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Journal of Operations Management 18 1999.

120
www.elsevier.comrlocaterdsw

The impact of human resource management practices on


manufacturing performance
Jayanth Jayaram
b

a,)

, Cornelia Droge

b,1

, Shawnee K. Vickery

b,2

a
Department of Decision Sciences, Charles H. Lundquist College of Business, Uniersity of Oregon, Eugene, OR 97403, USA
Department of Marketing and Supply Chain Management, N370 North Business Complex, Eli Broad Graduate School of Management,
Michigan State Uniersity, East Lansing, MI 48824-1046, USA

Received 2 January 1997; accepted 13 April 1999

Abstract
A human resource management HRM. analysis framework is proposed and tested using data from first tier suppliers to
the Big 3 in North America. Relationships among underlying dimensions of human resource management practices and
manufacturing performance are examined. The study found support for the proposed framework, suggesting that human
resource management practices can be grouped into five distinct factors, four of which are associated with specific
manufacturing competitive dimensions quality, flexibility, cost and time.. The remaining HRM factor is generic. The four
priority-specific HRM factors are strongly related to their respectie manufacturing performance dimensions. q 1999
Elsevier Science B.V. All rights reserved.
Keywords: Automotive supplier industry; Human resource management; Manufacturing performance; Factor score regression

1. Introduction
Global competition, shorter product life cycles,
and volatile product and market environments have
contributed to the complexity faced by businesses
and industries as the new millennium approaches.
Traditional competitive mechanisms have become
less effective as competitors meet or copy each
others corporate initiatives Ulrich, 1987.. In response, firms constantly search for newer sources of

Corresponding author. Tel. q1-541-346-3407; fax: q1-541346-3341; e-mail: jayaram@oregon.uoregon.edu


1
Tel.: q1-517-353-6381; fax: q1-517-432-1112.
2
Tel.: q1-517-353-6381; fax: q1-517-432-1112.

competitive advantage, one of the most important


being human resource management HRM. Schuler
and MacMillan, 1984.. Recent conceptual and empirical articles have examined the impact of human
resource management on the oerall competitive
performance of a firm Arthur, 1994; Huselid, 1995..
However, given the importance and complexities of
human resource decisions, the existing body of work
still falls short of comprehensively examining key
research questions in human resource management
Becker and Gerhart, 1996..
Despite claims that innovative human resource
practices can boost firm-level performance and national competitiveness, few studies have been able to
confirm this relationship empirically, and still fewer
have been able to systematically describe the manner

0272-6963r99r$ - see front matter q 1999 Elsevier Science B.V. All rights reserved.
PII: S 0 2 7 2 - 6 9 6 3 9 9 . 0 0 0 1 3 - 3

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

in which human resource practices influence performance. Innovative HR practices are often studied in
a vacuum with more attention paid to isolating the
effects of individual practices than to understanding
how different HR practices interact to reinforce one
another or how they are linked to business and
functional strategies MacDuffie, 1995.. Moreover,
prior work has shown that examining the impact of
individual practices on performance is misleading
because individual practices obviate the effect of a
group of HR variables that comprise the system
Ichniowski et al., 1997.. Other researchers have
suggested that a bundle of inter-related, overlapping HR practices provides several non-exclusive
modes of influencing performance Hackman, 1985;
MacDuffie, 1995..
We examine the impact of sets or bundles of
human resource practices on strategic dimensions of
manufacturing performance. The purpose of the research is three-fold. First, we identify key dimensions of human resource management HRM. practices from the literature and propose a conceptual
model for analyzing the deployment of HRM practices within firms. Second, we examine the effects of
indiidual HRM items on individual manufacturing
performance dimensions i.e., cost, quality, flexibility, and time.. The unit of analysis is at the firm or
business unit. level, and thus it is appropriate to
select these four competitive priorities because they
have been described in the literature as key measures. While there is merit in investigating the impact of HRM items on finer details of manufacturing
performance such as, conformance quality, design
quality, and durability instead of overall quality., we
have chosen not to do so because our research intent
is to determine what affects strategic dimensions of
manufacturing performance. Finally, we test our conceptual model and examine linkages between HRM
dimensions or bundles i.e., groups of inter-related
HRM items. and manufacturing performance.
This paper is organized as follows. First, the
operations management and HRM literatures are reviewed to identify key manufacturing performance
dimensions and to specify a set of human resource
management practices that should impact manufacturing performance. Five major categories of HRM
practices are identified. Propositions are introduced
that focus on the relationship between individual

HRM practices and manufacturing performance, the


deployment pattern of HRM practices within firms,
and the relationship between groups or bundles of
HRM practices and manufacturing performance. The
research methodology is described next, including
the sampling procedure and measurement issues. Relationships between individual HRM items and manufacturing performance dimensions are explored using correlation analysis. Factor analysis is then used
to reduce to underlying dimensions or bundles the
various HRM practices identified from the literature.
Next, factor score regression analyses are used to
examine the relationships between HRM factors and
manufacturing performance. Last, the results of the
study are discussed and their managerial implications
are explored.

2. Literature review: identification of key constructs


2.1. Manufacturing performance dimensions
The number of dimensions comprising manufacturing performance has been the subject of much
debate over the years. Skinner 1974. described several, including short delivery cycles, superior quality
and reliability, dependable deliveries, fast new product development, flexibility in volume changes, and
low cost. Wheelwright 1978. focused on efficiency,
dependability, quality, and flexibility, and later,
Hayes and Wheelwright 1984. changed efficiency
to cost. Three years later, Krajewski and Ritzman
1987. identified five manufacturing competitive dimensions: cost, high performance design, consistent
quality, on-time delivery, product flexibility, and
volume flexibility. In a related vein, Hill 1989.
outlined a set of order-winning criteria that fall
under the broad auspices of manufacturing. These
criteria included: cost, product quality conformance
to specifications. and reliability, delivery speed, delivery reliability, and volume flexibility ability to
respond to increases in demand..
In a comprehensive review of the literature, Leong
et al. 1990. contended that five dimensions are the
most critical: quality, delivery, cost, flexibility and
innovativeness. Around the same time, Ferdows and
DeMeyer 1990. focused on four generic manufac-

