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BJM
8,4 Human resource management
practices and the
HRM-performance link in public
416
and private sector organizations
Received 17 December 2012
Revised 5 May 2013
in three Western societal clusters
19 June 2013
Accepted 4 July 2013 Sinikka Vanhala
Aalto University School of Business, Helsinki, Finland, and
Eleni Stavrou
Faculty of Economic and Management, University of Cyprus, Nicosia, Cyprus

Abstract
Purpose – The purpose of the paper is to explore HRM practices and HRM-performance (HRM-P)
link in public and private sector organizations across three societal clusters: the Anglo, the Germanic,
and the Nordic European.
Design/methodology/approach – The article is based on international Cranet HRM survey data
collected from large private and public organizations.
Findings – According to results, HRM is more advanced in private companies than in public sector
organizations, even across three societal clusters. Instead, the analyses related to HRM-P link in
private and public organizations refer to interesting similarities but also differences between
organizational sectors (public versus private) and societal clusters.
Research limitations/implications – The main limitation is retaining in those performance
indicators that are applicable in both private and public organizations: subjective measures of
productivity and service quality, only. Performance measures relevant especially in the public sector
(e.g. qualitative targets, attaining budget frames) were not available, and the operationalization of
HRM as an index covering the main areas of HRM may have reduced differences between public and
private organizations. More in-depth research designs are needed in public sector HRM-P research.
Originality/value – The paper contributes to HRM-P research by showing that the level of HRM
and the HRM-P relationship varies to some extent according to sector and across Western societal
clusters.
Keywords Performance, Public sector, Human resource management, Comparative research,
Societal cluster
Paper type Research paper

