Professional Documents
Culture Documents
120
www.elsevier.comrlocaterdsw
a,)
, Cornelia Droge
b,1
, Shawnee K. Vickery
b,2
a
Department of Decision Sciences, Charles H. Lundquist College of Business, Uniersity of Oregon, Eugene, OR 97403, USA
Department of Marketing and Supply Chain Management, N370 North Business Complex, Eli Broad Graduate School of Management,
Michigan State Uniersity, East Lansing, MI 48824-1046, USA
Abstract
A human resource management HRM. analysis framework is proposed and tested using data from first tier suppliers to
the Big 3 in North America. Relationships among underlying dimensions of human resource management practices and
manufacturing performance are examined. The study found support for the proposed framework, suggesting that human
resource management practices can be grouped into five distinct factors, four of which are associated with specific
manufacturing competitive dimensions quality, flexibility, cost and time.. The remaining HRM factor is generic. The four
priority-specific HRM factors are strongly related to their respectie manufacturing performance dimensions. q 1999
Elsevier Science B.V. All rights reserved.
Keywords: Automotive supplier industry; Human resource management; Manufacturing performance; Factor score regression
1. Introduction
Global competition, shorter product life cycles,
and volatile product and market environments have
contributed to the complexity faced by businesses
and industries as the new millennium approaches.
Traditional competitive mechanisms have become
less effective as competitors meet or copy each
others corporate initiatives Ulrich, 1987.. In response, firms constantly search for newer sources of
0272-6963r99r$ - see front matter q 1999 Elsevier Science B.V. All rights reserved.
PII: S 0 2 7 2 - 6 9 6 3 9 9 . 0 0 0 1 3 - 3
in which human resource practices influence performance. Innovative HR practices are often studied in
a vacuum with more attention paid to isolating the
effects of individual practices than to understanding
how different HR practices interact to reinforce one
another or how they are linked to business and
functional strategies MacDuffie, 1995.. Moreover,
prior work has shown that examining the impact of
individual practices on performance is misleading
because individual practices obviate the effect of a
group of HR variables that comprise the system
Ichniowski et al., 1997.. Other researchers have
suggested that a bundle of inter-related, overlapping HR practices provides several non-exclusive
modes of influencing performance Hackman, 1985;
MacDuffie, 1995..
We examine the impact of sets or bundles of
human resource practices on strategic dimensions of
manufacturing performance. The purpose of the research is three-fold. First, we identify key dimensions of human resource management HRM. practices from the literature and propose a conceptual
model for analyzing the deployment of HRM practices within firms. Second, we examine the effects of
indiidual HRM items on individual manufacturing
performance dimensions i.e., cost, quality, flexibility, and time.. The unit of analysis is at the firm or
business unit. level, and thus it is appropriate to
select these four competitive priorities because they
have been described in the literature as key measures. While there is merit in investigating the impact of HRM items on finer details of manufacturing
performance such as, conformance quality, design
quality, and durability instead of overall quality., we
have chosen not to do so because our research intent
is to determine what affects strategic dimensions of
manufacturing performance. Finally, we test our conceptual model and examine linkages between HRM
dimensions or bundles i.e., groups of inter-related
HRM items. and manufacturing performance.
This paper is organized as follows. First, the
operations management and HRM literatures are reviewed to identify key manufacturing performance
dimensions and to specify a set of human resource
management practices that should impact manufacturing performance. Five major categories of HRM
practices are identified. Propositions are introduced
that focus on the relationship between individual
related to flexibility performance. In a recent empirical study, employee autonomy and employee impact
were shown to be underlying dimensions of employee empowerment Spreitzer, 1995.. Furthermore,
Powell 1995. found that employee empowerment
was significantly related to both TQM performance
and overall firm performance. MacDuffie 1995. also
found that participative work systems which included items such as employee involvement, employee suggestions, and employee empowerment.
were significantly related to both quality performance and productivity.
Some authors have examined the role of structural
variables such as broad jobs and open organizations
on competitive performance. In a survey of manufacturing firms, Powell 1995. found that broad jobs
and open organizations as indicated by an open
culture. were significantly related to quality performance. Similarly, in an empirical study of plant
performance in the auto industry, Keefe and Katz
1990. found that broad jobs as indicated by a
combination of job classifications. was significantly
related to quality performance. Finally, Cooper and
Kleinschmidt 1995. found that an entrepreneurial
climate, which is often associated with open organizations, was significantly related to new product
performance.
