HRM AND SMALL-FIRM EMPLOYEE MOTIVATION: BEFORE AND AFTER THE GREAT RECESSION ALEX BRYSON AND MICHAEL WHITE* A long-running debate in the small-firms’ literature questions the value of formal human resource management (HRM) practices, which have been linked to high performance in larger firms. The authors contribute to this literature by exploiting linked employer– employee surveys for 2004 and 2011. Using employees’ intrinsic job satisfaction and organizational commitment as motivational out- comes, the authors find the returns to small-firm investments in HRM are U-shaped. Small firms benefit from intrinsically motivating work situations in the absence of HRM practices and find this advan- tage disturbed when formal HRM practices are initially introduced. Firms can restore positive motivation when they invest intensively in HRM practices in a way that characterizes high performance work systems (HWPS). Although the HPWS effect on employee motiva- tion is modified somewhat by the Great Recession, it remains robust and continues to have positive promise for small firms. For more than two decades, there has been interest within the humanresource management (HRM) practitioner and research community in systems of practice that form a cohesive and integrated set designed to max- imize business effectiveness and employee well-being. These systems are commonly termed high performance work systems (HPWS), or strategic human resource management (SHRM), whereby the HRM systems are tuned to harmonize with business strategic objectives. This system or strate- gic perspective distinguishes between HRM practices adopted by a firm in a piecemeal way and more extensive initiatives that cross several domains of people management. *ALEX BRYSON ( https://orcid.org/0000-0003-1529-2010) is Professor of Quantitative Social Science at University College London. MICHAEL WHITE is Emeritus Fellow at University of Westminster. We thank Paul Edwards for his advice and we acknowledge the Department for Business, Energy and Industrial Strategy, the Economic and Social Research Council, the Advisory, Conciliation and Arbitration Service, and the National Institute of Economic and Social Research as the originators of the 2004 and 2011 Workplace Employee Relations Survey data, and the Data Archive at the University of Essex as the distributor of the data. For information regarding the data and/or computer programs uti- lized for this study, please address correspondence to the authors at [email protected] KEYWORDs: small firms, human resource management, High Performance Work System, workplace moti- vation, intrinsic job satisfaction, organizational commitment ILR Review, 72(3), May 2019, pp. 749–773 DOI: 10.1177/0019793918774524. � The Author(s) 2018 Journal website: journals.sagepub.com/home/ilr Article reuse guidelines: sagepub.com/journals-permissions Emerging evidence indicates that HPWS yield worthwhile performance gains for firms; however, most of this evi ...

1. HRM AND SMALL-FIRM EMPLOYEE MOTIVATION:
BEFORE AND AFTER THE GREAT RECESSION
ALEX BRYSON AND MICHAEL WHITE*
A long-running debate in the small-firms’ literature questions
the
value of formal human resource management (HRM) practices,
which have been linked to high performance in larger firms. The
authors contribute to this literature by exploiting linked
employer–
employee surveys for 2004 and 2011. Using employees’
intrinsic job
satisfaction and organizational commitment as motivational out-
comes, the authors find the returns to small-firm investments in
HRM are U-shaped. Small firms benefit from intrinsically
motivating
work situations in the absence of HRM practices and find this
advan-
tage disturbed when formal HRM practices are initially
introduced.
Firms can restore positive motivation when they invest
intensively in
HRM practices in a way that characterizes high performance
work
systems (HWPS). Although the HPWS effect on employee
motiva-
tion is modified somewhat by the Great Recession, it remains
robust
and continues to have positive promise for small firms.

2. For more than two decades, there has been interest within the
humanresource management (HRM) practitioner and research
community in
systems of practice that form a cohesive and integrated set
designed to max-
imize business effectiveness and employee well-being. These
systems are
commonly termed high performance work systems (HPWS), or
strategic
human resource management (SHRM), whereby the HRM
systems are
tuned to harmonize with business strategic objectives. This
system or strate-
gic perspective distinguishes between HRM practices adopted
by a firm in a
piecemeal way and more extensive initiatives that cross several
domains of
people management.
*ALEX BRYSON ( https://orcid.org/0000-0003-1529-2010) is
Professor of Quantitative Social Science at
University College London. MICHAEL WHITE is Emeritus
Fellow at University of Westminster.
We thank Paul Edwards for his advice and we acknowledge the
Department for Business, Energy and
Industrial Strategy, the Economic and Social Research Council,
the Advisory, Conciliation and
Arbitration Service, and the National Institute of Economic and
Social Research as the originators of the
2004 and 2011 Workplace Employee Relations Survey data, and
the Data Archive at the University of
Essex as the distributor of the data. For information regarding
the data and/or computer programs uti-
lized for this study, please address correspondence to the
authors at [email protected]

3. KEYWORDs: small firms, human resource management, High
Performance Work System, workplace moti-
vation, intrinsic job satisfaction, organizational commitment
ILR Review, 72(3), May 2019, pp. 749–773
DOI: 10.1177/0019793918774524. � The Author(s) 2018
Journal website: journals.sagepub.com/home/ilr
Article reuse guidelines: sagepub.com/journals-permissions
Emerging evidence indicates that HPWS yield worthwhile
performance
gains for firms; however, most of this evidence applies to large
firms.
Indeed, the value of HRM/HPWS for small firms remains
contentious.
Some small-business experts suggest that HRM development is
likely to
interfere with distinctive small-firm advantages such as
flexibility and
informality, which small businesses should use to the full. By
contrast, other
experts argue that human resources repay intensive development
in small
firms, as these firms are often constrained in respect to other
resources,
notably financial.
Our focus is on the role of HRM/HPWS in the small-firm sector,
which
constitutes a large and growing part of the economy in the
United States
(Acs 1999) and in Britain (Hijzen, Upward, and Wright 2010),
the country

4. we consider here. We define ‘‘small’’ firms as those with fewer
than 50
employees, excluding micro-businesses of 1 to 4 employees. We
also show,
however, that our findings hold when extended to firms with up
to 100
employees. The study focuses on employee attitudes that
represent motiva-
tion, using measures that have been shown in previous research
to be
strongly linked with individual performance.
Ours is the first British quantitative study to investigate the
relationship
between HRM/HPWS and employee motivation in small firms.
The study
makes several contributions to the debate sketched above,
showing that
small firms with no or minimal investment in formal HRM tend
to have
highly motivated employees, but that with the adoption of
HRM, employee
motivation declines somewhat. So far, the story accords with
the critics’
warnings. In those small firms that proceed to a more intensive
and inte-
grated HRM/HPWS, however, a threshold is reached from which
employee
motivation climbs again. In short, the HRM-to-motivation
relationship in
small firms depends on the variety and complementarity of
practices
adopted. Positive messages as well as warnings can be drawn
for small-firm
practice.

5. A feature of our research is its coverage of two contrasting
economic peri-
ods, 2004 and 2011. In 2004, economic conditions were stable
and prosper-
ous. In 2011, the British economy was struggling in the wake of
a severe
recession. The coverage of these two periods makes two
additional contribu-
tions: first, by testing the constructive validity (Treadway et al.
2005) of
HRM/HPWS effects; second, by showing, somewhat
counterintuitively, that
HRM/HPWS can have positive effects in the adverse context of
a recession.
We find that although the HRM/HPWS effect on employee
motivation is
modified somewhat by the Great Recession, it remains rather
robust and
continues to have positive promise for small firms.
Motivation and Attitudes
We view employees in small firms from a motivational
perspective, through
a study of their attitudes. There is a lack of consensus about the
meaning of
750 ILR REVIEW
motivation and about the relationship between motivation and
attitudes.
Therefore, we start by outlining our notion, which comes from
mainstream
attitude theory and work motivation theory. We assume first

6. that attitudes
are essentially motivational. Fishbein (1967: 389) quoted with
approval
Louis Thurstone’s definition of an attitude (‘‘the amount of
affect for or
against an object’’) and equated it with a ‘‘mediating evaluative
response’’
that tended toward overt behavior. Locke (1996: 121) continued
to make
values the basis of affective attitudes: ‘‘Emotions are the form
in which one
experiences automatized value judgements . . . according to the
standard of
one’s values. . . . Events and situations seen as furthering one’s
values pro-
duce positive emotions (happiness, satisfaction, love).’’ In their
review of
contemporary work motivation theory, Latham and Pinder
(2005)
explained how attitudes express the pursuit of desired goals and
values, and
how the realization of goals and values sustains motivated
behavior.
If this conceptual model is valid, one should observe links
between atti-
tudes and work behavior. Harrison, Newman, and Roth (2006)
supplied this
link with their meta-analysis that showed ‘‘overall job attitude’’
explains
about 25% of the variation (i.e., r = 0.50) in workers’
‘‘engagement’’ beha-
viors (task performance, organizational citizenship, attendance,
timeliness,
and reduced propensity to quit).

