Expanding the concept of fit in strategic human resource management: An examination of the relationship between human resource practices and charismatic leadership on organizational outcomes

• Author: Elizabeth McClean,Christopher J. Collins
• Date: 01 March 2019
• Published date: 01 March 2019
• DOI: http://doi.org/10.1002/hrm.21945

ORIGINAL ARTICLE

Expanding the concept of fit in strategic human resource

management: An examination of the relationship between

human resource practices and charismatic leadership on

organizational outcomes

Elizabeth McClean

1

| Christopher J. Collins

2

1

Department of Management and

Organizations, Eller College of Management,

University of Arizona Tucson, Tucson, Arizona

2

Human Resource Studies Department,

Industrial and Labor Relations School, Cornell

University, Ithaca, New York

Correspondence

Christopher J. Collins, Human Resource

Studies Department, Industrial and Labor

Relations School, Cornell University,

Ithaca, NY.

Email: cjc53@cornell.edu

We investigate the relationship between high-commitment human resources (HCHR) practices

and chief executive officer (CEO) charismatic leadership on voluntary employee turnover and

relative performance to peers in a sample of 281 small firms. In this study, we expand upon prior

conceptualizations of fit within the literature on strategic human resources (HR) to include the

fit of HCHR with other aspects of the people management system. Specifically, we hypothesize

a variety of relationships that may occur (e.g., positive synergistic, deadly combination, or substi-

tution) and find that when a firm uses a system of HCHR practices and has a charismatic leader,

performance is highest and turnover lowest. Conversely, when a firm does not invest in either,

performance is lowest and turnover highest. We also found some support for a substitution

effect as our data showed that when there is a mismatch between a firm's HR system and the

leadership characteristics of the CEO, turnover is higher and performance lower than the high-

investment people management system (high HCHR and high-charismatic leadership), but turn-

over is lower and performance higher than the low-investment (low HCHR and low-charismatic

leadership) people management system.

KEYWORDS

fit, leadership, strategic human resource management, turnover

1|INTRODUCTION

Strategic human resource management (SHRM) scholars have argued

human resource (HR) systems can be a source of sustainable competi-

tive advantage and drive firm performance to the extent that the sys-

tem creates and sustains valuable employee resources (Collins &

Smith, 2006; Wright, Dunford, & Snell, 2001). Scholars have referred

to these HR systems using a variety of terms including high-

performance work systems (Boxall & Macky, 2009), high-involvement

HR practices (MacDuffie, 1995), and high-commitment HR (HCHR)

practices (Collins & Smith, 2006). Theoretically, these systems share a

similar focus on employees as a source of competitive advantage,

although they differ based on how the practices do so (Zacharatos,

Barling, & Iverson, 2005). HCHR practices constitute one system that

can lead to competitive advantage by shaping the abilities and

motivation of employees to identify with the organization and to pro-

vide opportunities to exert effort to achieve its goals (Huselid, 1995;

Jiang, Lepak, Hu, & Baer, 2012; Kehoe & Collins, 2017). In prior

research, scholars have generally defined the HCHR system to include

practices such as recruitment and selection based on person-

organization fit, investment in employee training and development,

high pay and pay tied to organizational performance, and greater

autonomy and inclusion in decision-making (Arthur, 1994; Collins &

Smith, 2006; Kehoe & Collins, 2017). Although a growing number of

studies have shown a positive relationship between investing in

employees through HCHR systems of practices and organizational

performance outcomes (Datta, Guthrie, & Wright, 2005; Jiang et al.,

2012; Kehoe & Collins, 2017), there are a number of critical issues

that still need to be addressed to better understand the relationship

between HR systems and firm performance.

DOI: 10.1002/hrm.21945

Hum Resour Manage. 2019;58:187–202. wileyonlinelibrary.com/journal/hrm © 2018 Wiley Periodicals, Inc. 187

First, much of the extant literature in the field of SHRM has

focused on the direct or indirect relationship between HR systems

and firm performance, even though scholars have long argued the

effects of a HR system on firm performance may be contingent on

other factors (Chadwick, 2010; Wright & McMahan, 1992). Impor-

tantly, little is known about how HR practices interact with other

internal resources, like chief executive officer (CEO) characteristics,

that may have a similar or overlapping impact on employee abilities,

motivation, or opportunities to perform. Indeed, there is strong sup-

port from contingency theorists that structure (e.g., organizational

design, systems, and practices) should fit within the broader context

of the firm to be successful (Drazin & Van de Ven, 1985; Tushman,

1979); thus, to understand when HR systems lead to organizational

outcomes, researchers must begin to explore how HR systems work

in conjunction with other internal organizational resources. Integrating

the behavioral perspective (Schuler & Jackson, 1987a, Schuler & Jack-

son, 1987b) and contingency theory (Drazin & Van de Ven, 1985), we

argue HCHR practices impact firm performance by sending clear sig-

nals to employees that support and reinforce employees' ability and

motivation to enact specific behaviors and this effect is contingent on

CEO characteristics, like charisma.