Baltic Journal of Management
Vol. 8 No. 4, 2013
pp. 416-437
q Emerald Group Publishing Limited
1746-5265
DOI 10.1108/BJM-12-2012-0115
Introduction
The past two decades, the environment of companies and public sector organizations
has encountered major challenges that have affected their operational preconditions:
globalization has increased; the growth rate of technological innovations has been
exponential; and competition for customers, qualified employees and higher
performance figures has sharpened (Towers et al., 2006; Brooks et al., 2011).
The authors would like to thank their Cranet colleagues from the different countries who allowed
them to use their country data.
The rate of change has been especially fast in public sector organizations and public HRM practices
sector management. The traditional bureaucratic organizational model, relying and HRM-P link
on hierarchy, rules and the universalistic approach, has been challenged by new
public management (NPM) and other new modes of governance (Boyne, 2002;
Savoie, 2006). Along with the public sector modernization and increasing emphasis
on efficiency and cost-effectiveness, many public sector organizations have adopted
private sector managerial practices, processes and behaviors (Grimshaw et al., 2001; 417
Andrews et al., 2009).
Prior HRM literature has focused on identifying “best” HR practices, such as
employment security, selective hiring, decentralization of decision-making, extensive
training and compensation contingent on organizational performance (Pfeffer, 1994),
and HRM-performance (HRM-P) link (Huselid, 1995; Paauwe, 2004, 2009; Boxall, 2012).
In most studies, advanced HR practices, such as “high performance”, “high
commitment” or “high involvement” work practices, are positively related to
organizational performance (Gmür and Schwerdt, 2005; Paauwe, 2009). In addition to
correlations between individual HR practices and performance indicators, the
meta-analysis of 65 studies by Subramony (2009) revealed that HRM bundles related to
empowerment-enhancing, motivation or skill-enhancing, have significantly larger
impact than their constituent individual practices on business outcomes emphasizing
thus the value of synergistic combinations of HR practices.
In spite of a huge number of publications of HR practices and the HRM-performance
link, public sector HRM has received minor attention (Brown, 2004; Truss, 2008), and
the comparative designs between private and public organizations are rare (Boyne,
2002). Possibly one of the main reasons for such rarity is the persistent belief that these
two forms of organization are too different to compare directly. To illustrate, the
stream of research comparing public and private organizations began by Rainey et al.
(1976), highlighting distinctions rather than similarities between the two sectors.
Further, Mintzberg (1996) and Mintzberg and Bourgault (2000) went as far as to
“contest” the proposition that, as many have claimed, “managing is managing”
regardless of sector, and that government should become more like business: the one
has just as much to gain from the other type of organization and their different roles
and differing contributions in society must remain distinct and be respected. This set
of arguments is related to a more general call for contextual designs in HRM
research at the organizational and even the cross national level (Stavrou et al., 2010).
Therefore, the purpose of this article is to compare human resource management
practices and HRM-performance link in private and public sector organizations across
three societal clusters, the Anglo, the Germanic and the Nordic. The main rationale for
choosing these three societal clusters is related to the cultural studies by Hofstede
(2001) and House et al. (2004), and specifically, to differences in HRM (Ignjatovic and
Svetlik, 2003; Brewster et al., 2004; Gooderham and Nordhaug, 2011) and the nature of
public sectors among these cultural clusters: the Anglo cluster as characterized by
individualistic and managerialistic values and NPM ideology; the Germanic cluster
representing the continental European conservative and family-centered thinking
and relatively high insurance-based benefits; and the Nordic cluster with a welfare
state image with a large public sector financed by high taxes offering generous
services for all citizens (Esping-Andersen, 1990; Andersen et al., 2007; Bertilson and
Hjorth-Andersen, 2009).
BJM HRM in context
8,4 Prior studies, while focused on the private sector, show that HRM and its relationship
with performance may differ according to the national or the supra-national context
(Marchington and Zagelmeyer, 2005; Stavrou et al., 2010). According to Brewster et al.
(2004), marked differences in HRM exist between countries, partly due to culture,
legislative frames, patterns of ownership, and other cultural and institutional factors
418 that are country or region contingent. Further, Ignjatovic and Svetlik (2003) report that
practices considered appropriate in one culture may be less appropriate in another.
Aycan (2005) highlights a number of differences in HR practices among countries,
suggesting that cultural, institutional and structural factors at both national and
organizational levels have a moderating effect on how HRM is practiced around the
world. In fact, researchers have attempted to cluster countries using geography as a
proxy for socio-cultural and political differences in work-related practices (Ronen and
Shenkar, 1985; Hofstede, 2001; House et al., 2004).
Therefore, we aim to contribute to extant research on HRM and the HRM-P relation
in the private and public sectors by exploring the impact of context by using societal
cluster as a proxy for national socio-political and cultural context. Specifically, we
combine three of Gupta et al.’s (2002) clusters using the GLOBE with the HRM-P
relationship. In this way, we go beyond the firm level to capture national, even
cross-national societal characteristics that may affect, at least in part, the use of HRM
and its relationship to performance.
Compared with previous cultural studies, the GLOBE project incorporates a number
of cultural studies and theories, providing a more inclusive and recent list of variables
to classify countries into clusters (House et al., 2002). The societal clusters used in our
study are:
.
the Anglo cluster that includes organizations operating in Australia, Canada,
New Zealand, the UK and the USA;
. Germanic Europe that includes Austria, Germany and The Netherlands; and
.
Nordic Europe that includes organizations operating in Denmark, Finland,
Norway and Sweden.
All three clusters are located in the Western world and consist of countries classified as
individualistic and performance oriented (Hofstede, 2001; House et al., 2002).
The Anglo cluster, although comprising of countries from three different continents,
consists of societies that have a common language, are market and performance
oriented with masculine orientation in so far as they value individualism and apply
a meritocracy in managing people (Ashkanasy et al., 2002). Companies in these
countries are free to aim towards maximizing short-term profits for investors rather
than focusing on all stakeholder interests (Hall and Soskice, 2001). In these countries,
the role of unions is weak and relationships are contract-based (Midtbø, 1999).
Abrams et al. (1998) note that in contractual cultures job security is not guaranteed and
personal trust is not developed through long-term interactions, but rather through
social status and power. Finally, legislative restrictions in respect to HRM-related
practices in these countries are few: HRM is firm-centered and employer driven
(Kalleberg, 2001).
The public sector in the Anglo cluster of countries is characterized by the burden of the
Reagan-Thatcherite public management reforms. “Managerialism”, “neo-Taylorian”
and the NPM ideologies are strong denominators of public sectors in the Anglo cluster of HRM practices
countries (Pollitt, 1990). In the classification of welfare states presented by and HRM-P link
Esping-Andersen (1990), the Anglo model leaves the main responsibility to
individuals. The tax base and income transfers are low as is the share of social costs
of the GDP. Workers with average or higher incomes are expected to rely primarily on
private provisions. Voluntary organizations and charities have an important role in the
structure of welfare services (Scharpf, 2002; Sapir, 2006). 419
The Germanic cluster is culturally more similar to the Nordic than the Anglo
cluster. As Szabo et al. (2002) note, one of the key characteristics of Germanic Europe is
the emphasis on giving “a voice” to employees, encouraging approaches of collective
bargaining and the use of consultation rather than confrontation. Participation in such
group collectivism is seen as a way of achieving individual and organizational goals,
resulting in practices that are tightly defined and rule bound.
The public sector in the Germanic countries follows the continental European
model characterized by Esping-Andersen (1990) as conservative, referring to
relatively high social and educational services, and family-centered thinking