7. The components of overall job attitude are job satisfaction and
organiza-
tional commitment. A definition of job satisfaction that fits the
general
framework sketched above comes from Locke and Latham
(1990: 243): ‘‘The
degree of satisfaction or dissatisfaction will be a joint function
of the degree
of fulfilment of the value and the importance of the value to the
individual.’’
Organizational commitment then enters the frame, according to
these
authors, as a consequence of and complement to job
satisfaction: ‘‘Only if
satisfaction leads to commitment to the organization and its
goals . . . will sub-
sequent high performance result’’ (Locke and Latham 1990:
245). Kalleberg
and Berg (1987) defined affective organizational commitment in
terms of
employees’ identification with the goals and values of the
organization, and
their willingness to exert effort on its behalf.
To represent employee motivation in the present research, we
followed
this approach in using measures of job satisfaction and
organizational com-
mitment but adapted the former to focus on intrinsic or
autonomous satis-
faction, reflecting the valued experience of autonomous working
(Gagné
and Deci 2005). The reason for this focus will become apparent
in the fol-
lowing section.

8. Small Firms and Their Employees
We define small firms as those with fewer than 50 employees.
This approach
is consistent with official definitions in both the United
Kingdom and the
European Union, but some previous studies have used alternate
definitions;
for instance, Way (2002) studied US firms with 20 to 100
employees. We do
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 751
not think this difference is crucial, since our variant analyses
show that
results are similar if we expand our sample up to firms with 99
employees.
Evidence suggests employees in small firms have particularly
positive
work attitudes. For instance, studies for the United States using
the Quality
of Employment Surveys of 1973 and 1977 reported higher
satisfaction in
small firms (for a review see Tansel and Gazioglu 2013 who
cited 20 stud-
ies). In Britain, one can draw on studies using the Workplace
Employment
Relations (WERS) series, with their linked workplace and
employee data in
1998, 2004, and 2011. Tansel and Gazioglu (2013) have re-
analyzed the
1998 survey and reported numerous respects, including job
satisfaction and

9. perceptions of employee–management relations, in which
smallness is asso-
ciated with more positive attitudes. Forth, Bewley, and Bryson
(2006: 41,
70), analyzing the 2004 data set, reported that small firms’
employees have
the highest levels of self-rated well-being and—according to
management
respondents—relatively low incidence of employee grievances
or disciplin-
ary hearings. The present study is the first to use the WERS
2011 data to
analyze influences on employee attitudes in small firms, but
Lai, Saridakis,
and Johnstone (2017) considered employee attitudes as
explanatory vari-
ables for performance, and in passing (see their table 6)
reported that on
all the attitudinal items considered, small firms score somewhat
higher than
do medium-sized firms.
These findings are remarkable: bear in mind that small firms
offer rela-
tively low pay and fringe benefits, little training, and sometimes
coercive
forms of supervision and management (for Britain, see, e.g.,
Rainnie 1989;
for the United States, see the extensive literature on segmented
labor mar-
kets, e.g., Edwards 1979). Some insight into what seems a
paradox is pro-
vided by the study of Kalleberg and Van Buren (1996). Using
linked
employer and employee data for the United States, they showed
that larger

10. size was significantly associated with greater material rewards
but also lower
feelings of job autonomy even with controls for many variables
that might be
linked to size. Autonomy was measured as a composite of
working indepen-
dently, having a say over job changes, taking part in decisions,
and not being
closely supervised. Interpreting this in a work motivation
framework, we sug-
gest that small firms offer greater scope for autonomous or
intrinsic motiva-
tion (see especially the self-determination theory of Gagné and
Deci 2005)
to compensate for the relatively weak provision of extrinsic
rewards. This
finding also reinforces the warnings of those who have pointed
to dangers
in introducing HRM into small firms (see, e.g., Cardon and
Stevens 2004;
Marlow 2006).
British case study research provides further insight into how
small firms
offer intrinsic rewards. For instance, in his intensive study of
three clothing
manufacturers, Ram (1994) depicted an ethos of extensive
freedoms and
responsibilities for employees, all the more convincing because
Ram’s focus
was chiefly on how small businesses survived in intensely
competitive mar-
kets, rather than on employees’ job quality as such. Established
employees
752 ILR REVIEW

11. had an important role in determining their own working
methods, even in
one case in which the supervisor judged them to be inefficient;
they socia-
lized freely with their colleagues, and they had great discretion
over their
working times to fit work to the needs of their families. Their
responsibil-
ities included finding new recruits when these were needed and
for training
and embedding them into the work process; and, as also noted
by de Kok,
who examined small firms in the Netherlands (2003), employees
exerted
subtle but considerable influence over the decision making of
their manag-
ers and principals. Case studies in restaurant businesses (Ram,
Edwards,
Gilman, and Arrowsmith 2001) provided a similar picture.
Moule (1998),
studying a small manufacturing firm, showed in detail how a
work group
maintained its autonomy in the face of somewhat autocratic
principals.
A factor that tends to maintain a positive quality of work in
some small
firms is the closeness of the proprietors to employees. This
aspect is strongly
underlined in the Netherlands’ case studies analyzed by de Kok
(2003). He
observed that the employer-owner often worked alongside the
employees,

12. sought personal satisfaction in the work (as a distinct objective
alongside
profit), placed a high value on team spirit, and was in frequent
one-to-one
communication with employees, which offered scope for them
to be
influential.
In recent years, British small business has developed strongly in
industries
requiring high levels of technical and professional expertise,
such as health
services, information and communications technology, creative
media,
finance, and specialized consultancy. Case research by Tsai,
Sengupta, and
Edwards (2007) and by Gilman and Edwards (2008) addressed
this area.
The professional staff typically worked in a highly autonomous
manner,
with proprietors reliant on selecting people with appropriate
skills. Tsai
et al. (2007) reported high levels of employee satisfaction with
manage-
ment, in part because of the opportunities gained by having
seniors work
alongside them. A repeated motif in these studies is the extreme
flexibility
of workloads and hours, with minimal planning and a fluid type
of team
working that is described as ‘‘a natural extension of the way
work is per-
formed’’ (Gilman and Edwards 2008: 547).
Within the small-firm literature, a concept frequently deployed
to

13. describe employer–employee relationships is informality. This
concept is cer-
tainly applicable to the examples of autonomous working and
freedom
from controls cited above, but it can also be applied to aspects
of small-firm
relationships that are more negative, such as proprietors’
unconcern about
workplace regulations, arbitrary treatment of employees, and
favoritism. At
an extreme, the informal small firm can end by moving into the
gray econ-
omy and the casualization of its workforce (Ram et al. 2001).
Nonetheless,
evidence supports that informality is valued within small firms
by both own-
ers and employees, and movement toward a more systematized
or modern
approach, including HRM adoption, is often resisted. In the
ElectronCo
case of Gilman and Edwards (2008), supervisors and team
leaders were
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 753
being introduced but the company was stressing that the roles
would be
chiefly of a mentoring rather than monitoring type. In Ram et
al.’s (2001)
PatCo study, a specialist food manufacturer was being pushed
toward formal
controls, with reduced employee discretion, as a consequence of
selling to
supermarkets, but management was representing the

14. development to
employees as ‘‘organized autonomy’’ (Ram et al. 2001: 855).
Small-firm case
research can be cross-checked with large-sample analysis.
Storey et al.
(2010) developed a survey questionnaire instrument to measure
formaliza-
tion and showed higher formality to be associated with lower
ratings of job
quality.
Our overall conclusion from this review of evidence is that
small-firm
employment benefits in terms of intrinsic rewards in the form of
job auton-
omy and freedom from external controls. The strength of
autonomous or
intrinsic motivation (see Gagné and Deci 2005) suffices to
explain the
highly positive attitudes that have been reported. Much of the
evidence,
however, comes from small firms that have retained an informal
approach,
and it remains to be seen how the introduction of HRM affects
the picture.
HRM/HPWS Effects on Small-Firms’ Employees
In this section, we first consider, in a general way, how HRM
systems can
have performance-enhancing motivational effects on employees.
We then
go on to discuss whether similar results can be achieved in the
small-firm
sector. We will focus particularly on HPWS.

15. Many of the leading studies in this field have used intuitive
motivational
concepts for interpretation and prescription. For instance,
Macduffie
(1995) stated that an essential condition for performance
enhancement is
that employees possessing knowledge and skills are motivated
to apply them
in discretionary effort. Economists interested in the economic
effects of
complementary work practices stress their value in generating
incentives to
productivity (Ichniowski, Shaw, and Prennushi 1997). Becker
and Huselid
(1998: 63) argued that the aim of HPWS was to construct a
‘‘skilled and
motivated workforce providing the speed and flexibility
required by new
market imperatives.’’ Appelbaum, Bailey, Berg, and Kalleberg
(2000: 46)
stated that ‘‘jobs that are challenging and make use of workers’
skills are
intrinsically rewarding.’’ Batt (2002) theorized that HPWS
produced a posi-
tive effect through increased employee satisfaction that lowers
the firm’s
quit rate and thus helps to build up human capital and
organizational
learning.
Previous research (notably the seminal HPWS study of
Appelbaum et al.
2000) suggested participation and team organization (team-
working) were
central domains of HPWS. Participation referred to methods by
which

16. employees can make contributions that directly relate to work
tasks, work
organization, and the management of change. Team roles
supported by
skill development enabled employees to widen skills,
experience more
754 ILR REVIEW
challenge in their work, and experience increased relatedness
with col-
leagues. Several more traditional aspects of HRM/personnel
management
have been adapted to fit into an HPWS specification (see
Appelbaum et al.
2000). Financial incentives can be extended with group and/or
workplace
bonuses or profit-shares. Training and development can help
employees
take on variable job roles within teams and achieve enhanced
levels of skill
and self-efficacy. Recruitment and selection are complementary
to training
and help build a workforce committed to high performance
goals (Locke
1996).
Becker and Huselid (2006), elaborating earlier contributions,
argued that
for HRM to have a major positive impact, relevant work
practices need to
be bundled in a mutually supportive way. This argument points
to a thresh-
old effect, with motivation and performance rising more steeply

