Human Resource Management and Performance: A Comparative Study of Ireland and the Netherlands

Abstract

In this article, we compare the effects of 'high performance human resource management' (HPHR) on employee and company performance between Ireland and the Netherlands. Key hypotheses are, first, that companies using the HPHR system exhibit higher levels of employee and company performance than companies that do not. Second, we expect that these relationships are stronger for Ireland than for the Netherlands as the societal context (skill formation, industrial relations and value systems) consistently support the working of HPHR in Ireland but in the Netherlands these institutions restrict the potential contribution of HPHR to performance improvements . These hypotheses are tested on company-level data from Ireland and the Netherlands. The main finding is that HPHR is associated with higher performance levels in Ireland but not in the Netherlands. Comparing the effects of single HR domains between the two countries further supports the institutional context hypothesis. Key words: Human Resource Management, Performance, Societal Effect, Ireland, the Netherlands Introduction A substantial and growing body of research claims that substantial economic returns can be obtained through the implementation of what are variously called flexible production systems (MacDuffie 1995; Pil/MacDuffie 1996), high involvement (Lawler et al. 1998), high commitment (Walton 1985), high performance work systems (Appelbaum et al. 2000) and high performance human resource management (Becker and Huselid 1998; Pfeffer 1994). All of these share the idea that the practices are valued for their strategic quality. That is to say, when compared to traditional forms of personnel management, they are unsurpassable in their ability to forge for the firm a skilled and flexible workforce and to create more co-operative labour-management relations that encourage employees to work harder (Appelbaum et al. 2000). Many argue that while high performance HR management increases a company's productivity and profits (e.g., Ichniowski/Shaw/Prennushi 1997; Huselid 1995), the effect is even more pronounced when complementary bundles are used together (e.g., Ichniowski et al. 1997, Hoque 1999). The important question whether the working of high performance human resource management (HPHR) depends on certain cultural and institutional conditions has been largely neglected in the literature. However, for many, 'human resource management' evokes a strong association of being 'an American invention' and being from a culture dominated by 'the right to manage'. Consequently, there is widespread belief that 'human resource management' is de facto neither practical nor espoused in Europe (Brewster 1992). Within Europe, the effects of HPHR have been most intensively studied in the United Kingdom. Although mixed in their degree of support, these studies generally uphold the view that HPHR is associated with improved company performance (e.g., Hoque 1999; Michie/Sheehan 2001; cp. Wood/De Menzes 1998; Guest et al. 2003). This paper contributes to this question by examining whether similar support can be found for other European countries, in particular those less similar to the US in their cultural heritage and institutional set-up than the UK. We examine the effectiveness of HPHR in Ireland and the Netherlands. Both of these European countries have small, open economies, and the companies operating within them are strongly exposed to the globalization of the economy. Consequently, they are bombarded with pressure to re-structure and find new, challenging techniques for managing their human resources (e.g., Looise/Paauwe 2001; Gunnigle et al. 1994; 1997). Ireland and the Netherlands, however, demonstrate distinct differences in cultural orientation and reflect very different approaches to the employment of people and the provision of education and training. Ireland is a country that has had strong historical and cultural links with the US and the UK. The Netherlands in contrast, with its elaborate welfare state, corporatist industrial relations and egalitarian values, has developed more in line with Scandinavia and Germany. …