(Scharpf, 2002). For instance, the caring services are mainly left to be provided by the
family itself or the market. The Germanic or continental model relies extensively on
relatively high insurance-based, non-employment benefits and old-age pensions
(Sapir, 2006). According to several classifications and studies (Esping-Andersen,
1990, 1999; Scharpf, 2002), the public sector in Germanic countries lies between the
Nordic European model – with an expanded and expensive public sector, generous
and comprehensive benefits available for all citizens – and the managerial and
individualistic Anglo-American model relying on the individual’s ability to take care
of his/her own living.
In the Nordic cluster, institutional collectivism, uncertainty avoidance and future
orientation win through (Gupta et al., 2002). The Nordic culture is characterized by
decentralized decision-making and extensive communication (Hofstede, 2001;
Brewster et al., 2004). The Nordics are strong on unionization levels and job security
(Brewster et al., 2004); they are considered quite advanced in meeting both employee
and employer needs (Cressey and Jones, 1995). Differing from the Germanic, GLOBE’s
Nordic cluster fosters egalitarian values (Gupta et al., 2002), and is considered as a
prime example of social corporatism (Kilponen et al., 2000).
The Nordic cluster is characterized by a large public sector with a whole range
of welfare services financed by high taxes (Byrkjeflot, 2001; Andersen et al., 2007).
The core principle of the Nordic welfare model is an individual level entitlement
to public sector provisions, while the financing is collective: tax financed. A defining
characteristic of this model is the availability of these provisions to all citizens.
The Nordic public sector is responsible for the distribution and allocation of
about 50 percent of GDP (Andersen, 2008). In the Nordic countries, the public sector
is a large actor in the labor market by its demands for the provision of public
services. In contrast to the German model, a large social service sector provides the
basis for high rate “post-industrial” employment. In addition, the Nordic principle
of welfare state universalism makes a sharp contradiction to the German model
and other Christian democratic welfare regimes, as well as the Anglo system,
which offers minimum universal services with private alternatives for the rich
(Ryner, 2007).
BJM HRM and performance in private and public organizations
8,4 Prior research of HRM in private and public organizations gives a contradictory view
of similarity versus dissimilarity. On the one hand, the NPM ideology (Harel and
Tsafrir, 2001/2002; Savoie, 2006) pronounces a need for similarity between the two
sectors. The similarity hypothesis based on institutional theory (DiMaggio and Powell,
1983, 1991) claims that public sector organizations adopt similar HRM practices to
420 those of the private sector in order to gain legitimacy in regard to the demands for
increasing cost-effectiveness. On the other hand, organizations in the public sector are
still seen to represent a softer model of management and HRM (Boyne et al., 1999;
Boyne, 2002) with an emphasis on operational activities and a reactive role in relation
to strategy (Mesch et al., 1995; Coggburn, 2005; Järvalt and Randma-Liiv, 2010).
According to Boyne (2002), public sector organizations are distinguished in three main
ways from the private companies: ownership (members of political communities vs
entrepreneurs or shareholders), the source of funding (taxation vs customers) and
control (political vs market forces). Public sector HRM is seen to be associated with
softer norms and the ideal of “model employers” thus setting standards, such as
training and equal opportunities in the workplace, and it is seen to differ from the “hard”
(more formal and “calculative”) mode of HRM in the private sector (Boyne, 2002).
Most of the existing HRM studies focus on private companies (Poutsma et al., 2006;
Björkman and Budhwar, 2007) or “large organizations” without specifying the sector
they represent (Stavrou-Costea, 2002; Brewster et al., 2004). The study of public sector
organizations has played a marginal role, and the results are inconsistent. For example,
Boyne et al. (1999) uncover significant differences between public and private sector
organizations in HRM policies and practices, while the results reported by Stavrou et al.
(2007) refer to similarities between the two sectors, and Vanhala et al. (2006) reveal both
similarities and differences. Furthermore, as mentioned in the previous section, studies
have neglected to explore such differences and similarities within societal clusters.
In turn, we propose:
H1. Advanced HRM practices are applied less in organizations of the public than
the private sector in the overall sample as well as within country clusters.
As part of strategic HRM research, the relationship between HRM and organizational
performance (HRM-P) has been widely discussed and studied in prior literature, mostly
in the private sector (Huselid, 1995; Becker and Gerhart, 1996; Paauwe and Boselie,
2005; Paauwe, 2009; Prowse and Prowse, 2010). The performance measures applied
in HRM-P studies range from objective figures to a variety of subjective performance
evaluations. The objective measures are extracted from stock market information or
accounting figures and turnover (Guthrie, 2001), while the subjective measures
are evaluations by company managers of the performance of their companies,
e.g. evaluations of productivity, profitability, and customer satisfaction compared to
their major competitors (Huselid, 1995). The third type of HRM-P measures are
related to HR outcomes, such as employee satisfaction, commitment or stability (Guest,
1997; Gould-Williams and Davies, 2005), which, in turn, are related to the overall
organizational performance. Wall et al. (2004) studied the validity of subjective
performance measures by comparing objective and subjective measures. They
managed to show high convergent, discriminant and construct validity of subjective
performance measures. In prior research, a positive relationship between HRM and
organizational performance is widely documented (Huselid, 1995; Paauwe, 2004, 2009; HRM practices
Combs et al., 2006; Stavrou et al., 2007; Chan and Mak, 2012). and HRM-P link
Despite the variety in approaches used, the studies of the HRM-performance link
can be grouped into three main categories: universal best practices, contingency, and
configurational models (Delery and Doty, 1996). The universalists argue that the
greater use of “high performance” practices such as participation and empowerment,
incentive pay, employment security, promotion from within, and training and skill 421
development, results in higher productivity and profit across all types of organizations
(Pfeffer, 1994). By contrast, contingency theorists note how a number of HRM practices
are consistent with different strategic positions and how these practices relate to firm
performance. The configurational theorists, instead, have attempted to integrate
patterns of HRM-related practices and test their effects on performance. For example,
Ichniowski et al. (1997) explain that when HRM practices are combined in different
forms, the effects on organizational performance are much greater than when practices
are explored individually. However, none of the above approaches has proved better
than the others. As Ferris et al. (1999) note, all approaches are subject to many of the
same limitations and offer little consensus which HR practices should be included.
Although, along with NPM reforms, the call for increasing strategicness, efficiency
and effectiveness of HRM in public sector organizations has been emphasized (Teo,
2000, 2002), only a small number of empirical studies exists on the topic. Stavrou et al.
(2007) are among the few who explored this relationship and found that private
companies had a greater chance than public sector organizations to be superior
performers in relation to HRM. Bertucci (2006) makes a theoretical argument, based on
the NPM paradigm, of the existence of strong correlations between the quality of
human resource management in the public sector and government performance.
However, unless empirical evidence can show such a strong correlation, we cannot
draw certain conclusions on the matter. Due to lack of extant research, we cannot draw
conclusions as to whether such relationship is the same or different across country
clusters either: however, given the aforementioned discussion, we can argue that in the
majority of cases the HRM-P relationship will be higher in the private than the public
sector. In turn, we pose the following hypothesis:
H2. Organizational sector moderates the HRM-P relationship overall and within
societal cluster: the HRM-P link is weaker in the public sector compared to the
private sector.
In summary, we explore HRM practices in the private and public sectors: we propose
that the use of these practices is lower in the public sector and the HRM-P relationship
will differ between the two sectors overall as well as among three of the GLOBE
study’s Western societal clusters, the Anglo, the Germanic and the Nordic.

