64A STUDY OF HRM PRACTICES AND ORGANIZATIONALCULTURE IN SELECTED PRIVATE SECTORORGANIZATIONS IN INDIAAnil Kumar Singh*

1. Executive summaryThe new economic environment is primarily marked by the freeing of shackles for entrepreneurshipand economic growth. The “license system” has been replaced, to a greatextent, by a “market system”. The challenge of Human Resource Management (HRM)practices would be to create an environment of resilience, which can accommodateand assimilate successfully changes in systems, structures, technologies, methods,etc. People would have to ascribe the right meaning to the change process. India iswell-equipped to succeed on global markets. It has a pool of highly educated people,a well-developed judicial system, democratic governance, an established bankingindustry, and fairly sophisticated and inter-linked fi nancial markets. Knowledgeindustries will be at the vanguard of economic opportunity, and India will be poised totake advantage of this trend with its corpus of highly skilled people.The changes on the market scene have necessitated the Indian industry to lookinward for the development of human resources (HR). People develop themselvesin a globalized scenario with new directions along with new problems and issuesarising to develop new competencies to meet the changing requirements, aspirations,and problems. There are, however, some universal goods towards which allhuman resource management efforts should be aimed at. The emergence of Japanesehuman resource management has led to the concept of culture in a big way. At theorganizational level, the goal of HRM is normally to have competent and motivatedemployees to ensure managerial effectiveness and growth of the organization. Organizationsnormally direct their HRM efforts towards the development of competenciesand organizational culture. Organizations use mechanisms to achieve HRM goalswith competent and committed employees. Organizations can achieve very little evenif they have excellent technological and other resources at their command. Such anassertion gains better credibility in the context of developing countries like India, thatis, typically in early growth stages in terms of economic development, and growingmore rapidly than the ‚traditional‘ developed economies of Japan, North America and* University of Delhi, Sri Aurobindo College (dranil.singh@gmail.com).This paper was presented at the Tenth International Conference on the topic of “UN Millennium Development Goals:Challenges and Perspectives” held in Gödöllő, Hungary, on 23-26 June, 2009.65AOP 18(4), 2010, ISSN 0572-3043

Europe. The countries with higher rates of growth are mostly in South East Asia, SouthAsia and some Latin American countries.Research evidence shows that HR practices along with culture do affect effi ciencyin the organization. There are hardly any or very few studies which show a link betweenHRM practices and organizational culture in India. The review of literature hasidentifi ed that the major chunk of research in India emanates from descriptive data andexperience sharing, which does not serve certain practice-oriented concerns. There isvery little systematic, empirical research in the scientifi c paradigm that has been carriedout in the Indian HR lexicon. HR research is inspired by western models, and lacks anindigenous perspective. The review of literature on HRM practices has revealed thatthe most of the work done is in relation to organizational strategy.The methodology employed a sample of 95 respondents from two private sectororganizations. The questionnaire consists of 90 items, of which (1) 69 items concern

HRM practices of the organization, and (2) 21 items concern organization culture.The correlation analysis has been used to infer the relationship between variablesof HRM practices and organizational culture. A healthy culture is required for utilizingand enhancing employee competencies and to develop people. This study focuses on thepositive signifi cant relationship between HRM practices and organizational culture inprivate sector organizations. There is a positive signifi cant relationship between HRMpractices and variables of organizational culture operationalised in terms of self-realization,status enhancement, inventive values and socio economic support.The pressures are most likely to be felt by those who have led and managed thechange process in such a volatile economic environment. HRM would have the abilityto attract and retain people and this would be the key to manage this macro change—interms of both pace and rate. Change leaders would be confronted with the need to reorientculture, thinking and paradigms. HRM as a function and as a prime mover would need tofocus on this changing and emerging role with the help of organizational culture.2. IntroductionThe global turmoil has witnessed the growing importance of Human ResourcesManagement (HRM) in both business and public life. The turbulent business climatebrought in the wake of liberalization, globalization, changing technologies, growth inknowledge and advances in information technology is offering managers a complexand challenging situation (Davis, 1995).Indian organizations are tending to become competitive to meet globally relevantstandards. The growing emphasis on privatization has warranted a new focus in termsof result orientation, long-term strategies, consumer focus, initiative and differentmindsets for internal and external communication.The Indian business scenario is characterized by the historical rigidities arisinglargely out of centralized planning. Our decision-making is infl uenced, among otherfactors, by posing more a constraint rather than a facilitator. The practice of protectingIndian industries through protective tariffs and quotas for over four decades has led toa lack of global competitiveness in terms of quality of products, services and prices.66ACTA OECONOMICA PRAGENSIA 4/2010

Indians are more accustomed to thinking in terms of narrow identities like ourown selves, caste, and community, regional and linguistic groups. A failing anddefi cient infrastructure and frustrating bureaucracy at operating levels, and the culturaland indigenous barriers added fuel to fi re. Hamel and Prahalad (1991) contend thata competitive advantage is obtained if a fi rm can obtain and develop human resources,which enable it to learn faster and apply its learning more effectively than its rivals.The HRM has emerged and evolved as one of the most important areas of organizationalscience and practice. It has not been developed in isolation, but rather in thecontext of industrial change and economic development. The uniqueness of the HumanResources (HR) approach requires a totally different type of attention from managers.The HR has characteristics that provide the greatest challenge as well as opportunity.A company‘s HR is fragile with delicate relationships, along with unpredictable contributions,and permanency is uncertain (Guest, 1991).Wright, Smart, and McMahan, (1995) mention that the crucial inputs, among others,to an organization are its human resources. People bring to their jobs diversity of skills,needs, goals, and expectations. They are socialized into the organization through theirhiring to begin with, and their continuous functioning in the organization. According to

Bulla and Scott (1994), we need to ensure that the human resource requirements of anorganization are identifi ed and plans are made for satisfying those requirements.Guest, Conway, Briner and Dickman (1996) are of the opinion that the interfacebetween the individual and the organization is critical to full utilization of humanresources. The individual and the organization establish a „psychological contract“.Individual members expect to make contributions to the organization and receivecertain rewards in return. The organization provides certain rewards and expects inreturn certain contributions from the individual. It is at this interface between theindividual and the organization that issues such as HR planning, work analysis, careerdevelopment, leadership, job motivation, the appraisal-reward process, and the organizationalculture become important.The patterns of work relationships at work refl ect the HRM philosophy. The practicesand philosophy of HRM are perpetuated by managers who are encouraged to follow therole model of their seniors. In the process of organization socialization they internalizethe values and attitudes of their leaders. The entire process is thus institutionalized (Snell,Youndt, and Wright, 1996). In general, HRM has been described as: broad and strategic;involving all managerial personnel; regarding employees as the single most importantorganizational asset; being proactive in its responsibilities; and having the objective ofenhancing organizational performance and meeting employee needs (Poole, 1990).3. Organizational cultureThe idea that organizations have culture has been acknowledged since Lewin, Lippittand White’s (1939) research on creating social climate. Culture and climate are integralparts of an organization. Organizational culture refers to a system of shared meaningsheld by members that distinguishes one organization from other organizations (Schien,1985). Organizational culture provides employees with a clear understanding of the way67AOP 18(4), 2010, ISSN 0572-3043

things are done in that organization. Organizational culture is the perceived, subjectiveinfl uence of the formal system, the informal ‚style‘ of managers and other signifi cantenvironmental factors on the attitudes, beliefs, values and motivation of the people ina particular organization (Litwin and Stringer, 1968).The concept of culture is seen as a kind of bridge between the individual and theorganization. Culture performs a number of functions within an organization. It createsa distinction between one organization and another, it conveys a sense of identity forrole incumbents, it facilitates the generation of commitment, and it enhances socialsystem stability. Finally, culture sells as a sense-making and control mechanism thatguides and shapes the attitudes and behaviour of employees.Hofstede (1980) felt that cultures which are high on the long-term orientationfocus on the future and hold values in the present that will not necessarily providean immediate benefi t (e.g., Japan, China), while cultures with short-term orientation(e.g., USA, Russia) are oriented toward the past and present and promote respect fortradition and for fulfi lling social obligations.The fi ve dimensions discussed by Hofstede (1980), help us understand the potentialproblems of managing employees from different cultures. One interesting fi nding ofhis research was the impact of culture on a country’s economic health. He found thatcountries with individualistic cultures were wealthier. Collectivistic cultures with highpower distance were all poor. Cultures seem to affect a country’s economy throughtheir promotion of individual work ethics and incentives for individuals to increasetheir human capital.Research into the link between organizational culture and effectiveness is alsolimited by lack of agreement about the appropriate measures of effectiveness. The

current literature has its roots in the early 1980s. Deal and Kennedy (1982) and Petersand Waterman (1982) focused their attention on the strategic importance of organizationalculture and stimulated interest in the topic. Kotter and Heskett (1992) expandedon this by exploring the importance of adaptability and the fi t between an organizationand its environment.Peters and Waterman (1982) argued that companies with strong culture are highlysuccessful. They argued that superior fi rm performance is achieved if a company movesaway from a purely technical, rationalistic approach towards a more adaptive andhumanistic approach.Carroll (1983), Reynolds (1986), and Hitt and Ireland (1987) questioned theapproach taken by Peters and Waterman. Owing to such results, the causal link betweenstrong culture and performance was seriously questioned by the end of the 1980s.Most of the studies lack a clear theoretical conception of the nature of the cultureperformancelink. Siehl and Martin (1990) elaborate on this view and also suggest thatculture may serve as a fi lter for factors that infl uence the effectiveness of the organization.These factors may differ between organizations. A more thorough understandingof the mechanisms at play is essential for research on the culture-performance link.Wilderom and Van den Berg (1998) found no direct signifi cant zero-order relationshipbetween culture and performance.68ACTA OECONOMICA PRAGENSIA 4/2010