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

turing capabilities, namely, cost efficiency, quality,


dependability and flexibility in one of the earliest
empirical studies of manufacturing competitive dimensions. In two recent studies by the same authors., Ward et al. 1995. and Ward et al. 1998.
factor analyzed items relating to manufacturing competitive priorities into the four dimensions of cost,
quality, time and flexibility. Even more recently,
Vickery et al. 1996. found that manufacturing performance in the furniture industry consisted of four
distinct dimensions: delivery, value qualityrcost.,
flexibility, and innovation. However, a related study
also indicated that while manufacturing had the lions
share of responsibility for delivery, quality, cost, and
flexibility, it had a much smaller degree of responsibility for innovation Droge et al., 1994.. Vokurka et
al. 1998. also empirically investigated the impact of
different manufacturing improvement techniques on
the competitive performance capabilities of cost,
quality, delivery flexibility and time. Delivery flexibility was meant to tap the firms capability of
meeting promised delivery dates, which is a function
of timing and variety. In this study, time captured
manufacturing throughput time or speed. In the human resources literature, Youndt et al. 1996. operationalized dimensions of manufacturing strategy performance as cost, quality, delivery flexibility, and
scope flexibility. Delivery flexibility was defined in
terms of the timing performance of releasing new
products and making on-time deliveries. Scope flexibility was defined in terms of variety, such as adjusting product mix, handling non-standard items and
making products in small lots to allow for higher
variety.
The purpose of this research is not to delineate or
examine every conceivable dimension of manufacturing performance. Rather, we have focused on the
ones most strongly supported by the literature,
namely, the two traditional measures of cost and
quality, as well as flexibility and time. It may be
noted that this is a single-industry study and in order
to provide comparable data on manufacturing performance, respondents were asked to provide a rating of
their firms performance relative to its major competitors for each of the four measures of manufacturing performance. In the literature review on human
resource management practices that follows, we focus particular attention on those HRM practices that

impact cost, quality, flexibility, and time performance.


2.2. Human resource management practices
Several human resource management practices
have been touted as key factors affecting both manufacturing performance and competitive advantage.
Our research focuses on: 1. top management commitment; 2. communication of goals; 3. employee
training; 4. cross functional teams; 5. cross training; 6. employee autonomy; 7. employee impact;
8. broad jobs; 9. open organizations; and 10.
effective labor management relations. There is considerable consensus in the HRM literature for identifying most of these items as best practices Freund
and Epstein, 1984; Delaney et al., 1989; Arthur,
1994; Pfeffer, 1994; Huselid, 1995; and MacDuffie,
1995.. Note that the first four are closely linked with
specific manufacturing performance goals e.g., top
management commitment to flexibility; employee
training for quality ., while the other HRM practices
listed above are less tightly linked with specific
performance objectives e.g., broad jobs, labor management relations.. This critical distinction frames
the literature review that follows.
2.2.1. HRM practices linked to specific manufacturing performance goals
2.2.1.1. Top management commitment. MacDuffie
1995. observed that firms with flexible production
plants consistently outperformed firms with standard
mass production plants on the measures of productivity and quality performance. This suggests that a top
management commitment to flexibility affects multiple dimensions of manufacturing performance. Similarly, top management commitment to quality was
significantly related to quality performance Powell,
1995.. In a meta analysis of 70 management by
objectives MBO. studies, Rodgers and Hunter
1991. reported that the most essential success factor
for implementing MBO programs was top management commitment. The results showed that when top
management commitment to specific performance
objectives was high, firms experienced an average
gain in productivity of 56%. When top management

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

commitment to organizational objectives was low,


the average gain in productivity was only 6%. Ansari
1986. found that top management commitment to
JIT purchasing implementation was critical for JIT
purchasing success. Finally, Cooper and Kleinschmidt 1995. found that top management commitment to new products was significantly related to
new product lead time performance.
2.2.1.2. Communication of goals. In a case study of
Dow Corning, Seward 1992. identified communication of quality goals as critical for the successful
implementation of total quality management TQM..
Zhu et al. 1994. conducted a critical review of
published studies of key success factors in JIT implementation and found that communication of JITrelated goals was included in several articles. In the
new product environment, Rosenthal and Tatikonda
1993. reported that clear communication of
project-related goals significantly reduced product
development lead times.
2.2.1.3. Employee training. Bartel 1994. established
a link between the use of training programs and
productivity growth. In a randomized cross sectional
survey of 747 managers of manufacturing firms,
Dreyfus and Vineyard 1996. found that employee
training and education was significantly related to
product quality performance. Magnan et al. 1995.
reported that employee training was significantly
related to flexibility performance in the furniture
industry. Employee training in the form of JIT training was one of the critical factors of JIT program
success Im et al., 1994.. Kinnie and Staughton
1991. examined the role of HRM in implementing
manufacturing strategies in 7 batch manufacturing
firms. They found that employee training e.g., educational programs, technical training and role change
training. was one of the three critical HRM practices
that significantly contributed to success in implementing manufacturing strategy. Quality related
training has been emphasized in the literature as a
key human resource element of total quality management TQM. and also facilitates the effective use of
advanced manufacturing technologies Snell and
Dean, 1992.. Similarly, The Malcolm Baldrige Award
category of human resource deployment and management, emphasizes employee education and

training in quality as a critical enabler of quality


success Award Criteria, 1994..
2.2.1.4. Cross functional teams. High performance
work teams were significantly related to quality performance as measured by defect rates even after
controlling for the learning effect Banker et al.,
1995.. While the use of quality circles is most often
associated with quality improvement, Katz et al.
1983. found that the use of cross functional teams
in the form of quality circles increased productivity.
Cross functional teams were also found to be significantly related to flexibility performance and new
product performance Cooper and Kleinschmidt,
1995; Magnan et al., 1995.. In a recent exploratory
study of 15 software package companies, all the
survey respondents reported that cross-functional
teams were important for cycle time reduction
Carmel, 1995.. Northern Telecoms use of crossfunctional product teams to improve new product
introduction and development times helped achieve
2050% reduction in new product introduction time,
depending upon the division and product Merrills,
1989..
2.2.2. Other HRM practices
Several authors have suggested that cross training
contributes to a variety of strategic goals. In a study
of flexible manufacturing system FMS. implementation in eight companies, Graham and Rosenthal
1986. found that cross training of workers is an
important factor in successful FMS implementation.
Polakoff 1991. suggested that cross training of employees improves manufacturing performance via reduction in cycle times, elimination of non-productive
labor, and reduction in inventory costs. Cross training of workers was also important for improving
quality performance Moras et al., 1994.. In a review
of published JIT studies, Zhu et al. 1994. found that
over half of the cases reported cross training as a key
element of JIT implementation.
Employee autonomy and employee impact have
also been examined in the literature. Dreyfus and
Vineyard 1996. found that employee autonomy and
employee impact were significantly related to product quality performance. Similarly, in the furniture
industry, Magnan et al. 1995. found that employee
autonomy and employee impact were significantly

