Strength of the HRM system: The development of a measure

Coelho, Joaquim Pinto; e Cunha, Rita Campos; Gomes, Jorge F.S.; Correia, Anabela Gomes Article Strength of the HRM system: The development of a measure Journal of Industrial Engineering and Management (JIEM) Provided in Cooperation with: The School of Industrial, Aerospace and Audiovisual Engineering of Terrassa (ESEIAAT), Universitat Politècnica de Catalunya (UPC) Suggested Citation: Coelho, Joaquim Pinto; e Cunha, Rita Campos; Gomes, Jorge F.S.; Correia, Anabela Gomes (2015) : Strength of the HRM system: The development of a measure, Journal of Industrial Engineering and Management (JIEM), ISSN 2013-0953, OmniaScience, Barcelona, Vol. 8, Iss. 4, pp. 1069-1086, https://doi.org/10.3926/jiem.1432 This Version is available at: https://hdl.handle.net/10419/188724 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc/3.0/ Journal of Industrial Engineering and Management JIEM, 2015 – 8(4): 1069-1086 – Online ISSN: 2013-0953 – Print ISSN: 2013-8423 http://dx.doi.org/10.3926/jiem.1432 Strength of the HRM system: The development of a measure Joaquim Pinto Coelho1, Rita Campos Cunha2, Jorge F.S. Gomes3, Anabela Gomes Correia4 1CLISSIS/ISSSL – Universidade Lusíada de Lisboa (Portugal) 2Nova School of Business and Economics&INOVA – Universidade Nova de Lisboa (Portugal) 3ADVANCE/CSG, Lisbon School of Economics and Management (Portugal) 4Polytechnic Institute of Setúbal &GOVCOPP (Portugal) [email protected], rcunha@ novasbe .pt, jor[email protected], anabela.corr[email protected]t Received: March 2015 Accepted: July 2015 Abstract: Purpose: The aim of this study is to operationalize the construct Strength of the HRM System theoretically defined by Bowen and Ostroff (2004) as a set of process metafeatures to convey signals to employees about desired and appropriate work behaviors, as well as to develop and validate a questionnaire to measure it, the HRMSQ. Design/methodology/approach: Three studies contribute to this purpose. In the first study we develop a questionnaire and test it with employees from several organizations. In the second study we applied the refined questionnaire in a sample of employees from a large company, and assessed different types of validity. The final study replicated results from the second study. Findings: Psychometric properties reveal good internal consistency reliability, item reliability and construct reliability, as well as convergent and discriminant validity. Practical implications: Results indicate that the HRMSQ can be used in the study of strategic HRM. -1069- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 Originality/value: The HRMSQ is a friendly instrument that can help HR practitioners to assess whether the HRM system is unambiguously perceived by employees, and identify possible problem areas in terms of the implementation process. It also contributes to research in the strategic HRM field by operationalizing a construct that is likely to improve the understanding of the link between the HRM System and organizational performance. Keywords: strength of the HRM system, questionnaire validity, questionnaire development 1. Introduction The relationship between human resource management (HRM) and organizational performance has been empirically established in the last 25 years by many studies that focused either on the impact of HRM practices on employee skills, attitudes, and behaviors, or on strategically coherent work organization that can lead to operational effectiveness (e.g., Arthur, 1994; Delery, 1998; Huselid, 1995; Ichniowski, Shaw & Prennushi, 1997; Laursen & Foss, 2003). However, as Guest (1997; 2011) pointed out, these studies demonstrate an association rather than causation, which means that further methodological improvements are needed to understand how HRM and performance are connected, and what goes on in the black box (Boselie, Dietz & Boon, 2005). As argued by these and other authors, such complex linkage between HRM and performance is insufficiently studied with existing theories and with panel and cross-sectional data; rather, better theories and longitudinal researches with more powerful instruments should be developed. Following this plea, Bowen and Ostroff (2004) proposed that the relationship between the HRM system and organizational performance is mediated by organizational climate, defined as a shared perception of what the organization is like, in terms of practices, policies, procedures, routines, and rewards. The