The effect of individual HR domains on financial performance: evidence from Belgian small businesses

Abstract

The contribution of this study, which assesses the influence of HRM on financial performance, is fourfold. (1) We assess the relative contribution of different HR domains to organizational performance. By controlling for the overall HRM intensity in all analyses we try to meet one of the most striking shortcomings of 'single HR practice research', namely the neglect of the potential simultaneity that might exist with other HR practices. (2) By studying small Belgian companies, we focus on the importance of HRM for small business management. (3) Relying on bankruptcy prediction models, we optimize the conceptualization of financial performance. (4) Using structural equation modeling, we try to capture the mediating effect of operational performance on the relationship between HRM and financial performance. The analyses indicate mixed results for different HR domains with regard to their impact on operational and financial performance.

The adoption of high performance work practices in small businesses: the influence of markets, business characteristics and HR expertise

“…The results for business age were somewhat inconsistent, especially where the analysis of individual HPWPs was concerned. Nevertheless, on balance they provided greater support for Ichniowski et al's (1997) argument that the adoption of HPWPs will be more widespread in younger than older businesses, rather than the survival effects hypothesis that older small businesses will be more likely to adopt HPWPs (Faems et al 2005;Wager 1998). In relation to differences between multi and single-site small businesses, the findings did not support the argument that formalised procedures will be particularly prevalent in multi-site businesses (Knocke and Kalleberg 1994).…”

“…Hence, one might anticipate variation in the uptake of HPWPs between businesses at the upper and lower ends of the small business size spectrum. Second, with regard to business age, some empirical studies show that small businesses that have been in operation for several years tend to have more HPWPs in place than those with a short operation history (Faems et al 2005;Wager 1998). Arguably, this is because the focus of attention within small businesses in their start-up phase will be on staff recruitment rather than on the introduction of HPWPs aimed at employee retention, development and motivation (Hoque and Bacon 2006).…”

“…Despite concerns that the additional labour costs associated with using HPWPs may outweigh their productivity-enhancing benefits (Faems, Sels, de Winne and Maes 2005;Way 2002), HPWPs have been found in small businesses to raise labour productivity and reduce voluntary turnover (Deshpande and Golhar 1994;Faems et al2005;Messersmith and Guthrie 2010;Sels et al 2006;Way 2002), and to be associated with financial performance and profitability (Sels et al 2006, p. 319;Wu, Hoque and Bacon 2011). It would appear, therefore, that the positive relationship identified between HPWPs and performance in firms more generally (for reviews of the HPWP-performance literature, see: Becker and Huselid 1998;Combs, Liu, Hall and Ketchen 2006) (Curran and Blackburn 2000, p.12), and the support services offered to small businesses through the Jobcentre Plus Small Business Recruitment Service, which provides professional and financial support and advice on recruitment, pre-employment training, on-thejob training, apprenticeships and work trials.…”

The Implementation of High Performance Work System in Public Organizations: Implication for Organizational Performance.

“…However, studies have also established that selective training and development does not have direct effect on the performance of an organization (Aragón et al, 2013;Faems et al, 2005, Gelade & Ivery, 2003. Emphasizing that selective training and performance relationship can only be found through a mechanism of productivity (Faems et al, 2005).…”

“…Therefore, studies on selective training and development and organizational performance have gained much research attention over the past few years (Barba-Aragón, Jiménez, & Valle, 2013). Stressing that selective training and development improves both employees and organizational performance by creating a workforce with extensive knowledge and skills (Atteya, 2012;Ballesteros, De Saá, & Domínguez, 2012;Birdi, Clegg, Patterson, Robinson, Stride, & Wall, 2008;Faems, Sels, DeWinne, & Maes, 2005;Lopez-Cabrales, Valle, & Herrero, 2006) and remain a significant tool to woo qualified, flexible and well prepared employees (Bae & Lawler, 2000;Velada & Caetano, 2007). According to Goldstein (1993), training and development is a systematic development and acquisition of skills, attitudes and knowledge required by workers to effectively perform a task or increase performance in the work environment.…”