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Int. J.

of Human Resource Management 17:4 April 2006 559 579

The impact of strategic human resource management on rm performance and HR professionals work attitude and work performance

Kenneth W. Green, Cindy Wu, Dwayne Whitten and Bobby Medlin


Abstract The impact of strategic human resource management (SHRM) on organizational performance is assessed. Additionally, the impact of a SHRM approach on the individual performance, organizational commitment and job satisfaction levels of human resource professionals is investigated. An organization exhibits SHRM when the human resources function is vertically aligned with the mission and objectives of the organization and horizontally integrated with other organizational functions. Data from a national sample of 269 human resource professionals from large US manufacturing rms were analyzed using structural equation modeling techniques. Results indicate that the direct impact of SHRM on organizational performance is positive and signicant, as hypothesized. Further, SHRM was found to directly and positively inuence individual performance, organizational commitment and job satisfaction. Top managers implementing a SHRM system can, therefore, expect improved organizational performance and improved levels of individual performance, job satisfaction and organizational commitment from the organizations human resource professionals. Keywords Strategic human resource management; organizational performance; individual performance; organizational commitment; job satisfaction; structural equation modelling.

Introduction The area of strategic human resource management (SHRM) has attracted a great deal of research attention over the past decade because of its potential impact on the bottom line issues. Various studies have conrmed the positive impact of SHRM on organizational performance (Huselid, 1995; Huselid and Becker, 1996; Huselid et al., 1997; MacDufe, 1995). Recently, researchers have begun to examine the impact of SHRM on HR effectiveness and have discovered an unexpected negative relationship
Kenneth W. Green, Jr, School of Business, Henderson State University, Box 7762, Arkadelphia, AR 71999 (tel: 870-230-5018; e-mail: greenk@hsu.edu); Cindy Wu, Baylor University, Hankamer School of Business, Management and Entrepreneurship Department, Box 98006, Waco, Texas 76798 (tel: 254-710-7672; e-mail: Cindy_Wu@baylor.edu); Dwayne Whitten, Baylor University, Hankamer School of Business, Information Systems Department, Box 98005, Waco, Texas 76798 (tel: 254-710-6106; e-mail: Dwayne_Whitten@baylor.edu); Bobby Medlin, School of Business, Henderson State University, Box 7832, Arkadelphia, AR 71999 (tel: 870-230-5114; e-mail: medlinb@hsu.edu).
The International Journal of Human Resource Management ISSN 0958-5192 print/ISSN 1466-4399 online q 2006 Taylor & Francis http://www.tandf.co.uk/journals DOI: 10.1080/09585190600581279

560 The International Journal of Human Resource Management (Bennett et al., 1998). Organizational and departmental performance is composed of individual performance, which has been found to be related to individual work attitude (Judge et al., 2001). Thus, it is natural to ask how SHRM inuences HR professionals work attitudes and individual performance. To date, little is known concerning how SHRM inuences the work attitudes and individual performance of the HR staff. This is understandable because of the different levels of analysis. That is, while SHRM research uses organizations as the unit of analysis, it largely ignores the differences in individual employees work attitudes and performance. Rather, it aggregates them to form organizational outcomes. Much research attention has been given to the relationships between SHRM and rm performance and between individual HR practices and individual performance (Wright and Boswell, 2002), with the cross-level issues (e.g., inuence of SHRM on individual performance and individual HR practices on rm performance) largely ignored. Researchers have particularly called for studies that address cross-level research questions (Wright and Boswell, 2002). The purpose of this study, therefore, is to examine how SHRM impacts organizational and individual work performance and attitude. Specically, we attempt to answer the following research questions: 1 What is the impact of SHRM on organizational performance? 2 What is the impact of SHRM on HR professionals individual work attitudes? 3 What is the inuence of SHRM on HR professionals individual work performance? To achieve this aim, we conducted a national survey of human resource managers working in the US manufacturing sector. SHRM, organizational performance, individual performance, job satisfaction and organizational commitment were measured in the survey. The following section incorporates a review of the literature and develops the studys hypotheses. The results section includes a description of the methodology employed to test the hypotheses, a description of the sample, assessment of the reliability and validity of the study scales, and a presentation of the structural equation modelling results. Finally, a conclusions section is provided, which summarizes results of the study, describes the limitations of the study and the need for future research, and discusses the implications of the results for theory as well as practicing managers. Literature review A hypothesized model is presented in Figure 1. In this model, SHRM is depicted as positively impacting organizational performance, HR professionals job satisfaction, organizational commitment, and individual performance. In addition, HR professionals job satisfaction is hypothesized to be positively associated with organizational commitment. SHRM and rm performance SHRM researchers have adapted theories from the strategy literature to argue that human resources can help build sustained competitive advantages (Wright, Dunford and Snell, 2001; Wright and McMahan, 1992). More specically, a resource-based view of business strategy states that, in order to build a sustained competitive advantage, the resource that is intended to build a competitive advantage must add value, be unique and rare, be imperfectly imitable, and not be substitutable with another resource by competing rms (Barney, 1991). Given these characteristics, Wright and McMahan (1992) contend that

