The Development of Management and Leadership Capability and its ...

• In a study of 70 automotive assembly plants, representing 24 companies in 17
countries 'lean production systems' were found to be much higher in both productivity
and quality than those with 'mass production systems' (MacDuffie 1995). Lean
production systems aim to create a skilled, motivated and flexible workforce. It was
found that the success of these systems depended critically on such high-commitment
HR policies such as decentralisation of production responsibilities, multi-skilling
practices, profit/gain sharing, a reciprocal psychological contract, employment
security and a reduction of the status barrier.
• Delery and Doty (1996) found the financial performance of those banks adopting 3
HR practices, namely profit-sharing, results-oriented appraisals and employment
security, was 30% better than the average across 219 banks. 'Banks that were able to
align their HR practices with strategy are estimated to have nearly 50% higher ROA
and ROE than those banks whose HR practices were just one standard deviation out
of alignment. Specifically, banks that implemented a prospector strategy involving
high innovation, reaped greater returns from more results-oriented appraisals and
lower levels of employee participation than did banks that relied on a defender
strategy. Banks implementing a defender strategy performed better if they relied less
on results-oriented appraisals and gave their loan officers higher levels of
participation in decision-making and voice.' (1996:826).
Building evidence on HRM and performance in the UK
In the UK, the body of evidence on the link between HRM and organisational performance is
also growing.
HRM and organisational performance in the UK
• Patterson et al. (1997) in a longitudinal study of over 100 manufacturing companies
in the UK, grouped training with other practices affecting the acquisition and
development of skills (selection, induction, training and appraisal). This group of HR
practices were found to have a strong influence on productivity. 18% of variations in
productivity and 19% in profitability could be attributed to people management
practices. Human resource practices combined, affected productivity far more than
strategy, emphasis on quality, application of technology and R&D expenditure.
• Thompson (2000) conducted a longitudinal study of over 600 establishments in the
UK aerospace industry. It showed that firms increasing their use of high performance
work practices 1997 and 1999 recorded increases in value-added per employee of
from 20 to 34%. Both the number of practices and the proportion of employees
covered by practices differentiated between more and less successful firms. The four
practices most associated with increased productivity were: formal work teams,
appraisal, and broad job grading, individual responsibility for work quality.
It is important to note that most of the studies on the link between HRM and organisational
performance have concentrated on manufacturing organisations. In manufacturing, the move
in developed countries towards high skill strategies and the increased use of technology to
reduce employee costs has been prevalent.
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