Author:Ismail, Abdussalaam Iyanda
Position:High-performance work systems - Report


It is common-knowledge that proliferation of well-oiled and well-off firms, the firms with competitive advantage and enhanced performance, would metamorphose in to enhanced and better national socio-economic development. Likewise, the context within which organizations operate can precipitate success or failure of such organizations. These, coupled with the fact that new streams of research have identified strategic human resource management as a basis for competitive advantage (Bamberger & Meshoulam, 2000), enhanced performance (Seidu, 2011) and the attendant nation's development (Bida, Abdul-Halim & Ismail, 2016), underscore the need for a context-specific and SHRM-based research model that would explicate robust contributory role played by high-performance work system (HPWS) in guaranteeing firms' competitive advantage and enhancing optimal firm performance.

Thus, the current research is based on effect of HPWS on SME performance. Researching Small and Medium Enterprises (SMEs) in this very period is indispensable, given that SMEs has become a mainstay of the world economic growth and has played crucial roles in nations' economic development, industrial development, job creation cum poverty reduction (International Finance Corporation (IFC), 2013; Mahmood & Hanafi, 2013).

Research efforts to substantiate that HPWS precipitates competitive advantage and enhanced performance began in the 1990s (Arthur, 1994; Huselid, 1995) and quite numbers of empirical research have emerged as a result. Human resources and its management form an indispensable part of the whole of competitive advantage (Allen & Wright, 2007). Strategic HR that enhances task, targets and performance are formed through the effective adoption of HPWS. Moreover, competitive advantage of an organization over another is connected with improvement in technical competencies, productivity and organizational performance via the instrumentality of human resources which are equipped with the required skills, knowledge and competencies needed for the execution of organizational strategy and planning (Fu, 2013; Ismail, Abdul-Halim & Joarder, 2015).

In the same vein, Mason, Bauer & Erdogan (2010) opined that enhanced organizational performance is contingent upon HPWS that connote a systematic bundle of high performance work practices (HPWPs), called HR architectures/practices, because systems or bundles of HPWPs are more influential than individual practices (Fan et al., 2014; Shin & Konrad, 2014). This might have informed the cautionary assertion made by Boxall, Guthrie & Paauwe (2016) in the editorial introduction to Human Resource Management Journal's special issue entitled "progressing our understanding of the mediating variables linking HRM, employee well-being and organizational performance", The scholars assert that researchers should take caution against measuring HRM by just putting up some HR architectures (i.e. HR practices) into a unitary index. Bundling of HPWS should be in a cost-effective manner which represents contextualization. In other word, HRM should be measured based on contexts of the study.

In addressing this, Ismail et al. (2016b) posited that configuration of HPWS is many-sided but it should be context-specific. Moreover, HPWS should be employee-oriented for it to precipitate higher SME performance (Ismail et al., 2016a). Considering this explication, HPWS in this research would involve HPWPs that are context-specific and employee- oriented. Thus, HPWPs are job design/autonomy, non-financial reward, pay-for performance, employee participation and communication and training and development. This composition of HPWS is a blend of 'best practices', broads and peripherals of HR architectures and it is consistent with HPWS studies such as (Ismail et al., 2016a; Ismail et al., 2016b; Posthuma et al., 2013; Zakaria, 2013) and the host of others. This selection also supports AMO HRM model which proposed that HRM architectures are poised to play three roles. The first role is to improve workers' KSAs (Knowledge, Skills and Abilities). Through training, job design and compensation. The second role entails workers' empowerment via discretionary use of time and talent while the third role involves motivation of workers via incentive compensation.

Besides, the strategic orientations of firms also have bearing on the application of HR practices and effect on the firm's performance (Teo, Le Clerc & Galang, 2011). HPWS can be destructive or helpful because failure or success of HPWS depends on internal and external boundary conditions (Chadwick, Way, Kerr & Thacker, 2013). For that reason, the functions of the HRM are contingent upon the situations of the firm regardless of the size of the firm. It is then observed that management philosophy, otherwise known as managerial values, which is employee-oriented, would reinforce the effectiveness of HPWS and in turn enhance performance (Marchington & Wilkinson, 2005). It has been found that management ideologies or values regarding employees have influence on the effectiveness of HPWS (Osterman, 1994). With this and underpinned by contingency theory's supposition that the context within which firms' functions matter most, it is therefore expected that management philosophy would moderate HPWS-SME performance nexus.