17. once the
threshold has been crossed. Why this may be so is theorized
more fully by
Bowen and Ostroff (2004: 206), who maintain that ‘‘HRM
practices can be
viewed as a symbolic or signalling function.’’ If HRM is to
alter employee
behavior and performance, it must be a strong system that
communicates
persuasive messages: Implementing a wide range of practices is
valuable in
strengthening the HRM message and making it salient. This
thesis connects
with the idea that HPWS can project organizational values, such
as develop-
ing employees’ capabilities and valuing their views, with which
individuals
can identify. Such a message is more likely to be trusted when
the organiza-
tion demonstrates its seriousness by implementing a wide range
of
complementary practices. Inconsistency or half-hearted
dabbling in HRM,
however, can be interpreted as insincerity. Although Bowen and
Ostroff
referred only generally to HRM, and did not specify a particular
configura-
tion of practices as ideal, a fully developed HPWS appears to
meet their cri-
teria for a strong system.
Our assumption is that the motivations of small-firm employees
tend to
be highly positive before any HRM development has started. As
HRM prac-
tices enter the scene, they may infringe on established employee

18. freedoms
and autonomous working. Since this freedom and autonomy is
the main
reason for initially positive attitudes, the effect of HRM
adoption is to drive
motivation downward. As a firm moves closer to constructing a
full HPWS,
however, it signals a new participative, collaborative, and self-
developing
ethos with which employees can identify. To the extent that this
is success-
ful, attitudes (satisfaction and commitment) will move in a
positive direction
once again.
With the foregoing discussion in mind, we propose the
following
hypotheses:
H1: Intensive adoption of HPWS (a ‘‘strong system’’) results in
increased intrin-
sic work motivation, and this is expressed in two testable forms
that we base
on the work of Harrison et al. (2006) and on the more general
theory of
Locke and Latham (1990):
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 755
H1a: There is a positive relationship between the intensity of
HPWS practices
and the intrinsic job satisfaction (IJS) of employees.
H1b: There is a positive relationship between the intensity of

19. HPWS practices
and the organizational commitment (OC) of employees.
The positive relationships indicated in H1a and H1b only apply
above
some threshold of HPWS implementation that is to be identified
empirically.
H2: At below-threshold levels of adoption of HPWS, there will
tend to be
reduced levels of intrinsic work motivation. This outcome will
have identifi-
able consequences, H2a and H2b, that relate to reduction in IJS
and in OC,
respectively, from the high ‘‘baseline’’ state of motivation that
we regard as
characteristic of small firms.
The overall prediction, therefore, is a nonlinear (U-shaped)
relationship
between overall job attitudes and HPWS intensity. A model with
both linear
and quadratic (squared) terms represents such a relationship,
with the lin-
ear term having a negative sign and the quadratic term having a
positive
sign.
Since our study covers two distinct economic periods or
situations, the
question arises whether the above hypotheses apply without
modification to
both. Some previous studies suggest that in firms where
employee relations
are adversely affected by business conditions, the positive
impacts of HRM/

20. HPWS are cancelled. For example, Zatzick and Iverson (2006)
showed that
during recessionary conditions in Canada, the positive link
between HRM
and performance was lost in firms laying off workers, whereas
those firms
that avoided layoffs were able to maintain this positive linkage.
A British
case study (Hailey, Farndale, and Truss 2005) documented the
damage to
employee relations when a firm overlaid a highly participative
and empow-
ering HRM system with coercive managerial behaviors
responding to busi-
ness pressures. By contrast, Cappelli (1999) observed that
employees in the
United States in the 1990s tended to be forgiving toward
management that
imposed layoffs, because this was seen as an action forced by
external cir-
cumstances affecting most firms. In the UK recession of 2008–
12, most firms
were driven to make cost-reducing changes, and so management
teams may
have been insulated from blame by employee responses similar
to those
observed by Cappelli (1999). In that case, the effect of
HRM/HPWS on
employee attitudes and motivation would likely not be modified
by the
recession. Outcomes might partly depend on how baseline or
pre-HRM atti-
tudes in small firms react to recessionary pressures, but we have
found no
previous study directly addressing this issue. In the absence of a
compelling

21. argument to the contrary, we leave our hypotheses unaltered for
the reces-
sionary period.
756 ILR REVIEW
Data, Measures, and Analysis Methods
Data
We use the Workplace Employment Relations Surveys for 2004
and 2011
(henceforth, WERS2004 and WERS2011).1 We make use of
employee
within-firm samples to derive attitudinal outcome measures,2
and manage-
ment interviews (conducted prior to data collection from
employees)
provide the HRM/HPWS variables and other control variables.
This combi-
nation reduces the risk of common method artifact (Podsakoff,
MacKenzie,
Lee, and Podsakoff 2003) and respects time sequencing of the
independent
and dependent variables (Wright, Gardner, Moynihan, and Allen
2005). In
keeping with most of the literature on the effects of HRM or
HPWS, we con-
fine our analyses to the private-sector subsamples.
A sharp fall in response between 2004 and 2011 (typical of
British social
surveys during this period) poses a threat to comparability when
we assess

22. consistency of findings over time.3 We develop a new way of
mitigating this
problem, which is explained in the analysis section below.
From the management information, we identify those
workplaces that
represent small firms (less than 50 employees in the overall
organization).
Each firm is represented by only one workplace, but this is not
problematic,
since in the case of small firms, approximately 80% are single-
establishment
firms.4 In 2004, WERS obtained information from 280 private-
sector small
firms, and in 2011, from 375. The analysis focuses on these
small firms.
Dependent Variables
The chief analyses refer to overall job attitude (Harrison et al.
2006)
through two variables that we label intrinsic job satisfaction
(IJS) and orga-
nizational commitment (OC). We obtain the measures from
employee
responses that are averaged at the level of the workplace that
represents the
firm. This aggregation and averaging process results in smooth
quasi-
continuous measures. Unobserved individual attributes that may
bias attitu-
dinal responses (notably personality, see Diener and Lucas
1999) will tend
to be averaged out at the mean workplace level (there could,
however, still
be unobserved selection effects imposed by consistent selection

23. processes).
From the viewpoint of firm management, the aim is to have
positive motiva-
tion across all employees, and the workplace-average measures
reflect this
managerial perspective.
In both years, the WERS employee questionnaire contained
eight facet
satisfaction items and from these, four were selected for their
similarity to
1For details on the surveys, see van Wanrooy et al. (2013).
2At workplaces with up to 25 employees, all were sent a self-
completion questionnaire; in those with
more than 25 employees, a sample of 25 was drawn.
3Response to the management interview survey fell from 64%
in 2004 to 46% in 2011.
4We have also made analyses on the subsample of single-
establishment small firms. Results are qualita-
tively similar to those reported for the full small-firm sample
below.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 757
the ‘‘job itself intrinsic satisfaction’’ subscale of Warr, Cook,
and Wall
(1979). Table 1 provides item details. The Cronbach alpha of
the IJS items
in the full employee survey sample was 0.87 in both 2004 and
2011.
Responses are summed at the level of the individual respondent,

24. and the
summed IJS scores are averaged over the employee respondents
at each
workplace.
The WERS measure of OC consists of three items (see Table 1),
which
have counterparts in the six-item Lincoln-Kalleberg measure of
affective
organizational commitment. OC has a Cronbach alpha of 0.85 in
the full
employee surveys of both years. To compute the measure, the
three items
were summed at the individual level and then averaged across
the employ-
ees at each workplace.
The aggregation and averaging of these items requires an
assumption
that the items themselves constitute cardinal (interval)
measures. Applied
psychologists have been (implicitly) adopting the cardinality
assumption
since the introduction of Likert scales in the 1930s,
accompanied by the
method of summative ratings (Murphy and Likert 1937). More
recently,
economists have also tended to accept the cardinality
assumption for the
analysis of multi-point attitude scales. Recent examples include
Powdthavee
(2011) and Taylor, Jenkins, and Sacker (2011). Econometric
methodologi-
cal investigations that emphasize the advantages of the cardinal,
or linear,
assumption include Ferrer-i-Carbonell and Frijters (2004) and

25. Riedl and
Geishecker (2014).
To check the selection of items for our constructs, we
performed a princi-
pal components analysis using the full employee sample on the
eight satis-
faction items, the three OC items, and eight further items
relating to
Table 1. Intrinsic Job Satisfaction (IJS) and Organizational
Commitment (OC)
Scales for Small Firms, 2004 and 2011
Scale Range
2004 2011
ItemsMean s.d. N Mean s.d. N
IJS scale 4–20 15.84 1.61 280 16.02 1.79 375 (Satisfaction
with) Sense of
achievement from your work,
Scope for using your own
initiative, Amount of influence
over your job, The work itself. 5-
point item response, high = more
satisfied.
Alpha = 0.87
OC scale 3–15 11.67 1.54 279 12.10 1.56 375 (Agreement that)
Share many of
the values of my organization,
Feel loyal to my organization,
Proud to tell people who I work

