High Performance Work Systems for Service Quality: Boundary Conditions and Influence Processes

• Author: Ying Hong,Michael C. Sturman,Yuan Jiang,Hui Liao
• Published date: 01 September 2017
• Date: 01 September 2017
• DOI: http://doi.org/10.1002/hrm.21801

Human Resource Management, September–October 2017, Vol. 56, No. 5. Pp. 747–767

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21801

Correspondence to: Ying Hong, Management Systems, Gabelli School of Business, Fordham University, Martino Hall

Room 517, 45 Columbus Ave., New York, NY 10023, Phone: (646) 312-8275, E-mail: yhong24@fordham.edu.

HIGH PERFORMANCE WORK

SYSTEMS FOR SERVICE QUALITY:

BOUNDARY CONDITIONS AND

INFLUENCE PROCESSES

YING HONG, YU AN JIANG, HUI LIAO,

AND MICHAEL C. STURMAN

Drawing on agency theory and the resource-based view, this study examines the

moderating effect of hotel ownership structure on the relationship between high-

performance work systems for service quality (HPWS-SQs) and service perfor-

mance as well as the curvilinear relationship between hotel service performance

and hotel profi tability. Results from surveys and archival data of 126 hotels

showed that when hotels were owned and operated by brands, HPWS-SQs had

a positive effect on service performance. Moderated mediation analyses showed

that service performance as a mediator accounted for the moderating effect

of ownership and management structure on the relationship between HPWS-

SQs and hotel profi tability. In addition, service performance demonstrated an

inverted U-shaped relationship with hotel profi tability. These fi ndings advanced

the understanding of the boundary conditions and infl uence processes of HPWS-

SQs on fi nancial performance in service settings. ©2016 Wiley Periodicals, Inc.

Keywords: high-performance work system, ownership, service performance

Human resources (HR) has been recog-

nized as one of the most valuable assets

for organizations’ long-term survival and

sustainability (Hitt, Bierman, Shimizu, &

Kochhar, 2001). However, HR can also

incur significant costs for organizations (Cappelli

& Neumark, 2001). A key to successful human

resources management (HRM) is to maximize the

return on investment through achieving higher

performance while controlling costs. To this end,

the field of strategic HRM has devoted a great

amount of effort to understand whether and what

types of HRM practices will lead to higher produc-

tivity and performance of organizations (Becker

& Huselid, 1998; Combs, Liu, Hall, & Ketchen,

2006). A bundle of HRM practices, commonly

referred to as high-performance work systems

(HPWSs), generally includes practices such as

selective hiring, extensive training, performance

appraisal, incentive compensation, employee par-

ticipation, and information sharing (Huselid,

1995). Further theoretical development in this

field highlights the importance of a particular

strategic anchor for HPWS, such as service quality

(Liao, Toya, Lepak, & Hong, 2009), and its con-

tribution to the desired competitive advantage of

the organization. Such a strategic anchor of qual-

ity in service industries is important for HPWS

748 HUMAN RESOURCE MANAGEMENT

Human Resource Management DOI: 10.1002/hrm

Given that HPWSs are

costly to implement,

it is important

that organizations

understand the

influence processes

of HPWSs on

organizational

performance and take

necessary measures

to maximize their

effectiveness.

various ownership and management structures. In

this study we propose a more positive influence of

HPWS under aligned, rather than separate, owner-

ship and managerial control.

Besides the boundary conditions, the pro-

cesses through which HPWSs influence organi-

zational outcomes of different proximity are also

largely unexplored. Strategic HRM researchers

often assume that HPWSs will eventually trans-

late into distant financial performance through

various proximal operating indices such as ser-

vice performance (Colakoglu, Lepak, & Hong,

2006; Dyer & Reeves, 1995), yet efforts to theo-

retically develop and empirically examine such

translation processes remain sparse. Although HR

researchers often use different types of outcomes

interchangeably, strategic management theo-

ries suggest that certain competitive advantages

(such as that of higher service quality) may not

directly translate into organizational profitabil-

ity (Foss & Knudsen, 2003; Grahovac & Miller,

2009). The economic return generated from supe-

rior service performance depends on the actual

amount that customers are willing to pay for the

enhanced service, as well as the marginal oppor-

tunity costs incurred for the organization to serve

an additional customer (Peteraf & Barney, 2003).

For example, it is likely that the effects of service

performance on profitability may vary depending

on the level of service performance. Up to a cer-

tain level, higher service performance generates

higher profit; beyond that point, however, addi-

tional service improvement may diminish finan-

cial returns. Albeit this is an important practical

question for service organizations, prior research

has not examined the potential curvilinear rela-

tionship between the operational performance

generated by HPWS and financial performance,

limiting our ability to fully comprehend the

return on investment of HPWS. This study

attempts to fill this void.

In sum, the proposition that HR can be a

potential source of sustained competitive advan-

tage for firms has become the foundation of HR

research over the past decades; however, efforts

to explicate how HR contributes to operational

performance and how operational performance

is translated into profitability have been few and

far between (Sturman, 2012). Therefore, the pur-

pose of this article is twofold. First, we aim to

understand the boundary conditions of HPWSs

in relation to the operational performance of

organizations. Specifically, synthesizing strategic

HRM research with agency theory, we theorize

that HPWSs for service quality are more effec-

tive in improving service performance when the

ownership and management of organizations are

design and its functioning because customer ser-

vice work presents unique characteristics, such as

intangibility, labor intensiveness, and customer

interaction (Mills, Hall, Leidecker, & Margulies,

1983), which demand a particular form of human

capital (Ployhart & Moliterno, 2011) and a special

focus of HPWS (Batt, 2002).

Although prior research has accumulated

extant evidence in the linkage between HPWS and

organizational performance (Combs et al., 2006),

Chadwick and Dabu (2009) pointed out that “the

precise ways in which this relationship influences

competitive advantage are still ambiguous and

the subject of much scrutiny” (p. 253). Given that

HPWSs are costly to implement, it is important

that organizations understand the influence pro-

cesses of HPWSs on organizational performance

and take necessary measures to

maximize their effectiveness.

One potentially important yet

unexplored mechanism that may

moderate the HPWS-performance

relationship is the organization’s

ownership structure. Agency theory

(Jensen & Meckling, 1976) suggests

that owners generally have a vested

interest in the survival and perfor-

mance of organizations. Managerial

agents, however, may pursue self-

interest even at the expense of

the organization’s performance in

which the owners are most inter-

ested. As far as the ownership and

managerial control of an organiza-

tion are concerned, the orchestra-

tion of HPWS by owners versus

agents may be based on different

priorities. As such, HPWSs enacted

by owners versus agents may trigger

different attributions from employ-

ees and subsequently different employee reactions

(Nishii, Lepak, & Schneider, 2008). For example,

when agents focus on the “immediate” results and

apply incentives and punishments more exten-

sively, employees may interpret HPWS as a way

to exploit them. In contrast, when owners imple-

ment HR practices to enhance employees’ abili-

ties, motivation, and opportunities to perform,

employees are more likely to attribute the inten-

tion of HPWSs as caring about and developing

employees to better serve the customers. Nishii et

al. (2008) found that the former type of attribution

was negatively associated with employee attitudes

while the latter had a positive effect on attitudes.

Thus, the effects of HPWS on operational out-

comes may differ given different employee attri-

butions about the intention of HPWS induced by