Taking the perceived performance and managerial leadership along with HRMpractices into account, Wilderom and Van den Berg (1998) did discover that a significant relationship exists between culture and performance. This fi nding illustratesthe importance of the development of more elaborative theories on the direction andcontingencies in the relation between culture and performance. Without such theories,we may draw overly simple or even misleading conclusions. In light of the abovefi ndings, it is necessary to understand the relationship between HRM practices andorganizational culture.The presumption is that more effective systems of HRM practices, which simultaneouslyexploit the potential for complementariness or synergies with organizationalculture, lead to better performance and enhanced effectiveness. Indian organizationsare embedded in Indian culture, which infl uences and is infl uenced by the economic,political and social factors, and is also subjected to global business infl uences. Sinhaand Sinha (1994), found self-realization and inventive values as the highest formof work values in Indian culture. Organizations appreciate corporate core values ofself-realization and inventive values as they encourage and recognize innovation,creativity and achievement.4. Review of literatureSchuler (1992) suggests that Strategic Human Resource Management (SHRM) hasmany different components, including policies, culture, values and practices. Strategicbusiness needs of an organization are infl uenced by its internal (which mainly consistof factors such as organizational culture and nature of business) and external characteristics(consisting of the nature and state of economy in which the organization isexisting and critical success factors, i. e., opportunities and threats provided by theindustry), which are infl uenced by HR activities.Thornhill, Lewis, Millmore, and Saunders (2000) found a potential role for

HR-centred strategies to be used to change or realign the culture of an organization.An organization can change its culture through its recruitment strategy of replacingmanagers with those from outside, restructuring the organization, downsizing theworkforce, training programmes, new reward strategies and performance managementto alter employee behaviours or reinforce emergent ones. After the economic liberalization,Indian organizations were under pressure to change from low-cost, indigenous,less effi cient and outdated technology to high-cost modern technology and preparepeople to use it. This was done to develop and maintain their competitive edge in thelarger business environment (Khan, 1999).The potential value of the employees is to be increased by collectively enhancingand linking their skills and capabilities in tune with the contemporary requirementsof the market, and to be faster than the competitors. The success of the HRM will bedetermined by its ability to harness the intelligence and spirit of people by creatinga learning climate.Indian organizations normally direct their HRM efforts towards the developmentof competencies, culture and effectiveness among employees individually or in groups69AOP 18(4), 2010, ISSN 0572-3043

(Singh, 2003). Organizations may use many mechanisms to achieve their HRM goalsas without competent and committed employees, an organization can achieve verylittle even it has excellent technological and other resources at its command. Such anassertion gains better credibility in the context of developing countries like India, thatis, typically in early growth stages in terms of economic development and growingmore rapidly than the ‚traditional‘ developed economies of Japan, North Americaand Europe. This also includes most South East Asian, South Asian and some LatinAmerican countries.Selection in organizations is based on non-job related criteria like attractiveness,goal orientation, and interpersonal skills: a general lack of concern for value congruence(Prakash, 1994). The dominant emphasis has been on the universal practice of identifyingand improving on existing performance strategies. This practice would requirea complete reversal where congruencies of values should fi nd a place in selection andtraining. Only then would it possible to achieve linkages with the values of the widersocio-cultural context in India. In order to make an organization effective, the values ofthe society and the cultural milieu should be synthesised with those of the organizationand its functioning.Fombrun, Tichy, and Devanna (1984) expanded these premises and developed themodel of SHRM, which emphasises a ‘tight fi t’ between the organizational strategy,organizational structure and HR system. Political, economic and cultural forces areresponsible for an organization’s mission and strategy. This explains these causalrelations, which form the ‘tight fi t’ between strategy, organization structure and HRpolices and practices. On the basis of mission and strategy, the shape of organization isstructured, i.e., people are organized to carry out different tasks to achieve the organization’smission.Hendry and Pettigrew (1992) propose that a number of internal factors such asthe organizational culture, structure (positioning of HR), leadership, level of technologyemployed and business output directly contribute to forming the contents of HRM.HRM could be seen as a menu of strategic choices to be made by human resourceexecutives in order to promote the most effective ‘role behaviours’ that are consistentwith the organization’s strategy and aligned with each other (Sparrow and Hilltrop, 1994).

The present studyThe present study is to examine the relationship between HRM practices and organizationalculture. To this end, HRM practices are viewed in terms of planning, recruitment,selection, training and development, performance evaluation, career management andrewards.Organizational culture is viewed in terms of self-realization, status enhancement,inventive values and socio-economic support. Self-realization consists of values suchas achievement, ability utilization, advancement, aesthetics, personal development,and peace of mind. Status enhancement, one of the variables of organizational culture,consists of values of altruism, authority, physical activity, and prestige. Inventive values,another variable of organizational culture, consists of values of autonomy, creativity,70ACTA OECONOMICA PRAGENSIA 4/2010

lifestyles, risk-taking, and variety. Socio-economic support consists of work values ofsocial relationship and interaction, comforts, dependency, good working condition andeconomic gains. The self-realization and inventive values give inner satisfaction toa person while performing a job in an organization. The variables of status enhancementand socio-economic support are extrinsic values, which are required in the Indianenvironment. Indian society and developing societies are ridden with insecurities andlack of resources and people generally have a history of failures. Fear of failure leadsto giving importance to socio-economic support and lack of resources lends too muchimportance to status enhancement (Sinha, 1990).The idea that individuals are capable of development rests on the conviction thatpeople are important and their involvement is necessary for an organization to beeffective. This conviction is translated into practice through a variety of programs thatfacilitate individual development and lead to better adjustment with the environment.In a growing economy, the emergence of the new organization and shift in theHRM paradigm have necessitated a review of the skills, roles and competencies ofthe ‘new’ HR managers (Ulrich, 1997); in this new era, HRM has evolved in thecontext of the globalized economic environment. As such, it represents a responseto the dramatic and continuous change that globalization has had on society and theworld of work. Those who will man the HRM will undergo a change in roles. It willbe necessary to inculcate in employees the required new skills, competencies andmotivation (Dyer jr., 1999).The understanding of HRM practices would require a comparative study ofpractices in the organizations. The relationship between HRM practices and organizationalculture among private sector organizations is studied. This paper also studiessimilarities and differences in HRM practices and organizational culture between twodifferent organizations in the private sector.5. Objectives of the study1. To investigate the various HRM practices, i.e., planning, recruitment,selection, performance evaluation, training and development, careermanagement and rewards at the managerial levels in private sectororganizations.2. To study and examine the relationships between various aspects of HRMpractices and organizational culture.3. To fi nd whether there is any difference in the organizational cultures of thetwo organizations under study.6. Hypothesis of the studyHypothesis 1

HRM practices will be positively signifi cantly related to organizational culture.This hypothesis is further broken down into sub-hypotheses.71AOP 18(4), 2010, ISSN 0572-3043

Hypothesis 1a:Planning (one of the dimensions of HRM practices) is positively signifi cantlyrelated to the dimensions of organizational culture, namely self-realization, statusenhancement, inventive values and socio-economic support.Hypothesis 1b:Recruitment (one of the dimensions of HRM practices) is positively signifi cantlyrelated to the dimensions of organizational culture, namely self-realization, statusenhancement, inventive values and socio-economic support.Hypothesis 1c:Selection (one of the dimensions of HRM practices) is positively signifi cantlyrelated to the dimensions of organizational culture, namely self-realization, statusenhancement, inventive values and socio-economic support.Hypothesis 1d:Training and development (one of the dimensions of HRM practices) ispositively signifi cantly related to the dimensions of organizational culture, namelyself-realization, status enhancement, inventive values and socio-economic support.Hypothesis 1e:Performance evaluation (one of the dimensions of HRM practices) is positivelysignifi cantly related to the dimensions of organizational culture, namelyself-realization, status enhancement, inventive values and socio-economic support.Hypothesis 1f:Career management (one of the dimensions of HRM practices) is positivelysignifi cantly related to the dimensions of organizational culture, namelyself-realization, status enhancement, inventive values and socio-economic support.Hypothesis 1g:Rewards (one of the dimensions of HRM practices) are positively signifi cantlyrelated to the dimensions of organizational culture, namely self-realization, statusenhancement, inventive values and socio-economic support.7. MethodThis study is based on a sample of managers from two different private organizations.At the time of selection of companies, both were profi t-making organizations. The datawas collected personally by the researcher and also by mail using convenience samplingwith an assurance that information obtained would be kept confi dential. The samplewas obtained from all the management levels, but most of the respondents were frommiddle-level management, with an assumption that they would possess an accurate andcomprehensive perception of HRM practices being employed. The sample included alldepartments such as production, marketing, fi nance, HRM, etc. The sole purpose of thissampling was to get an honest picture of HRM practices of the organization; out of 150questionnaires distributed, 95 computed questionnaires were used for the fi nal analysis.72ACTA OECONOMICA PRAGENSIA 4/2010