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

related to flexibility performance. In a recent empirical study, employee autonomy and employee impact
were shown to be underlying dimensions of employee empowerment Spreitzer, 1995.. Furthermore,
Powell 1995. found that employee empowerment
was significantly related to both TQM performance
and overall firm performance. MacDuffie 1995. also
found that participative work systems which included items such as employee involvement, employee suggestions, and employee empowerment.
were significantly related to both quality performance and productivity.
Some authors have examined the role of structural
variables such as broad jobs and open organizations
on competitive performance. In a survey of manufacturing firms, Powell 1995. found that broad jobs
and open organizations as indicated by an open
culture. were significantly related to quality performance. Similarly, in an empirical study of plant
performance in the auto industry, Keefe and Katz
1990. found that broad jobs as indicated by a
combination of job classifications. was significantly
related to quality performance. Finally, Cooper and
Kleinschmidt 1995. found that an entrepreneurial
climate, which is often associated with open organizations, was significantly related to new product
performance.
Several authors have examined the impact of
labormanagement relations on performance. Bushe
1988. conducted a longitudinal study of five manufacturing plants and found that in two of the plants
an improvement in labormanagement relations improved product quality performance. Ansari 1986.
found that effective labormanagement relations was
one of the critical operational factors for JIT purchasing success. Cutcher-Gershenfield 1991. reported that firms adopting transformational labor
relations those emphasizing cooperation and dispute resolution had lower costs, less scrap and
higher productivity than did firms using traditional
adversarial labor relations practices. Finally, on a
global scale, labormanagement relations was one of
the five major activities that contributed to success in
productivity measures in Japanese firms in the automotive industry Otis, 1993..
In summary, the more general human resource
management practices examined herein are cross
training, employee autonomy, employee impact,

broad jobs, open organizations and effective labor


management relations. They were chosen because
the literature identifies them to be critical determinants of various aspects of manufacturing performance, even though they are not as tightly linked to
specific manufacturing performance dimensions as
are top management commitment, communication of
goals, employee training, and cross functional teams.
In view of the literature pertaining to both categories
of HRM items, we propose the following:
Proposition 1: There are positive relationships between individual HRM practices and manufacturing
performance.

3. A proposed human resource management initiative framework


The review of the literature suggests that the
broad array of human resource management practices affecting manufacturing performance can be
grouped into five major categories: 1. Top management commitment; 2. Communication of goals; 3.
Employee training; 4. Cross functional teams; and
5. General HRM practices. This grouping suggests a
conceptual scheme as highlighted in Fig. 1. This
figure implies that human resource management
practices can be analyzed using the five broad groupings of practices for realizing four broad strategic
dimensions cost, quality, flexibility, and time.. Note
that we do not disaggregate these strategic dimensions further into their respective sub-dimensions;
for instance, we do not measure volume flexibility
versus mix flexibility but rather oerall flexibility.
The strategic SBU goal is flexibility which in particular plants may mean volume or mix flexibility, or
both. Our focus is on overall HRM initiatives and
overall strategic SBU goals.
Based on the human resource analysis framework
in Fig. 1, three orientations for deploying human
resource management practices can be identified:
row-wise, column-wise and cell-wise or cellular.. In
the row-wise orientation, firms use multiple human
resource management practices for achieving specific strategic dimensions. For example, firms desiring to improve quality performance may choose to
use cross functional teams for quality and top man-

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

Fig. 1. Conceptual model.

agement commitment to quality. On the other hand,


in the column-wise orientation, firms use specific
human resource management practices for achieving
multiple strategic dimensions. For instance, cross
functional teams may be used for multiple purposes
such as flexibility, quality improvement and lower
costs. Finally, in the cellular approach, specific human resource management practices are geared towards achieving specific strategic dimensions. For
example, firms seeking to improve overall quality
performance would deploy cross functional teams for
quality i.e., to support quality goals..
The review of the literature suggests that the
cellular approach has not been examined in a comprehensive manner in any single study. As there can
be a huge number of possible cells, the cellular
approach offers little help in terms of reducing the
broad array of human resource management practices into a manageable set. Thus, the question becomes whether these HRM practices are organized in
a manner driven by the practice itself i.e., columnwise. or by the strategic manufacturing goal behind
the HRM practices i.e., row-wise.. It may be noted
that this proposition, as illustrated in Fig. 1 does not
specify item-to-factors. correspondence, as would
be necessary for the confirmatory approach. Indeed,
it is premature to conduct a confirmatory analysis
and accordingly, we have termed our expectations as
propositions as opposed to hypotheses.

Our research focus is on whether the split will be


row or column-wise as shown in Fig. 1. We suggest
that human resource management practices are best
grouped around strategic manufacturing goals. This
reflects the pervasive theme in the strategic management literature that strategy precedes structure
Mintzberg, 1979; Miller, 1981; Drazin and Van de
Van, 1985; Ginsberg and Venkatraman, 1985; Miller
and Droge,
1986; Venkatraman, 1989.. If we accept
the classic ordering of strategy and then structure,
it follows that HRM practices seen as the structuring of human resources. should factor analyze along
strategic underlying dimensions rather than along
dimensions that describe the type of HRM initiative.
Thus:
Proposition 2: Human resources initiatives can be
grouped according to the manufacturing performance
priority they are meant to support.
The above proposition suggests that human resource management practices can be grouped into
HRM-Cost, HRM-Quality, HRM-Flexibility, and
HRM-Time. These should be interpreted as human
resource management practices to support cost reduction goals, human resource management practices to support quality strategic goals, and so on.
Our final proposition focuses on these HRM factors:
We propose that these underlying factors will also be
related to manufacturing performance. In particular,

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

we wish to determine if HRM-Cost for example. is


related to manufacturing cost performance. Thus:
Proposition 3: There is a positive relationship between each HRM factor e.g., HRM-Cost. and measures of manufacturing performance e.g., cost performance.; i.e., the HRM factors found from the
factor analysis are significant predictors of manufacturing performance.
From the literature cited above, two things can be
observed: 1. HRM practices can exhibit a significant, positive relationship with more than one dimension of manufacturing performance; and 2.
HRM practices are usually discussed individually.
One goal in this research is to determine whether
sets or bundles of HRM initiatives from factor
analysis related to Proposition 2. are related to one
or more dimensions of manufacturing performance
Proposition 3.. We also examine the traditional
HRM-item to manufacturing performance measure
relationship. Proposition 1 examines the HRM initiatives one by one and thus to some extent replicates
past work.

4. Research methodology
4.1. The sampling procedure and sample
The study focused on first tier suppliers to the
Big Three in North America. The population
frame consisted of the top 150 first tier suppliers in
terms of annual sales. The list of companies was
provided by industry experts from the Automotive
Industry Action Group AIAG.. AIAG is a professional association with over 1000 members including
the Big Three North American automobile manufacturers Actionline, 1995..
The research questionnaire, accompanied by an
informational letter, was mailed to the CEOs of all
firms included in the population frame. The letter
stated the purpose of the project and that a member
of the research team would be calling soon. CEOs of
strategic business units SBUs. or individual firms
were instructed to complete the survey for their SBU
or firm. CEOs of multiple business units were instructed to select one of their SBUs to participate in
the study and to forward the research questionnaire

