DOI: 10.1002/hrm.

21990

ORIGINAL ARTICLE

Human resource management systems, employee well-being,

and firm performance from the mutual gains and critical
perspectives: The well-being paradox

Hoang Ho | Bård Kuvaas

BI Norwegian Business School, Oslo, Norway

Correspondence
Hoang Ho, Department of Leadership and
Organizational Behaviour BI Norwegian
Business School, Oslo N-0484, Norway.
Email: hoang.cbs@gmail.com
Abstract
In this study, we explored the additive, interactive, and nonlinear relationships among
human resource management (HRM) systems, employee well-being, and firm perfor-
mance. Based on a sample of 14,384 employees nested within 1,347 firms, we
obtained three main findings. First, HRM systems yield a performance effect that
exceeds the effect of single practice, suggesting positive synergies among HRM prac-
tices. Second, the opportunity bundle has a positive impact on firm performance, but
when integrating it with skills and motivation bundles, the result becomes negative,
indicating dis-synergy of interactions among HRM bundles. Third, at moderate levels
of adoption, HRM practices are positively correlated with employee well-being and
higher levels of commitment, job satisfaction, and management relations, as well as
lower levels of anxiety. However, at high levels, the relationship is less positive and
even turns negative with lower levels of job satisfaction and management relations.
To close, we present research implications and future directions after discussing our
results.

KEYWORDS
employee well-being, firm performance, HRM systems

1 | I N T RO D UC T I O N 2009; Guest, 2017; Van De Voorde, Paauwe, & Van Veldhoven,

Concern for employee well-being was first voiced in the early human
resource management (HRM) literature; for example, Beer, Spector,
Lawrence, Mills and Walton (1984) suggested that employee well-
being should be the long-term consequence considered when design-
ing an HRM system, and Legge (1998) argued that HRM may result in
morally problematic issues in cases where it leads to the exploitation
of workers. However, following these early concerns, employee well-
being has not become a central research agenda within the field, as
HRM scholars have mainly focused on the link between HRM and
performance, often known as the HRM–performance paradigm
(Boselie, Dietz, & Boon, 2005).
More recently, there has been heated debate regarding the impact
of HRM systems on employee health or well-being (Boxall & MacKy,
2012), as HRM scholars have increasingly recognized that taking care
of employee well-being is important from an ethical perspective
(Guest, 2017) and that there is empirical evidence suggesting that
employee well-being may have positive implications for firm perfor-
mance (Daniels & Harris, 2000).
Two competing views have emerged. The proponents of one view
argue that HRM systems benefit both employers and employees
(e.g., Kochan & Osterman, 1994; Levine, 1995; Pfeffer, 1998), denoted
by labels such as “shared capitalism” (Kruse, Blasi, & Park, 2010), “high-
involvement” (Lawler, 1992), “mutual gains” (Kochan & Osterman,
1994), or “high commitment” (Walton, 1985). Following Kochan and
Osterman (1994), we label this view “the mutual gains perspective,” as
it conveys the key message that both employers and employees bene-
fit from HRM systems. Proponents of the other view argue that HRM

Hum Resour Manage. 2019;1–19. wileyonlinelibrary.com/journal/hrm © 2019 Wiley Periodicals, Inc. 1