Green et al.: The impact of SHRM on attitude and performance 561

Figure 1 SHRM outcomes model with hypotheses

human resources, if properly aligned with corporate strategy, could serve as the basis for such competitive advantage. Aligning HR practices to support business objectives generally requires implementation of a SHRM approach (Delery, 1998; Huselid et al., 1997; McMahan et al., 1998; Wright, Dunford and Snell, 2001). In order to support different business strategies, both vertical t and horizontal t between HR practices and business strategies have been proposed in the SHRM literature (Delery, 1998). Horizontal t, often referred to as HR bundles (Delery and Doty, 1996; MacDufe, 1995), is the degree to which specic human resource practices are orchestrated in a coherent and consistent manner to best support one another and to integrate with other departments. Vertical t, on the other hand, refers to the alignment of human resource practices to the organizational context in order to support specic organizational objectives. Following previous research, we also dene SHRM as both horizontal t of HR practices and vertical t between HR practices and business strategies. Although researchers have found that SHRM is positively related to rm performance, SHRM in these studies is usually operationalized and measured as the existence or the effectiveness of a variety of sets of HR practices that are assumed to be universally effective (e.g., Bae and Lawler, 2000; Delaney and Huselid, 1996; Guthrie, 2001; Huselid, 1995; MacDufe, 1995). With limited empirical research on the t issue of SHRM, whether t is necessary is indenite. In fact, Delery (1998) even contends that simultaneous horizontal t and vertical t may not be necessary or benecial. We attempt to address this research gap by empirically testing the vertical and horizontal t of SHRM and its relationship with rm performance. Findings of SHRM studies that have taken a congurational approach may shed light on the issues of t. A congurational perspective takes an approach similar to horizontal t that examines human resource practices as a bundle as opposed to discussing each specic HR practice and its effect on organizational outcomes. Dyer and Reeves (1995) argue that different organizational environments require different types of employees and behaviours and that different human resource strategies should also produce different types of employees and behaviours from employees. Therefore, human resource strategies should

562 The International Journal of Human Resource Management be based on the organizational context, which points toward the importance of both the horizontal t and vertical t of SHRM. Recent empirical research provides modest support for this notion. Lepak and Snell (2002), in their investigation of 206 executives, HR managers and line managers from 148 rms with different employment modes (knowledge-based employment, job-based employment, contract work and alliance/ partnership), found that different HR congurations are associated with different employment modes. Specically, they found that job-based employment is signicantly associated with productivity-based HR conguration, contractual work arrangement is signicantly associated with compliance-based HR conguration, and alliance/ partnership is signicantly associated with collaborative-based HR congurations. These ndings suggest that in implementing SHRM, rms tend to bundle their HR practices in a coherent manner in order to support their unique organizational context. This also points out the importance of both types of t. We adopt the denition of SHRM as both horizontal t and vertical t and hypothesize, based on the resource-based view of SHRM, that: Hypothesis 1: SHRM has a direct, positive impact on organizational performance.

SHRM and HR professionals work attitudes SHRM may enhance HR professionals work commitment and satisfaction because their job is structured as intrinsically motivating. An organization that implements SHRM includes the HR professionals as business partners by involving them in the strategic planning process (Ulrich and Beatty, 2001). This allows them to use a variety of skills to full their daily job responsibilities. Specically, horizontal t allows HR professionals to coordinate various HR activities into a coherent HR system (Delery, 1998), which signies task identity by facilitating the integration of tasks and avoiding segmenting them. Vertical alignment links HR practices to rm strategy (Delery, 1998), which offers the chance for HR professionals to evaluate their HR work from the organizational perspective. This link helps HR professionals to realize the signicance of their work because it supports the accomplishment of company objectives and facilitates organizational change (Hoogervorst et al., 2002). It also ties HR activities and effectiveness to organizational performance, providing additional work feedback to HR professionals. In practice, horizontal and vertical t require that HR professionals coordinate both inside and outside the HR department so that HR activities can correspond with each other and with other department activities. This empowers HR professionals to make decisions and, as a result, elevates the level of task autonomy. As stated above, a HR professionals job at an organization that implements SHRM, dened as vertical t and horizontal t, could be depicted as having skill variety, task identity, task signicance, feedback and autonomy. The job characteristics model suggests that when a task is signicant, requires skill variety, possesses task identity, and provides autonomy and task feedback, employees will experience higher levels of intrinsic motivation through such critical psychological conditions as experienced meaningfulness, experienced responsibility, and knowledge of results (Hackman and Oldham, 1976). These job characteristics lead to higher levels of organizational commitment (Eby and Freeman, 1999; Glisson and Durick, 1988; Thatcher et al., 2002) and job satisfaction (Eby and Freeman, 1999; Glisson and Durick, 1988). Because SHRM is more likely to offer these characteristics in an HR professionals job, we propose:

Green et al.: The impact of SHRM on attitude and performance 563 Hypothesis 2: SHRM has a direct, positive impact on the organizational commitment of human resource professionals. Hypothesis 3: SHRM has a direct, positive impact on the job satisfaction of human resource professionals.