26. for. 5-point item response, high =
stronger agreement. Alpha = 0.85
Notes: Unweighted estimates. Alphas are based on the full
employee sample.
758 ILR REVIEW
individual well-being. After varimax rotation, the IJS and OC
constructs
emerged as distinct components with high loadings on all their
items.
These results (not shown here) are available on request. Another
distinct
component was formed of the three items relating to satisfaction
with pay
received, training received, and job security: We label this
extrinsic job satis-
faction (EJS). We ran variant models with EJS as the dependent
variable in
place of IJS, as a test of the discriminant validity of the IJS
construct.
Measures of HPWS Practice
Information about HRM practices comes from the WERS
interview with the
senior manager responsible for HRM or personnel management
at the
workplace. We consider only items that are descriptive of
current practice
and ignore any items that seek the manager’s opinion about
climate,
management–employee relationships, and so forth. British

27. studies that simi-
larly emphasize descriptive measures of HRM practice include
Ramsay,
Scholarios, and Harley (2000); Forth and Millward (2004); and
Brown,
Forde, Spencer, and Charlwood (2008); for North America, see,
for exam-
ple, Cappelli and Neumark (2001); Godard (2001); Wright et al.
(2005);
Osterman (2006); and Zatzick and Iverson (2006).
In the HRM-performance literature, all the HPWS items from a
cross-
sectional survey are usually aggregated into a single overall
index of prac-
tices (e.g., Becker and Huselid 1998: 63).5 Scholars have often
remarked,
however, that this approach has not led to consistent, replicable
measures
of HRM practice, because of differences across studies in the
available
items. We find in the present study that although many
descriptive items
are available, they sometimes do not remain the same across the
2004 and
2011 surveys, and marked variation occurs in the statistical
reliability of
domain measures over time. We therefore introduce a new
measurement
approach, as follows. 1) Five domains that correspond with the
HPWS con-
cept of Appelbaum et al. (2000) are defined; these domains are
participa-
tion, teams, development, recruitment, and incentives. Across
these
domains, we find 43 suitable item measures in 2004 and 44 in

28. 2011. 2) We
group items by domains, and the grouping is checked by
reliability analysis.
3) In each firm, we count how many practices are reported to be
present in
each domain. If three or more items are present,6 we classify
the firm as
achieving ‘‘high’’ on that practice domain. 4) In each firm, we
count how
5This approach is also common in the literature using the
Workplace Employment Relations Survey.
Recently, for example, Wu, Hoque, Bacon, and Llusar (2015)
used the 2011 survey to construct a single
index based on 17 factor-weighted dichotomous, categorical,
and count items. The practices they focus
on are a subset of those used in our analyses. The advantage of
using a broader set of practices is that it
makes separate domain counts feasible and hence is also
valuable for the new measure of intensity we
have derived that relies on having a minimum number of
practices within each domain.
6We also investigated on each side of this criterion, setting the
high domain criterion as having two or
more practices implemented, or alternatively four or more
practices. We discuss these sensitivity tests in
the Results section.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 759
many domains are classified as ‘‘high,’’ and this number is
taken as the
HPWS-intensity score for that firm. This yields a six-point scale

29. with values
from 0 to 5. Among small firms, this scale has correlation 0.91
with the addi-
tive index of HPWS items in 2004, and 0.83 in 2011. The
HPWS-intensity
measure has a high degree of face validity with respect to the
Bowen-Ostroff
concept of a ‘‘strong system’’ HRM. Its criterion validity (with
respect to
employee attitudes) is demonstrated in the Results section
below. Further, a
firm can reach the ‘‘high’’ threshold in any given domain
through a great
variety of ways; and from the five domains, firms can select,
through a num-
ber of ways, which ones they wish to develop: Thus, the HPWS-
intensity
score provides for uniqueness and equifinality in firm
HRM/HPWS strategy
(Becker and Huselid 2006) at both item and domain level. We
believe that
this method provides robust comparability across surveys; it is
not necessary
that the item pool be identical across time.
Our use of the label intensity score is consistent with practice in
economics,
in which (for example) the term intensive margin refers to the
number of
hours worked by employees. Many items are of the simple
‘‘present/absent’’
type, whereas others are derived by reducing a quantified
banded variable
(such as proportion of employees taking part in the practice, or
time
devoted to the practice) to dichotomous form by splitting at the

30. median.7
Note also that while some items refer to fairly basic HRM
practices, others
can be regarded as toward the sophisticated (Cox, Zegelmeyer,
and
Marchington 2006) extreme: for instance, teams that select their
own
leader, or communication meetings that discuss staffing levels
or company
finances (see Appendix Table A.1). Overall, the item pools for
both surveys
provide a reasonable basis for assessing how far firms have
progressed
toward HPWS.8 Although there is doubtless scope for further
refinement in
scaling, we have held back from pursuing that because of the
bias that
would likely be introduced by having estimated variables among
the
regressors.
Table 2 gives further details of the derived domain-high and
HPWS-
intensity scores. High-scoring domains increased substantially
between 2004
and 2011, notably in regard to participative practices and to
incentives.
Control Variables
Structural control variables, obtained from the management
interview, are
included in all the reported analyses. Industry is represented by
11 dum-
mies, and controls indicate the percentage of workplace

31. employees in
7Dichotomizing at the median is an efficient method of
removing measurement error from a regressor
variable (Wald 1940).
8That said, notable increases occur in the incidence of
participation and incentives between 2004 and
2011. These might partly reflect changes in the way data were
collected between 2004 and 2011, or might
reflect wider managerial familiarity with HRM concepts. It is
not necessary for our measures to be identi-
cal in the two years. What is important is that we count
practices in such a way as to be able to distinguish
between workplaces according to their high and low intensity
use of HRM within those two years.
760 ILR REVIEW
higher (professional and managerial) occupations; the
percentage in inter-
mediate (administrative, technician, and craft) occupations; the
percentage
of female employees; the percentage (banded) of employees in
non-
permanent jobs; and a dummy for presence of recognized
union(s). We
could not include a variable subdividing size within the small
(5–49 employ-
ees) segment, as this information was not available in 2004. We
count the
number of managers at the workplace, however, and create a
dummy for
those that had three or more managers—an indication of

32. organizational
complexity. We additionally include an item relating to job
security guaran-
tees made by management, which is an HRM variable
considered important
by Forth and Millward (2004), but did not combine with any of
our HPWS
domains.
Characteristics Special to Small Firms as Additional Control
Variables
In all analyses, we include controls for further characteristics
regarded as
significant in the small-firm literature. The number of years that
the busi-
ness has been located at its present workplace, or at previous
workplaces
from which it has moved, is used as a measure of newness (see
Cardon and
Stevens 2004). Newness is divided into five bands
approximating quintiles of
the firm-age distribution. To represent family control over the
firm, a fre-
quently noted characteristic of small firms, we constructed a
dummy based
on whether a family holds more than half the shareholding. We
also
included the Storey et al. (2010) measure of formality that can
be regarded
as particularly relevant to small firms. Full details of this
measure are given
in Storey et al. (2010: 311); it has a Cronbach alpha of 0.77 in
these surveys.
Firms’ Recessionary Policies in 2011

33. In analyzing the 2011 data, we incorporate a dummy variable
identifying
workplaces having more than one type of employment policy in
response to
the recession—commonly a wage freeze coupled with some
restriction of
Table 2. HRM Domains and HPWS Intensity Measure in Small
Firms,
2004 and 2011
‘‘High’’ on 2004 2011
Participation (%) 44 81
Teams (%) 42 46
Development (%) 46 55
Recruitment (%) 79 80
Incentives (%) 12 40
Mean HPWS intensity (s.e.): 2.23 (0.102) 3.02 (0.089)
Notes: ‘‘High’’ is a dummy variable for each domain, taking
value 1 when three or more practices are
implemented in that domain. All estimates are survey-weighted.
For further details of items used in
domain construction, see Appendix Table A.1.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 761
hours or change of hours contract (e.g., zero hours contracts).
One-third of
small firms had two or more employment policies responding to
the

34. recession.9
Table 3 presents correlations between the independent variables
in
2004 (panel A) and 2011 (panel B) for numeric (continuous and
multi-
categorical) variables followed by the tetrachoric correlations
for dummy
variables, excluding industry dummies.
Analysis Method
The analysis uses the survey regression method with a robust
variance esti-
mator (also known as robust regression: see Berk 1990). The
measures of
IJS and OC are treated as continuous variables, since they are
smoothly dis-
tributed workplace means. These means are themselves sample-
based esti-
mates. They are therefore measured with error and are
heteroskedastic
because the workplace samples vary in size. As these are always
dependent
variables, however, measurement error is incorporated in the
usual distur-
bance term, and this does not affect consistency of estimates.
The robust
variance estimator allows for heteroskedasticity as well as for
complex survey
design including weighting.
The HPWS-intensity variable is represented in two different
ways in var-
iant specifications. In the first variant, it is represented as a
linear effect; in