2 HO AND KUVAAS
systems benefit employers but not employees (Delbridge & Turnbull,
1992; Godard, 2001; Legge, 2005). We label this view “the critical
perspective.”
Unfortunately, the nature of the relationship between HRM sys-
tems and well-being is not accurately demarcated by existing empiri-
cal evidence, because such evidence has not conclusively confirmed
or ruled out either the mutual gains perspective or the critical per-
spective (Harley, Sargent, & Allen, 2010). On the one hand, some
studies have documented positive associations with employee experi-
ence of work (Appelbaum, Bailey, Berg, & Kalleberg, 2000; Butts, Van-
denberg, DeJoy, Schaffer, & Wilson, 2009; Castanheira & Chambel,
2010; Guest, 2002; Harley, Allen, & Sargent, 2007; Macky & Boxall,
2007). On the other hand, some have revealed negative associations
(Godard, 2001; Jensen, Patel, & Messersmith, 2011; Kroon, Voorde, &
Veldhoven, 2009; Landsbergis, Cahill, & Schnall, 1999). In addition,
some studies have indicated a mix of both positive and negative con-
sequences (e.g., Berg, Appelbraum, Bailey, & Kalleberg, 1996; Ramsay,
Scholarios, & Harley, 2000).
We suspect that such conflicting findings, which we refer to as the
well-being paradox, are attributable to two main reasons. The first rea-
son is that past studies have measured well-being as a single dimension
(Peccei, van de Voorde, & Van Veldhoven, 2013), although there is
wide scientific consensus that well-being has multiple dimensions
(Diener, 1994; Wright, 2014) and that there are often tradeoffs among
these dimensions “whereby one aspect of employee well-being
improves but another aspect of employee well-being decreases” (Grant,
Christianson, & Price, 2007, p.51). In the current study, we examine
multiple dimensions of well-being, including the construct's aspects of
happiness, health, and social relationships. A second reason is that past
studies assume a linear relationship among HRM systems, well-being,
and performance, whereas logic suggests that the relationship may be
nonlinear. For example, Cappelli and Neumark (2001) argued that HRM
systems have both value-creating and cost-enhancing effects. That is,
at higher levels, the positive effects of HRM systems on well-being and
performance may be neutralized or even diminished as the costs associ-
ated with the adoption of these systems substantially increases. Initial
evidence indicates a nonlinear relation between HRM systems and
well-being (Godard, 2001). However, the extant literature has mostly
tested the HRM, well-being, and performance relationship in a linear
fashion, thus leading to incorrect inferences.
Accordingly, the overall objective of this study is to contribute to
HRM research by examining the current well-being paradox. We do
this by (a) examining multiple dimensions of well-being, including hap-
piness, health, and social relationships, and (b) examining the additive,
interactive, and nonlinear relationships among HRM, well-being, and
performance.
2 | D EF I NI NG TH E KE Y C ON CE P T S
2.1 | HRM systems
Although there is no universal definition of HRM systems (Datta, Guth-
rie, & Wright, 2005), most empirical and theoretical works (e.g., Arthur,
1994; Huselid, 1995; Ichniowski, Shaw, & Prennushi, 1997; Jiang,
Lepak, Hu, & Baer, 2012; Macduffie, 1995; Subramony, 2009; Way,
2002) define HRM systems as an integrated set or cluster of HRM
practices that have the potential to achieve substantially enhanced
economic performance. Such HRM practices typically include sophisti-
cated selection procedures, developmental performance appraisals,
substantial investments in training, teamwork, extensive communica-
tion, motivating job design (e.g., autonomy, empowerment, employee
participation, and flexible work), performance-related pay/promotion,
harmonization, and employment security. These practices influence
firm performance by enhancing employees' knowledge, skills, and abili-
ties, providing employees the opportunities to use those attributes for
organizational benefit and increasing their motivation to do so (Boselie
et al., 2005; Combs, Liu, Hall, & Ketchen, 2006; Huselid, 1995).
In addition, inherent in the systems perspective is the notion of
complementary resources or synergies; that is, “individual policies or
practices have limited ability to generate competitive advantage in
isolation, but in combination… they can enable a firm to realize its full
competitive advantage” (Becker & Gerhart, 1996, p. 784). Conse-
quently, to capture the synergies when HRM practices are bundled
together into a system, most studies have created “a unitary index
that contains a set (though not always the same set) of theoretically
appropriate HRM practices derived from prior work” (Becker &
Huselid, 1998, p. 63).
In this study, we defined HRM systems in terms of nine HRM
practices: selective hiring, teamwork, job autonomy, staff training,
flexible work, participatory decision-making, information sharing, sup-
portive management, and performance-related pay. The selection of
HRM practices was based on previous studies (Appelbaum et al.,
2000; Combs et al., 2006; Ichniowski et al., 1997; Way, 2002) and
particularly on those in the previous analysis of the WERS data
(Guest & Conway, 2007; Ogbonnaya et al., 2017; Ramsay et al.,
2000). Consistent with the literature, we combined these HRM prac-
tices and created an HRM system unitary index.
2.2 | Employee well-being
Employee well-being is an elastic concept meaning “any number of
things to various people” (Danna & Griffin, 1999; Wright & Huang,
2012, p. 1188). In a broad fashion, employee well-being “refers to
people's evaluations of their lives” (Diener, Suh, Lucas, & Smith, 1999,
p. 213) or “all the things that are important to how we think about
and experience our lives” (Rath & Harter, 2010, p. 137). In a narrow
fashion, employee well-being is restricted to one dimension, such as
job satisfaction (Cropanzano & Wright, 2001; Grant et al., 2007). At
the operational level, variations in conceptualization are also evident.
Earlier conceptualizations of employee well-being, particularly within
the psychological tradition (e.g., Andrews & Withey, 2012; Bradburn,
1969; Campbell, 1981; Diener, 1984), focused exclusively on pleasant
emotional experiences as a fundamental dimension of employee well-
being, often described in academic research as “subjective well-being”
(Diener, 1994) or “psychological well-being” (Wright, Cropanzano, &
Bonett, 2007). According to this view, psychological well-being is said
HO AND KUVAAS
to occur if a person “experiences frequent positive emotions such as
joy and happiness and infrequent negative emotions such as sadness
and anger” (Bakker & Oerlemans, 2011, p. 179; Diener & Larsen,
1993). Consequently, employee well-being is operationalized as the
presence of a dispositional positive effect and the absence of a dispo-
sitional negative effect (Diener et al., 2010). Over the years, additional
dimensions have been added to psychological well-being, such as
social relations (Keyes, 1998; Larson, 1996), self-validation (Warr,
2011), and health (Danna & Griffin, 1999).
In this study, we adopted the definition of Grant et al. (2007),
defining well-being as “the overall quality of an employee's experience
and functioning at work” (p. 52), which can conceptually be assessed in
terms of three dimensions: happiness, health, and social relationships
(Van De Voorde et al., 2012). Happiness refers to an employee's expe-
rience and functioning at work (Grant et al., 2007). We focused on
commitment and job satisfaction as measures of happiness at work,
because they “are frequently used in conceptual models and empirical
studies” (Van De Voorde et al., 2012, p. 394). In organization science,
health has been studied both in terms of physical health, such as inju-
ries and diseases, and mental health, such as job-related anxiety, stress,
burnout, and exhaustion (Danna & Griffin, 1999; Grant et al., 2007).
With respect to mental health, Van De Voorde et al. (2012) made a dis-
tinction between stressors and strain. “Stressors (e.g., workload and
work intensification) refer to events or situations that give rise to
stress, whereas strain (e.g., stress and burnout) refers to responses to
stressors” (Van De Voorde et al., 2012, p. 394). We focused on work
intensification and anxiety as measures of mental health as they are
“among the most common indicators of employee health and well-
being” in the HRM literature (Ogbonnaya, Daniels, Connolly, & van
Veldhoven, 2017, p. 102–103). Finally, social relationships address the
quality of relationships at work between employees (e.g., cooperation)
or between employees and their leader or the employment organiza-
tion (e.g., trust, social support, reciprocity, leader-member exchange,
and perceived organizational support) (Grant et al., 2007; Guest, 2017).
We included social relationships, because they have an impact on well-
being (Danna & Griffin, 1999) and are “increasingly being incorporated
in conceptual models (Van De Voorde et al., 2012, p. 394). We focused
on the relationships between employees and their leaders (here mea-
sured through perceptions of good management relations) as a mea-
sure of social relationships because they are conceptually relevant
(Danna & Griffin, 1999; Grant et al., 2007) and have been used in prior
studies (e.g., Ramsay et al., 2000). It should be noted here that our defi-
nition of well-being in terms of happiness, health, and social relation-
ships is conceptually consistent with the World Health Organization's
(WHO) definition of health as “a state of complete physical, mental,
and social well-being” (Larson, 1996, p. 181).
3 | T H E O R Y A N D H Y P O T H E S ES
3.1 | Traditional wisdom
The sentiment that the greater the use of HRM is, the higher firm per-
formance is (Kaufman, 2012), or “more is better” in the language of
3
De Winne and Sels (2013, p. 181), has been universally accepted for
the last 30 years. This conventional assumption of “more is better”
has led to many HRM scholars to exclusively propose and test
hypotheses describing linear relationships between HRM and firm
performance, often referred to as HRM–performance paradigm
(Boselie et al., 2005).
Although there is still an ongoing debate about the precise mecha-
nisms aligning HRM practices with firm performance, the majority of
scholars agreed that HRM practices impact firm performance through
improving workforce skills, providing employees with the opportunity
to contribute to firm success, and motivating them to perform
(Boselie et al., 2005; Combs et al., 2006; Huselid, 1995; Subramony,
2009). For example, HRM practices, such as selective hiring and train-
ing, are intended to enhance employee skills (Jiang, Lepak, Hu, & Baer,
2012). Participatory and nonauthoritarian practices (e.g., teamwork,
delegation of decision-making, information sharing, and employee
involvement) are intended to “allow employees to have direct input
into production process” (Huselid, 1995, p. 647). Finally, motivation
practices (e.g., contingent compensation) help to reinforce desired
behaviors.
Moreover, there is consensus among scholars that a system of
HRM practices is more than the sum of the parts due to complemen-
tarities or synergies among HRM practices (Barney, 1995; Delery,
1998). In other words, combinations of practices into a system or bun-
dle rather than individual practices in isolation are the critical determi-
nants of firm performance (Ichniowski et al., 1997; Macduffie, 1995).
Likewise, research has shown that HRM systems yield an effect that
exceeds that of a single practice (Combs et al., 2006; Laursen & Foss,
2003). Therefore, we propose the following:
Hypothesis 1: The positive relationship between
HRM systems and firm performance is greater for
HRM systems than for individual HRM practices in
isolation.
In regard to the relationship between HRM systems and employee
well-being, there is less agreement. On the one hand, some authors
(e.g., Kochan & Osterman, 1994; Levine, 1995) argue that HRM systems
benefit employees and employers (the mutual gains perspective). On
the other hand, other scholars (e.g., Delbridge & Turnbull, 1992; Legge,
2005) claim that HRM systems benefit employers but not employees
(the critical perspective). The main dispute between the two perspec-
tives is whether HRM systems have a positive or negative effect on
employee health and well-being. Central to the mutual gains perspective
is the claim that HRM systems are generally good for employees and
their well-being. Such a claim is mainly based on the observations show-
ing that HRM systems are positively associated with various dimensions
of well-being, such as commitment and job satisfaction (i.e., happiness)
(Takeuchi, Chen, & Lepak, 2009), reduced job-related stress (i.e., health)