to the CEO of that unit. It may be noted that only


upper management can evaluate the firm-wide factors of interest: the tools and practices are broadbased initiatives that are not defined with reference
to a certain project or plant.
Repeated telephone calls were made to obtain
definitive responses from CEOs regarding their participation. In the survey, respondents were asked to
fill out their titles and contact addresses to receive a
copy of the summary results. All respondents filled
out this information and almost all of them were
either a CEO or member of the top management
team. We also called back the respondent to complete missing values and to confirm those responses
which seemed to be questionable or illegible.
The final sample for the study consisted of 57
firms. The response rate was approximately 39 percent. The response rate is high when compared to
other empirical studies in operations management.
Mean sales for the sample was US$501,516,415 with
a standard deviation of US$637.46 million. The mean
number of employees was 2810.09 with a standard
deviation of 3431.07.
An examination of firms comprising the first tier
of automobile suppliers reveals the diversity of products manufactured. Firms in the sample ranged from
manufacturers of seating systems to manufacturers of
anti-lock braking systems. The manufacturing environments of the responding companies was also diverse on average, 32% of the samples production
volume was characterized by a production department organization or batch production similar
equipment is organized into departments, and production flows in batches from department to department.; 30% was characterized as work cells, 24%
was characterized as assembly lines; and 14% was
characterized as continuous flow production. The
diversity of products and manufacturing environments represented in our sample contributed to the
generalizability of our research results.
4.2. Measurement issues
4.2.1. Validation of the research questionnaire
The unit of analysis was the individual firm or
strategic business unit SBU. involved in manufacturing and selling automotive systemsrcomponents
to North American OEMs. A panel of experts from

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

AIAG assisted in ensuring completeness and clarity


of meanings for the items. To engender a common
understanding of the questions, all items appearing in
the survey instrument were defined. Finally, the
expert panel assisted in the pilot testing of the survey
instrument.
4.2.2. Interrater reliability
To assess the reliability of our measures, we
faxed a second, very abbreviated questionnaire to our
original respondents. We asked them to have a
strategically knowledgeable individual within their
firms fill out the short-form questionnaire. To lessen
the burden on this second respondent, only a few
selected items from our original research questionnaire appeared in this brief survey. However, all of
our department variables i.e., the overall measures
of manufacturing performance. were represented.
4.2.3. Manufacturing performance measurement
Four aspects of manufacturing performance were
measured in this study: cost reduction, quality improvement, flexibility, and time reduction. The respondents were asked to provide a seven-point rating
of the firms performance relative to its major competitors for each item, where 1 represented Poor
and 7 represented Excellent see Appendix A..
Descriptive statistics and correlations with p-val-

ues. of the manufacturing performance items are


provided in Table 1. Note that only time and flexibility performance are significantly correlated.
As noted above, we collected data to assess the
interrater reliability of these four measures of overall
manufacturing performance. 25 of the original responding companies participated in this follow-up
survey. The results were extremely encouraging. For
overall quality, overall flexibility, overall cost, and
overall time, the correlations and p-values one-tail
tests. were as follows: 0.451 0.009.; 0.270 0.087.;
0.359 0.033. and 0.379 0.025.. All correlations
were positive and all except one was significant at a
level of significance less than 0.05. However, even
the exception was marginally significant at less than
0.10.
Respondents were also asked to rate the importance of each of the four dimensions of manufacturing performance using a seven-point scale with endpoints labelled Least Important s 1. and Extremely Important s 7.. Results indicate that CEOs
judged quality and cost to be the most important
dimensions of manufacturing performance. The
means were: 6.351 for quality, 6.280 for cost, 5.228
for flexibility and 5.017 for time. These four importance scores are uncorrelated with sales or the number of employees all p-values are greater than
0.10., indicating that firm size is unrelated to the
importance of these four performance dimensions.

Table 1
Descriptive statistics and correlations of manufacturing performance items
Manufacturing performance items

Mean

Std. Dev.

Correlations
1

1. Overall cost performance

5.053

1.245

2. Overall quality performance

5.772

0.982

3. Overall flexibility performance

5.035

1.101

4. Overall time performance

4.912

1.005

rs
ns
ps
rs
ns
ps
rs
ns
ps
rs
ns
ps

0.171
57
0.205
0.142
57
0.293
0.089
57
0.509

Manufacturing performance items are on a 1 to 7 scale with 1 sPoor and 7 sExcellent.

0.090
57
0.505
0.106
57
0.433

0.261UU
57
0.050

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

4.2.4. Measurement of extent of use of human


resource management practices
The survey instrument measured the extent of use
of 22 human resource management practices. Respondents were asked to indicate the extent to which
each of these practices was used by the firm to
support its overall business strategy see Appendix
A.. If a practice was not used by a firm or SBU, the
respondent was asked to circle Not Used. The
extent of use scale was a seven-point scale with
endpoints labelled Extremely Low Use of Initiative s 1. and Extremely High Use of Initiative
s 7.. Means and standard deviations for the extent
of use ratings for the 22 human resource management practices items are presented in Table 2.
Note the order of the first 16 items in the appendix: they are organized by HRM practice and not
by strategic goal. That is, the HRM practices for

cost reduction for example. are not listed together


because we wanted to avoid having the design of the
questionnaire encourage respondents to lump all the
cost reduction items together.

5. Results and discussion


5.1. Indiidual HRM practices and manufacturing
performance (Proposition 1)
The correlations and one-tailed p-values. of
HRM items with each of the manufacturing performance measures are reported in Table 3. Several
HRM items indicated in boldface in Table 3. were
significantly and positively associated with measures
of manufacturing performance at the p s 0.10 level
or less. Twenty-one of the 22 HRM items had signif-

Table 2
Descriptive statistics of human resource management practice items
Human resource management practices items

Sample size

Mean

Std. Dev.

Top Level Management Commitment to Cost Reduction


Top Level Management Commitment to Total Quality Management
Top Level Management Commitment to Flexibility
Top Level Management Commitment to Time-based Competition

57
57
57
56

5.947
5.895
4.930
5.018

1.025
1.160
0.998
1.228

Communication of Goals Relative to Cost Reduction


Communication of Goals Relative to Total Quality Management
Communication of Goals Relative to Flexibility
Communication of Goals Relative to Time-based Competition

57
57
57
57

5.983
5.614
4.526
4.456

0.991
1.177
1.283
1.364

Formal Employee Training to support Cost Reduction


Formal Employee Training to support Total Quality Management
Formal Employee Training to support Flexibility
Formal Employee Training to support Time-based Competition

57
57
57
57

4.947
5.614
4.070
3.983

1.288
1.373
1.237
1.482

Cross functional teams to support Cost Reduction


Cross functional teams to support Total Quality Management
Cross functional teams to support Flexibility
Cross functional teams to support Time-based Competition

57
57
57
57

5.649
6.000
4.404
4.246

1.173
1.086
1.425
1.491

Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations

56
57
54
57
55
57

4.875
4.983
4.722
5.123
5.436
5.544

1.192
1.217
1.352
1.053
1.167
1.196

Human resource management practice items are on a 1 to 7 scale with 1 sExtremely Low Use of Initiative and 7 sExtremely High Use
of Initiative.

10

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

Table 3
Correlatios of HRM items with manufacturing performance items
Sample size s 50. Significant correlations alpha - 10; one-tailed test. are in bold.