Several authors have examined the impact of
labormanagement relations on performance. Bushe
1988. conducted a longitudinal study of five manufacturing plants and found that in two of the plants
an improvement in labormanagement relations improved product quality performance. Ansari 1986.
found that effective labormanagement relations was
one of the critical operational factors for JIT purchasing success. Cutcher-Gershenfield 1991. reported that firms adopting transformational labor
relations those emphasizing cooperation and dispute resolution had lower costs, less scrap and
higher productivity than did firms using traditional
adversarial labor relations practices. Finally, on a
global scale, labormanagement relations was one of
the five major activities that contributed to success in
productivity measures in Japanese firms in the automotive industry Otis, 1993..
In summary, the more general human resource
management practices examined herein are cross
training, employee autonomy, employee impact,
4. Research methodology
4.1. The sampling procedure and sample
The study focused on first tier suppliers to the
Big Three in North America. The population
frame consisted of the top 150 first tier suppliers in
terms of annual sales. The list of companies was
provided by industry experts from the Automotive
Industry Action Group AIAG.. AIAG is a professional association with over 1000 members including
the Big Three North American automobile manufacturers Actionline, 1995..
The research questionnaire, accompanied by an
informational letter, was mailed to the CEOs of all
firms included in the population frame. The letter
stated the purpose of the project and that a member
of the research team would be calling soon. CEOs of
strategic business units SBUs. or individual firms
were instructed to complete the survey for their SBU
or firm. CEOs of multiple business units were instructed to select one of their SBUs to participate in
the study and to forward the research questionnaire
Table 1
Descriptive statistics and correlations of manufacturing performance items
Manufacturing performance items
Mean
Std. Dev.
Correlations
1
5.053
1.245
5.772
0.982
5.035
1.101
4.912
1.005
rs
ns
ps
rs
ns
ps
rs
ns
ps
rs
ns
ps
0.171
57
0.205
0.142
57
0.293
0.089
57
0.509
0.090
57
0.505
0.106
57
0.433
0.261UU
57
0.050
Table 2
Descriptive statistics of human resource management practice items
Human resource management practices items
Sample size
Mean
Std. Dev.
57
57
57
56
5.947
5.895
4.930
5.018
1.025
1.160
0.998
1.228
57
57
57
57
5.983
5.614
4.526
4.456
0.991
1.177
1.283
1.364
57
57
57
57
4.947
5.614
4.070
3.983
1.288
1.373
1.237
1.482
57
57
57
57
5.649
6.000
4.404
4.246
1.173
1.086
1.425
1.491
Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations
56
57
54
57
55
57
4.875
4.983
4.722
5.123
5.436
5.544
1.192
1.217
1.352
1.053
1.167
1.196
Human resource management practice items are on a 1 to 7 scale with 1 sExtremely Low Use of Initiative and 7 sExtremely High Use
of Initiative.
10
Table 3
Correlatios of HRM items with manufacturing performance items
Sample size s 50. Significant correlations alpha - 10; one-tailed test. are in bold.