Methodology
We drew on data from the Cranet comparative survey of human resource management
policies and practices developed by an international research team and coordinated by
Cranfield University, UK (Brewster et al., 2011). Using Cranet data has both pros and
cons: on the one hand, it allows for responses to standard questions across a large
number of organizations and countries; for instance, in this article the number of
organizations is over 3,600 representing 12 countries. On the other hand, due to its wide
BJM scope, it does not allow for an in-depth investigation of issues at hand. As described
8,4 below, the items used to compose the bundles, while typical survey questions, are
widely tested in prior literature, in general, and also in prior survey rounds of the
Cranet project (Vanhala et al., 2012). Therefore, while not necessarily the most
appropriate way to study in depth HRM and its links to performance in a limited
number of public and private sector organizations, the use of Cranet data is appropriate
422 when these relationships are studied in larger societal clusters. In spite of the
superficial nature of Cranet data, they are among the best when a large number of
organizations, countries and societal/cultural clusters are compared.
The Cranet questionnaire was developed by the international research team
(Brewster et al., 2004). Questionnaires were translated into the local language of each
country of the participating Cranet research team, and then re-translated back into
English in order to ensure comparability and equivalence (Tregaskis et al., 2004).
Questionnaires were then pilot-tested and subsequently administered by a research
team of business schools in each of the 12 countries in our study: Australia, Austria,
Canada, Denmark, Finland, Germany, The Netherlands, New Zealand, Norway,
Sweden, the UK and the USA. The target group were large ($ 200 employees) private
and public sector organizations in each country and were identified through databases
of senior HR managers, obtained from national HRM associations, Chambers of
Commerce and National Statistical Services (Vanhala et al., 2012). Potential
respondents, the most senior HR managers, were contacted via a letter and
questionnaire. Non-respondents were later sent a reminder to encourage response. The
response rate for the individual countries varies between 20 and 35 percent, which can
be considered acceptable for full population surveys (Cycyota and Harrison, 2006;
Baruch and Holtom, 2008). Our final sample of accepted questionnaires consists of
responses from 3,611 organizations, 65 percent representing private companies and
35 percent public organizations. The share of public organizations is highest in the
Nordic cluster (43 percent) and lowest in the Germanic one (30 percent). From the
questionnaire, we extracted the following measures.