Top Level Management Commitment


to Cost Reduction
Top Level Management Commitment
to Total Quality Management
Top Level Management Commitment
to Flexibility
Top Level Management Commitment
to Time-based Competition
Communication of Goals Relative
to Cost Reduction
Communication of Goals Relative
to Total Quality Management
Communication of Goals Relative
to Flexibility
Communication of Goals Relative
to Time-based Competition
Formal Employee Training to support
Cost Reduction
Formal Employee Training to support
Total Quality Management
Formal Employee Training to support
Flexibility
Formal Employee Training to support
Time-based Competition
Cross functional teams to support
Cost Reduction
Cross functional teams to support
Total Quality Management
Cross functional teams to support
Flexibility
Cross functional teams to support
Time-based Competition
Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations

Overall cost
performance

Overall quality
performance

Overall flexibility
performance

Overall time-based
performance

0.436
p s 0.000
0.074
p s 0.152
0.197
p s 0.042
0.107
p s 0.115
0.313
p s 0.007
0.122
p s 0.200
0.236
p s 0.025
0.093
p s 0.130
0.404
p s 0.001
y0.029
p s 0.420
0.236
p s 0.049
y0.068
p s 0.319
0.420
p s 0.001
0.193
p s 0.089
0.343
p s 0.007
y0.004
p s 0.489
0.029
p s 0.421
0.097
p s 0.251
0.026
p s 0.428
y0.017
p s 0.454
0.078
p s 0.295
0.136
p s 0.173

0.105
p s 0.235
0.203
p s 0.078
0.112
p s 0.220
0.251
p s 0.039
y0.023
p s 0.437
0.223
p s 0.006
0.074
p s 0.306
0.040
p s 0.391
0.029
p s 0.421
0.271
p s 0.028
0.145
p s 0.157
y0.086
p s 0.277
y0.062
p s 0.334
0.183
p s 0.101
y0.021
p s 0.441
0.017
p s 0.453
0.044
p s 0.380
0.105
p s 0.234
0.092
p s 0.262
0.168
p s 0.122
0.260
p s 0.034
0.170
p s 0.119

y0.164
p s 0.127
y0.121
p s 0.202
0.397
p s 0.002
0.336
p s 0.008
I0.226
p s 0.057
I0.309
p s 0.014
0.373
p s 0.004
0.249
p s 0.040
0.117
p s 0.209
y0.113
p s 0.217
0.383
p s 0.003
0.319
p s 0.012
y0.057
p s 0.347
y0.152
p s 0.146
0.259
p s 0.035
0.277
p s 0.025
0.178
p s 0.108
0.019
p s 0.449
0.144
p s 0.159
0.116
p s 0.211
y0.002
p s 0.499
0.186
p s 0.098

0.154
p s 0.142
0.125
p s 0.193
0.149
p s 0.151
0.413
p s 0.001
0.060
p s 0.339
y0.049
p s 0.368
0.246
p s 0.042
0.286
p s 0.022
0.197
p s 0.085
0.045
p s 0.378
0.230
p s 0.054
0.401
p s 0.002
y0.071
p s 0.313
0.035
p s 0.405
0.048
p s 0.371
0.358
p s 0.005
0.299
p s 0.017
0.281
p s 0.024
0.355
p s 0.005
0.156
p s 0.140
0.212
p s 0.070
0.290
p s 0.020

icant correlations with at least one dimension of


manufacturing performance. The exception was employee impact. Twelve items had significant correla-

tions with two manufacturing performance measures,


and three items top management commitment to
time, communication of goals related to flexibility,

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

and employee training for flexibility. were significantly related to three manufacturing performance
measures. Thus, Proposition 1 was strongly supported.
If we examine the correlations in Table 3, certain
patterns become clear. First, observe the pattern
under cost performance first column in the table..
All cost-specific HRM items i.e., top management
commitment to cost reduction, communication of
cost-related goals, employee training for cost reduction, and cross functional teams for cost reduction.
are positively correlated with cost performance.
These correlations are among the highest in the
column. However, all flexibility-specific HRM items
are also positively correlated with cost performance.
Second, the pattern for quality performance second
column. suggests that it is primarily quality-specific
HRM items that determine quality performance. All
four quality-specific HRM items are positively correlated with quality performance, but little else. Third,

11

the pattern in the next column suggests that flexibility-specific HRM items are related to flexibility
performance all four are significant. and that
time-specific HRM items are related to flexibility
performance all of these four are also significant..
Finally, an analysis of the fourth column shows that:
1. all four time-specific HRM items are significantly correlated with time performance; 2. flexibility-specific HRM items play a lesser role in time
performance particularly in communication of goals
and employee training.; and 3. the generic HRM
items at the bottom of the column are generally
related to time-based performance but not so extensively to any of the other three performance dimensions.
5.2. Dimensions of human resource management
practices (Proposition 2)
As stated earlier in the discussion of the conceptual model in Fig. 1, the literature is not clear as to

Table 4
Rotated factor loadings for the five HRM factors
Variables
Top Level Management Commitment to Cost Reduction
Communication of Goals Relative to Cost Reduction
Formal Employee Training to support Cost Reduction
Cross functional teams to support Cost Reduction
Top Level Management Commitment to Total Quality Management
Communication of Goals Relative to Total Quality Management
Formal Employee Training to support Total Quality Management
Cross functional teams to support Total Quality Management
Top Level Management Commitment to Flexibility
Communication of Goals Relative to Flexibility
Formal Employee Training to support Flexibility
Cross functional teams to support Flexibility
Top Level Management Commitment to Time-based Competition
Communication of Goals Relative to Time-based Competition
Formal Employee Training to support Time-based Competition
Cross functional teams to support Time-based Competition
Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations
Eigenvalue
Percentage of variance explained
Cumulative percentage of total variance explained

Factor 1
Cost.
0.774
0.798
0.648
0.693
0.100
0.264
0.067
0.228
0.113
0.184
0.026
0.010
0.044
0.117
0.001
0.021
0.067
0.055
0.159
y0.169
0.102
0.124
6.823
31.0%
31.0%

Factor 2
Quality.

Factor 3
Flexibility.

Factor 4
Time.

Factor 5
Generic.