Overall cost
performance
Overall quality
performance
Overall flexibility
performance
Overall time-based
performance
0.436
p s 0.000
0.074
p s 0.152
0.197
p s 0.042
0.107
p s 0.115
0.313
p s 0.007
0.122
p s 0.200
0.236
p s 0.025
0.093
p s 0.130
0.404
p s 0.001
y0.029
p s 0.420
0.236
p s 0.049
y0.068
p s 0.319
0.420
p s 0.001
0.193
p s 0.089
0.343
p s 0.007
y0.004
p s 0.489
0.029
p s 0.421
0.097
p s 0.251
0.026
p s 0.428
y0.017
p s 0.454
0.078
p s 0.295
0.136
p s 0.173
0.105
p s 0.235
0.203
p s 0.078
0.112
p s 0.220
0.251
p s 0.039
y0.023
p s 0.437
0.223
p s 0.006
0.074
p s 0.306
0.040
p s 0.391
0.029
p s 0.421
0.271
p s 0.028
0.145
p s 0.157
y0.086
p s 0.277
y0.062
p s 0.334
0.183
p s 0.101
y0.021
p s 0.441
0.017
p s 0.453
0.044
p s 0.380
0.105
p s 0.234
0.092
p s 0.262
0.168
p s 0.122
0.260
p s 0.034
0.170
p s 0.119
y0.164
p s 0.127
y0.121
p s 0.202
0.397
p s 0.002
0.336
p s 0.008
I0.226
p s 0.057
I0.309
p s 0.014
0.373
p s 0.004
0.249
p s 0.040
0.117
p s 0.209
y0.113
p s 0.217
0.383
p s 0.003
0.319
p s 0.012
y0.057
p s 0.347
y0.152
p s 0.146
0.259
p s 0.035
0.277
p s 0.025
0.178
p s 0.108
0.019
p s 0.449
0.144
p s 0.159
0.116
p s 0.211
y0.002
p s 0.499
0.186
p s 0.098
0.154
p s 0.142
0.125
p s 0.193
0.149
p s 0.151
0.413
p s 0.001
0.060
p s 0.339
y0.049
p s 0.368
0.246
p s 0.042
0.286
p s 0.022
0.197
p s 0.085
0.045
p s 0.378
0.230
p s 0.054
0.401
p s 0.002
y0.071
p s 0.313
0.035
p s 0.405
0.048
p s 0.371
0.358
p s 0.005
0.299
p s 0.017
0.281
p s 0.024
0.355
p s 0.005
0.156
p s 0.140
0.212
p s 0.070
0.290
p s 0.020
and employee training for flexibility. were significantly related to three manufacturing performance
measures. Thus, Proposition 1 was strongly supported.
If we examine the correlations in Table 3, certain
patterns become clear. First, observe the pattern
under cost performance first column in the table..
All cost-specific HRM items i.e., top management
commitment to cost reduction, communication of
cost-related goals, employee training for cost reduction, and cross functional teams for cost reduction.
are positively correlated with cost performance.
These correlations are among the highest in the
column. However, all flexibility-specific HRM items
are also positively correlated with cost performance.
Second, the pattern for quality performance second
column. suggests that it is primarily quality-specific
HRM items that determine quality performance. All
four quality-specific HRM items are positively correlated with quality performance, but little else. Third,
11
the pattern in the next column suggests that flexibility-specific HRM items are related to flexibility
performance all four are significant. and that
time-specific HRM items are related to flexibility
performance all of these four are also significant..
Finally, an analysis of the fourth column shows that:
1. all four time-specific HRM items are significantly correlated with time performance; 2. flexibility-specific HRM items play a lesser role in time
performance particularly in communication of goals
and employee training.; and 3. the generic HRM
items at the bottom of the column are generally
related to time-based performance but not so extensively to any of the other three performance dimensions.
5.2. Dimensions of human resource management
practices (Proposition 2)
As stated earlier in the discussion of the conceptual model in Fig. 1, the literature is not clear as to
Table 4
Rotated factor loadings for the five HRM factors
Variables
Top Level Management Commitment to Cost Reduction
Communication of Goals Relative to Cost Reduction
Formal Employee Training to support Cost Reduction
Cross functional teams to support Cost Reduction
Top Level Management Commitment to Total Quality Management
Communication of Goals Relative to Total Quality Management
Formal Employee Training to support Total Quality Management
Cross functional teams to support Total Quality Management
Top Level Management Commitment to Flexibility
Communication of Goals Relative to Flexibility
Formal Employee Training to support Flexibility
Cross functional teams to support Flexibility
Top Level Management Commitment to Time-based Competition
Communication of Goals Relative to Time-based Competition
Formal Employee Training to support Time-based Competition
Cross functional teams to support Time-based Competition
Broad Jobs
Cross training
Employee autonomy
Employee impact
Labor management relations
Open organizations
Eigenvalue
Percentage of variance explained
Cumulative percentage of total variance explained
Factor 1
Cost.