(Macky & Boxall, 2008), and social relations (Collins & Smith, 2006). In
contrast, based on the assumption of employers' desire to extract
increasing returns from labor (Keenoy, 1990; Willmott, 1993), the criti-
cal perspective predicts that HRM systems lead to work intensification
4 HO AND KUVAAS
(Legge, 2005). This work intensification may increase performance but
can have negative implications for workers (Peccei et al., 2013).
Supporting the critical view, research has demonstrated a positive asso-
ciation between HRM systems and higher levels of burnout, stress, and
workload (Jensen et al., 2011; Kroon et al., 2009).Thus, we propose the
following:
Hypothesis 2: HRM systems are positively associated
with employee well-being.
Hypothesis 3: HRM systems are negatively associated
with employee well-being.
3.2 | Nonlinear effects
We challenge the conventional assumption of linearity or more is bet-
ter. Drawing on Pierce & Aguinis' (2013) meta-theoretical principle of
the too-much-of-a-good-thing effect (TMGT effect), we argue that
when HRM practices are implemented at extremely high levels, the
widely accepted positive effects on well-being and firm performance
of HRM systems diminish and even turn negative, resulting in a curvi-
linear relationship.
There are at least two compelling reasons to believe that the rela-
tionships among HRM, well-being, and firm performance are curvilin-
ear. The first reason is the notion of HRM systems. The basic idea
behind systems is the notion of complementarity or synergy in the
sense that individual HRM policies or practices “have limited ability to
generate competitive advantage in isolation, but in combination… they
can enable a firm to realize its full competitive advantage” (Becker &
Gerhart, 1996, 784). This observation is because HRM practices are
complementary and mutually supportive; if they are bundled together
into a cluster or system, they create synergistic effects that are sub-
stantially greater than those of individual HRM practices in insolation
(Becker, Huselid, Pickus, & Spratt, 1997; Delery, 1998). According to
Godard (2001) and White and Bryson (2011), the idea that bundling
complementary practices together into a coherent system may have
effects exceeding the sum of the parts suggests nonlinear effects that
occur at particular thresholds. In other words, the HRM systems' per-
spective suggests that implementing a wide range of practices, partic-
ularly ones bundled into a coherent HRM system, “will yield higher
returns than an application comprising fewer such practices” (Becker
et al., 1997; Bryson et al., 2005, p. 491).
The second reason is what economists have called economies of
scale. The notion of economies of scale suggests that firms benefit
more from large-scale deployment of an HRM system than small-scale
deployment of the same system entailing limited practices, for “the
fixed portions of an HRM practice's administrative expenses are
spread out over larger proportions of an organizational work force”
(Chadwick, 2007, p. 502), which explains the marginal value added rel-
ative to the cost of isolated HRM practices. Empirical evidence has
shown that implementing a larger scale of HRM practices will yield
higher returns than that of a small scale (Ichniowski et al., 1997).
Drawing on the notions of bundling and economies of scale, we
propose that there is a small positive effect on well-being and firm
performance at a low level of implementation and that the positive
effect increases as more HRM practices are added to the scale of
HRM practices due to labor cost per unit of output decreasing with
increasing scale (i.e., economies of scale). However, at extremely high
levels of implementation, we predict that the effect is less positive
and even turns negative due to the significant magnitude of the addi-
tional costs associated with overimplementation. Scholars have long
noted that, although HRM systems increase widespread economic
benefits, they also increase costs (Bryson et al., 2005; Cappelli & Neu-
mark, 2001; Godard, 2004). The costs stem from complicated selec-
tion and recruitment practices, continuous investment in training
programs, higher wages, job security guarantees, and other supporting
practices (Chi & Lin, 2011; Godard, 2004). These costs may offset the
benefits of HRM systems (Cappelli & Neumark, 2001), indicating that
there is an optimal point at which further investments in HRM sys-
tems are not as valuable (Chadwick, 2007; Chi & Lin, 2011). Econo-
mists label this optimal point “diminishing returns to scale.” Godard
(2001) provided empirical evidence of diminishing returns to scale of
HRM systems. Godard found that, at moderate levels, alternative
work practices were associated with an increased sense of belonging,
empowerment, task involvement, and ultimately job satisfaction,
esteem, commitment, and citizenship behavior. At higher levels of
adoption, however, these associations declined in magnitude and even
became negative. Similarly, Chi and Lin (2011) found that high-
performance work systems are positively correlated with firm perfor-
mance at low levels of implementation, but that this relationship
became weaker at higher levels for high-technology firms. Therefore,
we hypothesize the following:
Hypothesis 3: The relationship between HRM sys-
tems and (a) firm performance and (b) well-being is
curvilinear, with positive effects at low to moderate
levels of implementation but negative effects at higher
levels.
3.3 | Interaction effects
Our operationalization of an HRM system in terms of a unitary index
implicitly assumes that relationships among practices constituting
HRM systems are additive. However, practices within systems may
also have interactive relationships (Barney & Felin, 2013; Delery,
1998) (we would like to thank Motohiro Morishima for drawing our
attention to this point). Delery (1998) has identified three forms of
interactive relationships. The first form of interactive relationship is
substitutes. Two practices are said to be substitutes when “both prac-
tices lead to the identical outcomes” and if one practice is already in
use, adding the second practice “will add nothing except the expense
associated with its implementation” (Delery, 1998, p. 293). The sec-
ond form of interactive relationship is positive synergy. Two practices
are said to have a positive synergistic effect when “two practices work
HO AND KUVAAS
together to enhance each other's effectiveness” (Delery, 1998, p. 294)
or the sum is greater than its parts (Ichniowski et al., 1997; Macduffie,
1995). Becker et al. (1997) have called this situation “powerful con-
nection.” Finally, the third form of interactive relationship is negative
synergy. Two practices are said to have a negative synergistic effect
when they work against one another; if combining together, “the two
practices will have poor performance” than if they are employed alone
(Delery, 1998, p. 294) or the sum is less than its parts. Becker et al.
(1997) have called this situation “deadly combination.”
To capture these different types of interactive effects, we decompose
HRM systems into skills, opportunity, and motivation bundles based on
the AMO model. According to Boselie et al. (2005), the literature has
shown a preference for using the AMO model to categorize HRM prac-
tices into subdimensions. The skills bundle aims to enhance workforce
skills (Subramony, 2009). Firms can enhance the overall skill level of the
workforce by selecting the best potential qualified employees and by pro-
viding current employees with training and development activities
(Delaney & Huselid, 1996; Delery, 1998). Indeed, research has shown that
selective recruitment and training are positively related to employee skills
(Jiang, Lepak, Hu, et al., 2012; Takeuchi, Lepak, Wang, & Takeuchi, 2007).
As a result, we combined selective hiring and training to create the skills
bundle. The opportunity bundle is to provide employees the opportunity
to have a direct voice over the production process (Huselid, 1995; Sub-
ramony, 2009). We used five empowerment and involvement HRM prac-
tices (job autonomy, teamwork, supportive management, information
sharing, and participatory decision-making) to create the opportunity bun-
dle. These five HRM practices together provide mechanisms for
employees and managers to communicate on work-related issues and
were selected based on the review of prior work (e.g., Huselid, 1995;
Jiang et al., 2012; Subramony, 2009). Finally, the motivation bundle aims
to motivate employees to perform their jobs (Subramony, 2009). Firms
can adopt various HRM practices to influence employee motivation
(e.g., performance-related pay and flexible work). However, performance-
related pay and flexible work enhance employee motivation differently.
The former motivates employees extrinsically, linking their work efforts to
external rewards (Jiang, Lepak, Hu, et al., 2012). The later motivates
employees intrinsically, allowing employees to have control over their
work and ultimately results in a more motivated, satisfied, and productive
workforce (Appiah-Mfodwa, Horwitz, Kieswetter, King, & Solai, 2000; Bal-
tes, Briggs, Huff, Wright, & Neuman, 1999; Hobson, Delunas, & Kesic,
2001). Consequently, we combined performance-related pay and flexible
work to create a motivation bundle (for the link between HRM practices
and the three HRM bundles, see Table A1).
According to the AMO model, the skills, opportunity, and motivation
bundles are mutually reinforced (Appelbaum et al., 2000; Blumberg &
Pringle, 1982; Boxall & Purcell, 2003). In other words, in isolation, the
skills, opportunity, and motivation bundles yield a limited effect but their
integration creates a net effect that is significantly greater than that of a
single bundle. For example, the effectiveness of skilled workers is limited
if they are not motivated to use their skills and knowledge toward orga-
nization success. Similarly, the effectiveness of motivated workers is lim-
ited if they do not have skills and knowledge to perform their jobs.
Finally, the effectiveness of skilled and motivated workers is limited if
5
their decision-making is constrained by organizational structure.
Macduffie (1995) even goes so far as to argue that to maximize returns
from investments in HRM systems, firms must adopt all three bundles.
Supporting his view, Macduffie (1995) found that interactions among
HRM bundle, production systems bundle, and use of buffers bundle
have significantly larger effects on assembly plant productivity and qual-
ity than the effects of individual bundles. Following this line of reason-
ing, we argue interactions among the skills, opportunity, and motivation
bundles will yield a combined positive effect that exceeds that of a single
bundle due to the positive synergies among them. Delery (1998) has
called this situation positive synergy and Becker et al. (1997) powerful
connection. Thus, we propose the following:
Hypothesis 4: Interactions among skills, opportunity,
and motivation bundles will be associated with higher
firm performance than each bundle taken in isolation,
reflecting the notion of positive synergy.
Hypothesis 5: Interactions among skills, opportunity,
and motivation bundles will be associated with higher
well-being than each bundle taken in isolation,
reflecting the notion of positive synergy.
On the other hand, interactions among the skills, opportunity, and
motivation bundles may also yield a combined effect that is significantly
smaller than the effect of a single bundle or even a negative effect. The
rationale is that, although investment in HRM systems yields economic
benefits, it also entails costs to firms (Bryson et al., 2005; Godard,
2004; Guthrie, 2001; Marchington & Grugulis, 2000). This means that
there is a point beyond which adding more HRM practices will yield
lower incremental per-unit returns or even negative returns if the cost
associated with adding more HRM practices exceeds the benefits.
Economists have labeled this situation “the law of diminishing returns.”
Indeed, a dozens of studies indicated that HRM systems are associated
with higher labor costs (Cappelli & Neumark, 2001; Way, 2002). In
addition, to the extent that the skills, opportunity, and motivation bun-
dles are substitutes or work against one another, combining them
together will generate a net return that is significantly smaller than the
return of individual bundles in isolation (Delery, 1998). Becker et al.
(1997) called this situation a deadly combination and Delery (1998)
substitutes or negative synergy. Thus, we propose the following:
Hypothesis 6: Interactions among skills, opportunity,
and motivation bundles will be associated with lower
firm performance than each bundle taken in isolation,
reflecting the notions of substitutes and negative