In this section of the study, literature review on HPWS, SME performance and management philosophy was done to authenticate the research questions the current research aims to answer.

Overview of HPWS, SME Performance and Management Philosophy

HPWS is a harmonized combination of HPWPs, otherwise known as HR architectures (Posthuma et al., 2013), that creates synergistic effects whereby particular practices strengthen one another to augment organizational efficiency and effectiveness (Horgan & Muhlau, 2006; Toh, Morgeson & Campion, 2008). It also refers to a bundle of HR architectures configured to augment workers' skills, commitment and productivity in such a way that workers become a source of viable competitive advantage (Datta, Guthrie & Wright, 2005).

SME performance denotes the indicators that appraise how well SMEs accomplishes its objectives (Ho, 2008). This involves financial and non-financial performance (Kaplan & Norton, 2000). Financial indicators of SME performance can include profitability, financial strength, operating efficiency, performance stability and ability to raise capital and level of indebtedness while non-financial indicators can involve public image and goodwill, employees' morale, adaptability, innovativeness, customers' patronage and growth rate of number of employees (Ogunyomi & Bruning, 2015).

Management philosophy refers to organization's view of employees as an important strategic resource (Osterman, 1994). It also means managers' thinking and managerial practices informed by managers' culturally-inherent belief regarding human nature and human behavior (Koprowski, 1981). According to Margolis (2015), management philosophy denotes the managerial values, leadership style of the top management and the existing corporate culture, values and the vision of the top management. This implies that management philosophy includes the values that are central, unique and lasting to the organization.

Hypothetical Moderating Effect of Management Philosophy on HPWS-Performance Nexus

HPWS symbolizes an assertion that higher performance can be accomplished through a set of work practices for core workers in an organization (Boxall & Macky, 2009). Commonsensical analysis of HPWS concept signifies the existence of a bundle of work practices that stimulate, in many ways, higher organizational performance. HPWS is a fuzzy concept that connotes three loosely-fused terms; performance, systemic effects and practices of work of some sort (Boxall, 2012; Boxall & Macky, 2009). A myriad of research (Martinaityte, 2014; Ogunyomi & Bruning, 2015; Seidu, 2011) has established the positive effect of HPWS on performance.

According to Ogunyomi & Bruning (2015), who conducted their research on the relationship between HPWS and organizational performance of small and medium enterprises (SMEs) in Nigeria via survey of 236 respondents, the selected HR architectures had a direct relationship with firm performance. Also, Seidu (2011) who conducted his research in the context of Ghana, confirm that management-rated HPWS influenced firm profitability. The finding of Martinaityte (2014), who did her research in the context of Lithuania's SMEs, indicates that HPWS for creativity simultaneously influences individual and branch creativity leading to firm profitability.

Nevertheless, the environment in which organization operates determine to a large extent the HR policies and practices (Schuler & MacMillan, 1984). The strategic orientations of firms also have bearing on the application of HPWPs and its effect on the firm's performance (Teo, Le Clerc & Galang, 2011). So, HPWS can be destructive or helpful because failure or success of HPWPs depends on boundary conditions (Chadwick, Way, Kerr & Thacker, 2013). Moreover, HPWS components (i.e. HPWPs) should be both vertically and horizontally fit and should be synergistically bundled up to produce higher organizational performance (Buller & McEvoy, 2012; Huselid, 1995; Subramony, 2009), but this cannot be achieved without management philosophy, because management philosophy would be translated to firm's strategy and consequently give rise to aligned HPWS.

In HPWS research, it is common to see scholars that affirm the nexus between investment in HPWS and fundamental organizational philosophies or values (Roche, 1999). This implies that HPWS program in the organization is shaped by the philosophies adopted by the management and values considered useful. It is assumed that HPWS reflect unitarist belief which means that...

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