Second, to understand how and when HR systems can lead to

organizational performance, SHRM research could benefit from

greater precision in identifying the contextual organizational factors

that are critical for firm performance or that may alter the effective-

ness of an HR system (Chadwick, Way, Kerr, & Thacker, 2013;

Collins & Smith, 2006). Indeed, most recent work on HRM in organi-

zations has been context-free, and yet context may affect the

nature of how and when HR systems are effective in organizations

(Cooke, 2018). To that end, we examine the relationship between

HCHR practices and firm performance in small businesses, an impor-

tant context to study as these firms employ approximately half of

the total U.S private sector labor force (BLS, 2014) and are consid-

ered to be a key driver of growth in the national economy (Kobe,

2012). Despite the importance to the economy, the relationship

between HR systems and firm performance in small businesses is

not well established (Allen, Ericksen, & Collins, 2013; Chadwick

et al., 2013). Although there is some early evidence that HR systems

may be positively related to the performance of small organizations

(Allen et al., 2013; Way, 2002), Chadwick et al. (2013) provided evi-

dence that the effectiveness of HR systems may be contingent on

the characteristics of small firms. However, these additional studies

focused on external factors that may impact the relative effective-

ness rather than internal factors that may enhance or limit the

effectiveness of how HCHR may impact firm performance through

their effect on key employee outcomes.

CEO leadership is one such factor that likely affects how HR prac-

tices impact employees and firm performance within small firms. The-

oretical and empirical research on upper echelons theory suggests

that CEOs matter for firm performance (Cannella & Monroe, 1997;

Hambrick & Mason, 1984), particularly for small businesses where the

CEO is more likely to interact with and be directly observed by front-

line employees (Daily & Dalton, 1992; Waldman & Yammarino, 1999).

CEO charismatic leadership may be particularly critical because it is

posited to have an effect on firm performance by positively

influencing the behaviors of other senior leaders and the attitudes and

efforts of front-line employees (Waldman & Yammarino, 1999). Thus,

because CEO charismatic leadership and HCHR practices both affect

firm performance by affecting employee resources (i.e., ability and

motivation), we argue understanding the nature of how these two

organizational factors interact is particularly critical in the small busi-

ness context.

Third, greater precision is needed regarding the specific nature of

how HR practices and organizational factors interact to influence per-

formance (Chadwick, 2010; Kepes & Delery, 2007). Researchers have

noted that future research should look at an array of potential interac-

tions between HR practices because they have the potential to rein-

force or conflict with one another depending on the consistency to

which they signal and support expected employee behaviors

(Chadwick, 2010; Kepes & Delery, 2007). Similarly, we argue, just as

with practices within an HR system, the consistency of signals to

employees from an HR system and CEO charisma can have significant

consequences for how employees understand what is expected of

them and their resulting motivation to consistently perform the

behaviors that are needed to positively impact firm performance.

Although several prior studies have examined HR systems and leader-

ship (Chuang, Jackson, & Jiang, 2016; Jiang, Chuang, & Chiao, 2015),

authors in these prior works have theorized and tested only a single

potential form of interaction—substitute effects—between HR and

leadership. Importantly, because other aspects of the overall

employee management system (i.e., CEO leadership behaviors) may

create complementary or alternative paths to impacting employee

abilities, motivation, or opportunities, it is important to examine alter-

native forms of interactions besides substitute effects. We build on

this prior work to hypothesize and test three potential competing

forms of fit between HCHR and CEO charismatic leadership: positive

synergistic, deadly combination, or substitute relationships (Kepes &

Delery, 2007).

Overall, our study makes several important contributions to the

literature on SHRM and CEO charismatic leadership. First, we add to

the literature on SHRM by examining the fit between HCHR and CEO

charismatic leadership in the context of small businesses where both

impact employee resources that drive firm performance outcomes.

Second, we add to the literature on SHRM by examining the concept

of fit with greater precision by theorizing and testing for three alterna-

tive forms of fit. Third, we examine how HCHR may affect firm per-

formance and interact with leadership in the context of small

businesses—a large population of firms that have largely been ignored

in empirical research on SHRM. Finally, we look to add to the litera-

ture on CEO leadership by empirically examining the relationship

between CEO charismatic leadership and firm performance, as prior

research has rarely examined the impact of CEO charisma leadership

behaviors on firm-level employee and performance outcomes and has

not examined these effects in the context of other factors that likely

impact employee resources. In the following sections, we more

completely develop our theoretical rationale and test our hypotheses

with data collected from multiple sources from a sample of 281 small

businesses.

188 MCCLEAN AND COLLINS