A bird’s-eye view of the sample distribution is as shown below:Organization A: (N-41)Organization B: (N-54)8. Description of the questionnaireThe fi rst part of the questionnaire consists of the information about the personal profi leof the respondent.The second part of questionnaire consist of 90 items, which are divided into two parts:

(1) 69 items concern HRM practices of the organization, and(2) 21 items concern organizational culture.For the purpose of measuring Human Resource Management practices, the questionnairedeveloped by Judith R. Gorden (1986) was used. This questionnaire wasstandardized and the split-half reliability was calculated to be 0.81. The HRM practicesquestionnaire consisted of 69 items.The questionnaire used for measuring organizational culture was developed bySuper and Nevill (1986) and new variables were added as per the Indian requirementby (Sinha 1982a and 1990). The items in the questionnaire belonged to four super-ordinatefactors. Super and Nevill (1986) considered it as a component of work salience.The values were defi ned as the ‘objectives that one seeks to attain to satisfy a need’(Super, 1970). However, the difference in the conceptualization of the role of valueexpectations did not deter the author from taking advantage of the groundwork done bythe Work Importance Study (WIS) group. The group thoroughly reviewed the literatureon values in about a dozen countries, discussed its representative nature, and drafteda list of twenty-one values. Of the twenty-one values, the fi rst eighteen were consideredusable by all WIS group members. The last three were optional, and the members wereencouraged to replace them with culture-specifi c values. Sinha (1982a) identifi ed thefollowing three as typical values in the Indian culture (with the sample statements inparentheses):19. Peace of mind (Work at a place where I can have peace of mind).20. Comforts of life (Have a comfortable life).21. Dependency (Work at a place where I can seek help from others in personalmatters).9. Organizations under studyOrganization AOrganization A is India’s largest private sector enterprise in the area of electricalengineering. The company has approximately 10,000 highly skilled dedicated technicians,engineers and managers. This organization has been producing fans, householdappliances and lighting systems for the last 50 years.In its endeavour to achieve excellence in the quality of its products and services,the focus on the customers remains unwavering. The TQM voyage that the company73AOP 18(4), 2010, ISSN 0572-3043

has embarked on continues to improve performance and competitiveness at all levels.The KAIZEN philosophy is being practiced throughout the company to reduce cycletime, improve productivity and quality, and eliminate waste. More than 90% of theemployees have been exposed to TQM awareness programs. In the near future, theorganization’s efforts will be focused on taking up HRM pursuits to improve functionalskills and strengthen emotional ties between the organization and its employees.Organization BOrganization B has a Personnel Department and there is no change in nomenclature.The managerial staff and workers are provided with housing, education, free electricity,and water. Organization B has progressive welfare practices for employees and theirfamilies. Trust and confi dence between employee and employer are built on personalizedrelationships. Organization B provides a way of life to the human resourcesit has acquired and developed to achieve the personal and organizational goals. Theway of life in the organization has created a culture, which leads to effective utilization

of human resources. Company B has one formal HR Manager. The functionsof performance evaluation, rewards, planning, recruitment, and selection and trainingare performed by its Personnel Department. There is no formal career managementscheme.10. Results and discussionAs a result of this study, it was found that a positive correlation between HRM practicesand organizational culture exists. HRM practices (namely planning, recruitment,selection, training and development, performance evaluation, career management, andrewards) and organizational culture (self-realization, status enhancement, inventivevalues and socio-economic support) were signifi cantly positive. The study of cultureindicated that individual values play an important role in determining how well anindividual fi ts into the organizational context (Rousseau, 1990). Besides, many researchershave conceptualized and measured values at the individual level (Katzu, 1986;Prakash, 1982; Rokeach, 1973; Sinha, 1990) in their attempts to understand organizationalculture.This study was conducted at a time when Indian organizations were facing a verydifferent competitive scenario compared to the past. They were facing competition fromMNCs in the new liberal and global economy on the domestic markets. The competitionwas in terms of reduced cost, improved quality of products and better services.These environmental constraints placed more pressure on managers. More often thannot, these concerns were looming large on the horizons of Indian organizations. Thefi ndings have bearing in this context.74ACTA OECONOMICA PRAGENSIA 4/2010

Table 1Correlations between HRM practices and the dimensions of organizational cultureVariables SelfrealizationStatusenhancementInventivevaluesSocio-economicsupportPlanning .40** .23 .44** .17Recruitment .45** .38** .54** .20Selection .56** .57** .44** .44**

Performance evaluation .52** .30* .47** .26*

Training and development .50** .33** .52** .31*

Career management .62** .48** .51** .45**

Rewards .62** .57** .63** .26*

Number of cases: 95; 1-tailed signifi cance *-- .01 **--- .001Managers across organizations in the private sector strongly endorsed self-realization(one of the variables of culture), which was signifi cantly correlated to almost allHRM practices. These are planning, recruitment, selection, performance evaluation,training and development, career management, and rewards. While organizations fi ndthemselves in worldwide competition, most of the individuals are striving for achievement,ability utilization, advancement, aesthetics, personal development, and peaceof mind. Realization or anticipation of realization of the values has resulted in betterperformance. Self-realization encourages people to satisfy their achievement needs inthe work situation (Super and Nevill, 1986; Sinha, 1990). Self-realization in India camequite close to self-actualization in Spain.Status enhancement was strongly related to HR practices in private sectororganizations. The values loaded on this factor are authority, altruism, prestige andphysical activities. The desire for authority, altruism, prestige and physical activity has

a positive impact on the performance of managers. Managers developed a positiveattitude towards their work and contributed signifi cantly to self-realization and statusenhancement, which were the most valued factors in India.Recruitment, selection, and performance evaluation, training and development,career management, and rewards turned out to be strongly correlated to status enhancementin the private sector. Selection based on planning along with proper recruitmentleads to status enhancement. Rewards (fi nancial and non-fi nancial) were stronglyrelated to status enhancement. Performance evaluation (one of the HRM practices) wasstrong related to status enhancement. Performance evaluation served as a key inputfor administering formal organizational rewards, career growth and a tool of punishment(Cummings, 1973). Managers working in the organizations were in an excellentposition to analyze newcomers’ skills and abilities and to provide feedback (House,1995). As a purveyor of organizational expectations, performance evaluation wascritical. Through the evaluation process, those working in the organization were awareof how well they were meeting their task and role demands (Asford and Cummings,1983; Nelson, 1990). Clear rewards are the hallmark of an organization that effectivelysocializes newcomers. In addition to their readily apparent value, the rewards provide75AOP 18(4), 2010, ISSN 0572-3043

challenging assignments, promotions and salary increases, etc., which give encouragementthat provide status enhancement for managers (Chatman, 1991).Rewards were also found to be strongly related to inventive values in privatesector organizations. Those working in the organizations with desired values ofrisk-taking, variety, autonomy, lifestyle and creativity were rewarded. Rewardsencourage people to be more creative, have variety and autonomy in their work lifealong with risk-taking and help to chalk out one’s own lifestyle in the organization.Similarly, training and development in private sector organizations were stronglycorrelated to inventive values. So, rewards and training and development in theprivate sector affect both individual esteem and lifestyle signifi cantly. Managershave developed to take on a variety of tasks in order to perform at an optimum level.Managers in the organization have developed to be autonomous and chalk out theirown lifestyles to be more effective in the job. This also means employees will expectorganizations to offer them opportunities to develop a portfolio of skills that enhancestheir marketability. Thus, organizations will have to provide work assignments andlearning opportunities that allow for challenge and growth and self-development(Maurer and Tarulli, 1994).Socio-economic support consists of social relationships and interaction, comforts,dependency, good working conditions and economic gains. Managers were indifferentand did not care much for social interactions and relationships, whereas Indian managersheld signifi cant value expectations concerning economic gains, good working conditionsand comforts.HR practices were signifi cantly related to socio-economic support in the privatesector. Through planning, recruitment and selection practices, newcomers withstronger systems of support report fewer adverse psychological outcomes related tojob performance than do those with less support. Quality relationships with organizationalinsiders can even help newcomers to overcome the negative effects of unmetexpectations (Major, Kozlowski, Chao, and Gardner, 1995). Interacting with enthusiasticnewcomers may be good for insiders’ attitude and morale. The study also found

a relationship between career management and socio-economic support. Peopleworking in the organizations look for career management that will give them thebreadth of experience that seems to be needed now, and start looking down on thein-depth expertise of the command-centred manager.So, a shift in culture happens, not because people have changed, but because theirbeliefs about what they have to do to get ahead have changed (Gunz, Hung, 2000).Rewards were strongly related to socio-economic support in private sector organizations.Litwin, Bray and Brooke (1996) felt that the nature of rewards is the key determinantof how effective they are. Managers who emphasized recognition and encouragementwere more effective in shaping the culture of the organization or targetedresults. The reason could be that managers working in the private organizations areexperiencing a tremendous amount of change around them, thereby realizing that socioeconomicwell-being will provide them with stability in a fast changing environment.Furthermore, evidence from literature found the contention that similar work experiencesresult in uniformity of culture characteristics (Schein, 1987).76ACTA OECONOMICA PRAGENSIA 4/2010

