Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy of Management Review. http://www.jstor.org Understanding HRM-Firm Performance Linkages: The Role of the "Strength" of the HRM System Author(s): David E. Bowen and Cheri Ostroff Source: The Academy of Management Review, Vol. 29, No. 2 (Apr., 2004), pp. 203-221 Published by: Academy of Management Stable URL: http://www.jstor.org/stable/20159029 Accessed: 11-03-2015 12:13 UTC Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/ info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. This content downloaded from 134.208.96.85 on Wed, 11 Mar 2015 12:13:04 UTC All use subject to JSTOR Terms and Conditions
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Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy of ManagementReview.
http://www.jstor.org
Understanding HRM-Firm Performance Linkages: The Role of the "Strength" of the HRM System Author(s): David E. Bowen and Cheri Ostroff Source: The Academy of Management Review, Vol. 29, No. 2 (Apr., 2004), pp. 203-221Published by: Academy of ManagementStable URL: http://www.jstor.org/stable/20159029Accessed: 11-03-2015 12:13 UTC
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/ info/about/policies/terms.jsp
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].
This content downloaded from 134.208.96.85 on Wed, 11 Mar 2015 12:13:04 UTCAll use subject to JSTOR Terms and Conditions
constructs?what Ferris and his colleagues (1998) term social context theory views of the
relationship between HRM and performance. By
higher order, we mean social structures that
cannot be reduced to an aggregation of the per
ceptions of the individuals currently composing the organization.
Although we focus on climate, two examples of higher-order social structures are organiza tional culture and the organization role struc
ture. Culture, conceptualized as organization
ally embedded assumptions and values, can
function both as an antecedent to the HRM sys tem and as a mediator of its linkage to firm
performance (Denison, 1996). Organizational as
sumptions and values shape HRM practices, which, in turn, reinforce cultural norms and rou
tines that can shape individual and firm perfor mance. Role theorists conceptualize the organi zation as a system of formal roles, existing apart from any one current occupant, which serve to
convey standardized information to employees about expected patterns of activity (Ashforth, 2001; Katz & Kahn, 1978). In this view the HRM
system can be seen as part of the "maintenance
subsystem" (Katz & Kahn, 1978) that defines
roles, which, in turn, influence individual and
firm performance.
Our focus on climate complements the techni
cal and higher-order social structure perspec tives on the HRM-firm performance relationship.
We focus on climate because of our interest in
multilevel relationships, since both psychologi cal climates?as individual-level perceptions? and organizational climate?as a shared per
ception at the firm level?have been positioned as mediators of the relationship between HRM
practices and performance (e.g., Kopelman et
al., 1990; Ostroff & Bowen, 2000). Additionally,
given our interest in strategic perspectives on
HRM, climate is an appropriate construct for de
veloping our framework, based on the recent
emphasis on climates around strategic objec tives that are purported to enhance effective
ness (e.g., Schneider, 2000).
Psychological climate is an experiential based perception of what people "see" and re
port happening to them as they make sense of
their environment (Schneider, 1990, 2000). This
sensemaking is relative to the goals the organi zation pursues; how employees are to perform their daily activities; the management practices
under which employees work; and the percep tions of the kinds of behaviors that management
expects, supports, and rewards (Schneider,
Brief, & Guzzo, 1996). Organizational climate is a
shared perception of what the organization is
like in terms of practices, policies, procedures, routines, and rewards?what is important and
what behaviors are expected and rewarded
(e.g., lames & Jones, 1974; Jones & James, 1979;
Schneider, 2000)?and is based on shared per
ceptions among employees within formal organ izational units.
Climate researchers have acquired a strate
gic focus over the years, with the move from
viewing climate perceptions as shared percep tions about global, generic issues to linking cli
mate perceptions to a shared, specific, strategic content criterion of interest, such as a climate for
innovation (Delbecq & Mills, 1985; Klein & Sorra,
1996) or service (Schneider, 1990). Individual
level psychological climates may emerge as a
shared organizational climate, which, in turn,
ultimately relates to organizational performance.
Climate is a critical mediating construct in
exploring multilevel relationships between
HRM and organizational performance. Because
climate is widely defined as the perception of
these formal and informal organizational poli cies, practices, and procedures (Reichers &
Schneider, 1990), it follows that the HRM prac tices and HRM system will play a critical role in
determining climate perceptions. In turn, empir ical demonstrations have indicated that organ izational climate is related to higher-level be
haviors and organizational performance indicators, including customer satisfaction, cus
tomer service quality, financial performance, or
ganizational effectiveness, and total quality
management outcomes (e.g., Borucki & Burke,
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application of reinforcement principles. Employ ees are more likely to perceive the instrumen
tality when behavior and outcomes are closely linked in time (evoking the contiguity causation
attribution principle) and when they are admin
istered consistently over some time schedule
(evoking the priority causation attribution prin
ciple). To the extent that HRM staff and line
managers have the resources and power to link
outcomes to behavior or performance on a
timely and consistent schedule, they will be
able to influence cause-effect attributions.
Validity. Validity of HRM practices is impor tant because message recipients attempt to de
termine the validity of a message in making attributions (Fiske & Taylor, 1991). Thus, HRM
practices must display consistency between
what they purport to do and what they actually do in order for them to help create a strong situation. Selection tests, for example, must
validly screen on desired employee abilities,
thereby making a substantive contribution to
human capital development. Recall that one as
pect of a strong situation is that employees have
the skills necessary to execute the behaviors
expected of them. Barnard (1938) long ago ob
served that employees would view a communi
cation as authoritative only if they were able
mentally and physically to comply with it.