synergy.
Hypothesis 7: Interactions among skills, opportunity,
and motivation bundles will be associated with lower
well-being than each bundle taken in isolation,
reflecting the notions of substitutes and negative
synergy.
6 HO AND KUVAAS
4 | METHODS
4.1 | Data
The data used to test the relation among HRM systems, employee
well-being, and firm performance were provided by the Workplace
Employment Relations Survey 2011 (WERS, 2011). WERS 2011 is the
sixth survey in a series that aims to provide a nationally representative
account of the state of employment relations and working life in Brit-
ish workplaces. The fieldwork for WERS 2011 occurred from March
2011 to June 2012.
WERS comprises two datasets. The first dataset is a management
survey collected from a total of 2,680 face-to-face interviews with
primarily senior managers who are responsible for employment rela-
tions, human resources, or personnel at the sampled workplace, yield-
ing a response rate of 46.3%. The second dataset is employee surveys
in both small and large organizations. A total of 21,981 employees
completed the survey, yielding a response rate of 54.3%.
WERS 2011 covers both private and public firms, but our sample
includes only private firms. After filtering to include only workplaces
and individual employees for which there was sufficient information
on all study variables and control variables, our sample included
14,384 employees nested within 1,347 firms. The median number of
respondents was 15 with a range from 3 to 25.
4.2 | Measures
HRM systems were measured with nine HRM practices: two practices
from the management survey (selective hiring and teamwork) and
seven practices from the employee survey (job autonomy, staff train-
ing, flexible work, participatory decision-making, information sharing,
supportive management, and performance-related pay). All HRM prac-
tices were measured using multiple-item scales, except staff training.
Furthermore, four HRM variables (teamwork, performance-related
pay, flexible work, and selective hiring) were measured using binary
items. The use of binary items is a common practice in the field
(e.g., Bryson & White, 2008; Guest & Conway, 2007). In line with
Ogbonnaya et al.'s (2017) recommendation, we aggregated the seven
HRM variables from the employee survey (i.e., job autonomy, staff
training, flexible working, participatory decision-making, information
sharing, supportive management, and performance-related pay) as the
mean scores that proxy organizational-level HRM practices. The
remaining two variables were derived from the management survey,
so they serve as proxies for organizational-level measures. Prior to
aggregation, we computed the intraclass correlation (ICC)—both ICC1
and ICC2—to examine interrater reliability. ICC1 values ranged from
.10 to .36 and ICC2 values from .56 to .86, which are similar to those
reported in Ogbonnaya et al. (2017), which included observed values
ranging from .07 to .20 for ICC1 and from .53 to 0.78 for ICC2. In
other words, these results offered sufficient justification for data
aggregation (see Table A2 for a full description).
4.3 | Employee well-being
We measured employee well-being in three dimensions: happiness,
mental health, and social relationships. Two variables, organizational
commitment and job satisfaction, were used as proxies for happiness.
Two variables, work intensification and anxiety, were used as proxies
for mental health. One variable, management relations, was used as a
proxy for social relationships (for justifications, review the well-being
definition section). Next, we conducted three sets of confirmatory
factor analyses to confirm the factor structures of well-being. The ini-
tial measurement model had three latent factors (i.e., happiness, men-
tal health, and social relationships) (Grant et al., 2007). We estimated
a model with three latent variables, a one-factor model and a five-
factor model. To determine the goodness of fit of the measurement
model, we relied on the root mean square error of approximation
(RMSEA, Hu & Bentler, 1999), the comparative fit index (CFI, Bentler,
1990), and the nonnormed fit index (TLI, Hu & Bentler, 1999).
According to Hu and Bentler (1999), RMSEA ≤ .06 or CFI ≥ .95 or TLI
≥ .95 indicates a good fit.
The three-factor model fit the data poorly (χ2 [227] = 26,882.635;
RMSEA = .09; CFI = 0.865; TLI = 0.850; SRMR = 0.091; AIC = 1,132,000).
The one-factor model was clearly insufficient (χ2 [230] = 116,094.383;
RMSEA = .187; CFI = 0.414; TLI = 0.355; SRMR = 0.209; AIC = 1,221,000).
The five-factor model fit the data well (χ2 [220] = 9,729.184; RMSEA = .05;
CFI = 0.952; TLI = 0.945; SRMR = 0.043; AIC = 1,115,000); therefore, we
decided to examine the five indicators of well-being separately. Subse-
quently, we provide a detailed description of the five variables; we also
conducted a pilot study to verify the construct validity (convergent and
discriminant validity) of the measures of organizational commitment and
work intensification. The data in the pilot study provided evidence for the
construct validity of both commitment and work intensification by dem-
onstrating both convergent and discriminant validity (results available
upon request).
Organizational commitment (alpha = .77) was measured by means
of three items adapted from the well-established scale by Meyer and
Allen (1997): “employees share the organization's values,” “employees
feel loyal to the organization,” and “employees are proud to tell people
about the organization.” The measure uses a five-point rating scale
(1 = strongly disagree; 5 = strongly agree).
Job satisfaction (alpha = .87) was measured by seven items,
reflecting seven facets of work, which have been used in a number of
WERS-based studies (e.g., Bryson, Cappellari, & Lucifora, 2010):
“employee satisfaction with influence,” “employee satisfaction with
achievement from work,” “employee satisfaction with using initiative,”
“employee satisfaction with job security,” “employee satisfaction with
the training received,” “employee satisfaction with involvement in
decision-making,” and “employee satisfaction with the work itself”
(1 = very dissatisfied; 5 = very satisfied).
Work intensification (alpha = .70) was assessed by means of two
items, measuring the perception of work pressure based on Karasek's
(1979) definition of job demands: “the extent to which employees felt
that their jobs required them to work very hard” and “whether they
HO AND KUVAAS
felt they had enough time to get their work done” (1 = strongly dis-
agree; 5 = strongly agree).
Anxiety (alpha = .94) was assessed by means of three items mea-
suring negative emotional states based on Warr's (1990) measure:
“thinking of the past few weeks, how much of the time has your job
made you feel tense,” “thinking of the past few weeks, how much of
the time has your job made you feel uneasy,” and “thinking of the past
few weeks, how much of the time has your job made you feel wor-
ried” (1 = never; 5 = all of the time).
Management relations (alpha = .92) were assessed by means of
four items, measuring employees' perception of their relations with
managers in terms of trust, understanding, honesty, and fairness
(1 = strongly disagree; 5 = strongly agree).
4.4 | Performance
We measured organizational performance using three items based on
the information provided by managers who had primary responsibility
for employment relations. These managers were asked to rate the per-
formance of their own workplaces compared with that of other work-
places in the industry in terms of financial performance, labor
productivity, and quality of product service. Ratings were based on a
five-point scale (far above average to far below average). Available evi-
dence indicates that managerial assessments correspond closely to
internal objective performance indicators (Dess & Robinson, 1984;
Wall et al., 2004) and external secondary data (Venkatraman &
Ramanujam, 1987). To reduce the complexity of the analysis, we com-
bined the three variables into a single global construct (alpha = .79).
4.5 | Control variables
In the analysis, we included control variables at the workplace and
employee levels. At the employee level, the five control variables were
sex (1 = female; 0 = male), age (eight dummies), type of job (1 = perma-
nent; 2 = temporary or fixed), hours per week, and union membership
(1 = yes; 2 = no). At the workplace level, the three control variables
were industry (12 dummies), age of firm (the number of years of oper-
ation), and firm size (1 = fewer than 50 employees; 12 = 100,000
employees or more).
5 | RESULTS
Table 1 presents the means, ESs, and correlations. Hypothesis 1 con-
cerns synergy among HRM practices when combined into a system,
that is, whether HRM systems have larger effects on firm performance
than the effects from adopting each practice individually. Based on
the literature review, Chadwick (2010) argued that an ideal approach
to testing the existence of synergy is “to explicitly compare the perfor-
mance effects of a set of HRM practices with a contextually and theo-
retically appropriate aggregation of those same practices” (p. 89). In
this study, we followed Chadwick's (2010) recommendation to com-
pare the effects of nine individual practices with the performance
7
effects of them all together in a unitary index. Furthermore, consistent
with Way's (2002) suggestion, the estimates of the effects of each
HRM practice on firm performance were controlled for the impact of
other HRM practices in the set. We used the following indicators to
evaluate the existence of synergistic effects: variable's statistical sig-
nificance, magnitudes of the coefficients, and change in R-square.
As shown in Table 2, only job autonomy and performance-related
pay had a significant and positive correlation with firm performance,
with each accounting for 10% of the variance in firm performance
(b = .10, p < .05; b = .10, p < .01, respectively). The other seven prac-
tices were nonsignificant. However, the HRM systems, composing of
all nine practices, had a significant and positive correlation with firm
performance and accounted for 17% of the variance in firm perfor-
mance (b = .17, p < .001). In other words, HRM systems have signifi-
cantly larger effects on firm performance than the effects from
adopting each practice individually. Hypothesis 1 was thus supported.
Hypothesis 2a predicted a positive relationship between HRM
systems and employee well-being, whereas Hypothesis 2b predicted a
negative relationship. To evaluate Hypotheses 2a and 2b, we first ran
a base model with control variables and added HRM systems in a sec-
ond model. As shown in Table 3, HRM systems have significant asso-
ciations with all well-being measures except work intensification.
Moreover, the signs were positive with organizational commitment,
job satisfaction, and management relations but negative with anxiety.
In other words, the results indicate that HRM systems have a positive
effect on well-being. Hypothesis 2a was therefore supported, but
hypothesis 2b was not supported.
In Hypothesis 3, we posited that the relationship between HRM
systems and (a) firm performance and (b) well-being is curvilinear, with
positive effects at low to moderate levels of implementation but nega-
tive effects at higher levels. To test for nonlinear effects, we followed
Chadwick's (2007) method. We first created an HRM index to present
HRM systems and then converted this index into its quadratic and
cubic terms. If nonlinear effects are present, the quadric or cubic
terms should be significant.
With respect to firm performance, Table 4 shows that the linear
effect of HRM systems was positive and significant association
(b = .13, p < .05), but the quadratic and cubic terms were nonsignifi-
cant (b = .01, p > .05). Hypothesis 3a was thus not supported.
With respect to well-being, Table 4 shows that there is evidence
of nonlinear relations for job satisfaction, management relations, and
anxiety (as indicated by significance of the quadratic or cubic terms)
but not for organizational commitment and work intensification
(as indicated by nonsignificance of the quadratic or cubic terms). For
job satisfaction, the quadratic effect was significant and negative
(b = −.02, p < .05) (Table 4), indicating that satisfaction first increased
and then declined as more intensive implementation is reached. A plot
of the relationship shows that the relationship was initially positive
but declined as the number of HRM practices increased (Figure 1). For
management relations, the quadratic effect sign was significant and
negative (b = −.04, p < .001) (Table 4), indicating that management
relations first increased and then declined as more
intensive implementation was reached (i.e., decreasing returns to
 8