Rewards (one of the HRM practices) were strongly related to all the variablesof culture in private sector organizations. There is hardly any difference between thetwo organizations when it comes to practicing rewards and training and development.People within the organizations are either rewarded or trained for acting in accordancewith the dominant values of the organizations in India. Although this sample is notlarge enough to generalize the results, still rewards send clear and consistent signalsabout desired values and norms expected from people working in the organizations(Sethia and Van Galinow, 1985).The perception of the respondents from both private sector organizations werecompared and it was found that there was a statistically signifi cant difference in thevariable of socio-economic support between the two organizations, as shown in thetable. This means employees in organization A perceived it in a better manner incomparison to their counterparts in organization B. Prakash (1994) felt that Indianorganizations are congruent with their cultural surroundings (which is marked by diversitiesand paradoxes). There is a need to use multiple perspectives at different levels ofanalysis such as society, organization, management and the individual. It is importantthat organizations continue to grow and evolve newer perspectives in terms of theirvalues and redefi ne their linkages with the society.Such fi ndings provide support that market economies have the inevitable consequencesof rendering organizations competitive. Newman (1972) predicted that theWestern work relationships are likely to appear to a great extent in Indian organizationsas well. That is, employees in the organizations are likely to become achievement-oriented. There is a struggle for survival, where no one can afford to ignore anopportunity to get optimum results. As one moves higher on the hierarchical ladderof an organization, the individualistic orientation becomes stronger. The correlationanalysis between dimensions of HRM practices and dimensions of culture shows thatHRM practices do affect the culture of the organization. Ulrich and Lafasto (1995)felt that HRM practices provide information and shape behaviour and experiences ofemployees.Thus hypotheses H1a, H1b, H1c, H1 d, H1 e, H1 f and H1 g are validated.11. Conclusions

This paper has shown a signifi cant, positive and meaningful relationship betweenHRM practices and organizational culture. HRM practices become the means wherebyorganizational culture is created and sustained. Designing new culture requires thatHRM professionals are ahead of the cultural change curve with innovative and excitingHRM practices. HRM has been proposed by others to be a potentially powerful leverfor shaping and changing the culture of an organization to make the organization moreeffective (Schien, 1983; Ulrich, 1997).This is a study of HRM practices in two large private sector organizations in India.HRM practices differ between the private sector organizations. This variation providessupport to the fact that the adoption of HRM practices is contingent on the specifi crequirements of each organization (Schuler and Jackson, 1981). There is a signifi cant77AOP 18(4), 2010, ISSN 0572-3043

difference between the socio-economic support variable in organizations A and B. Onefi nds no signifi cant difference in the other three variables of organizational culture inprivate sector organizations, i.e., self-realization, status enhancement and inventivevalues.The results developed through inferential analysis to measure differences amongthe variables of HRM practices and organizational culture in private sector organizationsare as follows:1. The two private sector organizations showed that the perceived meanof organization A was higher for all HRM practices.2. The comparison of the dimension of organizational culture in the two privatesector organizations showed that employees of organization A perceived thesocio-economic support more than those in organization B.3. It is evident that organization A showed relatively better perception ofplanning, recruitment processes, selection, performance evaluation and careermanagement aspects of HRM practices in comparison to organization B.4. There is no signifi cant difference between organization A and organization B intraining and development and rewards as per the response of the respondents.5. Planning, recruitment, selection, training and development, performanceevaluation, career management and rewards are signifi cantly correlated withall the dimensions of organizational culture.ReferencesASHFORD, S. J.; CUMMINGS, L. L. 1983. Feedback as an individual resource: Personal strategiesof creating information. Organizational Behavior and Human Relations. 32.BULLA, D. N.; SCOTT. 1994. Manpower requirements forecasting: a case example, in Human.CARROLL, D. T. 1983. A disappointing search for excellence. Harvard Business Review. 1983, vol. 61,no. 6, s. 78–88.CHATMAN, J. A. 1991. Matching people and organizations: Selection and socialization in publicaccounting fi rms. Administrative Science Quarterly. 1991, vol. 36, s. 459–484.CUMMINGS, L. L. 1973. A fi eld experimental study of the effects of two performance appraisal systems.Personnel Psychology. 1973, vol. 26, s. 489–502.GUEST, D.; CONWAY, N.; BRINER, R.; DICKMAN, M. 1996. The state of psychological contract in employment:Issues in people management. London : Institute of Personnel and Development, 1996.DAVIS, P. 1995. About time: Einstein’s unfi nished revolution. New York : Simon; Schuster, 1995.FOMBRUN, C. J.; TICHY, N. M.; DEVANNA, M. A. 1984. Strategic human resource management. NewYork : Wiley, 1984.GIBB DYER Jr., W. 1999. Training human resource champions for the twenty-fi rst century. HumanResource Management. 1999, vol. 38, no. 2.GORDEN, J. R. 1996. Human Resource management. Boston: Allyn and Bacon, 1996.GUEST, D. E. 1991. Personnel Management: The end of Orthodoxy? British Journal of Industrial Relations.1991, vol. 3, s. 137–156.HAMEL, G.; PRAHALAD, C. K. 1991. Strategic intent. Harvard Business Review. 1991, May-June,s. 63–76.HENDRY, C.; PETTIGREW, A. M. 1992. Patterns of strategic change in the development of humanresource management. British Journal of Management. 1992, vol. 3, s. 137–156.HITT, M. A.; IRELAND, R. D. 1987. Peters and waterman revisited: the unended quest for excellence.78

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ULRICH, D.; LAFASTO, F. 1995. Organizational culture and human resource management. In FARRIS,G. R.; ROSEN, S. D.; BARNUM, D. T. (eds.). Handbook of human resource management.Oxford : Blackwell Publishers, 1995.ULRICH, D. 1997. Human Resource champions. Boston : Howard Business School Press, 1997.WARD, D.; BECHET, T. P.; TRIPP, R. 1994. (eds.). Human Resource Forecasting and Modeling. NewYork : Human Resource Planning Society, 1994.WILDEROM, C. P. M.; Van den BERG, P. T. 1998. A test of leadership culture performance model withina large Dutch fi nancial organization. Paper presented in the annual meeting of the Academy ofManagement, San Diego, CA.WRIGHT, P. M.; SMART, D. L.; McMAHAN, G. C. 1995. Matches between human resources and strategyamong NCAA basketball teams. Academy of Management Journal. 1995, vol. 38, s. 1052–1074.A STUDY OF HRM PRACTICES AND ORGANIZATIONAL CULTUREIN SELECTED PRIVATE SECTOR ORGANIZATIONS IN INDIAAbstract: This paper examined the relationship between HRM practices and organizationalculture in private sector organizations operating in India. Organizational culture hasdeveloped in the Indian environment along with global work values. This study is based ona survey of 95 respondents working in two private sector organizations. Although the HRMpractices in these organizations differ a lot, there is a signifi cant relationship between HRMpractices and organizational culture.Keywords: Human Resource Management; Organizational cultureJEL Classifi cation: Z180ACTA OECONOMICA PRAGENSIA 4/2010

ANNEX ITable 1Comparison of two private sector organizations based on the dimensions of HRMpracticesA BVariables Total Mean S.D. Mean S.D. t-valuePlanning 50 31.46 6.96 28.44 3.65 2.73*

Recruitment 45 27.68 5.23 24.56 3.85 3.36**

Selection 30 20.39 2.90 18.13 3.37 3.44**

Performance evaluation 65 42.59 5.32 37.98 5.01 4.32**

Training & development 45 30.05 3.62 29.30 4.69 0.85Career management 50 25.07 5.41 21.72 4.34 3.35**

Rewards 60 34.83 6.78 34.17 6.14 0.50**p< .01ANNEX IITable 2Comparisons of two private sector organizations based on the dimensions of vultureA BVariables Mean S.D. Mean S.D. t-valueSelf-realization 22.29 3.30 22.41 4.25 -0.14Status enhancement 12.66 1.65 11.87 3.20 1.44Inventive values 14.20 1.95 14.63 2.72 -0.87Socio-economic support 21.10 3.02 18.83 3.70 3.20**

