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High-Performance Work Systems and Organizational Performance: The Mediating Role of Internal
Social Structure
W. Randy Evans and Walter D. Davis
Journal of Management 2005; 31; 758
DOI: 10.1177/0149206305279370

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Evans, Davis
ARTICLE
10.1177/0149206305279370
Journal of Management
/ Organizational
/ October
Performance
2005

High-Performance Work Systems and


Organizational Performance: The Mediating
Role of Internal Social Structure†
W. Randy Evans *
Walter D. Davis
School of Business Administration, the University of Mississippi, P.O. Box 1848, University, MS 38677-1848

This study provides a theoretical framework illustrating how the internal social structure of the or-
ganization can mediate the relationship between high-performance work systems (HPWS) and
organizational performance. HPWS positively influence the internal social structure by facilitat-
ing bridging network ties, generalized norms of reciprocity, shared mental models, role making,
and organizational citizenship behavior. Although HPWS are conceptualized as a system of
human resource (HR) practices, each category of HR practices has a differential relationship with
the mediating variables. HPWS lead to (a) financial performance via administrative efficiency
and (b) sustainable performance via flexibility arising from the coordination and exploitation of
knowledge resources.

Keywords: strategic human resource management; social networks; multilevel theory; firm
performance

There is growing empirical evidence that high-performance work systems (HPWS) can
have a significant impact on organizational performance. HPWS have been found to favorably
affect turnover (Guthrie, 2001; Huselid, 1995), labor productivity (Huselid, 1995), firm pro-
ductivity (Guthrie, 2001), and firm financial performance (Guthrie, 2001; Huselid, 1995).

†The authors would like to thank Lucy Gilson, the editor, and the anonymous reviewers for their helpful comments.
*Corresponding author. Tel: 662-281-1229; fax: 662-915-7968.
E-mail address: revans@bus.olemiss.edu
Journal of Management, Vol. 31 No. 5, October 2005 758-775
DOI: 10.1177/0149206305279370
© 2005 Southern Management Association. All rights reserved.
758

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Evans, Davis / Organizational Performance 759

Given these findings, HPWS are now seen as a potential source of competitive advantage
(Becker & Huselid, 1998). However, several researchers have noted a need to develop a better
theoretical understanding of the causal mechanisms explaining this relationship (Bowen &
Ostroff, 2004; Delery & Shaw, 2001).
Various arguments have been developed to explain the relationship between HPWS and
organizational performance. For instance, Pfeffer (1998) argued that HPWS reduce adminis-
trative expenses by empowering employees further down in the hierarchy, thus eliminating
levels of management. Strategic perspectives argue that an organization’s employees (i.e.,
human capital) can be a source of competitive advantage (Delery & Shaw, 2001; Huselid,
1995) when they add value to the organization, are difficult to imitate, uniquely contribute to
the organization’s success, and are not easily substituted. In this view, continual investments in
firm-specific human capital qualitatively differentiate a firm’s employees, thereby decreasing
the likelihood of imitation (Huselid, 1995). Despite these theoretical advancements, there
remains a need to better understand the process by which HPWS lead to desired outcomes—in
other words, the “how” of HPWS (Bowen & Ostroff, 2004). Furthermore, some scholars have
noted a surprising lack of attention to the impact of human resource (HR) systems on inter-
personal relationships within the firm (Delery & Shaw, 2001; Wright, Dunford, & Snell,
2001).
Recent attention to social relationships as an organizational resource (Collins & Clark,
2003; Hansen, 1999; Nahapiet & Ghoshal, 1998; Uhl-Bien, Graen, & Scandura, 2000) points
to the structure and quality of employee relationships as a potential mediator of the relation-
ship between HPWS and organizational outcomes. Employee social relationships have been
argued to add value to the organization by facilitating timely access to greater sources of infor-
mation (Collins & Clark, 2003), reducing the need for formal controls (Adler & Kwon, 2002),
facilitating collective action (Ghoshal & Moran, 1996), allowing more flexible work organiza-
tions (Leana & Van Buren, 1999), and enhancing organizational intellectual capital (Nahapiet
& Ghoshal, 1998). Overall, these benefits point to the aggregate internal social structure as a
contributor to organizational effectiveness. Building from these perspectives, we develop a
framework illustrating the positive influence of HPWS on social relationships and how these
relationships lead to improved organizational performance.

