Firm Performance Effects of High-involvement versus High-commitment HR in the context hotel SMEs

Abstract

In order to compare the relative effectiveness of firms that have adopted some (but not all) of the HR practices that make up a high-performance work system (HPWS), we propose a strategic HR choice framework in which firms choose between different internally consistent HR system approaches that emphasize “High-commitment” practices such as employment security, full- time work, internal promotions, and performance appraisal, and “High- involvement” practices such as enriched job design, teamwork, employee participation, and information sharing, or some of both of these systems. We use this framework to empirically classify the HR systems found in a sample of 165 independently-owned small- to medium-sized hotel enterprises (SMEs) in the U.S. Using longitudinal establishment-level performance data, we test multivariate statistical models of the effect of different HR system choices on hotel SME financial performance. In contrast to predictions based on a “best practice” HPWS perspective, we hypothesized and found that SMEs with a High-commitment HR system performed better than firms with High- involvement HR practices in our sample. In addition, we found the that positive interactive effect of the average level of employees’ human capital (education, experience, and training) and HR system on firm performance was limited to limited to hotel SMEs with a High-involvement HR system. The study addresses calls in the strategic HR literature for work that compares the relative effectiveness of multiple HR systems within a given context and contributes to advancing a more complete understanding of the HRM and firm performance relationship.