0.189
0.131
0.028
0.213
0.883
0.863
0.749
0.851
y0.015
y0.083
y0.040
0.148
0.160
0.039
y0.058
0.182
0.088
0.270
0.037
0.256
0.203
y0.055
3.387
15.4%
46.4%

0.176
y0.073
0.052
0.152
0.127
y0.089
y0.077
0.095
0.852
0.759
0.687
0.821
0.264
0.281
0.175
0.187
0.099
y0.070
0.171
y0.033
y0.082
0.434
2.432
11.1%
57.5%

y0.116
0.052
0.336
0.039
y0.015
0.080
0.261
y0.006
0.230
0.416
0.389
0.139
0.756
0.824
0.835
0.647
0.143
0.109
0.350
0.326
0.148
y0.097
1.647
7.5%
64.9%

0.121
y0.058
0.317
0.026
0.191
0.067
0.169
0.206
y0.060
0.021
0.289
0.052
0.208
0.152
0.279
0.103
0.698
0.854
0.715
0.715
0.766
0.666
1.338
6.1%
71.0%

12

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

whether deployment of human resource management


practices is competitive priority-holistic. That is, are
human resource management practices grouped according to the strategic dimensions they are meant to
support? The 22 HRM items were subject to principal components factor analysis with varimax rotation. The factor analysis revealed a stable five-factor
solution with each of the factors having eigenvalues
exceeding one. The cumulative percentage of total
variance explained due to these five factors was
71%. Table 4 presents the results of the factor analysis. It can be seen from Table 4 that there was a high
degree of convergence within each factor the lowest
factor loading within a factor was 0.647.. Also there
was a high degree of divergence across factors as

indicated by the lack of cross loading of any item on


more than one factor. Clearly, the nature of the items
that load on each factor suggests that the five factors
be named HRM-Cost, HRM-Quality, HRM-Flexibility, HRM-Time and HRM-Generic. Proposition 2 is
supported.
It is interesting to note that the six items constituting generic HRM items loaded separately on a single
factor. While the remaining sixteen items are specific
to a competitive manufacturing priority, the six items
under HRM-Generic factor can be construed as items
that are diffused in their impact on several dimensions. For example, cross training is frequently mentioned in the JIT literature. JIT implementations
typically have objectives that transcend several com-

Table 5
Factor items

Corrected
item-total
correlation

Cost HRM Factor


Top Level Management Commitment to Cost Reduction
Communication of Goals Relative to Cost Reduction
Formal Employee Training to support Cost Reduction
Cross functional teams to support Cost Reduction

0.620
0.558
0.570
0.539

Quality HRM Factor


Top Level Management Commitment to Total Quality Management
Communication of Goals Relative to Total Quality Management
Formal Employee Training to support Total Quality Management
Cross functional teams to support Total Quality Management

0.798
0.787
0.648
0.745

Flexibility HRM Factor


Top Level Management Commitment to Flexibility
Communication of Goals Relative to Flexibility
Formal Employee Training to support Flexibility
Cross functional teams to support Flexibility

0.727
0.743
0.711
0.614

Time HRM Factor


Top Level Management Commitment to Time-based Competition
Communication of Goals Relative to Time-based Competition
Formal Employee Training to support Time-based Competition
Cross functional teams to support Time-based Competition

0.770
0.744
0.767
0.678

Generic HRM Factor


Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations

0.645
0.779
0.718
0.689
0.660
0.514

Cronbachs
alpha

Cronbachs alpha
if item is deleted

0.766

Sample size

57
0.685
0.717
0.714
0.725

0.878

57
0.821
0.825
0.888
0.843

0.849

57
0.803
0.783
0.798
0.849

0.878
0.833
0.841
0.831
0.868
0.867

51
0.848
0.824
0.836
0.842
0.846
0.870

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

petitive manufacturing dimensions e.g., cycle time


reduction, reduction of waste and quality improvement.. Similarly, broad jobs and open organizations
represent structural interventions to ensure fluid
responsibilities and informal employee relations.
Effective labormanagement relations may be more
critical in unionized rather than non-unionized environments. Finally, employee autonomy and employee impact constitute the desirability of empowering employees to demonstrate visibility in decision-making which was traditionally the prerogative
of managers.
The items forming each of the HRM factors were
then tested for internal consistency using Cronbachs
alpha Cronbach, 1951.. As can be seen from Table
5, the scales for each of the HRM factors were
internally consistent and the constructs were reliable,
with Cronbachs alphas ranging from 0.76 to 0.88.
Churchill 1979. suggests that items with corrected
itemtotal correlations which are less than 0.45
should be eliminated from the scale. As can be seen
from the first column in Table 5, no item had a
corrected itemtotal correlation less than 0.45 and
thus no item was eliminated. The third column in
Table 5 indicates that for each of the items included
in the final instrument, the non-inclusion of that item
results in a reduction of internal consistency as can
be seen from the reduction in alpha values.. Overall,

13

the analyses indicated that the constructs were unidimensional and reliable, and thus the factor scored
items were taken as the units for further analyses for
testing Proposition 3.
5.3. HRM factors and manufacturing performance
(Proposition 3)
The correlations and p-values. of the five
HRM-factors with the four manufacturing performance items are presented in Table 6. For cost,
flexibility and time, each HRM factor was consistently related to performance on its respectie performance dimension. For example, HRM-Cost was
significantly related to overall cost performance p
s 0.000.. Furthermore, HRM-Quality just missed
one-tailed significance at 0.05 on the quality performance dimension. The HRM-Generic factor was only
related to time-based performance.
Two HRM factors were related to multiple manufacturing performance measures. The HRM-Flexibility factor was a significant predictor of flexibility
and cost performance. The HRM-Time factor was a
significant predictor of time and flexibility performance. These correlation results which are equivalent to standardized beta regression results since the
independent variables are orthogonal. present an
overall picture that is essentially the same as the one

Table 6
Correlations of HRM factors and manufacturing performance items
Variables

Correlations
HRM-Cost

1. Cost performance

2. Quality performance

3. Flexibility performance

4. Time performance

rs
ns
ps
rs
ns
ps
rs
ns
ps
rs
ns
ps

0.480
50
0.000
y0.043
50
0.765
y0.167
50
0.247
0.064
50
0.659

Significant at alpha of 0.10 two-tailed..


Significant at alpha of 0.05 two-tailed..
UUU
Significant at alpha of 0.01 two-tailed..
UU

UUU

HRM-Quality
0.032
50
0.823
0.234U
50
0.102
y0.225
50
0.116
y0.059
50
0.684

HRM-Flexibility
UU

0.276
50
0.052
0.083
50
0.564
0.362UUU
50
0.010
0.098
50
0.497

HRM-Time

HRM-Generic

y0.073
50
0.616
0.002
50
0.987
0.285UU
50
0.045
0.324UU
50
0.022

0.036
50
0.803
0.140
50
0.332
0.100
50
0.492
0.286UU
50
0.044

14

Manufacturing performance
item dependent variable.

Model
p-value

Adj. R 2

Overall cost performance


Overall quality performance
Overall flexibility performance
Overall time performance

0.011
0.314
0.017
0.101

0.215
0.027
0.196
0.103

Significant at alpha of 0.10 two-tailed..


Significant at alpha of 0.05 two-tailed..
UUU
Significant at alpha of 0.01 two-tailed..
UU

Beta coefficient controlling for size with p-values in parentheses.


HRM cost
factor

HRM quality
factor

HRM flexibility
factor

HRM time
factor

HRM generic
factor

Size

0.474UUU 0.001.
y0.067 0.641.
y0.176 0.183.
0.080 0.560.

0.019 0.882.
0.265U 0.071.
y0.232U 0.080.
y0.065 0.637.