0.774
0.798
0.648
0.693
0.100
0.264
0.067
0.228
0.113
0.184
0.026
0.010
0.044
0.117
0.001
0.021
0.067
0.055
0.159
y0.169
0.102
0.124
6.823
31.0%
31.0%
Factor 2
Quality.
Factor 3
Flexibility.
Factor 4
Time.
Factor 5
Generic.
0.189
0.131
0.028
0.213
0.883
0.863
0.749
0.851
y0.015
y0.083
y0.040
0.148
0.160
0.039
y0.058
0.182
0.088
0.270
0.037
0.256
0.203
y0.055
3.387
15.4%
46.4%
0.176
y0.073
0.052
0.152
0.127
y0.089
y0.077
0.095
0.852
0.759
0.687
0.821
0.264
0.281
0.175
0.187
0.099
y0.070
0.171
y0.033
y0.082
0.434
2.432
11.1%
57.5%
y0.116
0.052
0.336
0.039
y0.015
0.080
0.261
y0.006
0.230
0.416
0.389
0.139
0.756
0.824
0.835
0.647
0.143
0.109
0.350
0.326
0.148
y0.097
1.647
7.5%
64.9%
0.121
y0.058
0.317
0.026
0.191
0.067
0.169
0.206
y0.060
0.021
0.289
0.052
0.208
0.152
0.279
0.103
0.698
0.854
0.715
0.715
0.766
0.666
1.338
6.1%
71.0%
12
Table 5
Factor items
Corrected
item-total
correlation
0.620
0.558
0.570
0.539
0.798
0.787
0.648
0.745
0.727
0.743
0.711
0.614
0.770
0.744
0.767
0.678
0.645
0.779
0.718
0.689
0.660
0.514
Cronbachs
alpha
Cronbachs alpha
if item is deleted
0.766
Sample size
57
0.685
0.717
0.714
0.725
0.878
57
0.821
0.825
0.888
0.843
0.849
57
0.803
0.783
0.798
0.849
0.878
0.833
0.841
0.831
0.868
0.867
51
0.848
0.824
0.836
0.842
0.846
0.870
13
the analyses indicated that the constructs were unidimensional and reliable, and thus the factor scored
items were taken as the units for further analyses for
testing Proposition 3.
5.3. HRM factors and manufacturing performance
(Proposition 3)
The correlations and p-values. of the five
HRM-factors with the four manufacturing performance items are presented in Table 6. For cost,
flexibility and time, each HRM factor was consistently related to performance on its respectie performance dimension. For example, HRM-Cost was
significantly related to overall cost performance p
s 0.000.. Furthermore, HRM-Quality just missed
one-tailed significance at 0.05 on the quality performance dimension. The HRM-Generic factor was only
related to time-based performance.
Two HRM factors were related to multiple manufacturing performance measures. The HRM-Flexibility factor was a significant predictor of flexibility
and cost performance. The HRM-Time factor was a
significant predictor of time and flexibility performance. These correlation results which are equivalent to standardized beta regression results since the
independent variables are orthogonal. present an
overall picture that is essentially the same as the one
Table 6
Correlations of HRM factors and manufacturing performance items
Variables
Correlations
HRM-Cost
1. Cost performance
2. Quality performance
3. Flexibility performance
4. Time performance
rs
ns
ps
rs
ns
ps
rs
ns
ps
rs
ns
ps
0.480
50
0.000
y0.043
50
0.765
y0.167
50
0.247
0.064
50
0.659
UUU
HRM-Quality
0.032
50
0.823
0.234U
50
0.102
y0.225
50
0.116
y0.059
50
0.684
HRM-Flexibility
UU
0.276
50
0.052
0.083
50
0.564
0.362UUU
50
0.010
0.098
50
0.497
HRM-Time
HRM-Generic
y0.073
50
0.616
0.002
50
0.987
0.285UU
50
0.045
0.324UU
50
0.022
0.036
50
0.803
0.140
50
0.332
0.100
50
0.492
0.286UU
50
0.044
14
Manufacturing performance
item dependent variable.
Model
p-value
Adj. R 2
0.011
0.314
0.017
0.101
0.215
0.027
0.196
0.103
HRM quality
factor
HRM flexibility
factor
HRM time
factor
HRM generic
factor
Size
0.474UUU 0.001.
y0.067 0.641.
y0.176 0.183.
