The Competitive Advantage Behind Investing in Employees (Human Resource Management)

Topic: Performance, Human Resources, Culture, Business Strategy
Publication: Journal of Applied Psychology (2012)
Article: Impact of High-Performance Work Systems on Individual- and Branch- Level Performance: Test of a Multilevel Model of Intermediate Linkages
Authors: Samuel Aryee, Fred O. Walumbwa, Emmanuel Y. M. Seidu, & Lilian E. Otaye
Reviewed By: Lauren A. Wood, M.S.

With the rapid growth of global competition and the speed with which competitors can imitate products and technology, organizations are turning to human capital to differentiate themselves. As such, researchers and practitioners have stressed the value that employees play in creating and sustaining an organization’s competitive edge. As a result, many organizations have implemented high-performance work systems (HPWS), which are HR programs closely linked to the goals and culture of the organization that are designed to develop employee skills and organizational commitment in order to create a self-sustaining competitive advantage.

With a sample of 37 branches of two banks, Aryee, Walumbwa, Seidu, and Otaye tested a model linking HPWSs and performance to individual-level (i.e., employee service) and unit-level (i.e., branch market) performance outcomes. They based the model on empowerment theory which centers on redesigning work to minimize top-down control and build in greater decision-making autonomy in lower rungs of the organizational ladder. In general, the model proposes that HPWS leads to greater empowerment, and more empowered employees lead to increased customer service and branch market performance.

The authors found that variables assessed at the individual level of analysis (experienced HPWPs, employee empowerment, and service orientation) and at the unit level (use of HPWPs, empowerment climate, and aggregated service performance) influenced both levels of performance outcomes (individual level: service performance; unit level: branch market performance). Specifically, at the unit level, they found that the greater the usage of HPWPs level led to stronger empowerment climate. And, at the individual level, employee service orientation impacted the relationship between employee empowerment and service performance. They also found that empowerment climate and employee reports of experienced HPWS (at least in part) impacted the effect of unit level HPWPs on individual level employee empowerment. Additionally, individual reports of empowerment partially mediated the effect of experienced HPWS and empowerment climate on service performance.

Taken together, organizations can benefit from designing HPWS based on the goals and culture of the company. The findings indicate that investing in employees pays off in increased individual level and unit level performance. Investing in people can be the key that differentiates your organization from the competition.

 Aryee, S., Walumbwa, F. O., Seidu, E. Y.M & Otaye, L. E. (2012). Impact of high performance work systems on individual and branch-level performance: Test of a multilevel model of intermediate linkages. Journal of Applied Psychology, 97, 287-300.

human resource management, organizational industrial psychology, organizational management


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