0.240U 0.069.
0.074 0.608.
0.333UU 0.014.
0.117 0.398.

y0.090 0.486.
0.027 0.850.
0.281UU 0.036.
0.321UU 0.024.

0.002 0.988.
0.151 0.298.
0.080 0.542.
0.295UU 0.038.

0.178 0.178.
y0.268U 0.071.
0.078 0.556.
0.034 0.809.

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

Table 7
Regression analyses of the five HRM factors and size versus the four manufacturing performance measures

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

derived from the analysis of the patterns of correlations per individual HRM item.
For our final set of analyses, we performed regressions with all five HRM factors and firm size as
independent variables and each of the four manufacturing performance measures as dependent variable
Table 7.. The number of employees is used as a
proxy for firm size, and the inclusion of this size
variable ensures that the betas for the HRM factors
are calculated controlled for size. In Table 7, for
each of the four measures of overall manufacturing
performance, the final model p-value, the adjusted
R 2 , the regression coefficients b . controlling for
size, and the p-values for the independent variables
are listed. The inclusion of size as a control variable
particularly affected the regression in which overall
quality performance was the dependent variable. In
this regression, the number of employees a proxy
for size. entered as a significant negative predictor
suggesting that smaller companies achieved higher
quality performance.
These analyses revealed that a particular HRM
factor was always significantly related to performance on the corresponding manufacturing performance measure. For example, the HRM-Cost factor
was significantly related p s 0.000. to cost performance. Similarly, HRM-Quality, HRM-Flexibility,
and HRM-Time were significantly related to their
respective manufacturing performance measures.
After controlling for size, HRM factors entered as
significant predictors in more than one model. The
HRM-Quality factor appeared as a significant predictor of two manufacturing performance measures
quality and flexibility in the latter case inversely..
HRM-Flexibility factor predicts both flexibility and
cost, while HRM-Time predicts both time and flexibility performance. The generic HRM factor was
significantly related to only one measure of manufacturing performance, i.e., time performance. Based on
the results of correlations and the regression analyses, we can conclude that, overall, Proposition 3 was
supported.

6. Discussion and conclusions


Until recently, the importance of human resource
management practices was supported primarily by

15

case studies and anecdotal evidence rather than by


large-scale studies. The issue of selecting the appropriate set of HRM practices from a widely available
menu of practices was troublesome and many efforts have failed. We examined a comprehensive set
of 22 HRM practices and four manufacturing performance measures. We proposed that there is an underlying pattern to deploying HRM practices in a strategic manufacturing environment, and found that HRM
practices can be classified empirically into five factors. Four of these factors are specific to particular
manufacturing strategic dimensions of cost, quality,
flexibility and time, while the remaining factor is
generic. These five factors were shown to be related
to manufacturing performance, where performance
was measured in four areas: cost, quality, flexibility
and time. Nevertheless, additional research is needed
to examine the robustness of the findings, and generalizations should be interpreted with caution.
6.1. Summary of the results
The results show that 1. cost performance is
engendered by HRM-Cost and, to a lesser extent, by
HRM-Flexibility initiatives; 2. quality performance
is associated with HRM-Quality initiatives; 3. flexibility performance is engendered by HRM-Flexibility and HRM time initiatives positively. followed
by HRM-Quality initiatives inversely.; and 4. time
performance is related to HRM-Time and HRMGeneric initiatives. Finally, only flexibility performance and time performance are significantly
correlated with one another. This last result is not
surprising since each aspect of flexibility defined in
the literature has a range measure and a timing
measure associated with it see Gerwin, 1993..
The determinants of overall flexibility performance warrant further discussion. While HRMFlexibility and HRM-Time were significantly and
positively related to flexibility performance, HRMQuality displayed a significant negatie relationship
with flexibility performance. If we examine the four
items that constitute the HRM Quality factor, it is
apparent that all four correlations with flexibility
performance have negative signs, although only the
communication of goals item is statistically significantly negative. correlated with flexibility performance Table 3.. To understand why an emphasis

16

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

on quality in HRM could actually hinder performance in flexibility it is useful to think of quality
efforts as reducing variance while flexibility efforts
as accommodating variance. For example, if human
resources are focused on achieving very high conformance to specifications an important aspect of overall quality in this industry., it can be more difficult to
achieve performance on flexibility dimensions such
as: 1. rapidly accommodating a sudden increase in
demand volume flexibility.; 2. quick implementation of design changes modification flexibility.; or
3. frequent or rapid changes in the product mix
changeover flexibility.. Accommodating these
sources of variation in a timely fashion can be more
difficult when conformance standards are higher and
workers are highly focused on achieving them as
compared to when quality standards and focus are
less stringent.
6.2. Implications
The implications of the findings of this study in
the automotive supplier industry are several. First,
our results suggest that HRM bundles are important predictors of manufacturing performance. The
focus on manufacturing performance as opposed to
overall firm performance offers new perspectives on
human resource management in this industry. Second, the focus on four different aspects of manufacturing performance cost, quality, flexibility and
time presents actionable guidelines for managers.
To a large extent, trends in the automotive supplier industry are dictated by trends in the parent
industry of original equipment manufacturers
OEMs.. Therefore, the pattern of competition in the
OEMs industry offers an interesting reference point
for interpreting the results of this study. Traditionally, this industry has been subject to intense global
competition, especially from Japan. Advances in
Japanese manufacturing techniques e.g., JIT, kaizen
etc.. have attracted the attention of the North American car manufacturers. In one of the most comprehensive research projects in the car industry, Womack et al. 1990. found that a large portion of
Japanese competitive advantage was at the factory
level. Therefore, manufacturing performance, as examined herein, may be the key indicator of overall
competitiveness. However, the adoption of Japanese

manufacturing techniques requires a careful attention


to human resource management issues. In this regard, our results suggest that a focused emphasis on
a strategy-specific HRM bundle has a high impact
on its corresponding dimension of manufacturing
performance and that the typical prescriptions focusing on what we have termed generic HRM initiatives are less effective for achieving strategically
targeted performance improvement. For example, the
flexibility literature touts the use of empowerment
i.e., employee impact, employee autonomy., broad
jobs, and cross training as important for obtaining
flexibility success Adler, 1988; Parthasarathy and
Sethi, 1992; Upton, 1995.. Our study suggests that a
top management commitment to flexibility, communication of flexibility goals, employee training for
flexibility, and the use of cross-functional teams for
flexibility could have a higher impact on flexibility
performance than a bundle of such generic HRM
practices.
6.3. Limitations and directions for future research
Certain limitations of this research delimit the
interpretation of our findings. First, the data used in
this study were self reported by the respondents.
However, the survey instrument contained items for
which objective performance data on ROI, ROA,
and market share for example. were also requested
and a good portion of our sample 28 firms. complied. For 6 overall firm performance measures, 5 of
them had positive correlations between subjective
and objective data that were statistically significant
at a 0.05 level of significance and one of them had a
positive correlation that was marginally significant
p - 0.10.. The substantial concordance high correlations with significant p-values. between the objective and subjective performance measures for these
items increased our confidence in using the subjective performance measures examined for sub-classes
herein. It should also be noted that many prior
studies have used self report data to make inferences
between practices and performance see for example,
Choi and Hartley, 1996; Williams et al., 1995; Ward
et al., 1995.. Nevertheless, one area of future research is the use of objective measures for capturing
dimensions of manufacturing performance. For example, parts per million defective PPMs. might be