Variables
HRM. We operationalized the advanced HRM as an index from the set of 27 variables
in the Cranet questionnaire, chosen on the basis of Stavrou et al.’s (2010) work. First, we
created eight bundles, one for each of Stavrou et al.’s (2010) bundles:
. Bundle 1. HR planning (four items), e.g. “Does your organization have a written
personnel/HRM strategy? Corporate values statement?”
.
Bundle 2. HRM responsibility (five items), e.g. “Do line management and the HR
function in consultation have primary responsibility for major decisions on the
following issues? Pay and benefit, recruitment and selection, training and
development, industrial relations, workforce expansion/reduction?”
.
Bundle 3. Appraisal (three items), e.g. “Is the appraisal system used to inform any
of the following: HR planning, analysis of training and development needs,
career?”
.
Bundle 4. Training (two items), e.g. “Does the HR function/department have most
influence over the following: designing training activities? Implementing the
training activities?”
 .
Bundle 5. Employee relations and communication (12 items). HRM practices
.
Bundle 6. Briefing about business strategy (four items), e.g. “which employee and HRM-P link
categories are formally briefed about business strategy? Management,
professional/technical, clerical, manual?”
.
Bundle 7. Briefing about financial performance (four items) “which employee
categories are formally briefed about financial performance? Management,
professional/technical, clerical, manual?” 423
. Bundle 8. Briefing about organization of work (four items) “which employee
categories are formally briefed about organization of work? Management,
professional/technical, clerical, manual?”

Each of these bundles consisted of the number of original variables (in parenthesis,
above) divided by this number, in order to create bundles with equal weights. Then the
eight bundles were added up to make the HRM index: its scale varied from 0 to 8
(mean ¼ 5.60, SD ¼ 1.29). Even though the index is composite and does not
differentiate among Stavrou et al.’s (2010) original bundles, it does provide a general
view of advanced HRM in organizations. Future studies on the subject can focus on
separate HRM bundles for a more nuanced exploration of their effects.
Organizational performance. This measure included two separate perceptual
performance variables, each measured on a binary scale: productivity and service
quality (1 – organization is within the top 10 percent in productivity/service quality
compared to similar organizations in its field, 0 – organization is not within the top
10 percent productivity/service quality compared to similar organizations in its field).
Moderator. As a moderator we used, the organizational sector (public ¼ 1;
private ¼ 0).
Controls. We used organization size (standardized log number of employees),
industry sector (service ¼ 1; manufacturing ¼ 0), trade union recognition for collective
bargaining (yes ¼ 1; no ¼ 0) and main market of organization (local ¼ 1;
multinational ¼ 0) as control variables in order to reduce the potential for spurious
results (Huselid et al., 1997; Wiggins and Ruefli, 2002).