High-Performance Work Systems

Organizations using HPWS make a significant investment in their pool of human capital so
that employees are well trained, skilled, and empowered to conduct their jobs (Becker &
Huselid, 1998). Current perspectives on HPWS are closely aligned with research on high-
involvement work practices and high-performance management practices. In fact, researchers
frequently note that various naming preferences are often used interchangeably and refer to
the same phenomena of interest (i.e., a system of HR practices rather than isolated practices)
(Delery & Shaw, 2001; Guthrie, 2001). We define HPWS as an integrated system of HR prac-
tices that are internally consistent (alignment among HR practices) and externally consistent
(alignment with organizational strategy) that include selective staffing, self-managed teams,
decentralized decision making, extensive training, flexible job assignments, open communi-

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760 Journal of Management / October 2005

Table 1
Categories of Human Resource Practices Comprising HPWS
HR Practice
Category Description Examples

Staffing Extensiveness of procedures Selective screening


to evaluate relevant knowledge, Assessment of technical and interpersonal skills,
skills, and abilities for job fit attitudes, and/or personality
and organization fit Performance-based promotions

Self-managed Redistribution of power down- Employee participation programs


teamsa ward by granting authority and Teams with task and decision-making authority
responsibility to team structures Extensive use of teams throughout the organization

Decentralized Empowering employees via Less well defined tasks


decision making greater responsibility and access Authority to make decisions
to resources Employee involvement
Participative management

Training Extensiveness of formalized Training for current and future skills; including
programs to develop knowledge, technical and interpersonal
skills, and abilities Cross training
Training for both new hires and experienced employees

Flexible work Opportunities to broaden indi- Job rotation; rotation across teams
assignments vidual knowledge, skills, and Ability to perform +1 job
abilities Job enrichment

Communication Open vertical and horizontal Access to all levels of operating results
communication channels pro- Employee suggestion systems
viding access to information Explanation of business strategy
and opportunities to express
viewpoints

Compensation Performance-contingent pay, Profit/gain sharing


group-based pay, and above- Employee ownership
market pay policies Comparatively high level of pay
Performance-contingent pay
Team-based pay

Note: HPWS = high-performance work systems.


a. We use the term self-managed teams to broadly encompass all types of teams having increased responsibility and
autonomy, recognizing that there may be varied degrees of self-management.

cation, and performance-contingent compensation (Becker & Huselid, 1998; Guthrie, 2001;
Pfeffer, 1998). These practices (see Table 1) represent the general categories of HR practices
commonly found in most HPWS research. These practices are interdependent, such that the
inclusion of one practice often necessitates the inclusion of others (Becker & Huselid, 1998;
Pfeffer, 1998; Zacharatos, Barling, & Iverson, 2005).
Although the precise configuration of HPWS practices may vary based on organizational
idiosyncrasies, most theoretical treatments of HPWS focus on the aggregate level or degree of
investment in HR practices, which is often operationalized by an additive system index of
practices (Becker & Huselid, 1998; Delery & Shaw, 2001). We believe, however, that the

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Evans, Davis / Organizational Performance 761

Figure 1
Expanded Framework of HPWS and Organizational Performance

High Performance Internal Organizational


Work Systems Social Structure Performance

Staffing Bridging weak ties Organizational financial

Self-managed teams Generalized norms of efficiency

Decentralization reciprocity Organizational flexibility

Training Shared mental models

Flexible work assignments Role making

Communication Organizational citizenship

Compensation behavior

Note: HPWS = high-performance work systems.

effects of HPWS are likely to operate through processes that occur at individual, dyadic, and/
or group levels as well.
Figure 1 illustrates the HPWS framework we propose. In essence, the internal social struc-
ture mediates the relationship between HPWS and organizational performance. The internal
social structure can be characterized in terms of the nature of relationships (bridging weak
ties, norms of reciprocity, and shared mental models) and in terms of the behaviors that are
associated with those relationships (role-making and organizational citizenship behaviors).
Consistent with existing perspectives on HPWS, we argue that it is the system of HR practices
that influences organizational performance. However, each type of HR practice may have a
differential impact on the nature of employee relationships. We break down the system of HR
practices and more closely examine the influence of each HR practice on the internal social
structure and ultimately organizational performance. In the interest of parsimony, we focus on
the primary but not exclusive relationships between each of the constructs.

