1.87,NFI ¼ .97, GFI ¼ .98, AGFI ¼ .95), although it was not significant at the .01 level.

Discussion

This study was designed to assess the impact of SHRM on organizational performanceand on the individual performance, job satisfaction and organizational commitmentlevels of HR professionals. A sample of human resource professionals was effectivelyconstructed and results of the structural equation analysis support all study hypotheses.SHRM positively impacts organizational performance and the job attitudes andindividual performance of HR professionals.

Theoretical implications

The findings of the study raise several important theoretical implications. First, our studyhighlights the importance of both vertical fit and horizontal fit. Organizations thatvertically align and horizontally integrate HR function and practices perform better andproduce more committed and satisfied HR function employees who exhibit improvedindividual performance. Future research that incorporates both individual andorganizational level outcomes to assess the value of vertical and horizontal fit will notonly advance theories but also provide practical implications.

Second, findings from our study suggest that SHRM contributes positively to thecommitment, satisfaction and individual performance levels of HR professionals. Thesefindings seem to be contradictory to previous findings that SHRM negatively influencesHR effectiveness (Bennett et al., 1998). Specifically, Bennett et al. (1998) conjecturedthat, when the HR function is fully integrated into business strategy, it becomes ancillaryand is not perceived as a department that is playing its expected role. One particularlynoteworthy point in the study, however, is that the measure of the effectiveness of HRwasobtained from top management’s (CEOs, owners, plant managers) general perceptionswith a 3-item measure. This approach provided a different source for performanceevaluation of HR from top managers who may be better informed of the firm’s strategy.Topmanagementmay not be themost direct users of HR services and the accuracy of theirevaluation (particularly horizontal fit) may, therefore, be discounted. Wright, McMahan,Snell and Gerhart (2001) compared the HR effectiveness ratings obtained from HRexecutives and line executives, and not surprisingly found that HR executives reportedbetter HR effectiveness compared to the line executives’ evaluation.

Based on the notion that individual performance ultimately contributes todepartmental performance and based on the well-established linkage between workattitude and work performance, our study took a bottom-up approach to examine the


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influence of SHRM on individual HR professionals. The positive relationships identifiedin our study may suggest a higher level of HR departmental performance when the HRprofessionals’ individual performance is aggregated. Apparently, the relationshipbetween SHRM and HR effectiveness varies significantly depending on the source of theevaluation. Our study, along with previous findings, pinpoints the need to develop arefined HR performance measure using multi-source evaluators. This line of researchwill not only help clarify the relationship between SHRM and HR effectiveness, but alsoprovide rich diagnostic information to the HR managers in devising their action plans.

Limitations and future research directions

While the objectives of the study were successfully accomplished, limitations of thestudy should be noted. First, the data collected from a single source may raise concerns ofcommon method bias. Although Podsakoff et al. (2003) argued that statistical methodscannot completely eliminate common source bias, we tested for the potential commonmethod biases with the results supporting the contention that the bias does notsignificantly impact our study results. Future research should replicate our researchfindings incorporating multiple sources to avoid potential common method bias. Thesurvey methodology yielded a 15.4 per cent return, raising concerns related to non-response bias. Although the two waves of responses were compared and no evidence ofbias was noted, a more direct assessment of the potential bias utilizing data fromadditional waves and an intensive follow-up on non-respondents would strengthen thestudy.

Second, although we attempted to link the organizational level of antecedent (SHRM)to the individual level and organizational level of outcomes and our results confirmed thehypothesized positive relationships, methodologically no cross-level data were obtainedto further endorse our contention. Our study, however, provides initial support for theselinks. We encourage future research to gather data frommultiple levels to further confirmour current findings.

Third, while we proposed the possible mechanisms through which SHRM influencesindividual HR professionals’ job attitudes and performance, we did not directly test thesemediating mechanisms. Opening the ‘black box’ in which SHRM functions warrantsadditional study. We also encourage future research to test intrinsic motivation andfulfilled psychological contract as the mediating mechanisms to help theory building.A longitudinal study design is particularly encouraged as it will more accurately capturethe formation of a psychological contract and further confirm the causal relationshipbetween SHRM and performance.

Finally, this study focuses on human resource professionals in the manufacturingsector. Before the results and related conclusions can be generalized outside themanufacturing sector, replication with other samples from other sectors (such asthe service and governmental sectors) is important. It would also be helpful to replicate thestudy outside the US to determine the adoption and impact of SHRM internationally.Theorizing and testing the mechanisms through which SHRM influences organizationalmembers other than human resource professionals is also encouraged in order to enhanceour understanding of the influence of SHRM on individual employees.