Results
In order to obtain a preliminary view of the data, we conducted Pearson correlations
between the variables (Table I). We standardized the scale variables; thus they have
zero mean and unit variance. The remainder of the variables is binary and the mean
presented in the table indicates the percentage of organizations that have a value of one
for the specific variable.
Next, by means of a t-test, we explored the difference in the HRM index between
the public and private sectors overall and within societal clusters (H1). As Tables II
and III show, the value of the HRM index is higher in the private sector, and the
difference between the two sectors is statistically significant both overall and within
societal clusters.
Then we conducted logistic regressions to investigate the moderating effects of the
sector (public or private) in the relationship between HRM and productivity and service
quality (H2) overall and within clusters. As revealed in Tables IV and V, sector is a
significant moderator in the relationship between HRM and service quality. The
relationship between HRM and productivity, while statistically significant, is not
 8,4
BJM

424

Table I.

independent and
control variables
between dependent,
Descriptive statistics
and Pearson correlations
Mean SD 1 2 3 4 5 6 7 8 9 10

1. Recognize TUs for

collective bargaining 0.74 0.44 1
2. Sector (0 – public,
1 – private) 0.73 0.45 20.23 * * 1
3. Service sector 0.48 0.50 20.03 * * * 20.46 * * 1
4. Anglo societal cluster 0.52 0.50 20.41 * * 0.01 0.02 1
5. Nordic Europe societal
cluster 0.27 0.45 20.23 * * 20.08 * * 0.07 * * 2 0.64 * * 1
6. Germanic Europe
societal cluster 0.21 0.41 20.24 * * 20.09 * * 2 0.11 * * 2 0.51 * * 2 0.33 * * 1
7. Z size(log) 2 0.00 1.02 0.15 * * 20.18 * * 0.16 * * 0.06 * * 2 0.03 * * * 20.03 * * * 1
8. Main markets 0.57 0.49 20.01 20.36 * * 0.43 * * 0.11 * * 0.01 20.14 * * 0.06 * * 1
9. Service quality 0.45 0.50 20.10 * * 0.17 * * 2 0.07 * * 0.10 * * 2 0.05 * 20.08 * * 20.02 20.09 * * 1
10. Productivity 0.30 0.46 20.04 * 0.07 * * 2 0.02 0.01 0.02 20.04 * 0.02 20.04 * 0.48 * * 1
11. Z HRM index 0.00 1.00 0.03 20.04 2 0.02 0.05 * * * 0.04 20.10 * * 0.05 * * * 20.04 0.05 * * * 0.06 *
Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (all tests performed are two-tailed)
moderated by sector. When we conducted the analysis for service quality separately HRM practices
for public and private sectors, we found that, different from H2, in the public sector, and HRM-P link
this relationship is significant while in the private sector it is not.
Third, we conducted the analysis by societal cluster and found that HRM is
positively related with productivity in the Anglo cluster and service quality in the
Nordic cluster. Further, we found a significant moderation effect of sector only in the
Anglo societal cluster and only for service quality (Table VI). Therefore, we conducted 425
separate analyses for the Anglo societal cluster and service quality, broken down by
sector. As Table VII shows, and differently from H2, this relationship is significant in
the public sector, while in the private sector it is not.
Overall, the results of our study support the contention that HRM differs by sector
across all clusters. Further, the HRM-P relationship may in some cases differ based on
sector and cluster. However, differently from hypotheses, the moderation of the HRM-P
relationship by sector, where significant, is higher in the public than in the private
sector.

Discussion
In this study, we explored HR practices and the HRM-P relationship in the private and
public sectors of three GLOBE’s Western societal clusters: the Anglo, the Germanic
and the Nordic. Our study was motivated by the lack of research on the subject
involving the public sector, given the large number of publications of HRM and the
HRM-P link focusing on private companies (Huselid, 1995; Guest, 1997; Stavrou and
Brewster, 2005; Paauwe, 2009). Furthermore, possible societal differences in
conjunction with sector have been neglected in extant research as well (Brewster,
1995; Marchington and Zagelmeyer, 2005; Stavrou et al., 2007).
Our analyses confirmed the prior notion that HRM is less advanced in public
sector organizations than in private companies (Grimshaw et al., 2001), even across

Levene’s test for t-test for equality

Sector n Mean SD equality of variances of means df

Public 362 5.46 1.24 0.68 2 2.78 * * 1,525 Table II.

Private 1,516 5.67 1.29 t-test of HRM in the
public and the private
Note: Significant at: *p , 0.10 and * *p , 0.01 (test performed is two-tailed) sector

Levene’s test for t-test for equality

Country cluster Sector n Mean SD equality of variances of means df

Anglo Public 218 5.53 1.21 1.67 21.80 * * * 857

Private 641 5.72 1.34
Nordic Public 89 5.52 1.02 1.54 21.77 * * * 347
Private 260 5.77 1.20
Germanic Public 55 5.07 1.56 2.80 * * * 22.08 * 317 Table III.
Private 264 5.47 1.25 t-test of HRM in the
public and the private
Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (test performed is two-tailed) sector by country cluster
BJM
Service quality Productivity
8,4 B SE B SE