TABLE 1 Means, SEs, and correlations of study variables

Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13
1. Subj. performance 3.75 .59 1
2. HRM system 14.9 1 0.15*** 1
3. Org. commitment 3.82 .81 .08*** .31*** 1
4. Job satisfaction 3.65 .74 .09*** .29*** .62*** 1
5. Anxiety 2 .86 −.04*** −.15*** −.37*** −.51*** 1
6. Work intensification 3.65 .77 −.00 .01 .03** −.05*** .34*** 1
7. Management relations 3.04 .99 .04*** .11*** .27*** .26*** −.18*** −.04*** 1
8. Firm size 9.16 3.28 −.05*** −.18*** −.11*** −.10*** .06*** −.01 −.03** 1
9. Firm age 1.31 .45 −.02* −.05*** .01 −.03** .01 .00 −.03** .08*** 1
10. Female .49 .49 .03** .13*** .11*** .09*** −.06*** .04*** .08*** −.12*** −.05*** 1
11. Age 5.66 1.47 −.03** −.06*** .03** .02** −.01 .07*** −.01 .04*** .11*** −.07*** 1
12. Hours/week 36.03 12.81 .00 −.01 −.01 −.04*** .16*** .18*** −.06*** −.01 .03** −.30*** .06*** 1
13. Permanent job .92 .25 −.03** −.02 −.01 .00 .06*** .09*** −.03** .01 −.00 −.01 .13*** .12*** 1
14. Member of union .24 .43 −.08*** −.16*** −.10*** −.12*** .09*** .05*** −.09*** .30*** .11*** −.15*** .18*** .08*** .07***

Note: Firm size coded 1 = less than 50 (reference), 2 = 50–99, 3 = 100–149, 4 = 150–249, 5 = 250–499, 6 = 500–999, 7 = 1,000–1,999, 8 = 2,000–4,999, 9 = 5,000–9,999, 10 = 10,000–49,000,
11 = 50,000–99,999, and 12 = 100,000 or more. Gender coded 1 = female, 0 = male (reference). Age coded 1 = 16–17 (reference), 2 = 18–19, 3 = 20–21, 4 = 22–29, 5 = 30–39, 6 = 40–49, 7 = 50–59,
8 = 60–64, and 9 = 65 or more. Member of trade union/permanent job coded 1 = yes, 0 = no (reference). For ease of presentation, we omitted industry and sector. Please write to the first author for a complete
correlation matrix.
Abbreviation: HRM, human resource management.
*p < .05; **p < .01; ***p < .001.
HO AND KUVAAS
HO AND KUVAAS 9

T A B L E 2 The impact of individual HRM practices and HRM reflecting the notion of positive synergy. In contrast, Hypothesis
systems on firm performance 5 predicted that interactions among skills, opportunity, and motivation
Overall subjective bundles would be associated with (a) lower firm performance and
Variable firm performance ΔR2 (b) lower well-being than each bundle taken in isolation, reflecting the
Job autonomy .10(04)* 0.006* notions of substitutes and negative synergy.
Teamwork .01(04) 0.000 To test the interactions, we followed Macduffie's (1995) recom-