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

used as a proxy for overall quality in the automotive


industry.
Second, we operationalized manufacturing performance to consist of four separate macro-level aspects, i.e., quality, flexibility, cost and time. While
there is considerable support for this in the literature,
there is also support for a second order factor structure for manufacturing performance in which each of
these four aspects is comprised of subdimensions.
For example, subdimensions of quality may include
conformance quality, product durability, product reliability and design quality. It is possible that the
human resource factors considered in this research
differentially affect various subdimensions. Future
research could include a detailed operationalization
of manufacturing performance as a second order
factor structure.
Third, other measures of manufacturing performance were not considered here. For example, previous research has examined the impact of human
resource management practices on productivity
Huselid, 1995., which can also be considered as an
important aspect of manufacturing performance.
However, a lack of proper definitions of terms and
measurement schemes makes it a troublesome variable to investigate. For example, productivity can be
construed as labor productivity or asset productivity,
the former being less complex to measure. Future
research should consider other measures of manufacturing performance such as manufacturing asset productivity, agility, customer responsiveness and innovation all measures in which manufacturing has an
influence, albeit, an indirect responsibility..
Fourth, the choice of human resource items in our
study were driven by our conceptual model and
popular practice within the automotive supplier industry as suggested by our expert panel. Thus, certain HRM items for example, contingent compensation. were not included in our study even though the
literature indicates that they influence manufacturing
performance. Future research can be directed at a
meta-analysis of key determinants of manufacturing
performance.
Finally, our study used CEOs as the respondents
for data collection. As is well known, there are
trade-offs involving using CEOs as respondents. On
the one hand, they are most knowledgeable on systemic issues and strategic decisions. However,

17

CEOs are also very busy people. Due to constraints


of time, it is conceivable that they hurriedly responded to the research questionnaires, possibly
compromising the quality of data. Nevertheless, this
concern was substantially ameliorated by our consistent practice of calling back respondents to check on
missing values, questionable responses andror to
obtain objective performance data. Our excellent inter-rater reliability results also serves to ameliorate
this concern. In all but one case, we found that the
respondents had devoted time and effort to accurately complete the research questionnaires. In the
one case where accuracy was questionable, the corresponding data was not included in our analysis.
6.4. Conclusion
In summary, our study offers several contributions to the HRM and operations strategy literatures.
First, the link between individual human resource
management practices and four dimensions of manufacturing performance was examined. Second, our
study suggested that deploying strategy-specific bundles of human resource management practices has a
significant influence on manufacturing performance,
specifically, corresponding dimensions of performance. This has major implications for crafting overall, coordinated HRM strategies and linking these
strategies to competitive goals of manufacturing.
Third, we have shown that there is merit in looking
at manufacturing performance dimensions as key
indicators for measuring the effects of HRM practices. In some cases, the percentage explanation of
performance variation attributed to HRM practices
was in the 20% range. Finally, the impact of our
HRM-Generic bundle of items on manufacturing
performance reveals new insights. The HRM-Generic
bundle had direct impact on time performance measures only. One interpretation of this finding is that
HRM-Generic items as a set might be supplementary
to the strategy-driven HRM factors in achieving
higher performance on some manufacturing measures.
An alternative possibility might be that the wordings for the items constituting this factor caused the
formation of this factor. Some items were linked by
common words cost, for example. and some of
these items did load together. However, this did not
vitiate the robustness of our factor structure, as it is

18

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

equally true that other items sharing common words


such as cross functional teams. did not load
together. For example, the item open organization
included the word communications in its definition; however, it did not load with other items
containing the word communication. The four
other items containing the word communication
see Table 2. did not even load with each other see
Table 4. even though they were listed together on
the questionnaire. Note also that six items contained
the word employee but only two of these items
loaded together. It is true, however, that wording
might have had a role in the formation of the
generic factor. Furthermore, we acknowledge the
possibility that the HRM practices associated with a
specific competitive priority could be linked together
in name of the priority. only. These limitations are
acknowledged and future research could focus more
clearly on these issues.
r definition of inAppendix A. Operationalizationr
dependent variables
A.1. Operationalization
Summary of Instruction: Rate the degree to
which the following items Top Level Management
Commitment, Communication of Goals to Employees, Formal Employee Training and Cross-Functional Teams. were utilized by your SBU to support
the strategic objectives:
Top Level Management Commitment to Cost Reduction
Top Level Management Commitment to Total
Quality Management
Top Level Management Commitment to Flexibility
Top Level Management Commitment to TimeBased Competition
Communication of Goals Relative to Cost Reduction
Communication of Goals Relative to Total Quality Management
Communication of Goals Relative to Flexibility
Communication of Goals Relative to Time-Based
Competition
Formal Employee Training to Support Cost Reduction

Formal Employee Training to Support Total


Quality Management
Formal Employee Training to Support Flexibility
Formal Employee Training to Support TimeBased Competition
Cross-Functional Teams to Support Cost Reduction
Cross-Functional Teams to Support Total Quality
Management
Cross-Functional Teams to Support Flexibility
Cross-Functional Teams to Support Time-Based
Competition
Note: 7-point scale was used with endpoints, 1 s
Extremely Low Use of Item to Support Strategic
Objective, and 7 s Extremely High Use of Item to
Support Strategic Objective.
Summary of Instruction: Rate the degree to
which the following initiatives were utilized by your
SBU to support your overall business strategy:
Broad Jobs: Job design that permits employees to
do many different things at work, using a variety
of skills and talents.
Cross Trainingr Job Rotation: Training employees to do more than one job to enable job rotation.
Employee Autonomy: Allowing employees to decide on their own how to go about doing their
work.
Employee Impact: Ensuring that action is taken
on employee input or suggestions.
LaborManagement Relations: A set of practices
to foster a long-term cooperative labormanagement relationship that permits things such as flexible job assignments.
Open Organizations: Lean staff, open horizontal
communications, and a relaxation of traditional
hierarchy.
Note: 7-point scale was used with end points,
1 s Extremely Low Use of Initiative, and 7 s
Extremely High Use of Initiative; a Not Used
option was also provided.
A.2. Operationalizations of dependent ariables
Summary of Instruction: Rate the oerall performance of your SBU relative to major competitors
for each competitive objective:
QUALITY
FLEXIBILITY

J. Jayaram et al.r Journal of Operations Management 18 (1999) 120

TIME-BASED COMPETITION
COST REDUCTION
Note: 7-point scale was used with endpoints, 1 s
Poor and 7 s Excellent.
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