Step 1
Independent and control variables
Service sector 20.23 * * * 0.13 20.20 0.14
426 Recognize TUs for collective bargaining 0.21 0.13 0.07 0.14
Main market (national/international) 0.18 0.12 0.20 0.13
Organization size (z-log) 20.01 0.05 0.06 0.06
Sector (public/private) 20.62 * * 0.15 20.24 0.17
Z HRM index 0.10 * * * 0.06 0.12 * 0.06
Constant 0.04 0.12 20.79 * * 0.13
Cox & Snell R 2 0.02 0.01
Step 2
Independent, control and moderating variables
Service sector 20.23 * * * 0.13 20.20 0.14
Recognize TUs for collective bargaining (yes/no) 0.20 0.13 0.07 0.14
Main market (national/international) 0.18 0.12 0.20 0.13
Organization size (z-log) 0.01 0.05 0.06 0.06
Sector (public/private) 20.70 * * 0.16 20.28 0.17
Z HRM index 0.44 * * 0.13 0.26 * * * 0.13
Table IV. Z HRM index*sector 20.43 * * 0.14 20.17 0.15
Logistic regression for Constant 0.04 0.12 20.78 * * 0.13
service quality and Cox & Snell R 2 0.03 * 0.01
productivity with
sector as moderator Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (all tests performed are two-tailed)

Service quality
Sector B SE

Public
Service sector 20.19 0.56
Recognize TUs for collective bargaining 0.24 0.44
Main market (national/international) 0.75 * 0.32
Organization size (z-log) 20.02 0.11
Z HRM index 0.43 * * 0.13
Constant 20.75 * * 0.14
Cox & Snell R 2 0.06 0.01
Private
Service sector 20.21 0.14
Recognize TUs for collective bargaining 0.18 0.14
Main market (national/international) 0.08 0.13
Organization size (z-log) 0.01 0.06
Z HRM index 0.01 0.06
Table V. Constant 0.09 0.12
Logistic regression Cox & Snell R 2 0.01 0.01
between HRM and
service quality by sector Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (all tests performed are two-tailed)
 Service quality Productivity
HRM practices
Clusters B SE B SE and HRM-P link
Step 1
Anglo
Service sector 20.04 0.18 20.06 0.19
Recognize TUs for collective bargaining (yes/no) 0.10 0.17 0.32 * * * 0.18 427
Main market (national/international) 20.02 0.16 20.25 0.18
Organization size (z-log) 20.10 0.07 0.07 0.08
Sector (public/private) 20.49 * 0.20 0.02 0.22
Z HRM index 0.06 0.07 0.17 * 0.08
Constant 0.20 0.17 20.88 0.17
Cox & Snell R 2 0.02 0.01
Nordic
Service sector 20.60 * 0.27 20.48 * * * 0.28
Recognize TUs for collective bargaining (yes/no) 20.21 0.40 20.24 0.42
Main market (national/international) 0.46 * 0.26 0.62 * 0.27
Organization size (z-log) 20.10 0.13 0.01 0.14
Sector (public/private) 20.84 * 0.32 20.42 0.34
Z HRM index 0.27 * 0.13 0.18 0.13
Constant 0.09 0.23 20.72 * 0.25
Cox & Snell R 2 0.06 0.03
Germanic
Service sector 20.47 0.31 20.26 0.32
Recognize TUs for collective bargaining (yes/no) 20.05 0.62 20.37 0.70
Main market (national/international) 0.77 * 0.32 0.87 * 0.35
Organization size (z-log) 0.29 * 0.12 0.11 0.13
Sector (public/private) 20.92 * 0.43 20.68 0.48
Z HRM index 20.01 0.13 0.01 0.13
Constant 20.50 * 0.27 21.18 * * 0.30
Cox & Snell R 2 0.08 0.05
Step 2
Anglo
Service sector 20.04 0.18 20.06 0.19
Recognize TUs for collective bargaining (yes/no) 0.08 0.17 0.32 * * * 0.18
Main market (national/international) 20.01 0.16 20.25 0.18
Organization size (z-log) 20.09 0.07 0.08 0.08
Sector (public/private) 20.57 * 0.21 20.01 0.22
Z HRM index 0.36 * 0.16 0.26 0.16
Z HRM index*sector 20.40 * 0.18 20.12 0.19
Constant 0.20 0.17 20.87 * * 0.19
Cox & Snell R 2 0.02 0.01
Nordic
Service sector 20.59 * 0.27 20.48 * * * 0.28
Recognize TUs for collective bargaining (yes/no) 20.21 0.40 20.24 0.42
Main market (national/international) 0.46 * 0.26 0.61 * 0.27
Organization size (z-log) 20.09 0.13 0.02 0.14
Sector (public/private) 20.94 * 0.34 20.49 0.35
Z HRM index 0.64 * 0.31 0.43 0.31 Table VI.
Z HRM index*sector 20.45 0.34 20.31 0.35 Logistic regression by
Constant 0.10 0.23 20.72 * * 0.25 societal cluster for service
Cox & Snell R 2 0.06 0.03 quality and productivity
(continued) with sector as moderator
BJM Service quality Productivity
8,4 Clusters B SE B SE

Germanic
Service sector 20.47 0.31 20.27 0.32
Recognize TUs for collective bargaining (yes/no) 20.07 0.62 20.37 0.69
428 Main market (national/international) 0.75 * 0.32 0.88 * 0.35
Organization size (z-log) 0.29 * 0.12 0.11 0.13
Sector (public/private) 20.96 * 0.44 20.69 0.49
Z HRM index 0.42 0.36 20.14 0.34
Z HRM index*sector 20.51 0.39 0.18 0.37
Constant 20.50 * 0.27 21.18 * * 0.30
Cox & Snell R 2 0.08 0.05
Table VI. Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (all tests performed are two-tailed)