Implications for practice

Our study findings support the mounting body of evidence pointing to the idea that HRshould be an equal strategic business partner with operations, finance and marketing.Whether one calls it giving HR a seat at the table, making HR a player or calling HR a line


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function, the result is the same – recognition by organizations that a strategic HR functionis equally critical to organizational success as the primary functions of the firm. Also, thefindings point clearly to developing and implementing HR systems that are verticallyaligned and horizontally integrated, as opposed to a set of separate HR practices intraditional HR areas such as staffing, training, compensation and employee relations.

Practitioners are encouraged to adopt an SHRM strategy with the expectation thatorganizational performance will be improved. Further, practitioners can expectimprovements in job-related attitudes and individual performance on the part of HRprofessionals within their organizations following the adoption of SHRM. SHRM impactsboth the organization and the individuals within the organization for the better bystrategically focusing the HR function on the mission and objectives of the organization.

Appendix

Measurement scales

Strategic Human Resource Management (alpha ¼ .81)(7-point scales with endpoints ‘strongly disagree’ and ‘strongly agree’)

Items 1, 2 and 3 form a vertical-alignment factor (alpha ¼ .85)Items 4, 5 and 6 form a horizontal-integration factor (alpha ¼ .76)

1 Top management incorporates HR information (plans, requirements, activities, etc.)when establishing the direction the organization should take.

2 This organization’s top-level managers are trained to integrate all levels (supervisorythrough to executive) and functions (marketing, accounting, finance, HR, etc.) of theorganization into the decision-making process.

3 This HRM unit has been fully integrated into the strategic planning process.4 This HRM unit works hard to maintain a cooperative partnership with individual

managers.5 This HRM unit regularly checks with other units to identify organizational training

needs.6 This HRM unit helps departmental managers carry out their critical HR

responsibilities.

Organizational performance scale (alpha ¼ .94)(7-point scales with endpoints ‘well below’ and ‘well above’ industry average)

Items 1, 3 and 4 form a financial performance factor (alpha ¼ .92)Items 5, 6 and 7 form a marketing performance factor (alpha ¼ .94)

1 Average return on investment over the past three years.2 Average profit over the past three years.3 Profit growth over the past three years.4 Average return on sales over the past three years.5 Average market share growth over the past three years.


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6 Average sales volume growth over the past three years.7 Average sales (in dollars) growth over the past three years.

Note: Item 2 was removed to achieve unidimensionality.

Individual performance scale (alpha ¼ .79)(7-point scales with endpoints ‘strongly disagree’ and ‘strongly agree’)

1 I am very confident that I can reach my performance goals.2 The level of my individual performance last year was excellent.3 I regularly accomplish my goals.4 My individual goals directly support the goals of the organization.5 My individual performance has improved significantly during the last year.

Note: Item 5 was removed to achieve unidimensionality.

Organizational commitment scale (alpha ¼ .88)(7-point scales with endpoints ‘strongly disagree’ and ‘strongly agree’)

1 I am willing to put in a great deal of effort beyond that normally expected in order tohelp this organization to be successful.

2 I talk up this organization to my friends as a great organization to work for.3 I would accept almost any type of job assignment in order to keep working for this

organization.4 I find that my values and the organization’s values are very similar.5 I am proud to tell others that I am part of this organization.6 This organization really inspires the very best in me in the way of job performance.7 I am extremely glad that I chose this organization to work for over others I was

considering at the time I joined.8 I really care about the fate of this organization.9 For me, this is the best of all possible organizations for which to work.

Job satisfaction scale (alpha ¼ .87)(7-point scales with endpoints ‘strongly disagree’ and ‘strongly agree’)

1 There are some conditions concerning my job that could be improved.2 My job is a hobby to me.3 My job is usually interesting enough to keep me from getting bored.4 It seems that my friends are more interested in their jobs.5 I consider my job rather unpleasant.6 I enjoy my work more than my leisure time.7 I am often bored with my job.8 I feel fairly well satisfied with my job.9 Most of the time I have to force myself to go to work.10 I am satisfied with my job for the time being.11 I feel that my job is no more interesting than others I could get.12 I definitely dislike my work.13 I feel that I am happier in my work that most people.14 Most days I am enthusiastic about my work.15 Each day of work seems like it will never end.


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16 I like my job better than the average worker does.17 My job is pretty interesting.18 I find real enjoyment in my work.19 I am disappointed that I ever took this job.

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