Organizational Performance

Although HPWS are empirically linked to firm-level financial outcomes (e.g., Guthrie,
2001; Huselid, 1995), a richer understanding of HPWS can be developed via a theoretical
linkage to proximal outcomes arising from the aggregate internal social structure of the orga-
nization. Therefore, we seek to link HPWS practices to organizational efficiency and organi-
zational flexibility.

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762 Journal of Management / October 2005

Efficiency ultimately leads to better financial performance, whereas flexibility affords the
opportunity for sustained competitive advantage. Improved organizational efficiency is
achieved through the reduction of administrative overhead costs. A highly skilled workforce
with the responsibility and authority to make decisions reduces the need for managerial posi-
tions that “watch people who watch people who watch people who watch people who do the
work” (Pfeffer, 1998: 61). In addition, employee social networks may increase access to
timely information while also reducing monitoring costs (Adler & Kwon, 2002).
The ability to maintain a competitive advantage may be better described in terms of organi-
zational agility (Dyer & Shafer, 1999), flexibility (Sanchez, 1995), and the coordination and
exploitation of knowledge resources (Wright et al., 2001). Flexible organizations are able to
reconfigure their resources in response to environmental changes (e.g., markets, competitors,
etc.). Resources may consist of financial and physical capital, but we consider organizational
flexibility primarily in terms of effective knowledge management. Indeed, sustainable finan-
cial performance may depend on the ability to acquire and transfer the knowledge needed by
the organization to reconfigure itself and adapt to environmental changes (Teece, Pisano, &
Shuen, 1997; Wright et al., 2001). Tacit knowledge is especially difficult for competitors to
imitate and thereby a valuable resource. Here, organizational flexibility is conceptualized in
two forms: resource flexibility and coordination flexibility (Sanchez, 1995). Resource flexibil-
ity results from a greater range of alternative uses, less cost in switching a resource from one
use to another, and less time required to switch to alternative resource uses. Coordination
flexibility refers to the ability to synthesize, configure, and redeploy resources.

Integrating HPWS, Internal Social Structure,


and Organizational Performance

Our perspective for investigating HPWS and organizational outcomes is based on the
assumption that HPWS fundamentally change the internal social structure of the organization.
HPWS practices not only enhance the knowledge, skills, and abilities (KSAs) of the human
capital pool but also change the nature of employee relationships. On the basis of this perspec-
tive, we can look to theories that address questions such as Which patterns of relationships are
conducive to organizational performance? What facilitates productive exchange relation-
ships? How do management practices create a shared understanding and shared mental mod-
els among employees? What individual behaviors are necessary for the formation of these
relationships? We integrate theory regarding social networks (Burt, 1997; Granovetter, 1973),
exchange relationships (Blau, 1964; Sparrowe & Liden, 1997), shared mental models (Can-
non-Bowers & Salas, 2001; Mathieu, Goodwin, Heffner, Salas, & Cannon-Bowers, 2000),
role making (Katz & Kahn, 1978; Uhl-Bien et al., 2000), and organizational citizenship
behavior (Organ, 1997) to provide answers to these questions.
Table 2 outlines the proposed relationships among HPWS practices, the internal social
structure of the organization, and organizational performance (efficiency and flexibility).
Each cell within the table represents a proposition that the indicated social structure variable
mediates the relationship between the indicated HPWS practice and organizational perfor-
mance. In the sections that follow, we define each of the social structure variables and explain
their mediating functions in detail.