**p< .01

THE IMPACT OF HRM PRACTICES ON ORGANIZATIONAL PERFORMANCE: A GENERAL MODEL AND ATEST FOR URUGUAYINTRODUCTIONIndependently of the strategy followed to define the relevant HRM indicators, the empirical literature to date has generallyprovided with supportive evidence on the existence of positive relationships between at least one specific dimension offirms’ economic performance and certain Human Resources Management (HRM) practices (Brewster and Mayrhofer, 2012provide a comprehensive updated review). However, only few multivariate analyses have been performed considering at thesame time the configuration of these practices, the contingency variables of the organization, together with the institutionalcontext in which these practices are implemented and their impact on organizational performance. This paper introduces atestable general theoretical model and summarizes the results of a series of empirical analyses, using data for Uruguay. Recent institutional changes that have taken place in Uruguay starting in 2005 provide a unique opportunity to analyzeHRM under different contexts of industrial relations, collective bargaining and increasing unionization. The general modelintroduced links the probability of attaining a certain level of firm performance to Human Resource Management (HRM)practices, while controlling for diverse characteristics related to unionization as well as for other contingency variables.Particular emphasis is also set on the existence of complementarities among practices. Within empirical studies, this issueinvolves including HRM practices interacting individually or by subsets, usually in bundles/configurations previouslyidentified by different statistical methods.The Uruguayan evidence is modeled along these lines, based on a sample of 274 companies with more than 50 employees,most of them SMEs according to international standards but nonetheless the largest firms in the country.The next section is devoted to review the literature on these two topics that in turn justifies the specification of the empiricalmodel and its application to Uruguay. A description of the information set and the definition of the variables that areincluded in Section 3. In Section 4 the outcome of the estimated model is discussed while the most relevant conclusions aresummarized in the final section.2. LITERATURE REVIEW2.1. HRM and Organizational PerformanceThe reported evidence for the US (see Gerhart, 2005) suggests that labor productivity and/or organizational performance arepositively related to diverse features of HR management systems such as recruitment and selection (Koch y McGrath,11996); training programs (Bartel, 1994); performance evaluation (McDonald and Smith, 1995); compensation and benefits

(Gerhart and Trevor, 1996; Gómez-Mejía, 1992); and innovative practices (Delaney and Huselid, 1996; Huselid, 1995).Similarly, some research has shown that firms characterized by the use of the above practices outperform those that displayinflexible HR strategies within the same economic sector (Barton, 2004; Black and Lynch, 2001; 2004; Ichniowski et al.,1997; among others), even in the case of small and medium-size units (Way, 2002). Becker and Gerhart (1996), Boxall andPurcell (2003), and Gerhart (2005; 2007a,b) have made comprehensive reviews of the seminal work on the relationshipbetween HRM practices and firm performance as done by Arthur (1994), MacDuffie (1995), and Ichniowski et al.(1997) inmanufacturing and by Batt (2002) in the service sector. Huselid (1995), in turn, conducted an early and influential study thatintroduced the concept of complementarities as applied to HRM practices (Milgrom and Roberts 1990). The existence ofpositive linkages between at least one specific dimension of firms’ economic performance and certain HRM practices hasalso been found in small and medium size units (Way, 2002).From a theoretical point of view, due to its strong emphasis on a subset of these practices that would operate as “bestpractices”, supposedly superior to more traditional ones (and with a theoretical rationale behind it), much of this literaturehas been equated with a “universalistic perspective”. The logic posed assumes that the relationship found can be generalizedto any context, developing a set of ‘High Performance Human Resources Practices’ (HPP) with a progressive impact onorganizational performance (e.g. Delaney and Huselid, 1996). Universalists such as Pfeffer (1995) and Osterman (1994)argue that greater use of “high performance” practices such as participation and empowerment, incentive pay, employmentsecurity, promotion from within the firm, and training and skill development result in higher productivity and profits acrossorganizations.The contingency and configurational approaches, instead, argue that firm performance is dependent on the effectivecombination of some HRM practices and how these practices are “bundled” together in organizations that have distinctcharacteristics. The literature has examined the impact of different bundles on different levels and dimensions of outcomes(Arthur, 1994; MacDuffie, 1995; Ichinowski et al., 1997; Stavrou and Brewster, 2005), in which selected or specific HRMpractices have a consistent configuration that reinforces their impact. These bundles are at times used to define diverse‘work systems’ (Guthrie, 2001; Guest et al., 2003). In some of this literature, though, there is still a “normative tone” onwhat should be the best HR practices (Delery and Doty, 1996; Doty

et al.1993; Martín-Alcázar et al., 2005), as in the pre-existing management profiles approach that proposes “ideal types”. In this case, the focus had been set on thecharacterization of management profiles according to the presence/absence of specific practices within the mentionedcategories and on the assumption that they have a differential impact on performance (Druker and White, 1995; Edwards,21979; Gowler and Legge, 1986; Labadie, 2005; Monks, 1992; Rodríguez et al., 2003). Delery and Doty (1996) comparepractices within two configurational systems, namely the internal and the market systems. Huselid, Jackson, and Schuler(1997) cite activities such as compensation systems, team-based job designs, flexible workforces, quality improvementpractices, employee empowerment, and planned development of the talent required to implement competitive strategy andachieve operational goals.Ichniowski et al.(1997) explain that when HRM practices are combined in different forms, the effects on organizationalperformance are much greater than when practices are explored individually. In fact, MacDuffie (1995) argues that theappropriate unit of analysis for studying the strategic link between different HRM practices to performance does not involveindividual activities as much as interrelated and internally consistent practices, called “bundles.” He explains that a“bundle” creates the multiple, reinforcing conditions that support employee motivation. Along the same lines ofargumentation, Perry-Smith and Blum (2000) suggest that HR bundles capture broader and higher-level effects than thosecaptured by focusing on individual policies and are particularly appropriate for investigating firm-level effects.A strand of this literature has argued that the relevant configurations of practices vary across organizations depending onseveral dimensions, the focus being mostly set on divergences in management and distinct competitive advantages, that arein turn mirrored in different organizational strategies (a brief recent discussion on the topic can be found in Brewster, 2007).Schuler and Jackson (1987) distinguish among organizational strategies founded on either cost reduction, qualityimprovement or innovation activities. The authors argue that employees are required to play different roles depending onthe type of strategy and thus the best HR practices would be those that are most suitable to serve the purpose.1

HR managerial strategies displayed by firms seeking to improve organizational performance have been classified in two

broad types depending on their intrinsic character being oriented towards the increase of human resources’ skill-levels orelse of the degree of involvement of workers in the organizational strategy and the performance of the firm. These twocategories are discussed in the literature under different denominations, such as ‘control’ and ‘commitment-oriented’practices (Walton, 1985); ‘efficiency’ and ‘strategy’ related HRM activities (Fombrun et al., 1984); or ‘calculative’ and‘collaborative’ HR practices (Gooderham et al., 1999). The subsets of practices with the highest weight in a particularbundle built by Factor Analysis are generally of either one type or the other and thus the corresponding bundle is classifiedin accordance. However, it is at times the case that the bundle has a mixed and/or ambiguous character due to the fact that1

For example, non-professional recruitment and selection methods may be optimal for firms with competitive advantages stemming froman efficient management of costs, even at the expense of the quality of the goods and services supplied. In contrast, skilled workers thatare highly committed to the firm would fit a strategy rooted on continuous improvement and innovation activities and may hence requirethe use of professionalized and strategically-oriented hiring practices.3efficiency and strategically oriented HRM activities are both key components of the resulting construct. Gooderham et al.(2008) propose to denote these configurations as ‘intermediary’ bundles. Bundles that are usually found to be relevant are: selective recruitment, training and incentive pay, both of a calculative andcollaborative nature (e.g., Black et al., 2003;Galia, 2006;Gooderham et al., 2008; Huselid, 1995;Ichinowski et al.,1997;Katou, 2008; Stavrou and Brewster, 2005). Evaluation systems, both aimed at rewarding performance and or trainingmonitoring, are also frequently found to be relevant (e.g., Galia, 2006; Gooderham et al., 2008; Huselid, 1995; MacDuffie,1995; Stavrou and Brewster, 2005); team-working (e.g., Galia, 2006; MacDuffie, 1995); as well as management-workforcecooperation, shared values, communication and other features that should improve commitment of workers to theorganization (e.g., Huselid, 1995; Katou, 2008; MacDuffie, 1995).International evidence supports the existence of positive linkages between most of these HRM bundles and organizational

performance (Brewster and Mayrhofer, 2012). Research also suggests that improvements in performance are associated tothe use of several of the single practices within these bundles, such as those related to skill and cognitive recruitment,training or incentive pay (e.g., Beer et al., 1985; Black and Lynch, 2001; Delaney and Huselid, 1996; Fombrun et al., 1984;Guest et al., 2003; Guthrie, 2001; Jackson and Schuler, 2000; Walton, 1985).2

High-commitment HR practices identified asdrivers of performance include selection and training activities that emphasize values and human relations; behaviour-basedpromotion and rewarding; contingent pay systems; wages set above their market-level; among others (Lengnick-Hall etal.,2009).However,much of the existing empirical evidence on the actual adoption levels of HRM, as Godard (2004, pp. 6)convincingly argues, shows that many workplaces in effect combine a number of traditional personnel practices coupledwith intermediate levels of adoption of HPPs and none of these studies can fully account as to why most employers wouldsettle on the partial adoption of some of these high-level HPPs. It is recognizing that the significant gains they yield couldbe partially offset by their associated costs, that are rarely reflected in the performance measures used by researchers(Cappelli and Neumark 2001: 743) that some light can be shed. These costs, in turn, are strongly dependant on certain firmcharacteristics and its environment as argued in Godard (2004, pp. 20) and in particular in the role played by unions.The degree of influence of unions at the firm has indeed been analyzed as an additional contingent dimension (e.g., byBrewster, 1995), that has at times been considered jointly with the organizational strategy (e.g., in Gooderham et al., 2008).The topic is usually examined in the industrial relations literature in terms of either “the union substitution effect” or the2