35. the second, it is represented with both linear and quadratic
(squared)
terms. The latter specification makes it possible to assess the
existence of
nonlinearities (U-shaped relationship) as specified in the
hypotheses.
The lower response rate in 2011 compared with 2004 suggests
possible
bias from sample selectivity. Effects on the covariance structure
are unpre-
dictable. Both surveys employed stratified sampling by
workplace size and
industry, and establishment weighting is intended to restore
representative-
ness with respect to these variables. However, this does not
guarantee repre-
sentativeness with respect to the other control variables used in
our
analyses. We therefore use an alternative approach derived from
the statisti-
cal matching methodology used in program evaluation research
(Frölich,
Huber, and Wiesenfarth 2015). We take WERS2004 as the target
sample,
both because of its superior response rate and because of the
more typical
economic conditions in which it took place, and re-weight
WERS2011 to
achieve mean covariate balance across all control variables that
are present
in both 2004 and 2011. This strategy is made possible by the
entropy-
balancing program developed by Hainmueller and Xu (2013).
We carry out
the 2011 analyses along the same lines as for 2004, but with

36. control variables
that, when the sample is re-weighted, have the same mean
values (within a
small tolerance) as in 2004. For example, before re-weighting,
the small
firms in 2011 report having a mean of 49% of employees in
lower-skilled
9We investigate several other ways of representing recessionary
employment policies (e.g., separate
dummies for wage policies and hours policies), but the two-plus
criterion yields the clearest results.
762 ILR REVIEW
Table 3. Correlations of Regressor Variables
Panel 3(A) Year 2004
1. Correlations of numeric regressors
Hi-hr % fem % higher %inter formal age nonperm
HI-hr 1.0
% Female 0.205 1.0
% Higher 0.159 –0.057 1.0
% Intermediate 0.069 –0.119 –0.079 1.0
Formality 0.647 0.222 0.307 0.185 1.0
Firm age –0.164 0.005 –0.188 0.070 –0.143 1.0
% Nonpermanent 0.111 0.087 0.042 0.044 0.126 –0.122 1.0
Notes: Firm age and % nonpermanent are banded variables; as
the bands are based on approximate
quintiles, we treat them here as numeric but in models they are
treated as categorical. HI-hr is the

37. index of high-scoring HRM/HPWS domains.
2. Tetrachoric correlations of dummy variables
Family Union Managers Security
Family-owned 1.0
Unionized –0.296 1.0
3 + managers 0.095 –0.067 1.0
Job security –0.037 0.224 0.112 1.0
Notes: Matrix adjusted to be positive semi-definite. Job security
means a promise by the firm not to make
compulsory redundancies. Industry dummies are not included.
Panel 3(B) Year 2011
1. Correlations of numeric regressors
Hi-hr % fem % higher %inter formal age nonperm
HI-hr 1.0
% Female 0.074 1.0
% Higher 0.146 –0.048 1.0
% Intermediate –0.018 –0.205 –0.089 1.0
Formality 0.648 0.111 0.237 0.023 1.0
Firm age –0.105 0.032 –0.085 0.101 –0.074 1.0
% Nonpermanent 0.105 0.095 –0.029 –0.011 0.018 0.030 1.0
Notes: Firm age and % nonpermanent are banded variables; as
the bands are based on approximate
quintiles, we treat them here as numeric but in models they are
treated as categorical. HI-hr is the
index of high-scoring HRM/HPWS domains.
2. Tetrachoric correlations of dummy variables

38. 2 + cuts Family Union Managers Security
2 + cost-cuts 1.0
Family-owned 0.040 1.0
Unionized –1.0 –0.495 1.0
3 + managers 0.229 0.068 0.083 1.0
Job security –0.317 –0.147 –1.00 –0.059 1.0
Notes: Matrix adjusted to be positive semi-definite. 2 + cost
cuts refer to cuts made in response to the
2008 recession. Job security means a promise by the firm not to
make compulsory redundancies. The
perfect negative correlations between union and cuts, union and
job security probably arise because of
small number of unionized firms. Industry dummies are not
included.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 763
occupations, but after re-weighting this mean falls to 43%.
Other variables
that are substantially modified by rebalancing are the proportion
of family-
controlled business, the proportion of non-permanent
employees, and the
proportion of firms with a trade union. By reducing mean
differences in
control variables between surveys, we render comparative
assessment more
plausible. At the same time, however, we respect theoretically
relevant dif-
ferences between surveys by permitting the HPWS measure to
vary and by
introducing the additional measure of policy response to the

39. recession in
the 2011 analysis.
In variant analyses, we run the 2011 data without the re-
balancing proce-
dure and obtain HRM/HPWS effects that are neither significant
nor readily
interpretable. To the extent that our analyses after carrying out
covariate
rebalancing yield a convincing story, the method’s value is
supported.10
Results
HRM/HPWS and Overall Attitudes in Small Firms, 2004
Table 4 shows the key results from regression analyses for
2004. In models
(1) and (3), referring respectively to IJS and OC, the coefficient
of HRM-
intensity is negative and significant (albeit only at the 10%
level in the case
of IJS). This finding appears to support those who have argued
that HRM is
ill-suited to small firms’ employment relationships.
Results from models (2) and (4), which introduce a nonlinear
functional
form, paint a different picture. Whereas the linear term is
negative in both
models, the quadratic is positive, and both are statistically
significant at the
1% level. The turning-point row indicates the value at which the
effect of
HRM intensity changes from negative to positive. For both IJS
and OC,

40. small firms can expect positive outcomes once they have three
HRM
domains substantially developed (approximately 40% of the
small firms had
reached this level of HRM development), with further
improvement as they
proceed toward a more complete HPWS. These results provide
strong evi-
dence in support of both H1 (a and b) and H2 (a and b).
Table 4 also reports the estimated effects of formality, family
control,
internal structural complexity (three or more managers), and age
of firm.
Somewhat unexpectedly, the level of formality is positively and
significantly
related to OC and is positive but nonsignificant in relation to
IJS. This out-
come is inconsistent with the results reported by Storey et al.
(2010), who
included no representation of HRM intensity. The other small-
firm charac-
teristics had little effect on the IJS and OC outcomes.
Estimates for the other control variables are not shown for
reasons of
space, but the full results are available on request.
10This technique is relatively simple to implement; however,
whether it is appropriate is something
analysts need to consider on a case-by-case basis.
764 ILR REVIEW

41. HRM/HPWS and Overall Attitudes in Small Firms, 2011
Table 5 shows the results for 2011, with weighting that achieves
covariate
balance to 2004. This table follows the same general pattern as
in Table 4,
except for the inclusion of an additional variable that represents
the use of
multiple cost-cutting policies by the firm in response to the
recession. This
variable is key to understanding the 2011 results. Employees in
the one-
third of small firms using multiple cost-cutting methods have,
other things
being equal, substantially lower levels of IJS and OC. With
respect to the
HPWS effect, for IJS the nonlinear model continues to perform
well, with
the linear term significant at the 10% level and the quadratic
term signifi-
cant at the 5% level; IJS begins to climb once a firm has
achieved, roughly
speaking, substantial implementation of more than two HRM
domains (by
2011 about two-thirds of small firms had reached this stage of
develop-
ment). In the case of OC, however, the nonlinear model fails
and a simple
Table 4. Robust Regression Estimates of HR Intensity on Small
Firm Employees’
IJS and OC, 2004
Mean IJS Mean OC
Model (1) Model (2) Model (3) Model (4)

42. HR intensity
HI –0.192 (0.109) –0.983 (0.334) –0.199 (0.096) –0.855 (0.265)
–1.77 + –2.94 ** –2.07 * –3.23**
HI2 0.156 (0.056) 0.130 (0.048)
2.77 ** 2.73**
Turning point 3.15 3.29
Smallness features
Formality 0.058 (0.069) 0.090 (0.072) 0.111 (0.057) 0.138
(0.059)
0.84 1.26 1.95 + 2.33 *
Family-owned –0.245 (0.248) –0.240 (0.244) –0.290 (0.213) –
0.288 (0.214)
–0.99 –0.98 –1.36 –1.35
3 + managers –0.070 (0.246) –0.104 (0.242) –0.345 (0.220) –
0.377 (0.218)
–0.28 –0.43 –1.57 –1.73 +
Firm age, in years
7–12 –0.186 (0.339) –0.022 (0.358) 0.093 (0.289) 0.225 (0.305)
–0.55 –0.06 0.32 0.74
13–20 –0.018 (0.416) 0.103 (0.413) –0.107 (0.349) –0.007
(0.344)
–0.04 0.25 –0.31 –0.02
21–31 0.294 (0.433) 0.438 (0.411) 0.353 (0.358) 0.470 (0.336)
0.68 1.06 0.99 1.40
. 31 –0.576 (0.404) –0.417 (0.400) –0.347 (0.296) –0.216

43. (0.303)
–1.42 –1.04 –1.17 –0.71
R-squared 0.174 0.208 0.286 0.312
Notes: Cells present coefficient estimates with standard errors
in parentheses and t-statistics in italics
below. HI is the index of high-scoring domains (range 0–5). All
above analyses have N = 276. Analyses
have additional controls for industry, proportion female
employees, proportions higher-level and
intermediate-level employees, proportion (banded) of non-
permanent employees, trade union
recognition, and no compulsory redundancy policy.
Significance: + significant at the 10% level; * significant at the
5% level; ** significant t at the 1%
level.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 765
linear model is adequate: Substantial development of any HRM
domain is
associated with higher OC.
To clarify what is taking place as a result of firms’ employment
response
to the recession, we also ran models separately for those firms
that had mul-
tiple cost-cutting policy responses to the recession and those
that had not
(i.e., the latter comprise firms with no cost-cutting response or
with only
one). The estimates are shown in Table 6. When multiple cost-
cutting