sole consideration of HRM content, i.e., the set of HRM practices designed with a certain strategic focus, is insufficient because these practices may be idiosyncratically interpreted by employees, not allowing the desired type of organizational climate to materialize in the organization. Hence, they argue, it is important to understand how HRM practices are perceived by individual employees, if one wants to comprehend how HRM is linked to organizational performance. Following this reasoning, they coin the term ‘strength of the HRM system’ (SHRMS), which indicates the ability of the HRM function to send unambiguous signals about collective and desired responses and actions regarding organizational goals and purposes. The new concept, according to Bowen and Ostroff (2004) (see also Ostroff & Bowen, 2000), is composed of three features: distinctiveness, consistency and consensus. -1070- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 The contribution of this article to the strategic HRM literature is threefold: first, we refine and simplify the theoretical elaboration of strength of the HRM system, and highlight that it must be conceived as a situational characteristic that sends powerful signals to employees, and allows them to develop shared interpretations of organizationally desired behaviors; second, we develop and validate a questionnaire to measure SHRMS, which we include in the Appendix A; third, using several different samples, we obtained support for the impact of SHRMS on organizational climate and perceived organizational performance. We start by outlining Bowen and Ostroff’s model of strength of the HRM system and discuss its theoretical elaboration. We then describe and present the results of the three studies in which the new measure was developed and validated. In the first study we developed a preliminary version of the questionnaire and tested it with employees from several organizations. In the second we applied the refined questionnaire, in a sample of employees from a hotel chain and assessed its criterion-related validity; and the third is a replication study to assess the stability of the proposed new model. In closing we discuss our findings relative to Bowen and Ostroff’s model. 2. Strength of the HRM System In order to explain how the HRM practices influence employees’ behaviors, Bowen and Ostroff (2004) introduce the concept of ‘strength of the HRM system’ (SHRMS), and argue that strong HRM systems lead to strong organizational climates, by sending consistent messages to employees about which behaviors are valued by the organization. Bowen and Ostroff (2004) argue that with strong HRM systems the process of collective sense making is likely to produce the intended organizational climate, whereas weak HRM systems are likely to produce variability and unintended climates. Following Kelley’s attribution theory (1967; 1973; also Kelley & Michela, 1980), they propose that strong HRM systems are the result of three features: distinctiveness, consistency and consensus. Distinctiveness translates the ability to capture the attention of employees and increase their identification and acceptance of HRM practices. It includes four metafeatures: visibility, understandability, legitimacy of authority, and relevance. Visibility denotes the degree to which practices are salient and easily observable. Understandability refers to the absence of ambiguity and to the easy comprehension of the content of HRM practices. Legitimacy of authority refers to the perception of a high status and credibility of the HRM function. Finally, a situation is considered to be relevant if employees regard it as promoting the achievement of individual and organizational goals. The second feature, consistency, focuses on the three components that promote constant perceptions over time, people, and contexts: instrumentality, validity, and consistent HRM -1071- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 messages. Instrumentality refers to the establishment of an unambiguous perception of the cause-effect relationship between the desired employee behaviors and their consequences. Validity encompasses the consistency between what is said will be done and what really is done. Consistent HRM messages are present when there is compatibility and stability between the signals sent by the HRM practices. The final feature is consensus, which represents the clear agreement among employees regarding the relationship between an event and its