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Evans, Davis / Organizational Performance 763

Table 2
Relationship Between Practices of HPWS, the Internal Social
Structure, and Organizational Performance Outcomesa
Internal Social Structure Variables

Generalized Shared Organizational


Practices Bridging Norms of Mental Role Citizenship
of HPWS Weak Ties Reciprocity Models Making Behavior

Staffing Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility

Self-managed teams Efficiency Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility Flexibility

Decentralized decision making Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility

Training Efficiency Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility Flexibility

Flexible job assignments Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility

Open communication Efficiency


Flexibility

Compensation Efficiency Efficiency Efficiency


Flexibility Flexibility Flexibility

Note: HPWS = high-performance work systems.


a. The internal social structure variables are proposed to mediate the relationship between the practices of HPWS and
organizational performance outcomes (efficiency and flexibility).

Bridging Weak Ties

Social network analysis (Burt, 1997; Granovetter, 1973) provides a mechanism for under-
standing how the pattern of relationships within an organization affects individual and organi-
zational outcomes. Granovetter (1973) characterized interpersonal relationships as “ties” and
described the distinction between “strong ties” and “weak ties.” The strength of a tie is a func-
tion of the time, emotional intensity, intimacy, and reciprocation of services invested in the
relationship. A strong tie between two individuals is often characterized by largely, or even
completely, overlapping networks. On the other hand, individuals with a weak-tie relationship
may each have independent social networks that are largely, or completely, nonoverlapping.
Thus, a “bridging weak tie” is a connection between two relatively independent social
networks (Granovetter, 1973).
A striking conclusion of social network theory is that weak ties with distant contacts often
facilitate information and resource exchange (Granovetter, 1973; Sparrowe & Liden, 1997).
Although more developed strong ties may be characterized by greater affect and intimacy,

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764 Journal of Management / October 2005

they may also characterize closed, isolated networks with redundant contacts. A closed net-
work may have quality exchange relationships, but the network itself may not facilitate the
acquisition of novel knowledge or other resources. Weak ties facilitate the search for informa-
tion and resources (Hansen, 1999) and the diffusion of information and innovation between
groups (Granovetter, 1973). This flow of information between groups within an organization
facilitates cohesion within the organization as a whole (Granovetter, 1973). Furthermore,
weakly tied groups may be more flexible and adaptive because they are not constrained by the
obligations and normative constraints associated with strong ties (Hansen, 1999).
HPWS facilitate the development of bridging ties primarily through the use of flexible
work and self-managed teams. Flexible work involves the relatively frequent rotation of indi-
viduals to job assignments that require different skill sets and different relationships (Way,
2002). Self-managed teams empower employees to make decisions traditionally reserved for
supervisors (Manz & Sims, 1987). Self-managed teams and flexible work provide a less con-
straining environment that creates opportunities for individuals and groups to build networks
of bridging weak ties beyond one’s immediate social unit. Self-managed teams often require
members to seek ties with others possessing needed information resources (Hansen, 1999;
Nonaka, 1994). For instance, teams with work and production scheduling authority may need
to establish ties with those individuals who have information regarding customer orders,
demand forecasts, inventory data, and quality assurance data to effectively manage their own
work processes. Relatively short-term project teams, such as those often found in new product
development settings, may also lead to the development of what later become bridging weak
ties when individuals move on to different project teams. In settings where self-managed
teams are difficult or impossible to implement, job rotation may serve the same function.
The bridging ties that result from self-managed teams and flexible job assignments are
likely to improve organizational efficiency. Bridging ties become conduits for the flow and
exchange of information (Nahapiet & Ghoshal, 1998; Nonaka, 1994), replacing traditional
supervisor functions. Self-managed teams are predicated on self-regulation that minimizes or
replaces traditional hierarchical control, enabling organizations to eliminate layers of man-
agement (Pfeffer, 1998). Bridging ties facilitate the flow of information among interdepen-
dent persons and departments and reduce the more costly and slower information flows up and
down traditional vertical hierarchies (Galbrith, 1973). Increased access to information result-
ing from bridging ties may at least partially explain why self-managed teams frequently result
in increased productivity and reduced product and service defects (Cohen & Bailey, 1997).
Increased productivity, fewer defects, and reduced managerial expenses lead directly to
greater organizational efficiency and improved financial performance.
Bridging ties should also facilitate greater organizational flexibility. Whereas specializa-
tion and departmentalization can result in isolated knowledge silos (Grant, 1996), social net-
works with a broad range of interunit ties may result in access to novel knowledge sources.
Bridging ties thus serve as a conduit for information exchange. Such networks of bridging ties
allow knowledge to be exploited by different individuals or groups within the organization.
This should facilitate (a) the identification of threats or opportunities stimulating change and
(b) access to information actually needed to make changes. In some firms, the benefits of
bridging ties have been manifested in increased product innovations (Hansen, 1999; Tsai &
Ghoshal, 1998), enabling such firms to more effectively adapt to market changes.