SHRM and HR professionals work performance SHRM may also enhance the performance of HR professionals because it fulls the expectation of an ideal HR professionals role. There has been an increasing recognition that HR professionals are expected to be business partners who have the power to inuence the business outcomes (Ulrich, 1997). For example, in a semi-structured indepth interview, HR professionals report that they believe their most important roles in business are as advisors and change agents (Caldwell, 2003), both of which relate to strategic issues but differ in how much they are allowed to intervene in strategy planning (Storey, 1992). Ulrich and Beatty (2001) also suggest that HR professionals view themselves as coaches to the stakeholders, architects who design the HR systems and organizational structure, and builders who implement the blueprints sketched in the architecture stage, facilitators who ensure the smooth teamwork and the right person job t, leaders who manage the HR department like a business unit, and as gatekeepers who ensure that HR decisions are made in an ethical fashion. In practice, an organization where the HR function is horizontally and vertically aligned with business strategy is likely to offer to full the aforementioned role expectations. Specically, horizontal t allows the HR professionals to view the specic HR activities as a coherent system that supports the business strategy. HR professionals are also empowered to offer suggestions to other departments in such a way that the HR function is integrated with other organizational functions. Furthermore, vertical alignment allows HR professionals to become strategic partners in the strategic planning and implementation process by offering advice to management executives so that they are playing in the game, rather than playing at the game (Ulrich and Beatty, 2001). This suggests that an organization that implements SHRM will entrust the HR professionals with a high-level strategic role, which not only supports the HR professionals mission but also offers to meet the role expectations in their minds. The theory of psychological contract suggests that employees have certain beliefs concerning the nature of the exchange agreement between the employee and the organization (Rousseau, 1989). When employees perceive a negative imbalance where employees expectations of their organization are not met, employees will take counterbalancing actions, which, in turn, leads to reduced satisfaction with the organization (Porter et al., 1998), reduced commitment (Robinson and Morrison, 1995; Rousseau and Parks, 1993), reduced job satisfaction (Robinson and Morrison, 1995; Turnley and Feldman, 2000), and higher cynicism (Robinson and Morrison, 1995). On the other hand, the fullment of such expectations results in employees reciprocation by increasing their effort in work, which consequently leads to higher in-role and extra-role job performance (Turnley et al., 2003). Because an organization where SHRM is vertically and horizontally aligned is more likely to bring an HR professionals job role closer to the expected role, we propose: Hypothesis 4: SHRM has a direct, positive impact on the individual performance of human resource professionals.

564 The International Journal of Human Resource Management Job satisfaction and organizational commitment In addition to the relationships between SHRM and HR professionals job attitudes, the two job attitudes, job satisfaction and organizational commitment, may also correlate with each other. Organizational commitment refers to an individuals attachment, loyalty and identication with the organization (Meyer and Allen, 1984). Porter et al. (1974) contend that satisfaction is an unstable and immediate affective response to the work environment, while organizational commitment is viewed as a long-term, slowerdeveloping attitude. They therefore posit that satisfaction is an antecedent to commitment. Extensive research ndings suggest that job satisfaction is a precursor to organizational commitment (DeCotiis and Summers, 1987; Lok and Crawford, 2001; Mathieu and Hamel, 1989; Wasti, 2003; Williams and Hazer, 1986). Using two different samples from different organizations, Williams and Hazer (1986) nd that job satisfaction mediates the inuence of personal characteristics and work environment on organizational commitment. Testing a model that hypothesizes the antecedents and consequences of job satisfaction using retail salespeople as the respondents, Brashear et al., (2003) also found that satisfaction precedes commitment. Similar results are found in different settings, including marketing (Brown and Peterson, 1993), blue-collar workers (Iverson and Roy, 1994) and information technology (Thatcher et al., 2002). Although some researchers suggest that organizational commitment precedes job satisfaction (e.g., Bateman and Strasser, 1984), Mathieus (1991) non-recursive model indicates that satisfaction has a stronger inuence on commitment than vice versa. Given the extensive and well-established previous research ndings, we hypothesize a positive relationship between job satisfaction and organizational commitment: Hypothesis 5: Job satisfaction has a direct, positive impact on the organizational commitment of human resource professionals.

Methodology To test the stated hypotheses, a two-wave mail survey of human resource professionals for large US manufacturing companies was conducted. Since budget and time constraints did not allow more that two mailings, several measures were taken to improve the response rate. The focus of the study (SHRM) was believed to be of signicant interest to HR professionals and a relatively short (front and back of one legal-sized sheet) questionnaire was used. The accompanying letter was personalized, assured anonymity, and offered an executive summary to respondents. The survey packet included a selfaddressed, metered return envelope and was sent through rst-class mail. The HR professionals were asked to complete and return a survey form containing scales that measure SHRM, organizational performance, individual performance, job satisfaction and organizational commitment. The paper will proceed with a description of the sample along with an assessment of the effectiveness of the sample which includes discussion of the response rate, item completion rate, and an assessment of the impact of non-response bias. The results of a thorough assessment of the unidimensionality, reliability and validity of all scales are provided along with an assessment of the impact of potential common method bias. Descriptive statistics for the study variables and a correlation matrix are also provided. Finally, the results of the structural equation modelling analysis of the hypothesized model are described.