outcome, and it includes two metafeatures: agreement among principal HRM decision makers and fairness. The first promotes shared perceptions on people management, whereas the latter includes the three types of fairness, commonly referred to in the literature: distributive (ends achieved), procedural (means used), and interactional (information provided). As a result, the strength of the HRM system is likely to enhance employee attitudes and behavioral patterns, such as work motivation, organizational commitment and skill development, and will thus have a positive effect on organizational performance. Empirical research to test Bowen and Ostroff’s theory is still scarce. Several empirical studies were made (e.g., Li, Frenkel & Sanders, 2011; Sanders, Dorenbosch & Reuver, 2008; Stanton, Young, Bartram & Leggat, 2010; Sheehan, Cooper, Holland & De Cieri, 2007; Ferris, Hochwarter, Buckley, Harrell-Cook & Frink, 1999; Pereira & Gomes, 2012; Ribeiro, Coelho & Gomes, 2011). However these have used measures which were not validated, as up to very recently there were no available instruments to capture the full content of Bowen and Ostroff’s concepts. One important exception is the work of Delmotte, De Winne and Sels (2012), who have developed and validated a self-reported questionnaire based on line managers and union representatives in Belgium. The current work differs from Delmotte et al.’s (2012) study in two ways. Firstly, it is based on employee data, and not on managerial or union-representative data. As in fact recognized by Delmotte et al. (2012), their results are limited to perceptions of two important functional groups, but did not take into account employees’ perceptions of HR practices. As put forward by Nishii, Lepak and Schneider (2008), employees’ perceptions are paramount in explaining the linkages between HRM and performance. And secondly, their results showed a surprisingly distinct construct arrangement from that proposed by Bowen and Ostroff (2004). Distinctiveness, for example, showed two metafeatures, instead of four, as theoretical advanced by Bowen and Ostroff (2004). Likewise, Delmotte et al.’s results showed that consistency was composed of two metafeatures, instead of three. The current work also follows Delmotte et al.’s call to test Bowen and Ostroff’s theory through more empirical investigations looking at construct measurement and instrument validation. All in all, the above-mentioned arguments justify that a measure of SHRMS, as an organizational signaling process, needs to be developed and validated to improve the -1072- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 understanding of the HRM-organizational performance link, not only for the advancement of theory on HRM but also for practitioners who want HRM to have a significant impact on their organizations. 3. Method 3.1. Study 1 3.1.1. Item generation The development of the questionnaire began with a brainstorming among the authors. Some items were later modified and others were added as a result of interviews with HR managers. To assess content validity, these items were presented to a group of graduate students in one executive post-experience OB/HRM master’s program, together with the definitions of the nine metafeatures. We asked these experts to classify the items in the nine metafeatures and retained only those that reached a minimum of 75% agreement (Hinkin, 1998). We then evaluated the terminology to ensure that it was distilled from the theoretical model and to enhance readability, clarity, and relevance and ended up with 72 items, 8 in each characteristics, which is considered an adequate number (Harvey, Billings & Nilan, 1985). We used a 7-point scale, where 1 = strongly disagree and 7 = strongly agree. 3.1.2. Participants The initial version of the questionnaire was administered simultaneously in six different organizations from different sectors. The sample is made up of from 198 employees (23%return rate) of which 42% were male. 3.1.3. Results and discussion Reliability, ranging from .80 to .92, for the nine metafeatures, well above the .70 threshold (Hair, Black, Babin, Anderson & Tatham, 2006). In order to identify and confirm the underlying structure of each feature and to trim the questionnaire, an exploratory factor analysis (EFA) was run for each feature separately, to reduce multicollinearity, due to the strong correlations among the three features and their nine metafeatures. The principal axis factoring extraction method was used, with direct oblimin and Kaiser normalization rotation method. The final solution emerged, retaining 22 items for distinctiveness accounting for 66.12%, 12 items for consistency accounting for 64.46%, and 8 items for consensus accounting for 58.48% of the total variance. Based on the theoretical -1073- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 model and the item reduction process, a new version of the questionnaire was tested in a new sample. 