Performance-oriented human resource (HR) practices increase firm performance by increasing managerial affective commitment, according to research by Yaping Gong of the Hong Kong University of Science and Technology, Kenneth S. Law and Song Chang of the Chinese University of Hong Kong, & Katherine R. Xin of the International Institute for Management Development.
In this study, the following eight HR performance practices were categorized as either performance oriented or maintenance oriented: employment security, reduction of status distinctions, selective hiring, participation in decision making through teams, performance appraisal, comparatively high pay contingent on performance, extensive training, and career planning.
Performance-oriented HR practices are aimed at developing, motivating, and effectively utilizing human resources, and six of the eight HR practices were categorized as such and are as follows: selective hiring, participation in decision making through teams, performance appraisal, comparatively high pay contingent on performance, extensive training, and career planning. The remaining two HR practices – employment security and reduction of status – were categorized as maintenance-oriented, and this type of HR practice is aimed at establishing employee security and equality.
After this categorization, the authors next investigated the impact of performance-oriented and maintenance-oriented HR practices on firm performance. In this study, indicators of firm performance were the firm president and vice presidents’ rankings on the following dimensions: profit, total sales growth, market share, total asset growth, after-tax return on total assets, after-tax return on total sales, and labor productivity. Results indicated that performance-oriented HR practices positively affected firm performance whereas maintenance-oriented HR practices did not. In taking this investigation one step further, the researchers sought out the mechanism by which the performance-oriented HR practices affected performance. In other words, they knew that A led to C, but they were unsure of what B was.
In line with the authors’ hypothesis, step B was related to managerial affective commitment – which refers to a manager’s emotional connection, involvement, and identification with the firm. In sum, the authors conclude that performance-oriented HR practices increase managerial affective commitment that in turn increases firm performance.