Green et al.: The impact of SHRM on attitude and performance 565 Survey effectiveness Initial and follow-up requests for participation were sent to 1,750 individuals holding human resource management related positions within US manufacturing organizations. The 1,750 names and addresses were randomly chosen from almost 8,000 listed in a database provided by Manufacturers News, Inc. The database included information on US manufacturers with 250 or more employees. The data collection focused on large manufacturers because those organizations are likely to have well-established HR functions managed by experienced HR professionals. Completed survey instruments were received from 269 individuals representing manufacturing rms for a gross response rate of 15.4 per cent. The response rate is relatively high for research that draws from manufacturing sample frames. Harmon et al. (2002) note that low response rates are not untypical in industrial research and report a 10.8 per cent response rate from a traditional two wave mail methodology. Dwyer and Welsh (1985) report a somewhat lower 6.3 per cent rate under similar circumstances. Additionally, Nahm et al. (2003a, 2003b) report receiving 224 responses from a survey of 3,000 manufacturers for an effective response rate of 7.5 per cent. Additionally, Tan et al. (2002) report a 6.7 per cent response rate from a survey of purchasing managers within a manufacturing setting. In addition to the survey response rate, item completion rate can be used as another measure of survey effectiveness (Klassen and Jacobs, 2001). Klassen and Jacobs (2001: 717) dene item completion rate as the proportion of survey items answered relative to all applicable items. The item completion rate for this study is a relatively high 99 per cent, suggesting adequate survey effectiveness.

Assessment of non-response bias Testing for non-response bias is important to identify any potential bias due to the failure of members of the sample to respond. Although Hunt (1990) argues that otherwisecredible research should not be rejected solely on the basis of potential non-response bias, the potential for such bias is always a concern when conducting mail surveys. Nonrespondents have been found to descriptively resemble late respondents (Armstrong and Overton 1977), thus it is important to determine if the early and late responders are similar. Lambert and Harrington (1990: 21) describe a common approach to assessment by comparing the rst and second waves and assuming that non-response bias is nonexistent if no differences exist on the survey variables. Following this common approach, respondents were categorized as responding to either the initial or follow-up requests sent approximately three weeks later. Those responding to the initial requests were classied as early responders; those responding to the follow-up requests were classied as late responders. Of the respondents, 71 per cent (191) were categorized as early responders and 29 per cent (78) were categorized as late responders. A comparison of the means of the descriptive variables and the strategic human resource, organizational performance, individual performance, organizational commitment and job satisfaction scale-item responses for the two groups was conducted using one-way ANOVA. None of the comparisons resulted in differences statistically signicant at the .01 level. Because non-respondents have been found to descriptively resemble late respondents, this nding of general equality between early and late respondents lends some support to a conclusion that non-response bias has not negatively impacted the assembled data set.

566 The International Journal of Human Resource Management A more precise assessment of bias requires the use of more than two waves and a nal mailing of a condensed questionnaire to non-respondents (Lambert and Harrington 1990). Teitler et al. (2003) note that budget and time constraints limit the number of possible mailings. Such was the case in this study. Budgetary and time constraints only allowed for two mailings to the 1,750 identied human resource professionals. Sample description All respondents held human resource related positions. Fifty-one per cent identied themselves specically as human resource managers and an additional 32 per cent as human resource directors. Respondents averaged 7.8 years in their current positions. Mean sales for the rms included in the sample were $2.14 billion, and the mean number of employees per rm was 6,852. Eighteen specic manufacturing SIC codes were identied. Respondents represented 40 different states. Measures Measures of SHRM, organizational performance, individual performance, job satisfaction, and organizational commitment were necessary to assess the direct and indirect impact of a SHRM approach on organizational performance. We considered HR professionals to be particularly knowledgeable of SHRM, individual performance, job satisfaction and organizational commitment. Some concern was noted, however, related to the knowledge of such professionals related to overall organizational performance. We believe that both HR directors and managers are sufciently knowledgeable of organizational performance since both are intimately involved in budgeting, work force level determination, and the processes related to compensation management that depend heavily on the overall success of the organization. The 6-item SHRM scale incorporates the use of 7-point Likert scales anchored with strongly disagree and strongly agree. This scale was developed and assessed for validity and reliability by Green et al. (2001). The scale incorporates two factors reecting the vertical-alignment and horizontal-integration components of the SHRM denition. The 7-item organizational performance scale was also used and assessed by Green et al. (2001). Respondents were asked to assess the nancial and marketing performance of their organizations over the past three years as compared to the industry average. The scale includes seven items and incorporates 7-point Likert scales with well below and well above anchors. Items 1 to 4 relate to nancial performance and were originally developed by Claycomb et al. (1999). Green et al. (2001) developed the three additional items related to marketing performance based upon performance criteria described by Kohli and Jaworski (1990). The 5-item individual performance scale was developed for this study. The 9-item version of the organizational commitment scale developed and assessed by Mowday et al. (1979) and the 19-item job satisfaction scale developed and assessed by Brayeld and Rothke (1951) were incorporated in the survey. The individual performance, job satisfaction and organizational commitment scales used 7-point Likert scales anchored with strongly disagree and strongly agree. All study scales are presented in the Appendix. Prior to assessing the study hypotheses, it is necessary to ensure that the scales are reliable and valid measures of the intended constructs. Specically, measurement scales must exhibit content validity, unidimensionality, reliability, discriminant validity, convergent validity and predictive validity.