Training −.02(05) 0.000 mendation. First, a base model was run, which contained all the con-
trol variables and the tree bundles. A second model was then run that
Performance-related pay .10(04)** 0.009**
added the two-way interactions among the three bundles (Skills ×
Flexible work −.03(04) 0.000
Opportunity; Skills × Motivation; Opportunity × Motivation). Finally, a
Selective hiring −.02(04) 0.000
third model added the three-way interaction (Skills × Opportunity ×
Participatory decision-making .09(05) 0.004
Motivation). Because multilevel modeling is used given the nested
Information sharing .10(05) 0.005
structure of the data (employees within firms), instead of the change
Supportive management .03(05) 0.000
in R-square, the likelihood ratio test will be used to determine
HRM systems .17(04)*** 0.022*** whether adding interaction terms imply a significant gain in the
Note: Cell entries are the estimated coefficients with the SE of estimate in model's explained variance.
brackets. All analyses include all controls as described in the text and the The influence of interactions among the three bundles on firm
new controls for each HRM practice (the index of the other eight practices
performance is presented in Table 5B. The results show that, in isola-
of the HRM systems).
tion, the opportunity bundle had a significant and positive association
Abbreviation: HRM, human resource management.
*p < .05; **p < .01; ***p < .001. with firm performance (b = .05, p < .001) (Model 1), but it had a signif-
icant and negative association when interacting with skills and motiva-
tion bundles (−.04, p < .05) (Model 3). In other words, the three-way
scale). A plot of the relationship showed that the relationship initially
interactions among the bundles do not yield a net effect that exceeds
increased but declined as the number of HRM practices increased
the effect of single bundle. Hypothesis 5a was thus supported, but
(Figure 2). Finally, for anxiety, the cubic effect was significant and neg-
Hypothesis 4a was not supported.
ative (b = −.01, p < .05), but the magnitude of coefficient was reduced
Supplemental analyses (Table 5B and Table 6) reveal that, in isola-
from −.14 to −.01 (Table 4), indicating that anxiety increased as HRM
tion, the opportunity bundle had a statistically significant positive
implementation moves from lower to higher levels. A plot of the rela- association with labor productivity (.08, p < .05) (Model 1), but it
tionship shows that for systems with very few practices, adding an became nonsignificant when interacting with skills and motivation
additional practice has a great impact in reducing anxiety. This impact, bundles (−.03, p > .05) (Model 3). In other words, the insignificant
however, diminishes for firms with average number and high number result is attributed to the rise labor costs associated with the integra-
of practices where the curve flattens (Figure 3). On the whole, three tion of the three bundles, as reflected by the nonsignificance between
out of five indicators of well-being show nonlinear paths with HRM the two- and three-way interactions between the bundles and labor
systems. Hypothesis 3b was therefore supported. productivity. These results indicate that for firm performance, the
Hypotheses 4 and 5 concern the interactive effects. Hypothesis interrelationships of skills, opportunity, and motivation bundle are
4 predicted that interactions among the skills, opportunity, and moti- substitutes for negative synergy but not for positive synergy.
vation bundles would be associated with (a) higher firm performance The influence of the interactions among the three bundles on
and (b) higher well-being than each bundle taken in isolation, well-being is presented in Table 6. The results were generally

TABLE 3 The impact of HRM systems on well-being

Well-being dimensions

Happiness Mental health Social relationships

Variable Organizational commitment Job satisfaction Anxiety Work intensification Management relations
Model 1
Controls Yes Yes Yes Yes Yes
Model 2
HRM systems .32(01)*** .30(01)*** −.18(02)*** −.01(02) .10(01)***
LRT 362.11*** 377.20*** 122.70*** 0.46 56.35***

Note: Cell entries are the estimated coefficients with the SE of estimate in brackets. All analyses include all controls as described in the text.
Abbreviations: HRM, human resource management; LRT, likelihood ratio test.
*p < .05; **p < .01; ***p < .001.
10 HO AND KUVAAS

TABLE 4 Nonlinear effect results

Well-being dimensions

Happiness Mental health Social relationships

Overall subjective Organizational

firm performance commitment Job satisfaction Anxiety Work intensification Management relations
Model 1
Controls Yes Yes Yes Yes Yes Yes
Model 2
Controls Yes Yes Yes Yes Yes Yes
HRM system (linear) .17(.04)*** .32(02)*** .30(.01)*** −.18(.02)** −.01(.02) .10(.01)***
Model 3
Controls Yes Yes Yes Yes Yes Yes
HRM system (linear) 13(05)* 33(02)*** 30(02)*** −.13(02)*** 02(02) 11(02)***
HRM system (quadratic) .01(.03) −.00(.01) −.02(01)* .02(.01) −.00(.01) −.04(.01)***
HRM system (cubic) .01(.01) −.00(.01) .00(.00) −.01(.01)* −.01(.01) −.01(.00)

Note: Cell entries are the estimated coefficients with the SE of estimate in brackets. All analyses include all controls as described in the text.
Abbreviation: HRM, human resource management.
*p < .05; **p < .01; ***p < .001.

nonsignificant except for the interaction between motivation and
skills bundles for organizational commitment. More precisely, in isola-
tion, the motivation bundle had a significant and positive correlation
with organizational commitment (b = .08, p < .05) (Model 1). When
interacting with skills bundle, the relationship became negative (−.10,
p < .05), indicating the combined effect of interaction between skills
and motive bundles does not exceed the effect of single bundle. How-
ever, on the whole, we found little evidence of the influence of inter-
actions between the three bundles on well-being. Hypotheses 4b and
5b were therefore not supported.
linearity demonstrating that the relationship is nonlinear. Specifically,
we found that, at moderate levels of implementation, HRM practices
are positively correlated with employee well-being as well as higher
levels of commitment, job satisfaction, management relations, and
lower levels of anxiety. However, at high levels, the relationship is less
positive and even turns negative with lower levels of job satisfaction
and management relations. This curvilinear finding bridges the divide
between the mutual gains and the critical scholars regarding the
impact of HRM systems on well-being, suggesting that the conflicting
findings of the relationship between HRM systems and well-being
may be attributable to the fact that prior research is constrained by its

6 | DISCUSSION linearity obsession and hence ignores a possible nonlinear association

This study attempts to shed light on the well-being paradox; HRM
practices have at times positive effects on well-being and at other
times negative effects. Our study has both research and practical
implications.
between HRM systems and well-being. In other words, from a theo-
retical viewpoint, our study extends the research on well-being specif-
ically and the HRM literature generally by arguing that the nonlinear

6.1 | Research implications

First, our study contributes to the well-being debate. As argued,
researchers have recently engaged in active debate about the nature
of the relationship between HRM systems and well-being. Some
scholars have argued that HRM systems are good for employees and
employers (the mutual gains perspective) (Kochan & Osterman, 1994).
Other scholars have argued that HRM systems are bad for employees
but good for employers (the critical perspective) (Legge, 2005). The
accumulating body of evidence supports both views, which we have
called the well-being paradox in this study. Furthermore, with some
exceptions (White & Bryson, 2013), researchers have been gravitating
toward the assumption that the relationship between HRM practices FIGURE 1 Curvilinear relationship between HR system and job
and well-being is linear. We falsified this conventional assumption of satisfaction
HO AND KUVAAS 11

TABLE 5A Interaction effects between bundles and firm

performance

Overall subjective firm

performance

Bundles β Δ2
Model 1
Controls Yes
Skills −.02(04)
Opportunity .05(01)***
Motivation .12(08)
Model 2
Controls Yes 0.001
Skills −.03(04)
F I G U R E 2 Curvilinear relationship between HR system and Opportunity .05(01)***
management relations
Motivation .12(09)
Skills × Opportunity −.00(01)
model is better to describe the nature of the relationship between Skills × Motivation −.03(09)
HRM systems and well-being than the linear model, opening a new Opportunity × Motivation .02(02)
door for potential groundbreaking research and theory development. Model 3
Second, our study contributes to research on HRM-performance
Controls Yes 0.006*
paradigm. Most research within the HRM-performance paradigm
Skills −.02(04)
explicitly or implicitly assumes that there are additive or positive syn-
Opportunity .05(01)***
ergistic effects among the HRM practices constituting HRM systems
Motivation .18(09)
or “more is better” in the language of De Winne and Sels (2013). Our
Skills × Opportunity −.00(01)
results challenged the conventional wisdom of more is better. We
Skills × Motivation −.07(09)
found that when an opportunity bundle was implemented in isolation,
Opportunity × Motivation .02(02)
it had a positive effect on firm performance. However, when an
Skills × Opportunity × Motivation −.04(02)*
opportunity bundle interacted with skills and motivation bundles, it
LRT
had a negative effect. Supplemental analyses revealed that the nega-
tive result was due to the rise labor costs associated with the integrat- Note: Cell entries are the estimated coefficients with the SE of estimate in
brackets. All analyses include all controls as described in the text.
ing the three bundles (i.e., the three-way interaction among the
Abbreviation: LRT, likelihood ratio test.
bundles was not associated with labor productivity). These findings *p < .05; **p < .01; ***p < .001.
indicate that more is not necessarily better, as implementing a large
scale of HRM practices (i.e., integrating all the three bundles together) leads to negative outcomes due to the increase in labor costs. In other
words, contrary to the common assumption that the interrelationship
among skills, opportunity, and motivation bundles exhibits positive
synergistic effects (Macduffie, 1995), our study showed that the rela-
tionship is substitutable and negative synergistic effects, suggesting
that our “more is better” assumption may be based on faith rather
than on hard evidence. It should be noted here that the finding that
investments in HRM practices increase labor costs supports the argu-
ment that HRM systems have both value-creating and cost-enhancing
effects (Godard, 2004; Guthrie, 2001; Marchington & Grugulis, 2000);
an argument that is, according to our best knowledge, rarely tested.
Third, our study contributes to research on fit or synergy.
Although fit or synergy has been a central concept in the HRM litera-
ture for decades, our knowledge of it remains limited (Chadwick,
2010). Recent major reviews have revealed that not only is there few
research on fit (Jiang, Lepak, Han, et al., 2012) but also that we are,
FIGURE 3 Curvilinear relationship between HR system and given the current accumulated body of knowledge, neither able to
anxiety demonstrate the existence of synergy nor refute it (Chadwick, 2010;
12 HO AND KUVAAS