Validity also makes a symbolic contribution
by signaling to employees what KSAs are val
ued in a setting and by adding more employees with specified skills to the workforce. Further, when a practice is implemented and advertised
to have certain effects, and then does not do what it was intended to do, the message sent to
employees is contradictory, and employees are
left to develop their own idiosyncratic interpre tations.
Consistent HRM messages. These convey
compatibility and stability in the signals sent by the HRM practices. Considerable evidence indi cates that individuals desire consistency in or
ganizational life (e.g., Kelley, 1973; Lidz, 1973;
Siehl, 1985). The lack of consistency in "double bind" communication can lead to particularly intense cognitive dissonance (Siehl, 1985).
Double-bind communication occurs when a per son is faced with significant communication in
volving two separate messages (Bateson, Jack son, Haley, & Weakland, 1956). The messages are related to each other and deal with the same
content area, but they are incongruent or contra
dictory. Consequences of inconsistency can be severe (Lidz, 1973).
Three types of consistency are required, each of which entails the need to avoid sending double-bind communications to employees and to allow for HRM content to be perceived consis
tently. One is between what senior managers say are the organization's goals and values and
what employees actually conclude those goals and values are based on their perceptions of
HRM practices. Inconsistency here is a differ ence between what has been termed espoused values and inferred values (Martin & Siehl,
1983). For example, managers may espouse a
value of risk taking, but employees may infer that performance appraisal and reward system
practices reinforce playing it safe. A second requirement for avoiding double
bind communication is internal consistency among the HRM practices themselves. In recent
years, much has been written on the importance of designing an HRM system with practices that
complement one another and fit together as a
whole in achieving the organization's goals (e.g., Becker & Gerhart, 1996; Delery & Doty, 1996;
the firm. A comparison between those practices that agents of the HRM function assert are in
place and those that employees indicate are
used would provide some assessment of how
visible the practices are to employees.
Similarly, to assess consistency, employees could be asked to what extent they have actu
ally participated in or experienced each of these
practices (e.g., received a semiannual perfor mance review). The percent of people indicating
they experienced the practice would provide some indication of how consistently the practice is administered across employees in the organi zation. As an alternative, employees could be
asked to indicate the extent to which they be
lieve the practice applies to all employees.
Agreement might be assessed by asking top decision makers to delineate the strategic goals related to HRM and the intended message of the
HRM practices (e.g., promote innovation and risk
taking, promote loyalty and longevity, promote
safety). High agreement among decision makers
should be related to higher consensus among
employees as to what practices are salient, vis
ible, administered consistently, and so forth.
Such measures would be useful from multiple
perspectives. First, the mean score on the di
mension would provide an indication as to the
level at which these characteristics are present. That is, a higher mean score on measures tap
ping distinctiveness, consistency, and consen
sus would be one indicator of strong HRM pro cess. Second, researchers could assess the
extent to which employees perceive character
istics in the same way?that is, they could as
sess the extent of agreement or variability in
responses among employees. Higher agreement would support consensus and a strong system, whereas high variance in responses would in
dicate a weak system. As to assessments of climate, agreement
among employees about their perceptions must
be demonstrated before aggregated measures
of psychological climate perceptions can be
used to represent a unit-level or organizational level climate construct (James, 1982). Further, it
is important to examine both the level (e.g., the
level of rating on a dimension of climate) and
the variability in responses. Level is an indica
tor of "content," whereas variability is an indi
cator of situational "strength." At the individual
level of analysis, if one is interested in examin
ing the relationship between perceptions of the
climate and individual responses, the level of
the individual's responses on the variables is
most useful. However, when moving to higher levels of analysis, additional measurement is
sues emerge. Strong and well-designed HRM
systems produce greater homogeneity of per
ceptions and responses within the organization,
resulting in organizational climate. The strength of the climate is indicated by the degree of vari
ability in responses, regardless of the level of
the aggregate rating on the content of climate.
An indication of whether the HRM system cre
ates a strong situation is the extent of agree ment on climate ratings (Payne, 2000).
FINAL THOUGHTS
In listing challenges that the HRM community faces in the future, Ulrich cites the need for HR
practice to be guided by HR theory. He reminds
HRM professionals that theory helps explain the manner in which outcomes emerge:
To make HR practices more than isolated acts, managers and HR professionals must master the
theory behind HR work; they need to be able to
explain conceptually how and why HR practices lead to their outcomes ...
Regardless of the pre ferred theory, managers and HR professionals should abstract from it a higher level of reason
ing for their day-to-day work and thus better ex
plain why their work accomplishes its goals (1997: 238; emphasis added).
Recently, in the literature scholars have de
veloped "why" HR practices lead to sustainable
competitive advantage. Hopefully, this present effort at theory building on the strength of the HRM system can begin to help explain "how"
HRM practices lead to outcomes the organiza tion desires.
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David E. Bowen is dean of faculty and programs and professor of management at
Thunderbird, The American Graduate School of International Management. His re
search interests are organizational behavior issues in service quality and the linkage between human resource management effectiveness and competitive advantage.
Cheri Ostroff is a professor of psychology and education at Teachers College, Colum
bia University. She received her Ph.D. in industrial-organizational psychology from
Michigan State University. Her current research interests include levels of analysis
issues, human resource management systems, and person-environment congruence.
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