3.2. Study 2 3.2.1. Participants The study was conducted in 38 hotels of a hotel chain with several brands. The questionnaire was sent to a total of 666 employees, of which 455 provided valid replies (response rate of 68%). 57.7% were women. 3.2.2. Results and discussion In Table 1, we report the descriptive statistics of this sample. Cronbach alphas are all above the .70 cutoff (Hair et al., 2006). Mean SD Pearson’s Correlations Metafeature (1) (2) (3) (4) (5) (6) (7) (8) (9) (1) Visibility 3.94 .81 (.92) (2) Understandability 4.05 .88 .76 (.94) (3) Legitimacy of Authority 4.61 .72 .55 .52 (.81) (4) Relevance 4.45 .87 .66 .61 .80 (.83) (5) Instrumentality 4.17 .90 .56 .52 .69 .80 (.70) (6) Validity 4.46 .77 .58 .54 .72 .73 .74 (.75) (7) Consistent HRM Messages 4.62 .68 .59 .54 .75 .71 .69 .78 (.79) (8) Agreement among principal HRM decision makers 4.58 .69 .55 .51 .81 .76 .71 .75 .83 (.83) (9) Fairness 4.29 .89 .61 .52 .58 .70 .69 .64 .60 .64 (.76) Cronbach’s alpha in parentheses Table 1. Descriptive and reliability statistics -1074- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 3.2.3. Confirmatory factor analysis (CFA) A CFA was conducted to assess goodness of fit of the integrated SHRMS model. The solution was not admissible because the covariance matrix was not positive definite. So, the model was re-specified, considering both theory and modification indices (Figure 1). Figure 1. Hypothetical SHRMS’ model Agreement among principal HRM decision makers (a metafeature of consensus), was excluded from the model, because respondents did not consider it as independent from the other ones, particularly consistent HRM messages (a metafeature of consistency). The Pearson correlation (r=.83) between these two features was the highest one and it explains why the covariance matrix before re-specification was not positive definite. This model showed a good fit (χ2(359)= 834.43, χ2/df= 2.32, CFI = .94, PCFI = .84, RMSEA = .05, CI 90% for RMSEA] .05; .06[). The composite reliabilities (Fornel & Larcker, 1981) were: .94 for visibility, .96 for understandability, .84 for legitimacy, .89 for relevance, .73 for instrumentality, .80 for validity .85 for consistent HRM messages, and .82 for fairness. -1075- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 3.2.4. Reliability, convergent and discriminant validity Two methods were used to assess reliability: •internal consistency reliability, measured by Cronbach’s alpha, reflects the extent to which the multiple items for a latent variable belong together; and •individual reliability of the items, measuring the amount of variance in a descriptor due to the underlying construct rather than to error (Chau, 1997). Cronbach’s alphas are: .94 for distinctiveness (16 items), .85 for consistency (9 items) and .76 for fairness (4 items). The variance explained by the respective latent variable measured by the squared multiple correlation value is higher than .25 (Johnson & Stevens, 2001), with the exception of items CI1 (.24), underlying consistency, and CF4 (.24), underlying fairness, as shown in Figure 1. Convergent validity measures the extent to which the items, reflecting a factor, truly represent that factor. Regression weights for in their latent metafeatures were significant and higher than .50, with the exception of one in consistency (.49) and one in fairness (.49). Convergent validity was measured by the average variance extracted (AVE), which represents the overall amount of variance in the items, accounted for by the latent construct (Fornel & Larcker, 1981). The AVE results are adequate for each metafeature: .76 for visibility, .81 for understandability, .64 for legitimacy, .74 for relevance,.53 for instrumentality, .58 for validity . 