An extensive review of this literature can be found in Boselie, Paauwe and Jansen (2001).4“mutual gains” hypotheses, with some consensus within the literature that High Performance HRM practices would operateas a substitute to unions (Kochan, 1980). Under that frame, powerful or militant unions with a poor relationship with

management are likely to have a negative impact on the adoption of ‘High Performance HR Practices’ (HPP), at the extentthat organizations characterized by large union militancy might exhibit a significantly lower likelihood of undertaking anyHPP (Wells, 1993). However, the assumption has little empirical support except in the case of activities related to pay andcommunication methods that give direct voice to workers (Godard, 2009; Machin and Wood, 2005), or the use of ‘word ofmouth’ as a recruitment source that has become a prominent practice in unionized frameworks, as is the case of India(Budhwar & Khatri, 2002). Some authors have argued that the implementation of some HR practices may in contrastgenerate a “mutual gain” with unions playing a more partnership-oriented role instead of their traditional adversarialpositioning (see the review in Gill, 2009). The contingent character of management has been also associated to other organizational characteristics, such as the firm’seconomic activity (e.g., in Bloom and Van Reenen, 2007); sales market (e.g., in Osterman, 1994); societal form (e.g., inRajan and Wulf, 2006); size (e.g., in Jackson and Schuler, 1995); and ownership (with respect to its family/non-familynature, as in Bertrand and Schoar, 2006, or its national/multinational character, as in Bloom et al., 2009). Further, firm size,industry, the presence of unions, labor-management conflicts, and bureaucratic hiring and termination procedures all appearto have some relationship with external labor arrangements (Masters and Miles, 2002).Small organizations and family businesses are more likely to operate in an informal and flexible manner than larger firms,replicating these patterns in HRM practices (Baconet al., 1996; Koch and McGrath, 1996). The national/multinationalcharacter of firms is also considered as a differential feature (Kostova and Roth, 2002; Gómez and Sánchez, 2005). Given the above, the universalist view on the role of HR management and the optimality of specific practices in terms offirm performance seems to be strongly questioned as a suitable explanation of actual trends in the US, Canada, England andsome European countries. However, no generalization whatsoever can be made for Latin American countries, for which thelack of knowledge and quantitative studies is critical, even at the basic descriptive level. Very limited valid empiricalresearch has been published, with the exception of Elvira and Davila (2005) and Davila and Elvira (2009), who compilecases and narratives of HRM practices in the region, but no quantitative empirical test. Given the scant knowledge on Latin America, a general multivariate model is herein introduced, that stylizes therelationships among these constructs, depicted in Figure 1. As a general specification, it allows to provide valid tests andanswers to research questions suchas:5

1)What is the impact of unions on organizational performance when controlling for HRM practices ?2)Are there complementarities among HRM practices?3)Are there complementarities among different bundles of HRM practices? 4)Are there “complementarities” or “substitution” effects among HRM and Unions?5)Do these effects differ depending on the type of HRM practice (calculative or collaborative)?6)Do these effects differ depending on the levels of Union influence?7)How do they change when union influence changes?8)Do they differ by type of performance indicator?9)Do they differ by levels of institutionalization of collective agreements?Figure 1. GENERAL MODEL OF HRM PRACTICES AND ORGANIZATIONAL PERFORMANCE As part of aresearch agenda, this model can be tested with evidence from Uruguay. The new labor relations setting andhigher union influence at the societal level described in the next section, not only provides an interesting Latin Americancase but it also constitutes a unique “statistical experiment” to test some of the traditional hypotheses that link HRM andunions. These relationships have been traditionally tested –for more developed countries- in a particular context ofunionization or at best comparing patterns between countries with different degrees of union influence. Instead, the case ofUruguay allows a test for the same set of firms in two distinct scenarios of unionization and collective bargaining6mechanisms -a period of declining union density with firm-level negotiations and a period of increasing union power withmandatory sector level collective bargaining. Preliminary answers to the above research questions have been provided byusing multivariate models have been alreadypresented elsewhere, indicating the relevance of complementarities, the importance of distinguishing between calculativeand cooperative bundles to model the relationship to union behavior and organizational strategy, but the estimation of thefull model poses some methodological limitations imposed by the Uruguayan sample size, briefly referred in the nextsection.2.2 The Uruguayan Case2.2.1. HRM practicesAlthough the empirical research on HRM in Uruguay is still very scant, it has nonetheless brought forth the existence ofseveral regularities. A first worthy finding refers to the apparent progressive professionalization of HRM practices among

medium and large firms that took place along the last two decades, the drivers of such trend not being yet clearly identified(Font, 2010; Labadie, 2005). The heterogeneity of HRM practices reported in Font (2010) for 2007 is in sharp contrast tothe ‘simple management profile’ that prevailed in the 1990s, even among the largest companies, characterized by employer-employees relations aimed at short-run goals; infrequently observed formal systems of performance-evaluation; andadministrative/bureaucratic HR departments (Labadie, 2005; Rodríguez-Gustá et al., 2003). According to these studies, the most widespread practices, both currently and in the past, are related to recruitment andtraining, as opposed to the use of monetary premia based on individual/team performance or sophisticated performanceevaluation systems. However, the patterns differ among firms depending on several features, such as family, national orcorporate ownership; size; sales market; and economic sector; while it also depends on the firm having or not a HRdepartment. A higher degree of formality and professionalism of HRM is found among large corporations, non-family-owned firms that have a formal HR division, operating in the service sector and/or oriented to the international market(Rodriguez-Gustá et al.2003; Font, 2010). The relationship between economic/organizational performance and HRM has been explored by Font (2010)and by theauthors of this paper (references available)using two distinct methodologies. Measured as the self-ranking relative to itscompetitors in terms of profitability; labor productivity; and quality of the products/services, firm performance is examinedin relation to individual HRM practices (recruitment; training; performance evaluation; and monetary payments). Fontfurther considers several additional features that are grouped using factor analysis to build indicators of ‘best practices’ and7despite the general conclusion points at professional HRM being matched to an improved firm economic/organizationalperformance, the four configurations obtained cannot be unambiguously ordered in terms of ‘best practices’, except forfirms in the cluster denoted as ‘low-profile’. Previously, Labadie (2005) had hypothesized that the linkages between HRM practices and performance are influenced bythe overall institutional framework of labor relations and particularly by the role played by HR departments in relation totrade unions. The additional insights provided in Font (2010) also point in that direction while they further suggest that thestructure of bargaining and its continuity in time have also a major incidence. 2.2.2. HRM and Industrial relations in Uruguay

Major institutional changes have characterized the industrial relations system in Uruguay. Starting in 1985 Uruguay Psunique system of Wage Councils was re-instituted after almost 15 years along which collective bargaining was absent giventhat the 1973 military coup had banned unions. The traditional system operated mainly through a system of trilateralnegotiations – unions, employers P representatives and government - within wage councils by industry. Minimum wages byjob category were set through collective agreements and endorsed by the government to all firms within the sector. Thesystem implied that for most SMEs the level and timing of wage setting were located outside the boundaries of firmdecision-making, by the negotiators of the larger companies that were represented in the employers P associations (seefurther details in Cassoni et al., 2004). Along these lines, the HR department was only strategically relevant for those largefirms with powerful unions that frequently operated in concentrated sectors (Labadie, 2005). Unions, in turn, were almostexclusively interested in setting wage levels, in accordance with the intermediate degree of centralization of the system andthe highly inflationary entourage. This was particularly the case of the manufacturing sector, which in 1985 employedalmost half the labor force in the private sector, of which one third were union members (Cassoni et al., 2004). In 1991 there was a significant change. The government stopped participating in bargaining and hence collectiveagreements bound only those firms and unions that were actually represented in the negotiation. As a result, union densitywithin the private sector dropped sharply and many agreements started to be bargained at the firm level (for details on thesechanges and their effects on the labor market regarding employment, mobility, wages, as well as on firm economicperformance, investment and profitability, see Cassoni et al., 1996; 2000; 2004; 2005). In 2005, with the advent of a newly elected government, the traditional tripartite industry-level negotiation system was re-instituted, while compulsory bargaining was also extended to all services, commerce, rural workers and activities with atraditionally high informality degree. As a result, the number of firms that set wages internally decreased sharply. Union8membership increased about 40% between 1997 and 2007 further fueled by the prevailing context of sustained economicgrowth, employment formalization and wage increases after the 2002-economic crisis, one of the most significant in thehistory of Uruguay (Bianchi et al., 2011). The joint analysis of the hypotheses summarized in Figure 1 and the answers to the research questions posed in the previous

section has been attempted in previous studies (reference withdrawn to secure blind review) given the advantages of theseinstitutional changes in Uruguay. However, the estimation can only be robust if performed using a large-sized sample sothat the degrees of freedom are still sufficient to validate the statistical inference. Further, the high collinearity that isintroduced among regressors also generates increases in the variance of estimates that may prevent the identification ofactual effects. The use of bundled practices poses additional methodological challenges linked to the introduction ofendogeneity biases, forcing the use of full-information estimation methods that further reduce the degrees of freedom.Therefore, the full analysis of all the hypothesized effects has to be undertaken sequentially. In this paper we thus focus on the identification of significant bundles of practices and on the quantification of their impacton firm performance, as measured by labor productivity. We also include individual practices seeking to contribute to thediscussion on their merit relative to that of configurations as productivity drivers. In doing so, and following the proposedmodel, we control for diverse firm characteristics, the main strategy that is the source of the firm’s competitive advantage;and the degree of union influence and its evolution with respect to 2004.3. DATA, DEFINITION OF VARIABLES AND BUNDLESThe information used stems from the “Survey on Labor Relations and HRM Practices” (SLR), performed in 2007 to asample of 274 medium and large enterprises, representative of the universe of 1172 firms with 50 and more workers thatbelong to Industry; Construction; Commerce; and Services.3