TABLE 5B Supplemental analyses: Interaction effects between bundles and individual firm performance outcomes

Financial performance Labor productivity Quality of product

Bundles β ΔR2 Β ΔR2 β ΔR2

Mode 1
Controls Yes Yes Yes
Skills −.05(04) −.01(04) .02(04)
Opportunity .12(04)** .08(04)* .13(04)**
Motivation .08(04) .07(04) −.02(04)
Model 2
Controls Yes 0.005 Yes 0.003 Yes 0.002
Skills −06(04) −.03(04) .03(04)
Opportunity .12(04)** .08(04) .13(04)**
Motivation .06(04) .08(04) −.02(04)
Skills × Opportunity −.03(03) −.02(03) .03(03)
Skills × Motivation .00(04) −.04(04) .00(04)
Opportunity × Motivation .06(03) .02(03) −.02(03)
Model 3
Controls Yes 0.004 Yes 0.002 Yes 0.004
Skills −.06(04) −.03(04) .04(04)
Opportunity .13(04)** .08(04) .14(04)**
Motivation .09(04)* .09(04)* −.00(04)
Skills × Opportunity −.04(03) −.03(03) .01(03)
Skills × Motivation −.01(04) −.05(04) −.01(04)
Opportunity × Motivation .05(03) .02(03) −.02(03)
Skills × Opportunity × Motivation −.04(02) −.03(03) −.04(02)

Note: Cell entries are the estimated coefficients with the SE of estimate in brackets. All analyses include all controls as described in the text.
*p < .05; **p < .01; ***p < .001.

Gerhart, 2007; Wall & Wood, 2005). This inability is because most of
research on fit or synergy is “driven by convenience rather than by
theory,” with little specification for the forms of synergy within an
HRM system or explanations for how synergies within an HR system
operate (Boon, Den Hartog, & Lepak, 2019; Chadwick, 2010, p. 86;
Delery, 1998; Kepes & Delery, 2007). Our study overcomes these lim-
itations. In our study, we went beyond the general statement that a
system of practices has more influence on firm performance than the
individual practices, specifying different relationships within an HRM
system (e.g., additive, substitutable, positive, and negative synergistic
relationships) and explaining how these influence organizational out-
comes. For example, drawing on the AMO model, we argued the skills,
opportunity, and motivation bundles are complementary. As a result,
we predicted that if these bundles were integrated together, they

TABLE 6 Interaction effects between bundles and well-being

Well-being dimensions

Happiness

Bundles Organizational commitment Job satisfaction

1 2 3 1 2 3
Skills .02(01) .03(02) .03(02)* .01(01) .01(01) .01(01)
Opportunity .10(00)*** .10(00)*** .10(00)*** .11(00)*** .11(00)*** .11(00)***
Motivation .08(03)* .11(03)** .12(03)*** −.07(03)* −.06(03) −.06(03)
Skills × Opportunity .01(00) .01(00) −.00(00) −.00(00)
Skills × Motivation −.10(03)* −.11(03)* −.03(03) −.03(03)
Opportunity × Motivation .01(01) .01(01) .01(01) .01(01)
Skills × Opportunity × Motivation −.01(01) .00(00)
LRT 10.92* 1.6 2.21 0.00
HO AND KUVAAS 13

TABLE 6 (Continued)

Well-being dimensions

Mental health Social relationships

Bundles Anxiety Work intensification Management relations

1 2 3 1 2 3 1 2 3
Skills .00(02) .01(02) .01(02) −.00 −.00 .00(01) −.01(01) −.02(01) −.02(01)
(02) (02)
Opportunity −.06 −.06 −.06 −.01 −.01 −.01(01) .05(00)*** .05 .05
(00)*** (00)*** (00)*** (01) (01) (00)*** (00)***
Motivation .02(03) .00(03) .00(04) .03(03) .02(03) .04(04) −.11 −.09 −.08
(02)*** (03)** (03)**
Skills × opportunity .00(00) .00(00) −.00 −.00(00) −.01(00)* −.01(00)*
(00)
Skills × motivation .01(04) .01(04) .02(04) .01(04) .00(03) .00(03)
Opportunity × motivation .00(01) .00(01) .01(01) .01(01) −.01(01) −.01(01)
Skills × opportunity × .00(01) −.03 −.01(01)
motivation (01)**
LRT 2.56 0.02 1.26 9.01** 11.12** 3.71

Note: Cell entries are the estimated coefficients with the SE of estimate in brackets. All analyses include all controls as described in the text. Model
1 contains all the control variables and the tree bundles. Model 2 adds the two-way interactions between the three. Model 3 adds the three-way
interaction.
Abbreviation: LRT, likelihood ratio test.
*p < .05; **p < .01; ***p < .001.