66 for consistent HRM messages and .53 for fairness, since all are above .50 (Hair et al., 2006). Discriminant validity measures the extent to which the constructs are conceptually distinct. Discriminant validity was analyzed with two different methods. Firstly, we used the chi-square difference test of the final baseline model and alternative nested models specifying equality between each pair of features (Anderson & Gerbing, 1988). These differences were all significant (χ2diff(1)=65.5, p<.005, for distinctiveness with consistency; χ2diff(1) =92.37, p<.005, for distinctiveness and fairness; χ2diff(1)=40.04, p<.005, for consistency and fairness), which suggests discriminant validity. 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Organization Science, 16, 409-421. http://dx.doi.org/10.1287/orsc.1050.0133 Appendix A - HRMDQ Below are some questions about Human Resource Management (HRM) in your organization. In each row, please indicate with a cross - T - the box/option that best matches your opinion. 1. Please indicate the extent to which each of the HRM practices has visibility in your organization (easily observable) Not at all visible Hardly visible Not very visible Visible Very visible Extremely visible 1.1 Performance appraisal □ □ □ □ □ □ 1.2 Career development □ □ □ □ □ □ 1.3 Communication □ □ □ □ □ □ 1.4 Performance-pay □ □ □ □ □ □ 1.5 Recruitment and selection □ □ □ □ □ □ 2. Please indicate to what extent you understand how each of the HRM practices works in your organization I understand nothing about how this practice works I understand very little about how this practice works I have a limited understanding of how this practice works I understand how this practice works I have a good understanding of how this practice works I have a very good understanding of how this practice works 2.1 Performance appraisal □ □ □ □ □ □ 2.2 Career development □ □ □ □ □ □ 2.3 Communication □ □ □ □ □ □ 2.4 Performance-pay □ □ □ □ □ □ 2.5 Recruitment and selection □ □ □ □ □ □ -1085- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.1432 3 Now please indicate your level of agreement with each statement. Remember that there are no right or wrong answers, only your opinion matters. I very much disagree I disagree I partially disagree I partially agree I agree I very much agree I Don’t Know 3.1 (L) In my organization, the HR Department is considered to be influential □ □ □ □ □ □ □ 3.2 (R)HRM practices in my organization help employees to achieve their personal goals □ □ □ □ □ □ □ 3.3 (I) The HRM practices in my organisation contribute to have highly skilled employees □ □ □ □ □ □ □ 3.4 (V) HRM practices are consistent over time □ □ □ □ □ □ □ 3.5 (M) The goals of the HRM practices are all consistent among themselves □ □ □ □ □ □ □ 3.6 (F) When deciding upon matters that concern me, my superiors seek my opinion □ □ □ □ □ □ □ 3.7 (F) My superiors deal with me in an honest and ethical way □ □ □ □ □ □ □ 3.8 (L) In my organization, the HR Department is considered to be influential □ □ □ □ □ □ □ 3.9 (R) HRM practices in my organization help employees to achieve their personal goals □ □ □ □ □ □ □ 3.10 (R) The HRM practices in my organisation contribute towards its competitiveness □ □ □ □ □ □ □ 3.11 (I)If I change my behaviour in accordance with HR Department guidelines, I know this will be acknowledged □ □ □ □ □ □ □ 3.12 (V) I feel that there is a connection between what is assessed in the performance appraisal and what is done on a day-to-day basis □ □ □ □ □ □ □ 3.13 (M) I believe that the goals and values of my organisation’s HRM will be the same six months from now □ □ □ □ □ □ □ 3.14 (F)In my organisation, the employees rewarded are those who deserve to be □ □ □ □ □ □ □ 3.15 (L) The guidelines provided by the HR Department are credible □ □ □ □ □ □ □ 3.16 (I)In my organisation, all employees know exactly when and what to do to be rewarded □ □ □ □ □ □ □ 3.17 (V) There is consistency between what the HR Department advocates and what it actually implements □ □ □ □ □ □ □ 3.18 (M)All the HRM activities complement one another to reach my organisation’s goals □ □ □ □ □ □ □ 3.19 (F)My organisation has allowed me to choose my career direction □ □ □ □ □ □ □ L – Legitimacy of Authority; R – Relevance; I – Instrumentality; V – Validity; M - Consistent HR Messages; F – Fairness Journal of Industrial Engineering and Management, 2015 (www.jiem.org) Article's contents are provided on a Attribution-Non Commercial 3.0 Creative commons license. Readers are allowed to copy, distribute and communicate article's contents, provided the author's and Journal of Industrial Engineering and Management's names are included. It must not be used for commercial purposes. To see the complete license contents, please visit http://creativecommons.org/licenses/by-nc/3.0/. -1086-