0.080 0.560.
0.019 0.882.
0.265U 0.071.
y0.232U 0.080.
y0.065 0.637.
0.240U 0.069.
0.074 0.608.
0.333UU 0.014.
0.117 0.398.
y0.090 0.486.
0.027 0.850.
0.281UU 0.036.
0.321UU 0.024.
0.002 0.988.
0.151 0.298.
0.080 0.542.
0.295UU 0.038.
0.178 0.178.
y0.268U 0.071.
0.078 0.556.
0.034 0.809.
Table 7
Regression analyses of the five HRM factors and size versus the four manufacturing performance measures
derived from the analysis of the patterns of correlations per individual HRM item.
For our final set of analyses, we performed regressions with all five HRM factors and firm size as
independent variables and each of the four manufacturing performance measures as dependent variable
Table 7.. The number of employees is used as a
proxy for firm size, and the inclusion of this size
variable ensures that the betas for the HRM factors
are calculated controlled for size. In Table 7, for
each of the four measures of overall manufacturing
performance, the final model p-value, the adjusted
R 2 , the regression coefficients b . controlling for
size, and the p-values for the independent variables
are listed. The inclusion of size as a control variable
particularly affected the regression in which overall
quality performance was the dependent variable. In
this regression, the number of employees a proxy
for size. entered as a significant negative predictor
suggesting that smaller companies achieved higher
quality performance.
These analyses revealed that a particular HRM
factor was always significantly related to performance on the corresponding manufacturing performance measure. For example, the HRM-Cost factor
was significantly related p s 0.000. to cost performance. Similarly, HRM-Quality, HRM-Flexibility,
and HRM-Time were significantly related to their
respective manufacturing performance measures.
After controlling for size, HRM factors entered as
significant predictors in more than one model. The
HRM-Quality factor appeared as a significant predictor of two manufacturing performance measures
quality and flexibility in the latter case inversely..
HRM-Flexibility factor predicts both flexibility and
cost, while HRM-Time predicts both time and flexibility performance. The generic HRM factor was
significantly related to only one measure of manufacturing performance, i.e., time performance. Based on
the results of correlations and the regression analyses, we can conclude that, overall, Proposition 3 was
supported.
15
16
on quality in HRM could actually hinder performance in flexibility it is useful to think of quality
efforts as reducing variance while flexibility efforts
as accommodating variance. For example, if human
resources are focused on achieving very high conformance to specifications an important aspect of overall quality in this industry., it can be more difficult to
achieve performance on flexibility dimensions such
as: 1. rapidly accommodating a sudden increase in
demand volume flexibility.; 2. quick implementation of design changes modification flexibility.; or
3. frequent or rapid changes in the product mix
changeover flexibility.. Accommodating these
sources of variation in a timely fashion can be more
difficult when conformance standards are higher and
workers are highly focused on achieving them as
compared to when quality standards and focus are
less stringent.
6.2. Implications
The implications of the findings of this study in
the automotive supplier industry are several. First,
our results suggest that HRM bundles are important predictors of manufacturing performance. The
focus on manufacturing performance as opposed to
overall firm performance offers new perspectives on
human resource management in this industry. Second, the focus on four different aspects of manufacturing performance cost, quality, flexibility and
time presents actionable guidelines for managers.
To a large extent, trends in the automotive supplier industry are dictated by trends in the parent
industry of original equipment manufacturers
OEMs.. Therefore, the pattern of competition in the
OEMs industry offers an interesting reference point
for interpreting the results of this study. Traditionally, this industry has been subject to intense global
competition, especially from Japan. Advances in
Japanese manufacturing techniques e.g., JIT, kaizen
etc.. have attracted the attention of the North American car manufacturers. In one of the most comprehensive research projects in the car industry, Womack et al. 1990. found that a large portion of
Japanese competitive advantage was at the factory
level. Therefore, manufacturing performance, as examined herein, may be the key indicator of overall
competitiveness. However, the adoption of Japanese
17
18
TIME-BASED COMPETITION
COST REDUCTION
Note: 7-point scale was used with endpoints, 1 s
Poor and 7 s Excellent.
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