Green et al.: The impact of SHRM on attitude and performance 567


Content validity Content validity results from developing scale items based upon the theory described in the associated literature and upon expert opinions of knowledgeable researchers and practitioners (Shin et al., 2000). Green et al. (2001) derived a 19-item strategic human resource management scale from a careful review of the literature. They assessed the scale with both exploratory and conrmatory samples, ultimately reducing the scale to nine items. Of the nine items, three measured the vertical alignment of the HR function, three represented horizontal integration of the HR function, and the nal three represented impact of the function on performance. Prior to use in this study, the 9-item scale was reviewed by a group of practising HR professionals. This group determined that the scale developed by Green et al. (2001) should be shortened from 9 to 6 items, removing 3 items related to the impact of the HR function on performance. The organizational performance scale adopted from Green et al. (2001) includes both the items related to nancial performance originally developed by Claycomb et al. (1999) and additional items related to marketing performance. These additional items specically relate to market share, sales volume and sales performance and were identied by Kohli and Jaworski (1990) as measures of marketing performance. Since the SHRM, organizational performance, organizational commitment and job satisfaction scales have been carefully developed and thoroughly assessed in previous research efforts (Brayeld and Rothke, 1951; Green et al., 2001; Mowday et al., 1979), content validity is assumed. The ve items in the individual performance scale were developed by the current researchers and reviewed by a group of practising human resource managers in an effort to ensure content validity. Unidimensionality

Conrmatory factor analysis based upon the covariance matrix facilitates the test for unidimensionality (Dunn et al. 1994). Raykov and Marcoulides (2000) point out that decisions related to goodness of t should be based on a review of multiple indices. Goodness-of-t (GFI), non-normed-t (NNFI) and comparative-t (CFI) indices greater than .90 and root-mean-squared-approximation-of-error (RMSEA) values between .05 and .08 support a claim of unidimensionality (Ahire et al., 1996; Garver and Mentzer, 1999). Byrne (1998) noted that RMSEA values between .08 and .10 indicate mediocre rather than good t. Statistically signicant (at the .05 level) parameter estimates of the expected sign and values greater than .70 also provide strong evidence of unidimensionality (Garver and Mentzer, 1999). Conrmatory factor analysis for the SHRM scale with two dimensions returned GFI (.95), NNFI (.93) and CFI (.96) values greater than the recommended .90 level but an RMSEA (.12) higher than the recommended maximum of .08. When the error covariances for items 4 and 6 were allowed to correlate, as suggested by a modication index, the RMSEA dropped to .08. All of the parameter estimates were signicant at the .01 level and ve of the six estimates were greater than .70. It was necessary to re-specify the organizational performance scale by removing item 2 to achieve unidimensionality. Analysis of the organizational performance scale with two dimensions returned GFI (.95), NNFI (.97) and CFI (.99) values greater than the recommended .90 level but a RMSEA (.12) higher than the recommended maximum of .08. When the error covariances for items 4 and 6 were allowed to correlate, as suggested by a modication index, the RMSEA dropped to .04. All of the parameter estimates were signicant at the .01 level and greater than .70. It was necessary to re-specify the individual performance scale by removing item 5 to achieve unidimensionality. Following the re-specication, the conrmatory analysis returned GFI (.98), NNFI (.91) and CFI (.97) values greater than the recommended .90 level. The RMSEA (.13) exceeded the recommended limit of .08. When the error

568 The International Journal of Human Resource Management covariances for items 2 and 4 were allowed to correlate, as suggested by a modication index, the RMSEA dropped to .00. All of the parameter estimates were signicant at the .01 level and three of the four were greater than .70. The organizational commitment scales returned NNFI (.89) and GFI (.88) values that approached but did not exceed the recommended .90. The CFI (.92) did exceed the .90 level. The RMSEA (.12) exceeded the .08 limit. Allowing the error covariances for items 2 and 6, 1 and 13, 1 and 2, and 3 and 7 to correlate as recommended by modication indices reduced the RMSEA to .10. All of the parameter estimates were signicant at the .01 level and six of the nine were greater than .70. Because the commitment scale is so well established in the literature, no attempt at re-specication was made. The job satisfaction scale is also well established, and no attempt at re-specication was made. The conrmatory analysis returned GFI (.83), NNFI (.82) and CFI (.84) values that approached but did not exceed the recommended .90 level. The RMSEA (.10) falls outside the recommended range of .05 to .08 for good t. Allowing the error covariances for items 13 and 16 and 14 and 18 to correlate as recommended by modication indices reduced the RMSEA to .08. All but one of the 19 parameter estimates were signicant at the .01 level and eight of the 19 were greater than .70.
Reliability Garver and Mentzer (1999) recommend computing Cronbachs coefcient alpha and the SEM construct-reliability and variance-extracted measures to assess scale reliability. They indicate that alpha and construct-reliability values greater than or equal to .70 and a variance-extracted measure of .50 or greater indicate sufcient reliability. The SHRM scale includes vertical-alignment and horizontal-integration dimensions. Reliability assessment of the vertical-alignment subscale returned alpha (.85), construct-reliability (.87) and variance-extracted (.70) values that exceed the recommended minimum levels. The alpha (.76), construct-reliability (.84) and variance-extracted (.64) coefcients for the horizontal-integration subscale also exceeded the minimums. The organizational performance scale also includes two dimensions: nancial performance and marketing performance. The alpha (.94), construct-reliability (.95) and variance-extracted (.84) values for the nancial-performance subscale exceed the recommend levels. The alpha (.94), construct-reliability (.96) and variance-extracted (.88) coefcients for the marketing-performance subscale also exceed the minimums. Reliability analysis for the individual performance scale returned alpha (.79), construct-reliability (.81) and variance-extracted (.51) values that meet or exceed the recommended levels. The alpha (.88), construct-reliability (.92) and variance-extracted (.56) values for the organizational commitment exceed the recommended minimums. For the job satisfaction scale only the alpha (.87) coefcient exceeds the recommended minimum; the construct-reliability (.50) and variance-extracted (.40) coefcients, however, do not. Convergent validity