44. responses are absent (panel B), the effect of HPWS intensity is
similar to
2004 in the case of IJS, but disappears in the case of OC. When
multiple
cost-cutting responses are present (panel A), a simple linear
model with
positive coefficient is now supported for both IJS and OC,
whereas the non-
linear model is maintained in a much weakened form for only
IJS. Overall
then, it seems as if the recessionary pressures transmitted to
employees
Table 5. Robust Regression Estimates of HR Intensity on Small
Firm Employees’
IJS and OC, 2011
Mean IJS Mean OC
Model (1) Model (2) Model (3) Model (4)
HR intensity
HI 0.157 (0.113) –0.631 (0.328) 0.187 (0.090) –0.013 (0.276)
1.40 –1.92 + 2.09* –0.05
HI2 0.136 (0.056) 0.035 (0.048)
2.42* 0.72
Turning point 2.32 none
Recession policies
Multiple cuts –0.887 (0.280) –0.912 (0.278) –0.560 (0.256) –
0.566 (0.258)
–3.17** –3.28** –2.18* –2.20*
Smallness features

45. Formality –0.162 (0.064) –0.153 (0.062) –0.082 (0.050) –0.080
(0.050)
–2.53* –2.49* –1.62 –1.59
Family-owned –0.068 (0.253) –0.019 (0.247) –0.044 (0.209) –
0.031 (0.207)
–0.27 –0.08 –0.21 –0.15
3 + managers –0.181 (0.251) –0.258 (0.255) –0.026 (0.213) –
0.045 (0.211)
–0.72 –1.01 –0.12 –0.21
Firm age, in years
7–12 –0.852 (0.518) –0.863 (0.506) –0.940 (0.404) –0.943
(0.403)
–1.64 –1.71 + –2.33* –2.34*
13–20 –0.667 (0.368) –0.685 (0.358) –0.738 (0.278) –0.742
(0.278)
–1.81 + –1.92 + –2.65** –2.67**
21–31 –0.493 (0.388) –0.464 (0.372) –0.676 (0.305) –0.669
(0.302)
–1.27 –1.25 –2.22* –2.21*
. 31 –0.831 (0.403) –0.849 (0.395) 0.925 (0.334) –0.929 (0.334)
–2.06* –2.15* –2.77** –2.78**
R-squared 0.184 0.201 0.174 0.175
Notes: Cells present coefficient estimates with standard errors
in parentheses and t-statistics in italics
below. HI is the index of high-scoring domains (range 0–5). N
for these analyses is 336; the reduction
in N, compared with Table 1, is mainly attributable to missing

46. information concerning industry. For
other controls, see Table 4.
Significance: + significant at the 10% level; * significant at the
5% level; ** significant at the 1% level.
766 ILR REVIEW
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6
–2
.3
3*
–0
.7
7
–0
.0
4
H
I2
0.
24
4

57. (0
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01
)
0.
11
4
(0
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93
)
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12
9
(0
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)
–0
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58. )
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–0
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9
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rn
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59. o
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12
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m
al
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es
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at
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re
s
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60. it
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–0
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56
(0
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25
)
–0
.2
33
(0
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)
–0
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08
(0
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61. .1
97
(0
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09
)
–0
.0
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(0
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)
–0
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(0
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)
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6
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)
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03
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(0
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)
–2
.0
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63. –1
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)
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(0
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)
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–0
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6
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0.
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0.
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3

67. +
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an
ag
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s
–1
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35
(0
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)
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60
(0
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)
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)
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(0
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69. –0
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(0
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71. 7–
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36
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9
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87. n
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88. ar
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92. 5.
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93. si
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l.
through small-firm cost-cutting policies in the recession tended
to increase
the positivity of HRM/HPWS effects (the opposite result to the
Canadian
study of Zatzick and Iverson 2006). A possible interpretation is
that reces-
sionary policies erase the baseline motivational advantage of
small firms but
not the positive impact of HPWS. Note that some caution is
needed over
the magnitude of point estimates in models based on 111
observations, as
there is a risk of over-fitting.
Additional Tests of Robustness and Validity
We carried out several tests relating to aspects of model
robustness and
validity; to avoid the additional complication of rebalancing the
2011 data,
these tests were confined to 2004. Appendix Table A.2 shows
estimates,

95. comparable to those in Table 4, for which the definition of
small firm is
extended to 5 to 99 employees. The estimates change very little
with this
extension, suggesting that the methodology is robust to
moderate changes
in population definition.
We conducted variant analyses with the HPWS intensity
variable based on
domains that met a criterion of two or more practices adopted
(instead of
three or more). The results are similar to those shown in Table
4.
Confining attention to the linear-quadratic specifications, for
IJS the HI
effect is –1.16 with t-statistic of –2.86 and the HI-squared
effect was 0.168
with t-statistic of 2.64; both test statistics are significant at the
1% level. For
OC, the corresponding effects are –0.664 and 0.094, with t-
statistics of –1.95
and 1.74, both significant at the 10% level. These results
indicate that our
method of specifying the HPWS variable permits a degree of
flexibility in
the domain criterion, and this contributes to its constructive
validity. When
we shift the domain criterion in the other direction, to four or
more prac-
tices, all estimates for the linear and quadratic HPWS terms
become non-
significant. This result may be because relatively few small
firms achieved
the higher criterion.

96. We also ran an analysis with EJS as the dependent variable.
Here the
results for the linear HPWS term were b = 20.34, t = 21.22, and
for the
quadratic term b = 0.054, t = 1.21. (Full results are available on
request.)
This nonsignificant result indicates the discriminant validity of
IJS as against
EJS, hence supporting our notion that working in a small firm is
intrinsically
motivating.
Conclusions
The aim of this research has been to assess the effects of human
resource
management and the more systematic use of such practices in
High
Performance Work Systems on the intrinsic job satisfaction and
organiza-
tional commitment of small firms’ employees, both before and
after the
2008 recession in Britain. These attitudes represent dimensions
of employee
768 ILR REVIEW
motivation that previous research has demonstrated to have
substantial
implications for individual behavior and performance.
The analyses for 2004, when the British economy was buoyant,
provide
strong evidence that the effects of HRM are nonlinear (U-

97. shaped), with neg-
ative effects at low levels of HRM implementation but positive
effects once
more-intensive implementation has been reached. These
findings are con-
sistent with our depiction of small-firms’ employees as having
somewhat pos-
itive attitudes at a baseline where HRM is undeveloped, initially
reacting
negatively to the introduction of HRM, but then recovering
more positive
attitudes as a firm moves to a more developed HPWS that
fosters participa-
tion, team work, and skill development.
Results are somewhat more complex for 2011. Differences then
appeared
both between the effects on IJS and the effects on OC, and
between small
firms that had introduced multiple cost-cutting policies to
counter the
recession and those that had not. For the overall 2011 sample,
the U-shaped
relation between HRM/HPWS was maintained for IJS, but for
OC a simpler
linear or additive effect of HRM/HPWS now appeared best.
Further analysis
showed that the linear model applied for both IJS and OC in the
case of
the subsample of small firms that had introduced multiple cost-
cutting poli-
cies. When small firms responded to the recession through cost-
cutting
employment policies, the former negative effect of low-
intensity HRM on
motivation tended to be suppressed. This result was

98. accompanied by
strongly negative reactions toward the cost-cutting employment
policies
themselves. A parsimonious interpretation is that the cost-
cutting policies
severely constrained the autonomous working and time
freedoms normally
enjoyed by small-firm employees, and against that frame the
development
of HRM/HPWS practices appeared relatively benign to
employees.
The practical implications of these findings are challenging for
small
enterprise management. Much of our investigation accords with
criticisms
of HRM: attitudes are highly positive when HRM is absent. It
seems unrealis-
tic, however, to recommend staying in this never-never land. As
the enter-
prise grows, there is a normal, possibly inevitable, movement
toward more
complexity, leading management to seek a more systematized
approach.
Such a transition is certain to be difficult, and the early stages
of HRM/
HPWS implementation form part of this difficulty. The key for
the small
firm is to press on to a more-intensive and more-integrated form
of HPWS
that sends stronger signals of positive intent to employees.
Descriptive infor-
mation for 2011 indicates that this is the direction in which
many small
firms are moving. The 2011 results also suggest that in
turbulent competi-

99. tive conditions, that may well affect small firms for the
foreseeable future,
HRM/HPWS will be accepted more readily by their employees.
This out-
come, however, requires further confirmation; qualitative
research with
employees of small firms adopting HRM/HPWS would be of
particular
value.
HRM AND SMALL-FIRM EMPLOYEE MOTIVATION 769
Appendix
Table A.1. Items Used in Construction of HRM/HPWS Measures
Domain name Contents
Year 2004
Participation
KR20 = 0.78
Meeting time; briefing time; subjects discussed in meetings
(organization,
production, staffing, finance, planning, pay); consultative
committee set
up; attitude surveys used; changes made with employee
involvement
Team working
KR20 = 0.67
Proportion in teams; task rotation within teams; teams have
interdependence,