The sample was selected through a stratified (economic sectorand size) sampling model. The data relate to a wide range of HRM practices, many of which are also referred to 1999-2001,and other operational characteristics of the firm, its main sales market and the current and past institutional setting of laborrelations.3

“Encuesta de Relaciones Laborales y Prácticas de Recursos Humanos a nivel de Empresa”, Universidad ORT Uruguay - EquiposMori, 2007. 9Data were collected using the CRANET questionnaire through personal interviews.4

The answers provided by therespondents allow for defining binary indicators that state if a HRM practice is used or not by the firm or else categoricalvariables that differentiate between the intensity with which a practice is used within a 5-value likert scale (where 1corresponds to the absence of the HRM activity and 5 to its permanent use). Given the subjective nature of the survey, itwas decided not to differentiate between degrees of intensity that correspond to the two top/bottom strata (that may

introduce distortions into the analysis as shown by Fowler, 2009 and by Kanouze and Elliot, 2010). Hence, the originalvariables become categorical with 3 possible values instead of 5. The resulting indicators reflect the degree of usage of 130 individual HRM practices. In many cases, however, the sameHRM activity gives rise to four different individual practices, one for each type of employee – managers; technicians andprofessionals; administrative staff; and blue-collar workers. Practices are classified in 7 subsets that match particulardimensions of management – hiring (recruitment sources, selection profile sought, selection methods); training (withdifferent goals); performance evaluation (aimed at distinct objectives); pay (wage setting mechanisms, regular benefitslinked to diverse aspects and contingent extraordinary premia); communication flows and channels (collective and/orindividual, involving employees in different occupations and referred to distinct topics); formalization/organizationalculture (the existence of unwritten/written statements on eight organizational aspects); and organizational characteristics ofHRM (the existence and type of HR department; the qualification and roles of HR managers; and the degree of outsourcingof practices). Practices are further re-defined by jointly considering those with a shared character (e.g., recruitment throughadvertisements in newspapers or web pages, public pools or among unsolicited workers give rise to a unique HRM activity)and also by ignoring differences by type of worker. The definite set involves 71 HRM practices (Table 1).Factor Analysis is performed over different sets of practicescontrolling for sample design effects to avoid the introductionof biases (Fazio et al., 2008). Significant factors (that are therefore kept) are those with an associated eigenvalue that is notbelow 1. These factors are afterwards transformed into orthogonal constructs using the Varimax method.5

The use of the re-defined set of HRM activities together with those single practices for which the previously estimated loadings differ4

The CRANET questionnaire has been developed by an international team of scholars doing research on human resource managementover the past 15 years (see Brewster, Mayrhofer and Morley, 2004 for details on the questionnaire and its methodology). Thequestionnaire is structured with eighty composite closed-ended questions, each of which presents a number of options/items, attemptingto cover all facets of HR management. The unit of analysis of the questionnaire is the organization and the respondent is the highest-ranking corporate officer in charge of human resource management. Besides the regular CRANET questionnaire validated in Spanish, anadditional module added questions on HRM and union practices in 1999-2001.5

These analyses are reported in working papers whose citation is withdrawn to secure the blind review process. They are available uponrequest and available on the web. The analysis is first performed over all original practices (130) and 29 significant factors are identified

that account for 84% of the total variance. Most of them (26) are just a grouping of the same practice referred to each of the fouroccupational types considered. We therefore perform a robustness check by factor analyzing practices within each of the 7 above-listedHRM dimensions and obtain fully consistent constructs. In both cases, the total number of identified bundles is too large if they are to beincluded in a multivariate model for firm performance. 10substantially, leads to the identification of 15 significant constructs that account for 84% of the total variance and that aregenerally consistent with those obtained using the original set of practices, although with an enlarged prevalence of bundlesthat involve HRM activities of both an efficiency and strategic nature (the estimation outcome is reported in the Appendix). Table 1. HRM practices in UruguayDimensionHRM practicesHiring Recruitmentsources Specialized agents (educational institutes and specialized agencies, anyoccupation); qualified word of mouth information (any occupation; blue-collars;managers); internal to the firm (any occupation; blue-collars; managers); others(adverts, public pools, unsolicited applications, any occupation)Selection profile Identification w/firm values; team-work; current skills; proven experience; futureperformance; long-lasting work relationSelection method Scientific methods (specialized panel; scientific tests); personal interview;personal references TrainingGoal soughtImprove technical skills; improve team-work abilities; access to monetary premia;enhance the identification with firm values and the comprehension of the business;develop a career within the firm through the acquisition of technical/attitude-related abilitiesEvaluationGoal soughtImprove efficiency; task accomplishment; career development; communication;wages settingPay andMonetaryIncentivesWage settingmechanisms Firm-level; collective bargaining (any occupation; blue-collars & white collar);sector & firm-level collective agreements.Benefits Future-oriented; large

share of pay; linked to seniority; linked to performance;linked to organizational goals Premia Firm shares (managers; other occupations); contingent monetary bonuses Communicationw/workersChannelsConsultative board; employees’ representative body; to teams; to individuals;unwritten/written Subjects Organizational strategy; financial results; work organization (managers, otherworkers)Formalization/OrganizationalCultureStatementsCorporate mission; strategy; HR strategy; values; ethics; social responsibility;diversity; communicationFormalizationWritten (all; at least one; at least on corporate mission, strategy & values);unwritten (at least one)OrganizationalCharacteristicsof HRMHRM carried outThrough a formal HR department; fully and/or partially outsourced HR dept.profileProfessional (updated); bureaucratic (administrative)Profile of HRmanagerQualification-level; involvement in policy design; participation in decision-making(member of Board of Directors)Source: Survey on Labor Relations and HRM Practices.Factor analysis performed over the new set of HRM activities leads to the identification of 15 significant constructs thataccount for 84% of the total variance and that are generally consistent with those obtained using the original set of practices,although with an enlarged prevalence of bundles that involve HRM activities of both an efficiency and strategic naturePurely calculative bundles (2) refer to qualified word of mouth and internal to the firm recruitment sources involving anytype of worker, blue-collars and managers. Collaborative factors (6) refer in turn to formalization/organizational culture (2);communication flows (2); and contingent pay (2). The largest complementarities found among organizational culture11

aspects relate to its degree of formalization and to the existence of statements on corporate mission, strategy and values.Practices related to communication flows on organizational strategy, work organization and financial results complementeach other to a different extent depending on whether they involve managers or workers in other occupations. Regularbenefits as an important share of wages regardless of them being linked to seniority or to performance (both current and inthe long-term) are bundled together while contingent annual premia materialized in both monetary bonuses and firm shares(differentiating managers from workers in other occupations) give rise to another construct.Two additional bundles are identified and refer to pay practices, but their theoretical categorization as strategic orefficiency-oriented is unclear (they may even be thought of as intermediary). One configuration suggests that collectivebargaining effects are reinforced when undertaken at the sector level and when negotiations involve blue-collars andadministrative employees while the other construct reflects the gains that stem from collective negotiations at the level ofthe firm besides centralized bargaining. Under the assumption that wages set at the firm are used as a means to promoteincreases in productivity (as claimed by the Efficiency Wages theory), even if done through collective negotiations, thebundles may be classified as efficiency oriented (and would be expected to have a negative impact on productivity).Nevertheless, the configurations may also be assigned a strategic character whenever wages set at the firm (and hence abovethe negotiated level) are used as a means to promote workers’ commitment to the company.The remaining five significant constructs are intermediary in nature. The reinforcement of evaluation and training aimed atimproving efficiency and commitment levels and the preference for applicants with a diversified profile suggests that bothHR policies and practices complement each other all. A larger weight assigned to a high degree of alignment of newworkers with the organizational strategy/goals and the likelihood of establishing a long-lasting relation point, however, atan enhanced relevance of strategic over efficiency oriented profiles in recruitment. The last two factors involve practices linked to more than one HRM dimension. A first bundle gathers organizationalcharacteristics of HRM (such as the existence of a HR department and the participation of HR managers in policy design),together with scientific selection methods and the use of written communication channels, particularly on work organizationwith non-managers. The bundle is thus suggested to be mostly aimed at improving efficiency levels. The second bundleincludes the existence of communication flows (written and/or unwritten), the use of non-professional recruitment sources(adverts, public pools and unsolicited applications) and selection methods (based on personal references). Its character isthus linked to the use of less professionalized hiring practices combined with a strategically-oriented communication policy.12