Ahire et al. (1996) recommend assessing convergent validity using the normed-t index (NFI) coefcient, with values greater than .9 indicating strong validity. Garver and Mentzer (1999) recommend reviewing the magnitude of the parameter estimates for the individual measurement items to assess convergent validity. Statistical signicance of an estimate indicates a weak condition of validity and an estimate greater than .7 indicates a strong condition. The NFI for the two-dimensional SHRM scale is .95. All associated parameter estimates are statistically signicant, and ve of the six estimates are greater than .70. For the two-dimensional organizational performance scale, the NFI is .97, and all parameter estimates are statistically signicant

Green et al.: The impact of SHRM on attitude and performance 569 and greater than .70. The NFI for the individual performance scale is .97, with all estimates statistically signicant and three of four estimates greater than .70. The NFI for the organizational commitment scale is .90, with all estimates statistically signicant and six of nine greater than .70. The NFI for the job satisfaction scale is .79, with 18 of 19 estimates signicant and eight of 19 greater than .70.
Discriminant validity Ahire et al. (1996) recommend that scales be tested for discriminant validity using a chi-square difference test for each pair of scales under consideration. Conrmatory factor analysis is rst run on the pair of scales allowing for correlation between the constructs and then run a second time xing the correlation to one (Ahire et al., 1996). The difference between chi-squares from the two factor analyses is computed and tested for signicance (Ahire et al., 1996). A statistically signicant difference in chi-squares indicates discriminant validity (Ahire et al., 1996). Chi-square difference tests were run on all possible pairs of study scales and subscales. The chi-square differences ranged from 237.94 to 6,460.89 with one degree of freedom. All differences are signicant at the .01 level. Predictive validity

Both Ahire et al. (1996) and Garver and Mentzer (1999) recommend assessing predictive validity by determining whether the scales of interest correlate as expected with other measures. Values for each of the scales were computed by averaging across scale items. Table 1 displays the correlation matrix for the scale averages. With three exceptions all correlation coefcients are positive and signicant, as expected. The SHRM horizontal-integration variable did not correlate with either nancial or marketing performance and nancial performance did not correlate with job satisfaction. The SHRM, organizational performance, individual-performance and organizationalcommitment scales exhibit content validity, unidimensionality, reliability, convergent validity, discriminant validity and predictive validity. It should be noted, however, that unidimensionality as measured by the RMSEA was achieved only when the error covariances of certain item pairs within each scale were allowed to correlate. Minor deciencies in terms of reliability, unidimensionality and convergent validity were noted for the job satisfaction scale. Since all coefcients and indices approached the desired levels, the deciencies are not considered signicant enough to preclude use of the job satisfaction data. Assessment for common method bias When data for the independent and dependent variables are collected from single informants, common method bias may lead to inated estimates of the relationships between the variables (Podsakoff and Organ, 1986). Podsakoff and Organ (1986) describe scale reordering as a procedural option for minimizing common method variance. This option requires that the measurement items related to the independent variable precede the items for the dependent variable on the survey instrument. The survey instrument used was structured such that the SHRM related items preceded the organizational performance, individual performance, organizational commitment and job satisfaction measurement items. Additionally, as Podsakoff and Organ (1986) recommend, Harmans one-factor test was used post hoc to examine the extent of the potential bias. As prescribed by Harmans test, all variables were entered into a principal components factor analysis. According to Podsakoff and Organ (1986), substantial common method variance is signalled by the emergence of either a single factor or one general factor that explains a majority of the

Table 1 Descriptive statistics (A) and correlation matrix (B)

A. Descriptive statistics (n 269) Mean 4.97 6.00 4.75 4.74 6.08 5.44 5.26 2 1.000 .117 .096 .417** .247** .222** 2.029 2.008 1.000 .829** .131* .170** .091 .031 .041 1.000 .145* .220** .137* .009 .011 1.000 .357** .407** .049 .027 1.000 .641** 2.033 2.032 3 4 5 6 7 8 9 Standard deviation 1.34 .88 1.28 1.32 .69 .97 .68

SHRM: vertical-alignment SHRM: horizontal-integration Financial performance Marketing performance Individual performance Organizational commitment Job satisfaction

570 The International Journal of Human Resource Management

B. Correlation matrix (n 269)

1 2 3 4 5 6 7 8 9

SHRM: vertical-alignment SHRM: horizontal-integration Financial performance Marketing performance Individual performance Organizational commitment Job satisfaction Number of employees Annual revenues

1 1.000 .419** .194** .203** .315** .399** .337** .050 .074

1.000 2.020 2.034

1.00 .883**

1.00

Notes ** Correlation is signicant at the 0.01 level (2-tailed), * Correlation is signicant at the 0.05 level (2-tailed)