100. responsibility, autonomy; team chooses their leader; quality
circles used
Development
KR20 = 0.68
‘‘Investor in People’’ standard achieved; development included
in firm
strategy; proportion given off-job training; proportion given
cross-job training;
variety of training courses used; induction courses used; team
training;
training discussed in briefing groups; appraisal for non-
managers
Selection
KR20 = 0.52
Selection criteria: qualifications, skills, references, motivation,
experience;
use personality tests; use skill tests
Incentives
KR20 = 0.68
Bonus for individual, group/team, workplace, organization
performance;
profit-sharing for non-managers; merit-based or performance
pay;
appraisals that affect pay differentials; incentives that affect
pay
differentials
Year 2011
Participation
KR20 = 0.69

101. Regular meetings, frequency of meetings; meeting time for staff
comments/questions;
Briefing meetings; frequency of briefing meetings; briefing time
for staff comments/
questions; information about investment given by management;
financial
information given by management; staffing information given
by
management; consultative committee set up; attitude surveys
used
Team working
KR20 = 0.57
Proportion in teams; task rotation within teams; team training;
teams have
interdependence, specific responsibility, autonomy; quality
circles used
Development
KR20 = 0.60
‘‘Investor in People’’ standard achieved; induction training;
managers have
performance appraisal; all non-managers have performance
appraisal;
employee development forms part of strategy; proportion
getting workplace
training; proportion getting off-job training; proportion getting
cross-job training;
vacancies filled internally if possible; variety of training
Selection
KR20 = 0.62

102. Selection criteria: references, skills, qualifications; experience;
motivation;
personality tests for managerial jobs; personality tests for non-
managerial
jobs; skill tests for managerial jobs; skill tests for non-
managerial jobs
Incentives
KR20 = 0.81
Profit-related incentive for non-managers; managers have
payment by
results or merit pay; non-managers have payment by results or
merit pay;
some type of merit pay is applied; incentive pay on basis of
individual
performance, workplace performance, organizational
performance; pay
rises while doing same job based partly on skill increase, tasks
carried out,
performance
Notes: KR20 is the Kuder Richardson reliability measure for
dichotomous item scales. Italicized items
are quantitative banded variables reduced to dichotomies by
splitting at the median. ‘‘Investor in
People’’ is an externally awarded standard for people
development.
770 ILR REVIEW
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HR intensity
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(–2.96**)
HI2 0.151 (2.82**) — 0.113 (2.50*)
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= 351
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23
Review of Management,
Vol. 2, No. 3/4, December 2012, pp. 23-31
ISSN: 2231-0487

113. HR Planning and Corporate
Performance in the Nigerian Banking Sector
Michael P. Nnamseh
Department of Business Management, University of Uyo,
Nigeria
Abstract
This paper examines the impact of human resource planning
(HRP) on enterprise overall
performance. Its major objectives are to evaluate the importance
of human resource
planning in stimulating sustainable organisational success;
determining the extent to which
employee planning could influence productivity at enterprise
level and assess the
correlation between its benefits and the cost of achieving
effective human resource
planning. From a population of 25 registered commercial banks
in Nigeria, a simple random
sample of 400 respondents was selected for the study. The
major instruments for data
collection were the structured questionnaire and the interview
methods. Data were
analysed using the percentage analysis, Pearson moment
correlation and the t-test analysis.
Findings revealed a strong correlation between HRP and
increase in organisational
productivity, followed with the fact that the cost of human
resource planning is far minimal

114. than the benefits derivable from it. The study recommends,
among others, the need for
effective HRP which could result in competitive advantage in a
manner that competing firms
may not be able to imitate.
Keywords: HR Planning, Corporate Performance, Banking
Sector, Nigeria
Introduction
Planning is an essential process of management (Jerome, 2010).
Human Resource Planning
(HRP) provides the foundation for establishing an effective
human resource management
functions. It also allows the human resource management
functions to position itself to take
the best advantage of fluctuations in the economy or labour
market. The likely effects of
future economic, social and legislative conditions or
organisational changes can be
converted from constraints and pressure to challenges and
opportunities.
Lloyd and Rue (2004) defined human resource planning (HRP)
as the process of “getting the
right number of qualified people into the right job at the right
time”. It could also mean the
system of matching the supply of people-internally (existing
employees) and externally
(those to be hired or searched for) with the openings that
organisation expects to have over
a given time frame. The long-term success of any organisation
ultimately depends on having
the right people in the right job at the right time. Organisation
objectives and the strategies

115. Review of Management, Vol. 2, No. 3/4, December 2012
24
for achieving those objectives are meaningful only when people
with the appropriate skills,
talents, and desire are available to carry out those strategies.
The need for human resource planning (HRP) is due to
significant lead time that normally
exists between the recognition of the need to fill a job and the
securing of a qualified person
to feel that need. Thus, the success of HRP depends largely on
how closely the human
resource department can integrate effective people planning
with the organisation’s
business planning process. Unfortunately, however, HRP is
often inadequately tied to overall
corporate planning.
Although, HRP is seemingly a universally acceptable concept
for the sustainable success of
contemporary organizations’; there appear to be some doubt and
controversy on the role it
plays in the achievement of enterprise objectives. Scholars like
Ulrich (1997) and Truss
(2001) believe that with appropriate human resource planning
firms can achieve their goals;
hence they justify the huge investment on HRP. To the contrary,
Purcel (2003) and Vladimir
(2006) believe that given the enormous resources at firm’s

116. disposal, achieving enterprise
objective can be feasible without the rigours of human resource
planning. Given this
controversial opinions, the questions, therefore are, can the
investment made by firms on
HRP be justified in terms of organizational performance? Does
HRP make any positive
impact on corporate performance? This paper seeks to find
answers to these questions.
Objectives of the Study
This paper is modeled to achieve the following objectives:-
i. evaluate the importance of HRP in organisation;
ii. determine the relationship between HRP and organizational
productivity; and
iii. assess the relationship between the benefits derivable from
HRP are the cost of HRP.
Theoretical Framework
The belief that human resource is the most important resource
available to the organisation
and that HRP, if carried out properly, has implications on
corporate performance has been
prevalent among scholars and management practitioners for
many years (Almus, 2009).
Interest in this area has recently intensified as most scholars
favour the opinion that,
collectively, a firm’s human resource can provide a unique
source of competitive advantage
that will be difficult for competitors to replicate, if the human
resource is well planned for.
For example, Penrose (1995), Russell, Terborg and Powers
(1992), Stanger (2000) and Porter

117. and Lawler (2008) drawing on Barney’s (1991) resource-based
theory of the firm contend
that human resource can provide a source of sustained
competitive advantage when:
i. the human resource is properly planned for in terms of the
right number, right kind
of skills and the right mix that will be required now and in the
foreseeable future;
ii. the recruited human resource are trained and developed,
according to the training
needs and objectives of the organisation so as to be able to add,
maximally, to the
firm’s production processes because according to Porter and
Lawler (2008), levels of
individual performance must always matter; and
iii. the combined human capital investment in a firm’s human
resource represent
cannot be replicated.
Review of Management, Vol. 2, No. 3/4, December 2012
25
Russell’s, Terborg’s and Powers’ work, mentioned above, points
to the importance of human
resource in the creation of firm’s competitive advantage and
they argue that firms can
capitalize on this potential source of profitability if properly
planned for.

118. According to Bailey (1993), HRP influences corporate
performance through the planned
acquisition and development of firm’s human capital;
recruitment procedures that provides
a large pool of qualified applicants, paired with a reliable and
valid selection regimen; and
provision of formal and informal training experiences, such as
basic skills training, on-the-job
experience, coaching, mentoring and management development
which can further enhance
productivity.
Other authors like Gerhart and Milkovich (1992) and Snell and
Dean (1994), opine that the
effectiveness of even highly skilled employees will be limited if
they are not motivated to
perform and that HRP can affect employees motivation and
encourage them to work harder
and smarter. Examples of firm’s efforts to direct and motivate
employees’ behaviour, they
note, include the use of performance appraisals that assesses
individual or work group
performance, linking these appraisals tightly with incentive and
compensation systems, the
use of internal promotion system that focuses on employees
merit and other forms of
incentives to align the interest of the organisation with the
interest of the employees.
Thus, the theoretical literature above clearly shows that the
behaviour of employees within
an organisation has important implications for corporate
performance and that HRP can
affect, positively, individual employee performance through its
influence over employees’

119. acquisition, skills and motivation, and through the provision of
organizational structures that
allow employees to improve how their jobs are performed.
Conceptual Issues
Planning, according to Joseph (2006), is establishing where one
wants to go and how to get
there. Their view implies that without planning an organisation
would have nothing to
achieve, because organizational activities would not be goal-
directed. In the same vein, HRP
refers to the process which entails formulating targets or
objectives for an organisation and
outlining the strategies or means of achieving these objectives
with regards to human
resource (Tsui, 2003; Westman & Schuster 2007).
As one of the activities in the scope of human resource
management, Truss (2001) and
Vladimir (2006) consider HRP the most important activity as
according to them, HRP either
“houses” the other activities of human resource management or
serves as a link to them.
Peretomode and Peretomode (2001) opine that the importance of
HRP has brought about
increase emphasis on it as a result of expansion or contraction
of an organization;
technological changes (new technologies); death; retirement;
resignation; withdrawal of
service; termination and dismissal; changing economic
conditions (boom and depression);
changing work force (changing demographic); mobilization of
staff through transfer;
globalization and environmental uncertainty, internal and
external, to the organization; and