Service quality
Sector B SE

Public sector
Service sector 0.30 0.67
Recognize TUs for collective bargaining 0.03 0.48
Main market (national/international) 0.50 0.41
Organization size (z-log) 20.10 0.14
Z HRM index 0.36 * 0.16
Constant 20.46 * 0.18
Cox & Snell R 2 0.04 0.04
Private sector
Service sector 20.06 0.19
Recognize TUs for collective bargaining 0.06 0.18
Main market (national/international) 20.10 0.18
Table VII. Organization size (z-log) 20.10 0.08
Logistic regression for Z HRM index 20.03 0.08
the Anglo societal cluster Constant 0.28 0.19
between HRM and Cox & Snell R 2 0.01 0.02
service quality with
sector as moderator Note: Significant at: *p , 0.05, * *p , 0.01 and * * *p , 0.10 (all tests performed are two-tailed)

societal clusters, thereby confirming H1. H2 concerning the moderating role of

organizational sector (public versus private) on the HRM-P relationship was not
confirmed: the relationship between HRM and service quality, where significant, was
stronger in the public and weaker in the private sector. Furthermore, when broken into
societal clusters, the moderation effects of sector were significant only in the Anglo
cluster: once more the relationship between HRM and service quality was stronger in the
public sector and weaker in the private one. In addition, the relationship between HRM
and productivity in our study, while statistically significant in the overall model
(Table IV) and in the Anglo cluster (Table VI), was not moderated by sector. Given our
results, private and public sector HRM may not be so fundamentally different in relation
to productivity (Savoie, 2006).
 These results differ from Stavrou et al.’s (2007) work, reporting that top performing HRM practices
organizations, measured by productivity and service quality, were more likely to be and HRM-P link
private than public sector organizations. Furthermore, the aforementioned results raise
questions as to why would the HRM-P relationship be stronger in the public sector
while, according to the results, HRM is more advanced in the private sector. Taking a
closer look at the relationships between sector and our dependent variables, we may
conclude that both service quality and productivity are more likely to be advanced in 429
the private sector as well. Thus, and in the absence of prior studies on these issues, we
may reach the preliminary conclusion that the impact of the HRM-P relationship may
be bigger in the public sector given that public sector organizations have not adopted
HR practices in the same scale as the private sector companies and in turn the public
sector is slower to respond on the basis of softer human resource management and
performance standards as suggested by Boyne (2002) and Boyne et al. (1999). Even
though the debate of similarity/dissimilarity remains faint in relation to HRM and
sector, as introduced in the beginning of this article, we have been able to show some
differences between the two sectors in HRM and the HRM-P relationship, bringing us a
step closer to addressing this debate in future research.
Finally, while HRM was more advanced in the private than in the public sector in all
three societal clusters, the HRM-P relationship varied somewhat by the cluster.
Specifically, in the Anglo cluster the relationship between HRM and productivity was
significant while the sector was a significant moderator between HRM and service
quality. In the Nordic cluster, HRM was positively related with service quality but we
had no moderation effects of the sector. Finally, we had no significant moderation
effects or relationships between HRM and our dependent variables in the Germanic
cluster. The lack of moderation effects in the latter two clusters, while the significant
moderation effect was observed in the Anglo cluster, may have to do with the cultural
and institutional differences and similarities among the clusters as discussed earlier
(Esping-Andersen, 1990; Szabo et al., 2002; Ignjatovic and Svetlik, 2003; Aycan, 2005;
Andersen et al., 2007; Bertilson and Hjorth-Andersen, 2009).
The examination of public sector HRM and HRM-P across societies and in
comparison with the private sector is challenging. To add to this challenge, little
consistency exists about the definitions of both HRM and performance (Stavrou et al.,
2010). Boselie et al. (2005) and Guest (1997) report a lack of clear theory on the concept
of HRM and the concept of performance. A primary question regarding performance
concerns whether the organisation’s own measures are accepted, rather than some
measure of employee or public good (Delaney and Huselid, 1996; Lindström and
Vanhala, 2013). Looking across national boundaries complicates the picture even
further. This is a serious challenge for survey researchers, who should decide how to
measure the performance of a multitude of both private and public sector organizations
(e.g. firms, schools, and prisons) in the same survey inquiry.
The narrow use of performance measures is thus among the main limitations of our
study. In order to compare the HRM-P relationship between private and public
organizations, we had to use only such performance indicators that were applicable in
both types of organizations. Consequently, all objective measures and a part of
subjective measures, e.g. profitability (Stavrou and Brewster, 2005) were excluded.
Even though, service quality and productivity employed in this study represent
widely applied performance measures in prior HRM research (Huselid, 1995;
BJM Ichniowski et al., 1997; Vanhala and Tuomi, 2006), when considering performance
8,4 measurement in public organizations we encountered a wide range of qualitative
targets, budget frames, political decisions, and also exact numerical targets and
measures (Modell, 2004, 2005; van Helden et al., 2008). Applying such qualitative
targets and measures would entitle a qualitative research design, something that
compromises sample size significantly.
430 Another limitation is related to the operationalization of HRM as an index from the set
of 27 original HR variables applied in Stavrou et al. (2010). Though condensing data and
increasing reliability of the HRM measure, this kind of index overlooks information and
concreteness. Furthermore, even though the same survey covered public and private
organizations, it is not clear whether the same HRM measures are equally applicable to
both sectors. Future studies should examine the appropriateness of these measures for
these sectors, for HRM in public organizations is seen to represent softer HRM (referring,
e.g. to the emphasis of training and equal opportunities in the workplace, differing
thus from “hard” (more formal and “calculative”) mode of HRM in the private sector
(Boyne, 2002).
Third, our data were collected from a single source; multi-level studies would
strengthen the data (Bowen and Ostroff, 2004; Vanhala et al., 2012). Nevertheless, we
attempted to minimize the effects of single-method bias (Gerhart et al., 2000): the
questions were factual (yes/no) rather than measuring opinions (rating scale);
furthermore, differences between four categories of employees were included. As
advocated by Podsakoff et al. (2003), respondents were guaranteed anonymity and
criterion measures were placed in different sections of the questionnaire and posed in
different response formats from predictor variables. As suggested by Huselid and
Becker (2000), the respondents were members of the organization’s corporate HRM
team. In addition, the Cranet survey has been conducted approximately every four
years over two decades, during which expertise has been developed with regard to the
methods and procedures to make the questionnaire as specific and clear as possible.
Typical to all vast international surveys, the response rates are relatively low, and the
trend has been degreasing. So is the case with Crane surveys, as well (Mayrhofer et al.,
2011). In these data, the country-level response rates vary between 20 and 35 percent,
which are not very high but compares well with other international company-level
surveys (Cycyota and Harrison, 2006).
Fourth, we focus on Cranet data covering large organizations ($ 200 employees).
Some smaller countries have collected data also form smaller organizations (employing
100-199 people). In order to avoid bias in data we decided to keep the large
organizations, only. In spite of the fact that the great majority of companies (99 percent
in the EU) are micro, small or medium-sized (EC, 2005), the HRM studies typically
focus on large organizations where well developed HRM functions or departments
exist. Formalized HRM policies and practices are much more seldom in small and
micro organizations. However, this focus on larger organization means that the results
can be generalized only to large public and private organizations in the societal clusters
of the study.
Finally, the differences between societal/cultural clusters did not appear strong in
the data of organizations. This may be due to the combination of HRM practices but
also partly due to the focus on Western European societal/country clusters. Involving
differences in cultural orientations, HRM, and sectors between the three societal
clusters, the differences in HRM and HRM-P measured by Cranet data are smaller. HRM practices
Obviously, differences in HRM and HRM-P would be higher if culturally and and HRM-P link
economically more different societal clusters were compared, such as the CEE
transition countries (Brewster et al., 2010), Latin America (Elvira and Davila, 2005) or
Asia (Warner, 2010).
Based on limitations of this study, the implications for future research are clear:
better and more case-sensitive measures are needed for HRM practices as well as for 431
performance. In the same vein, the performance measures need elaboration; public
sector performance should be studied as case study designs using qualitative methods
in order to better understand the nature and dimensions of public performance. After
that, novel public sector performance measures could be tested to elaborate for survey
inquiries. In addition, comparative HRM research needs a more culture-sensitive
approach. Prior comparative HRM literature focuses on identifying similarities and the
distribution of HRM practices across cultures, countries and fields of industry instead
of searching for cultural differences and idiosyncrasies (Vanhala et al., 2012).
For practical management and societal level actors the results emphasize the role of
HRM in the organizational performance, though both HRM and performance are
measured in a relatively narrow way. Such best/high performance HRM practices
are partly universal, applicable in all kinds of organizations in all cultural contexts
(Pfeffer, 1994) and partly contingent, typically depending on business strategy (Delery
and Doty, 1996) and contextual, depending on the cultural, country- or sector context
(Brewster et al., 2004). The practical HR managers both in private companies and public
organizations should select a portfolio of HRM practices which takes into consideration
the relevance of universal best practices, the core competences of the organization, and
the needs originating from the business, societal and cultural environment of the
organization. The HRM architecture, which considers the needs of the organization
and the challenges of the context, should lead to better performance. Especially, for
public sector managers with pressures to increase efficiency and cost-effectiveness of
their organizations, the results emphasize the importance of the role of advanced/high
performance HRM practices. The results also indicate that better (more varied)
performance measures should be developed for public organizations, which means that
public sector managers should pay special attention to the composition of performance of
their organizations. By putting these two together, i.e. understanding the whole range of
advanced HRM practices and better understanding of the components of public sector
performance – and the relations between these two – might help public organizations to
survive and thrive in the future. In addition, the results remind practical management
of the increasing importance of cultural understanding. While multinational companies
have adjusted to different cultures along with internationalization of businesses
and companies, the public organizations typically meet the cultural differences as an
increasing number of foreign employees and customers (immigrants, refugees) today.
The differences in practices and valuations between three Western societal clusters
remained relatively low in the study; instead, culturally more different areas might bring
more diversity to management and HRM.

Conclusions
Despite its limitations, this study has helped us confirm that HRM and the HRM-P
relationship differs to some extent between the public and the private sector and across
BJM certain societal clusters. Through this study we have come a step closer to exploring
8,4 the reasons behind such differences and similarities.
Overall, the study adds to extant studies by confirming some differences both in
HRM and in the HRM-service quality link between the private and the public sector. To
this respect, it reveals new information by showing that, given the specific
performance measures used, the HRM-P relationship is stronger in the public sector.
432 Further, breaking the analysis by societal cluster, it demonstrates that sector is a
significant moderator to this relationship only in the more individualistic and
short-term oriented Anglo world. Finally, it extends previous research (Stavrou et al.,
2007) by showing that the level of HRM and HRM-P relationship varies to some extent
across societal clusters as well.
Given these results, and in accordance with Kostova and Roth (2002), we propose
that both institutional and cultural theories could be applicable, helping organizations
obtain legitimacy and adapting their activities in specific contexts. Thus, this study
may be useful to both academics and practitioners in helping them begin to understand
the idiosyncrasies of HRM in the public versus the private sector and its variation
across societies.

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Corresponding author
Sinikka Vanhala can be contacted at: sinikka.vanhala@aalto.fi

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