Green et al.: The impact of SHRM on attitude and performance 571 total variance. Results of the factor analysis revealed 10 factors with eigenvalues greater than one, which combined to account for 65 per cent of the total variance. While the rst factor accounted for 25 per cent of the total variance, it did not account for a majority of the variance. Based upon these results of Harmans one-factor test, problems associated with common method bias are not considered signicant (Podsakoff and Organ, 1986). Results The structural equation modelling capabilities of LISREL 8.5 software were employed to assess the SHRM outcomes model illustrated in Figure 1. Summary values for each of the seven study constructs were computed by averaging across the items in the measurement scales. SHRM and organizational performance are second-order constructs each with two underlying dimensions. Descriptive statistics and the correlation matrix for the summary variables are presented in Table 1. To assess the need to control for rm size in the subsequent structural analysis, both the number of employees and annual revenues were included in the correlation matrix. Since neither measure of size is signicantly correlated with the study variables, neither was incorporated in the structural analysis. The structural model ts the data well. Figure 2 illustrates the SHRM outcomes model as structurally assessed. The relative chi-square (chi-square/degrees of freedom) value of 2.27 is less than 3.00 as recommended by Kline (1998). The root mean square error of approximation (.07) falls below the recommended maximum of .08 (Schumacker and Lomax, 1996), and values for NFI (.96), GFI (.97) and adjusted GFI (.93) all exceed the recommended .90 level, indicating good t (Schumacker and Lomax, 1996). Results from the structural equation modelling analysis provide the information necessary to evaluate the study hypotheses. The signicant path identied from SHRM to organizational performance exhibits a standardized estimate of 0.28 with an associated t-value of 3.42 and supports hypothesis 1. Thus, SHRM directly and positively impacts organizational performance. The link from SHRM to organizational commitment is also signicant with a standardized estimate of 0.31 and a t-value of 4.31, supporting

Figure 2 Structural STHRM outcomes model with standardized estimates and (t-values)

572 The International Journal of Human Resource Management hypothesis 2. SHRM directly and positively impacts organizational commitment. The estimate for the SHRM to job satisfaction link is 0.53 with a t-value of 7.59 indicating signicance and support for hypothesis 3. Hypothesis 4 is also supported. The estimate (0.62) and t-value (9.16) indicate that SHRM directly and positively impacts individual performance. Finally, the results also support hypothesis 5 that job satisfaction positively impacts organizational commitment. The estimate for the satisfaction to commitment link is 0.48 with a t-value of 7.91. Hair et al. (1998) recommend a competing models approach to structural equation modelling when alternative formulations are suggested by the underlying theory. Recent studies have reported a positive relationship between job satisfaction and individual performance (Judge et al., 2001). Therefore, an alternative model incorporating the additional path was assessed. The estimate for the job satisfaction to individual performance link is 0.20 with a t-value of 3.05. The overall t did improve (relative chi-square 1.87, NFI .97, GFI .98, AGFI .95), although it was not signicant at the .01 level. Discussion This study was designed to assess the impact of SHRM on organizational performance and on the individual performance, job satisfaction and organizational commitment levels of HR professionals. A sample of human resource professionals was effectively constructed and results of the structural equation analysis support all study hypotheses. SHRM positively impacts organizational performance and the job attitudes and individual performance of HR professionals. Theoretical implications The ndings of the study raise several important theoretical implications. First, our study highlights the importance of both vertical t and horizontal t. Organizations that vertically align and horizontally integrate HR function and practices perform better and produce more committed and satised HR function employees who exhibit improved individual performance. Future research that incorporates both individual and organizational level outcomes to assess the value of vertical and horizontal t will not only advance theories but also provide practical implications. Second, ndings from our study suggest that SHRM contributes positively to the commitment, satisfaction and individual performance levels of HR professionals. These ndings seem to be contradictory to previous ndings that SHRM negatively inuences HR effectiveness (Bennett et al., 1998). Specically, Bennett et al. (1998) conjectured that, when the HR function is fully integrated into business strategy, it becomes ancillary and is not perceived as a department that is playing its expected role. One particularly noteworthy point in the study, however, is that the measure of the effectiveness of HR was obtained from top managements (CEOs, owners, plant managers) general perceptions with a 3-item measure. This approach provided a different source for performance evaluation of HR from top managers who may be better informed of the rms strategy. Top management may not be the most direct users of HR services and the accuracy of their evaluation (particularly horizontal t) may, therefore, be discounted. Wright, McMahan, Snell and Gerhart (2001) compared the HR effectiveness ratings obtained from HR executives and line executives, and not surprisingly found that HR executives reported better HR effectiveness compared to the line executives evaluation. Based on the notion that individual performance ultimately contributes to departmental performance and based on the well-established linkage between work attitude and work performance, our study took a bottom-up approach to examine the