would yield a combined positive synergistic effect on firm perfor-
mance that exceeds the effect of single bundle. From a theoretical
viewpoint, our theory-driven definitions of different forms of synergi-
es/relationships and our specific discussions of how their interactions
effect on firm performance not only have a conceptual contribution
to research on fit/synergy but also advance our still incomplete under-
standing of the black box connecting HRM to firm performance.
Fourth, in the well-being literature, it is generally accepted that
“psychologically well people are more prone to experience positive
emotions and less prone to experience negative emotions” (Wright &
Cropanzano, 2000, p. 84). That is, well-being scholars tend to treat
well-being as a bipolar construct, assuming that as positive well-being
increases negative well-being decreases (Diener, 1984; Wright, 2014).
Our result questions this traditional wisdom, showing that at higher
levels of implementation, HRM systems have favorable effects on
employee well-being by reducing anxiety, but they also have debilitat-
ing effects on employee well-being by lowering job satisfaction and
management relations. This observation suggests that some dimen-
sions of well-being are independent, unipolar constructs, which can
potentially arise simultaneously. In other words, some dimensions of
well-being are too distinct from one another to be merged into one
composite score; if bundled together, we obscure the different foci of
the individual dimensions of well-being, leading to inaccurate interpre-
tations of theoretical and practical consequences. We believe that this
result might also explain the previously noted inconsistencies in stud-
ies examining the relationship between HRM systems and well-being;
that is, the inconsistencies may be attributable to the fact that prior
research has not paid sufficient attention to the complexities of the
concept of well-being. Grant et al. (2007) have long observed that
HRM practices “frequently create tradeoffs between different dimen-
sions of employee well-being, whereby one aspect of employee well-
being improves but another aspect of employee well-being decreases”
(p. 51); our results confirm their observation.
6.2 | Practical implications
Perhaps the most important practical implication of our study is that
failing to recognize the existence of a nonlinear relationship may lead
managers to make wrong decisions about the practical utility of HRM
practices. To illustrate our point, let us consider a hypothesized case
that managers want to increase the well-being of their workforce,
because they believe that happy employees are more productive than
unhappy employees. If mangers followed the traditional wisdom of
more is better (i.e., linearity), they would increase their investments in
HRM by adopting a large scale of HRM practices with the hope of
maximizing employee well-being. Because the HRM/well-being rela-
tionship is curvilinear, as documented by our study, their investments
in HRM would initially result in increased well-being. Continuing
investments in HRM would, however, ultimately lead to decreased
well-being. If managers had known about our study and, therefore,
had understood that investments in a large scale of HRM practices
could lead to decreased instead of increased well-being, they would
have limited the scale of their investments and focused on a small,
economic scale of practices, avoiding waste energy and resources. In
other words, knowing the existence of a nonlinear relationship can
prevent missteps in the application of HRM practices.
14
Our study also highlights the importance of how to bundle HRM
practices. Although our study suggested that while combining HRM
practices into a system or bundle has a positive performance impact,
not all the combinations yield positive returns. For example, we found
that when adopted in isolation, the opportunity bundle enhances firm
performance, but when integrating it with motivation or skill bundles,
firm performance declined due to the increase in labor costs. For prac-
tical managers, this observation means that they should pay attention
to or avoid this kind of “deadly combination,” to use the language of
Becker et al. (1997), when designing their HRM systems.
6.3 | Limitations and future research
We acknowledge that our research has several limitations. First,
although our conceptual model implies causality, with HRM systems
preceding well-being and firm performance, the cross-sectional nature
of our data precludes such direct causal conclusions. For example, the
reverse order of the relation may be possible (Cappelli & Neumark,
2001) such that high-performing firms may have the financial resources
to invest in HRM systems, resulting in higher firm performance.
Although our results on the effects of HRM systems on firm perfor-
mance are consistent with prior work that explicitly corrected for simul-
taneity bias (Huselid, 1995), a recent longitudinal study that tested the
causal associations between HRM systems and performance using a
large longitudinal dataset with three time points revealed that the asso-
ciation is probably reciprocal; past HRM systems have positively con-
tributed to later productivity, and the reverse has also been found
(Shin & Konrad, 2017). In addition, as nonlinear effects emerge over
time, longitudinal designs are more suitable for testing such effects
(Pierce & Aguinis, 2013). We therefore encourage future research to
retest our nonlinear hypotheses with longitudinal designs.
Second, we did not examine whether moderating conditions affect
the studied relationships. Previous research has suggested that the
relationship between HRM systems and well-being may be moderated
by a range of individual, organizational, and institutional factors. For
example, broader institutional and legislative contexts set limitations
on the agency of managers with regard to how they address human
resource policies and practices as well as employment relations
(Paauwe, 2004). These limitations, in turn, may affect well-being.
Another example can be found in Jensen et al. (2011), who deter-
mined that HRM systems lead to work intensification. However, this
relationship was contingent on employees' perceptions of job control;
that is, employees with low levels of perceived job control reported
higher work intensification than those with higher levels of perceived
job control. Therefore, we encourage future research to systematically
examine these possible moderator effects to develop a more complete
understanding of the relationships among HRM systems, well-being,
and firm performance.
Third, we rely on subjective measures of firm performance.
Although there is some merit in relying on perceived measures of per-
formance due to the difficulty of gathering “hard” financial data (Way,
2002), using subjective measures may make our results biased
(Becker & Gerhart, 1996). With this in mind, the reader should be
HO AND KUVAAS
cautioned when interpreting the subjective firm performance results
reported in our study. That said past studies have shown that subjec-
tive measures are positively associated with objective measures
(Dess & Robinson, 1984; Wall et al., 2004) and that the problem of
single source is not as serious as normally assumed (Crampton & Wag-
ner, 1994; Spector, 2006). Nevertheless, we acknowledge that using
objective financial data would boost the robustness of our results.
Fourth, we rely on existing survey data and are therefore unable to use
more established, validated measures of our constructs, most notably the
measures of organizational commitment and work intensification. Although
the data in the pilot study provided evidence for the construct validity (both
in terms of convergent and discriminant validity), this use of measurement
clearly limits the comparability of our findings to previous research.
7 | C O N CL U S I O N S
Researchers have long been divided regarding the impact of HRM sys-
tems on employee well-being and such systems' implications for firm
performance. At one end of the spectrum, researchers have argued
that both employers and employees benefit from HRM systems
(i.e., the mutual gains perspective). On the other end of the spectrum,
researchers have argued that employers, but not employees, benefit
from HRM systems (i.e., the critical perspective). Both approaches
have been successful with respect to accumulating evidence, yet they
seem fundamentally incompatible. We considered this paradox in the
current study, and our findings suggest that at moderate levels of
adoption, HRM systems enhance well-being but reduce well-being at
higher levels. In other words, our results suggest that the con-
tradicting findings in the literature may be attributable to the extant
literature's failure to account for the possible nonlinear associations
between HRM systems and well-being and to pay sufficient attention
to the tradeoffs between different components of well-being. We
hope that our results stimulate further debate and research on this
important topic.
ACKNOWLEDG MENTS
For insightful feedback, we thank Dr. Motohiro Morishima and the
three synonymous reviewers.
OR CID
Hoang Ho https://orcid.org/0000-0002-7242-6022
Bård Kuvaas https://orcid.org/0000-0002-9516-5259
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AUTHOR BIOGRAPHIES
Hoang Ho received his Ph.D. from BI Norwegian Business School.
He studies strategic human resource management, organizational
performance, high-performance work systems implementation,
organizational commitment, workforce diversity, affect, emotions,
turnover, work stress, health, and employee well-being.
Bård Kuvaas is a Professor of Organizational Psychology at BI
Norwegian Business School in Oslo. He studies framing and
mood, motivation, social exchange, pay systems, performance
appraisal, training, and human resource management systems.
How to cite this article: Ho H, Kuvaas B. Human resource
management systems, employee well-being, and firm
performance from the mutual gains and critical perspectives:
The well-being paradox. Hum Resour Manage. 2019;1–19.
https://doi.org/10.1002/hrm.21990
18 HO AND KUVAAS

APPENDIX

TABLE A1 HRM practices and their links to the AMO model bundles

HRM practices Skills bundle Motivation bundle Opportunity bundle

Job autonomy x
Teamwork x
Staff training X
Performance-related pay x
Flexible work x
Selective hiring X
Supportive management x
Information sharing x
Participatory decision-making x

TABLE A2

Items in the Human Resource Management System Index

Variables Observed items Response scale

Job autonomy How much influence do you have over 1 = none to 4 = a lot
what tasks you do?
How much influence do you have over the
pace at which you work?
How much influence do you have over how
you do your work?
How much influence do you have over the
order in which you carry out tasks?
Teamwork Team members depend on each other's 0 = no to 1 = yes
work to be able to do their jobs.
Tasks or roles rotate among the members of
the team.
Staff training Training either paid for or organized by your 0 = have had no training to 1 = have had
employer during the last 12 months? some training
Performance-related pay Payments based on the overall performance 0 = otherwise to 1 = yes
of the group or team?
Payments based on the overall performance 0 = otherwise to 1 = yes
of your workplace or organization?
Flexible work Are flexi-time arrangements available to 0 = no to 1 = yes
you?
Are job sharing arrangements available to
you?
Are chances to reduce your working hours
available to you?
Are working at or from home in normal
working hours available to you?
Selective hiring Individuals' skills are important when 0 = not selected to 1 = selected
recruiting new employees.
Individuals' qualifications are important
when recruiting new employees.
Individuals' experience is important when
recruiting new employees.
(Continues)
HO AND KUVAAS
Continued
Variables
Supportive management
Information sharing
Participatory decision-making
19
Observed items Response scale
Managers understand employee 1 = strongly disagree to 5 = strongly agreed
responsibilities outside of work.
Managers encourage staff to develop their
skills.
Managers keep employees informed about 1 = very poor to 5 = very good
the way job is done.
Managers keep employees informed about
changes in staffing.
Managers keep employees informed about
financial matters.
Managers seek employee views. 1 = very poor to 5 = very good
Managers respond to employee
suggestions.
Employees influence final decisions.