Theestimated configurations are generally consistent with those reported in the international literature (see, e.g.,Gooderham at al., 2008). However, in the case of Uruguay efficiency-oriented HRM activities would complement eachother to a negligible extent compared to the reinforcing impact that stems from their interaction with commitment-relatedactivities and also to the gains associated to the combined use of collaborative practices. 4. THE IMPACT OF HRM PRACTICES ON ORGANIZATIONAL PERFORMANCEFor the purposes of this paper economic performance of firms was measured by means of their relative ranking in terms oftheir level of labor productivity with respect to the sector’s average (Model 1 shows alternative measures). The indicator isdefined as equal to (-1) whenever the firm’s productivity is below the average; it is equal to 0 if similar to the sector’saverage level; and it is equal to 1 whenever the firm outperforms its competitors. Firms that are self-ranked below thesector’s average are only 6% of the sample, implying that most small enterprises, excluded from the sample, have asignificantly lower productivity level than medium and large firms. HRM activities are proxied by the 15 bundles estimatedin the previous section and also by 11 individual practices that are not included in any bundle with a sufficiently significantassociated loading.6

The model includes a set of binary variables that account for differences across firms in terms of economic sector (industryand construction, commerce and services); size (medium and large), national and family ownership (full-national or not;family-owned or not); corporate character; and main sales market (local or international). Firms in commerce are acomparatively smaller share of the sample, in line with the sector’s size-composition (biased towards micro and small units)while the prevalence of national versus foreign companies is a most expected regularity. In contrast, the distribution of firmsaccording to all other characteristics is quite balanced 7

. The degree of union influence at the firm (low or high) and its evolution with respect to 2004 are two further controlsincluded in the model. Even though powerful unions are present in only 12% of firms, one third of respondents perceive thattheir influence has indeed increased. Lastly, we also acknowledge for differences that stem from firms’ strategy as a sourceof competitive advantage, distinguishing between six different strategies: marketing (advertising and services provided toclients); innovation (new products and/or brands; novel merchandising and marketing practices); costs and prices

management; HR efficiency levels (qualified managers and skilled workforce); HR commitment to the company (sharedknowledge of organizational mission, values, etc. and high involvement with organizational goals); and overallorganizational performance (as reflected on factors such as strategic cooperation; systematic improvement; operational6

An in-depth description of these variables can be found in a working paper available upon request and not cited to secure the blindreview process.7

The composition of the sample by diverse characteristics is available upon request.13efficiency; and explicit individual, team and overall goals). The composition of the sample according to this aspect showsthat around 60% of firms have competitive advanatges that originate in a high HR efficiency or commitment to theorganization, while at the other end only 10% of companies root their success on innovation activities. Given the definition of the dependent variable, an ordered logit regression model is specified and estimated by Full-Information Maximum Likelihood controlling for sample design effects.8

No differences in productivity are found acrossfirms according to the national or family ownership and corporate character of the organization. Even though no gains orlosses are found associated to one specific major source of competitive advanatge, the most productive organizations arethose that exhibit advantages, at least to a certain extent, on all dimensions. The suitability of a diversified organizationalstrategy is consistent with the volatile macroeconomic conditions, market imperfections and high uncertainty degrees thathas historically characterized the Uruguayan economy (Table 3). Large-sized, local market oriented companies and those that operate in commerce are also found to outperform medium,exporting companies in the industry and services sectors. The size composition of the economic sectors, the existence ofeconomies of scale and the emphasis on other dimensions of performance needed to compete in foreign markets are mostlikely explanations at the root of these findings. Lastly, productivity levels would be higher among firms that are not subjectto a high union influence than otherwise while no differences are found related to the temporal evolution of such influence.The result may be thought as consistent with an adversarial role of unions.Table 3. Productivity model – Estimated coefficients for control variablesVariablesCoef.Sector: Manufacturing & Construction industries-1.9***

Sector:Services-2.4***

Medium-sized (between 50 and 99 workers)-1.0***

Family-ownership-0.2National-ownership0.3Corporate nature0.4Local-market oriented1.0***

High union influence at firm-1.1**

Increased union influence at firm-0.4Competitive advantage - all 1.0***

Note:*

/ **

/***

refer to p<0.15; p<0.10; p<0.05, respectively.The full output is available upon request.The model is able to identify several linkages between productivity and diverse dimensions of HR management that involveboth calculative and collaborative practices, either individually or in bundles (Table 4). No calculative bundle is found todifferentiate firms in terms of their productivity level while gains associated to efficiency oriented individual practices areonly linked to the use of specialized agents that recruit workers for at least one occupational category (so as to guarantee8

The authors discuss the topic at length and show that the biases driven by the disregard of sample design are mostsignificant in a Working Paper available upon request.14that applicants have the necessary skills). The absence of significant effects associated to most hiring practices is consistentwith the professionalized characterization of firms in the sample with respect to this particular HRM dimension. Further, thepositive impact associated to the preference of a diversified profile of applicants, where the largest weights are assigned tothe identification with the organization’s ideology and to the likely establishment of a long-lasting work relation, revealsthat firms that put the emphasis on the strategic profile of new workers would outperform their competitors.Table 4. Productivity model – Estimated coefficients for HRM practices VariablesCoef.Individual practicesRecruitment: specialised agents (educational institutes & specialized agencies) 1.2***

Training: aimed at developing a career through the acquisition of technical skills 0.9*

Training: aimed at developing a career through the acquisition of attitude-related abilities -1.0*

Wage setting at the firm for at least one occupational category0.5*

Communication flows: to teams-1.4***

Collaborative BundlesFormalization/organizational culture – bundle 11/

0.3*

Formalization/organizational culture – bundle 2 2/

0.5*

Intermediary BundlesSelection profile: commitment & efficiency oriented characteristics0.5**

Evaluation: commiment & efficiency oriented goals0.6***

Benefits: future oriented and linked to seniority, current & future performance 0.4**

Population/Sample/Strata889/206/9Significance of model: Prob. > F0.0016Notes: *

/ **

/***

refer to p<0.15; p<0.10; p<0.05, respectively. Only significant coefficients are reported. The full estimation output isavailable upon request. 1/

The bundle includes the existence of at least one written statement (negative loading if unwritten); writtenstatements on corporate mission, strategy and values; and written or unwritten statements on these three aspects and also on HRstrategy and ethics.2/

Statements: all written; written or unwritten on resposibility, communication policies and diversity.Training aimed at developing a career within the firm is predicted to exert opposing impacts on productivity depending onits being based on the acquisition of technical (positive effect) or attitude related (negative effect) abilities. The resultsuggests that the combined use of efficiency and strategically oriented HRM practices has a magnified impact on

productivity, a pattern that is also observed with respect to the use of evaluation systems and pay practices (wage setting atthe firm and contingent benefits). Further productivity gains are associated to the two bundles that include statements on all the considered organizationalculture aspects and their degree of formalization (written or not), as opposed to the negative impacts driven by the use ofcommunication policies that involve working-teams.5. CONCLUDING REMARKS15Theevidence presented supports the existence of complementarities among HRM activities that involve not only the use ofa particular practice with various purposes and/or for workers in diverse occupations, but also different dimensions ofmanagement. Bundled HRM activities are able to magnify the impact of single HRM practices on the economicperformance of Uruguayan firms as measured through their comparative level of productivity. However, the significanteffects that stem from single HRM practices would in principle be inconsistent with a strict interpretation of the theoreticalpredictions of the configurational approach and definitively suggest that the universalistic approach of best practices is notapplicable. Even though the prevailing profile of management in Uruguay is more efficiency than strategy oriented according to theexistent empirical literature, our results show that their impact on performance is generally materialized only whencombined with practices that are commitment-related. Strategic HR activities, in contrast, are found to be of relevance bythemselves, both in bundles or individually.Future work should include interactions and complementarities with organizational strategy, their respective interactionswith union behavior and their impact on productivity, as well replicating the analyses for other organizational performancemeasures –quality and gross profits- as indicated in Figure 1. Preliminary analyses indicate different effects.6. REFERENCESArthur, J. B. (1994). ‘Effects of Human Resource Systems on Manufacturing Performance and Turnover’, Academy ofManagement Journal37(3): 670-687.Bacon, N., P. Ackers, J. Storey and D. Coates (1996). ‘It Ps a Small World: Managing Human Resources in Small Business’,The International Journal of Human Resource Management7(1): 82-100.Bartel, A. P. (1994). ‘Productivity Gains from the Implements of Employee Training Programs’, I

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