120. government policies.
HRP, when properly conducted, can provide a number of
benefits. The benefits, according to
Mathis and Jackson (1982), Klatt (1985) and Pritchard and
Jones (2006) are that:
Review of Management, Vol. 2, No. 3/4, December 2012
26
i. human resource can be deployed in support of basic strategic
objectives
of the organisation;
ii. management gains an improved understanding of human
resource activities and of
the influence of business strategies on the human resource of
the organisation;
iii. people may be planned for, and use more effectively and
efficiently in
the daily operations of the organisation;
iv. human resource may be continuously upgraded by the
implementation of the plan
for recruitment, termination, training, development, career
management and
reward for performance;
v. employees will be more satisfied with the quality of work
life;

121. vi. easier diagnosis and solution to problems involving human
resource will be possible
because planning essentially provides a model of the human
resource system;
vii. equal employment opportunity requirements may be
achieved because
objectives and actions are spelt out in plans;
viii. it enables management to anticipate the development of
plans for avoiding or
scorrecting problems before they become serious;
ix. it permits the forecasts of recruitment needs in terms of both
the number and types
of skill sought; and
x. it provides the identification of replacement or backups for
present key managers
from either inside or outside the organisation.
Pritchard and Jones (2006) further say that the above benefits
can be reaped fully if:
i. the organisation devices a personnel inventory of available
knowledge, skills abilities
and experience of present employees;
ii. the organisation have a forecast of both the internal and
external human resource
supply and demand;
iii. the organisation, on the basis of information from the
personnel inventory and
human resource demand and supply forecast, formulates various
action plans and

122. programmes in order to meet predicted staffing need; and
iv. monitoring and evaluation procedures of the programmes are
specified in order to
provide feedback on the adequacy of the HRP effort and its
contribution to
corporate performance.
Corporate Performance
The outcome of management processes, from strategic planning
to implementation of the
plan, underpins the measurement of corporate performance.
Thus, corporate performance
refers to the end result of management processes in relation to
corporate goals. Daft (1991)
defined corporate performance as the organization’s ability to
attain its goals by using
resources in an efficient and effective manner. There are
different perspectives on the
measurement of corporate performance in management literature
(Lenz, 1980 &
Venktrakaman, 1986). For example, Ventrakaman and
Ramanujam (1986) divide corporate
performance into operational and financial performances.
Operational performance
includes: (i) market share, (ii) product quality, and (iii)
marketing effectiveness. Financial
performance is broken down into two subcategories: (i) market-
based performance (e.g.,
stock price, dividend payout and earnings per share) and (ii)
accounting-based performance
(e.g., return on assets and return on equity). The concept of
corporate performance in
accounting literatures refers normally to financial aspects such
as profit, return on assets

123. (ROA) and economic value added (EVA), using the nick name
of ―the bottom line. Kaplan
Review of Management, Vol. 2, No. 3/4, December 2012
27
and Norton (1992) coined the extended measurement of
corporate performance as
balanced scorecard, where the core idea is to balance the
domination of financial and non-
financial aspects in corporate performance. Kaplan and Norton’s
extended corporate
performance is in line with the measurement of corporate
performance by Ventakraman
and Ramanujam (1986). Simons (1995) and Simons (2000)
define corporate performance
using an approach of market mechanism by which the company
actively interacts with the
financial, factor and customer product markets. In the financial
market, the corporate
performance strives to satisfy shareholders and creditors in the
form of financial indicators.
In the factor market, such as suppliers and other production
owners, the corporate ability to
pay in time and in agreed amount are important in evaluating
corporate performance.
From the perspective of customer product market, corporate
performance is evaluated by
parties in the market based on the ability of the corporation to
deliver value to customers

124. with affordable price which the net effect, in turn, will be
indicated in the corporate
revenue. The banking sector in Nigeria fits into this last group
as they operators constantly
seek to deliver value to customers using different marketing
strategies with the aim of
increasing corporate revenue while guaranteeing customers
satisfaction. Overall, Simons’
(1995) and Simons’ (2000) view of corporate performance
parallels the input-output view of
an organisation, suggesting that the existence of an organisation
is due to mere
contributions by stockholders (most importantly employees)
with the hope of return for
each party through market mechanism (Donaldson, 1995).
Methodology
A study of this nature present a number of data collection
challenges. It requires as broad a
sample as possible and at the same time requires each data point
provide comprehensive
information on both the organizational HRP system and firm-
level performance. Thus, the
entire staff of the 25 commercial banks in Nigeria formed the
population for this study. In
drawing the sample from the case study, a simple random
sampling method was employ to
eliminate bias and priority was given to the senior and middle
level staff. In all, a total of 400
randomly selected respondents participated in the study. The
choice of the banking sector
was due to the leading role it plays in the Nigerian economy.
The instruments for data collection were structured
questionnaire and interview method.
The study relied on both qualitative and quantitative analysis of

125. data in establishing the
relationship between the different variables involved in the
study.
Based on the objectives of this study, 3 hypotheses were tested
thus:
H0.1: HRP is not important in organisation;
H0.2: There is no significant relationship between HRP and
organisational productivity; and
H0.3: The benefits derivable from HRP are not commensurate
with the cost of HRP.
Data gathered from the questionnaire were analysed using the
percentage analysis, Pearson
moment correlation analysis and the t-test analysis.
Review of Management, Vol. 2, No. 3/4, December 2012
28
Sample Profile
Table 1: Distribution of respondents according to banks and rate
of return of administered
questionnaire

126. Banks
Copies of
questionnaire
administered
Copies of
questionnaire
returned
Percentage
returned
Afribank
*
60 54 13.5
Diamond Bank 40 38 9.5
First Bank
*
60 50 12.5
Finland Bank 40 35 8.8
Intercontinental Bank 40 37 9.3
Oceanic Bank 40 34 8.5
UBA
*
60 53 13.3
Union Bank
*

127. 60 56 14.0
Total 400 357 89.4
Source: Field survey, 2010
*
Old generation banks
Data for this analysis was collected from 8 commercial banks by
administering 400 copies of
questionnaire out of which 357 representing 89.4% were
completed and returned in useable
form.
Table 2: Distribution of respondents according to rank
Rank Number of respondents Percentage
Top level management 33 9.2
Middle level management 214 60.0
Supervisor 84 23.5
Others 26 7.3
Total 357 100
Source: Field survey, 2010
Table 2 shows that out of 357 respondents that participated in
the research, 33 (9.2%)
belong to top level management, 214 (60%) belong to middle
level management. Supervisors
were 84 or 23.5% and others were 26 or 7.3%.
Results
Results of the test of hypotheses are as presented in Tables 3, 4
and 5

128. Table 3: Responses to the importance of HRP in organisation
Responses Number of respondents Percentage
Strongly Agree 96 26.9
Agree 257 72.0
Undecided 4 1.1
Disagree 0 0
Strongly Disagree 0 0
Total 357 100
Source: Field survey, 2010
Review of Management, Vol. 2, No. 3/4, December 2012
29
Table 4: Testing the relationship between HRP and
organisational productivity
Source: Field survey, 2010
Table 5: Testing the relationship between cost and benefits of
HRP
Source: Field survey, 2010
Discussion of Results
Considering the result in Table 3, H0.1 is rejected as 26.9% and

129. 70% strongly agreed and
agreed respectively that HRP is important in an organisation.
The null hypothesis in the case of HRP and organizational
productivity, H0.2 is rejected as the
correlation coefficient (r) is 0.89 according to the result of the
Pearson moment correlation
test. From Table 4, it can be seen that the t-cal value (279.48) is
greater than the t-tab
values (1.96 and 1.64) at 5% and 10% levels of significance
respectively. This implies that
there is significant relationship between HRP and organizational
productivity.
In the case of cost and benefit of HRP, the null hypothesis, H0.3
is rejected as the correlation
coefficient (r) is 0.76 and further data analysis using the t-test
gives a t-cal value of 110.14
which is greater than the t-tab values of 1.96 and 1.64 at 5% and
10% levels of significance
respectively. Thus, it can be said that the benefits derivable
from HRP is commensurate with
cost of HRP in the Nigerian banking sector.
The significant relationships shown by this study support the
earlier theoretical notions and
are consistent with institutional theory and the resource-based
view of the firm (Barney,
1991; Wright, McMahan & McWilliams 1994). HRP is found to
show a positive impact on
corporate performance.
Conclusion
The main function of HRP is to ensure that organizations’
determine their human capital

130. requirement, obtain and retain same, and employ them
productively. To do this,
organizations’ make colossal investment in HRP. Therefore, this
study was designed to
determine the effect of HRP on corporate performance by
looking at its importance in
organization, its relationship with organizational productivity
and also examine if the benefits
derivable from HRP is commensurate with the cost of HRP.
Based on the findings of the study, it is concluded that HRP is
important in the organization,
that there exist significant relationship between HRP and
organizational productivity and that
the benefit derivable from HRP is commensurate with the cost
of HRP. The managerial
Variables α r t-cal t-tab
HRP and organizational productivity 0.01
0.05
0.89 279.48 1.64
1.96
Variables α R t-cal t-tab
Benefits and cost HRP 0.01
0.05
0.76 110.14 1.64
1.96
Review of Management, Vol. 2, No. 3/4, December 2012

131. 30
implication is that HRP, if properly carried out, can provide the
organization with a unique
source of competitive advantage that will be difficult for
competitors to replicate.
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