HRM policies & worker/company performance 1. HRM policies 1. HRM policies 2. The effect on worker performance 2. The effect on worker performance Job satisfaction Job satisfaction 3. The effect on company performance 3. The effect on company performance Ichniowski et al (1997) Ichniowski et al (1997)

1. HRM policies HRM practices are a substitute for unionisation, offering management HRM practices are a substitute for unionisation, offering management –…the prospect of improved performance whilst simultaneously improving workers job satisfaction, security and perhaps pay (Machin & Wood, 2004). High performance workplace practices High performance workplace practices –(a) Recruitment & selection –(b) Training –(c) Pay policies & incentives

1. HRM practices –(d) Non-pecuniary elements –(e) Unions & union agreements –(f) Employee involvement schemes –(g) Team working transform organisations into being cost- efficient and productive, whilst also increasing employee well-being (Black and Lynch, 1997) transform organisations into being cost- efficient and productive, whilst also increasing employee well-being (Black and Lynch, 1997)

2. The effect of HRM practices on worker performance Data Data –The Changing Employment Relationships, Employment Contracts and the Future of Work Survey (CERS) Collected between July 2000 and January 2001, Collected between July 2000 and January 2001, Main aim of the Survey was to identify and describe the key changes in British employee relations. Main aim of the Survey was to identify and describe the key changes in British employee relations. Two data collection methods were used: interviews and self- completion questionnaires. Two data collection methods were used: interviews and self- completion questionnaires. Sample size = 2,466, respondents = 2,349 (95% response rate) Sample size = 2,466, respondents = 2,349 (95% response rate) Omit respondents with missing values on key variables and the self- employed (334), the sample drops to 1,518. Omit respondents with missing values on key variables and the self- employed (334), the sample drops to 1,518. –The Workplace Employment Relations Survey (WERS) contains a much larger sample of workers 19,890 once we allow for missing data, - both employees and their managers. 19,890 once we allow for missing data, - both employees and their managers.

2. The effect of HRM practices on worker performance Methods of analysis Methods of analysis –Dependent variables = 7 point likert scale Completely satisified (7),……, Completely dissatisifed (1) Completely satisified (7),……, Completely dissatisifed (1) Not normal – not OLS Not normal – not OLS –Ordered logit model –Descriptive statistics

Table 1 The distribution of overall job satisfaction (CERS) FrequencyPercent Completely satisfied Very satisfied Satisfied Neither satisfied not dissatisfied Dissatisfied Very dissatisfied Completely dissatisfied Total2, 132 Note: 10 respondents did not state their level of job satisfaction.

Table 2B The distribution of satisfaction over pay (WERS) FrequencyPercent Very satisfied Satisfied9, Neither satisfied nor dissatisfied6, Dissatisfied7, Very dissatisfied3, Total27, Note: 1.16 percent of respondents (326) did not answer the question, or answered I dont know.

Table 3 The effect of HRM practices and perceived pay inequality on overall job satisfaction (CERS) Variables P- values Completely satisfied Very satisfied SatisfiedNeutralDissatisfied Work organisation Teamwork Supervision Performance differentiated from others Employee can be seen all the time by supervisor or manager Work progress can be visually assessed

Employee involvement / voice Information dissemination Employee part of an improvement group Formal suggestion scheme Management holds meetings were employees Recruitment & selection Initial pay is negotiable Training & learning Employer provided education or training Job requires on- going learning

Seniority-based pay Pay based on tenure Performance-related pay Own performance Team performance Company performance Profit-share/share option

3. The effect of HRM practices on company performance Data Data –36 homogeneous steel production lines 17 companies – visits 17 companies – visits Longitudinal data – 2,190 months Longitudinal data – 2,190 months Changes in productivity & changes in HRM practices Changes in productivity & changes in HRM practices Theory Theory –Engineering production function Actual Q it = [f(w it. g it. s it. h s it )] X (1-d it ) Actual Q it = [f(w it. g it. s it. h s it )] X (1-d it )

3. The effect of HRM practices on company performance Control variables & complementary HRM practices Control variables & complementary HRM practices –HRM System 4 (Traditional) E.g. supervision, rules, incentive pay for Q, etc. E.g. supervision, rules, incentive pay for Q, etc. –HRM System 3 As above but also worker involvement in teams & improved communications As above but also worker involvement in teams & improved communications –HRM System 2 As above but skills training & worker involvement in teams As above but skills training & worker involvement in teams –HRM System 1 See Table 2 Ichniowski See Table 2 Ichniowski

3. Fixed effects models Why fixed effects models? Why fixed effects models? –U it = µH it + bX it + a i + e it Results Results –Production lines using innovative HRM practices substantially higher levels of productivity substantially higher levels of productivity –Complemetarities in HRM practices

Conclusion HRM practices are important for worker & company performance HRM practices are important for worker & company performance Data problems – under-researched area by economists Data problems – under-researched area by economists