Exploring the potential of high performance work systems in SMEs
| Pages | 192-207 |
| Published date | 09 January 2007 |
| DOI | https://doi.org/10.1108/01425450710720011 |
| Date | 09 January 2007 |
| Author | Ian Drummond,Ian Stone |
| Subject Matter | HR & organizational behaviour |
Exploring the potential of
high performance work
systems in SMEs
Ian Drummond
Small Business Service, Sheffield, UK and Durham Business School,
Durham, UK, and
Ian Stone
Centre for Entrepreneurship, Durham Business School, Durham, UK
Abstract
Purpose – Aims to explore aspects of employee relations in firms included within The Sunday Times
list of the UK’s “Best Small Companies to Work For”, focusing in particular on the use of high
performance work systems (HPWS), and the way they impact upon performance in these businesses.
Design/methodology/approach – The research is based upon a postal survey supplemented by
detailed face-to-face interviews with CEOs in 60 per cent of the ranked firms.
Findings – The SMEs studied are found to be highly successful in terms of sales and employment
growth. Our analysis suggests that the common explanation for enhanced business performance in
terms of HPWS (coherent bundles of human resource management practices that function
synergistically and thus have more effect than might be expected from the sum of the parts) is a valid
but partial. The bundles employed in these businesses are synergetic, but the enhanced outcomes
produced need to be understood in terms of the system as a whole, not just the more concrete practices
that are normally considered.
Research implications/limitations – While there is a need to explore further some of the findings
through larger scale qualitative research, we contend that the deeper understanding of HPWS
emerging from this approach is important to the formation of effective policy in relation to the small
business sector.
Originality/value – It is suggested that the cultures, values and norms established within the
businesses are necessarily part of the system and that they play a fundamental role in shaping,
empowering and reproducing the practices used.
Keywords Business performance,Small to medium-sized enterprises,Training,
Human resource management, Organizationalculture
Paper type Research paper
Introduction
High performance work systems (HPWS) have been a subject of academic intere st for a
number of years and there is now considerable evidence that such systems tend to be
associated with enhanced business performance (see, for example, Appelbaum et al.,
2000; Sheppeck and Militello, 2000; Den Hartog and Verburg, 2004). However, the
significance of this relationship is not uncontested. Evidence for the causa l significance
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0142-5455.htm
The authors are grateful to Dr Graham Dietz for his helpful comments on a draft of this paper.
Ian Drummond also expresses his thanks to Grey College/the Holgate Trustees for awarding the
Fellowship that enabled him to work at DBS on this project during Spring 2005.
ER
29,2
192
Received 19 February 2006
Revised 10 April 2006
Accepted 16 May 2006
Employee Relations
Vol. 29 No. 2, 2007
pp. 192-207
qEmerald Group Publishing Limited
0142-5455
DOI 10.1108/01425450710720011
of HPWS is limited and some analysts have argued that observed competitive
advantages simply reflect the direct effects of elements of good practice and the
effective deployment of human resources rather than a system per se (see, for example,
Harley, 2002; Danford et al., 2004; Ordiz-Fuertez and Fernadez-Sanchez, 2003). Godard
(2004) similarly suggests that claims of “superior performance may be unwarranted”
and that “the problems of these systems run deeper than proponents assume”. Based
on a critic of conventional explanations, he argues that more consideration needs to be
given organisational context in which HPWS operate.
Even less consideration has been given to how generally relevant or transferable
such systems are in practice, particularly in relation to SMEs (Whitfield and Poole,
1997; Barnard and Rodgers, 2000; Ramsey et al., 2000). Despite this, a significant
proportion of the literature on HPWS suggests, either explicitly or implicitly, that such
systems are transferable and can purposively be established in businesses. Sung and
Ashton (2005, p. 3), for example, define HPWS as “work practices that are deliberately
introduced with the purpose of improving business performance”. It is also clear that
policy makers in the UK and elsewhere are making similar assumptions. In this paper,
we begin to assess how valid these assumptions are by exploring how such systems
came about and how they underpin productivity gains and growth in 30 highly
successful SME businesses in the UK.
A widely accepted definition sees HPWS as sets of complementary work practices
covering three broad areas or “bundles” of practices. In Sung and Ashton’s (2005)
report, 35 work practices are identified in the three areas:
(1) high employee involvement practices, including self-directed teams, quality
circles and sharing of company information;
(2) human resource practices, cover ing sophisticated recruitment pro cesses,
performance appraisals and mentoring, etc.; and
(3) reward and commitment practices, embracin g financial rewards, “family
friendly” policies, job rotation and flexible working.
However, a key distinguishing feature of HPWS is that the “system” is more than the
sum of its parts. The argument is that sets of practices act synergistically to provide
for additional positive outcomes beyond those that might be expected from the
individual elements. These bundles are variously described in the literature as
necessarily being “internally consistent”, “congruent” “cohesive” and “coherent”
(Whitfield and Poole, 1997; Appelbaum et al., 2000).
Most analysts argue that HPWS enhance business performance through a
two-stage process (Harley, 2002). First, the use of HPWS improves employee
orientations to work, which in turn, typically has a number of effects, including a
reduction in staff turnover and greater flexibility in work practices. The AMO model
(Appelbaum et al., 2000) specifically cites improvements in ability, motivation and
opportunity to participate which result in higher productivity and better overall
organisational performance (see also Miller and Le Breton-Miller, 2005). However , few
published studies of HPWS have unpacked this process in real depth. Causal
explanation of why and how the bundle should produce more than the sum of its parts
is generally lacking or superficial. Moreover, while the literature stresses that bundles
must be coherent, there is little discussion of how this coherence is established and
maintained in practice. While the notion of a complementary and self-reinforcing
Exploring HPWS
in SMEs
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