Green et al.: The impact of SHRM on attitude and performance 573 inuence of SHRM on individual HR professionals. The positive relationships identied in our study may suggest a higher level of HR departmental performance when the HR professionals individual performance is aggregated. Apparently, the relationship between SHRM and HR effectiveness varies signicantly depending on the source of the evaluation. Our study, along with previous ndings, pinpoints the need to develop a rened HR performance measure using multi-source evaluators. This line of research will not only help clarify the relationship between SHRM and HR effectiveness, but also provide rich diagnostic information to the HR managers in devising their action plans. Limitations and future research directions While the objectives of the study were successfully accomplished, limitations of the study should be noted. First, the data collected from a single source may raise concerns of common method bias. Although Podsakoff et al. (2003) argued that statistical methods cannot completely eliminate common source bias, we tested for the potential common method biases with the results supporting the contention that the bias does not signicantly impact our study results. Future research should replicate our research ndings incorporating multiple sources to avoid potential common method bias. The survey methodology yielded a 15.4 per cent return, raising concerns related to nonresponse bias. Although the two waves of responses were compared and no evidence of bias was noted, a more direct assessment of the potential bias utilizing data from additional waves and an intensive follow-up on non-respondents would strengthen the study. Second, although we attempted to link the organizational level of antecedent (SHRM) to the individual level and organizational level of outcomes and our results conrmed the hypothesized positive relationships, methodologically no cross-level data were obtained to further endorse our contention. Our study, however, provides initial support for these links. We encourage future research to gather data from multiple levels to further conrm our current ndings. Third, while we proposed the possible mechanisms through which SHRM inuences individual HR professionals job attitudes and performance, we did not directly test these mediating mechanisms. Opening the black box in which SHRM functions warrants additional study. We also encourage future research to test intrinsic motivation and fullled psychological contract as the mediating mechanisms to help theory building. A longitudinal study design is particularly encouraged as it will more accurately capture the formation of a psychological contract and further conrm the causal relationship between SHRM and performance. Finally, this study focuses on human resource professionals in the manufacturing sector. Before the results and related conclusions can be generalized outside the manufacturing sector, replication with other samples from other sectors (such as the service and governmental sectors) is important. It would also be helpful to replicate the study outside the US to determine the adoption and impact of SHRM internationally. Theorizing and testing the mechanisms through which SHRM inuences organizational members other than human resource professionals is also encouraged in order to enhance our understanding of the inuence of SHRM on individual employees. Implications for practice Our study ndings support the mounting body of evidence pointing to the idea that HR should be an equal strategic business partner with operations, nance and marketing. Whether one calls it giving HR a seat at the table, making HR a player or calling HR a line

574 The International Journal of Human Resource Management function, the result is the same recognition by organizations that a strategic HR function is equally critical to organizational success as the primary functions of the rm. Also, the ndings point clearly to developing and implementing HR systems that are vertically aligned and horizontally integrated, as opposed to a set of separate HR practices in traditional HR areas such as stafng, training, compensation and employee relations. Practitioners are encouraged to adopt an SHRM strategy with the expectation that organizational performance will be improved. Further, practitioners can expect improvements in job-related attitudes and individual performance on the part of HR professionals within their organizations following the adoption of SHRM. SHRM impacts both the organization and the individuals within the organization for the better by strategically focusing the HR function on the mission and objectives of the organization.

Appendix Measurement scales

Strategic Human Resource Management (alpha .81) (7-point scales with endpoints strongly disagree and strongly agree) Items 1, 2 and 3 form a vertical-alignment factor (alpha .85) Items 4, 5 and 6 form a horizontal-integration factor (alpha .76) 1 Top management incorporates HR information (plans, requirements, activities, etc.) when establishing the direction the organization should take. 2 This organizations top-level managers are trained to integrate all levels (supervisory through to executive) and functions (marketing, accounting, nance, HR, etc.) of the organization into the decision-making process. 3 This HRM unit has been fully integrated into the strategic planning process. 4 This HRM unit works hard to maintain a cooperative partnership with individual managers. 5 This HRM unit regularly checks with other units to identify organizational training needs. 6 This HRM unit helps departmental managers carry out their critical HR responsibilities. Organizational performance scale (alpha .94) (7-point scales with endpoints well below and well above industry average) Items 1, 3 and 4 form a nancial performance factor (alpha .92) Items 5, 6 and 7 form a marketing performance factor (alpha .94) 1 2 3 4 5 Average return on investment over the past three years. Average prot over the past three years. Prot growth over the past three years. Average return on sales over the past three years. Average market share growth over the past three years.

Green et al.: The impact of SHRM on attitude and performance 575 6 Average sales volume growth over the past three years. 7 Average sales (in dollars) growth over the past three years. Note: Item 2 was removed to achieve unidimensionality. Individual performance scale (alpha .79) (7-point scales with endpoints strongly disagree and strongly agree) 1 2 3 4 5 I am very condent that I can reach my performance goals. The level of my individual performance last year was excellent. I regularly accomplish my goals. My individual goals directly support the goals of the organization. My individual performance has improved signicantly during the last year.

Note: Item 5 was removed to achieve unidimensionality. Organizational commitment scale (alpha .88) (7-point scales with endpoints strongly disagree and strongly agree) 1 I am willing to put in a great deal of effort beyond that normally expected in order to help this organization to be successful. 2 I talk up this organization to my friends as a great organization to work for. 3 I would accept almost any type of job assignment in order to keep working for this organization. 4 I nd that my values and the organizations values are very similar. 5 I am proud to tell others that I am part of this organization. 6 This organization really inspires the very best in me in the way of job performance. 7 I am extremely glad that I chose this organization to work for over others I was considering at the time I joined. 8 I really care about the fate of this organization. 9 For me, this is the best of all possible organizations for which to work. Job satisfaction scale (alpha .87) (7-point scales with endpoints strongly disagree and strongly agree) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 There are some conditions concerning my job that could be improved. My job is a hobby to me. My job is usually interesting enough to keep me from getting bored. It seems that my friends are more interested in their jobs. I consider my job rather unpleasant. I enjoy my work more than my leisure time. I am often bored with my job. I feel fairly well satised with my job. Most of the time I have to force myself to go to work. I am satised with my job for the time being. I feel that my job is no more interesting than others I could get. I denitely dislike my work. I feel that I am happier in my work that most people. Most days I am enthusiastic about my work. Each day of work seems like it will never end.

576 The International Journal of Human Resource Management 16 17 18 19 I like my job better than the average worker does. My job is pretty interesting. I nd real enjoyment in my work. I am disappointed that I ever took this job.

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