Human Resources and Service Quality: The Mediating Role of Employees’ Human Capital and Turnover

Abstract

The relationship between human resource management practices and performance has received considerable attention; however, the mechanisms that link bundles of practices, intermediate outcomes, and performance in service contexts, are not yet fully understood. The article unpacks their relationship by applying a framework that combines an employment systems approach with human capital theory. It uses unique longitudinal matched employer- employee data from the social care sector in England to test the framework and to examine the pathways that underpin the impact of HRM practices on performance. The analysis provides evidence that the impact of skills-enhancing and motivation-enhancing HR practices on service quality is mediated by collective human capital and voluntary turnover. The results support the importance of a more widespread diffusion of HRM practices in low wage services sectors that improve service quality through investment on employees’ human capital and reduction of turnover.