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Evans, Davis / Organizational Performance 765

Generalized Norms of Reciprocity

In organizational settings that are increasingly characterized by interdependence, the qual-


ity of interpersonal exchange relationships takes on greater importance (Uhl-Bien et al.,
2000). Social exchange theory (Blau, 1964) provides a framework for understanding relation-
ship quality at both individual and organizational levels. Exchange relationships can be char-
acterized along a continuum of reciprocity (Sahlins, 1972; Sparrowe & Liden, 1997). This
“norm of reciprocity” continuum ranges from negative to balanced to generalized. These
forms of reciprocity can be described in terms of the extent to which the parties are concerned
with equivalence of exchange, immediacy of reciprocation, and focus of interest (self vs.
mutual). High-quality relationships are characterized by generalized norms of reciprocity.
Concern for equivalence of exchange is low, such that exchanges go beyond formally speci-
fied or contractual obligations. Concern for immediacy of reciprocation is also low, such that
individuals are willing to wait for exchange obligations to be met. Finally, individuals within
teams and the organization as a whole share mutual interests and enter exchange relationships
aware of those mutual interests.
HPWS use several practices that facilitate generalized norms of reciprocity. First, HPWS
use selective staffing techniques to identify applicants who are uniquely compatible to the
organization (Huselid, 1995; Pfeffer, 1998). Selective staffing systems often screen applicants
on job-related contextual criteria such as personality and interpersonal skills that affect an
individual’s capacity to socially integrate and develop quality relationships (Judge, Bono,
Ilies, & Gerhart, 2002; Treadway et al., 2004). Selection for relationship potential increases the
likelihood that individuals will join networks of relationships based on mutual interests and low
concern for equivalence of exchange and immediacy of reciprocation (Uhl-Bien et al., 2000).
Following organizational entry, training in both technical and interpersonal skills can lead
to more competent and reliable behavior (Lawler, 1992; Pfeffer, 1998), leading to greater trust
as well (Lewicki & Bunker, 1996; Uhl-Bien et al., 2000). Trust is based on the expectation that
others will behave in a helpful manner (Gambetta, 1988) and that such behavior is reliable and
predictable (Lewicki & Bunker, 1996). Reliable and predictable behavior is a function of indi-
vidual competence (i.e., KSAs) to perform job duties. Therefore, training that leads to greater
individual competence should also lead to greater trust that individuals will perform reliably.
This trust should reduce concerns over equivalence and immediacy of exchanges, resulting in
generalized norms of reciprocity.
Compensation practices will also affect exchange relationships, potentially enhancing gen-
eralized norms of reciprocity. HPWS companies commonly pay above-market wages (Pfeffer,
1998), which can result in greater commitment to the organization (Levine, 1993) and a felt
obligation toward the collective organization (Rhoades & Eisenberger, 2002). Furthermore,
linking pay to cooperative group-oriented behavior encourages individuals to develop positive
relationships (Podsakoff, MacKenzie, Paine, & Bachrach, 2000). For instance, team perfor-
mance–based rewards, such as gain sharing or bonuses for new product developments, will
lead to less self-interest and greater mutual interest (Pfeffer, 1998; Schuster, 1984), resulting
in more generalized norms of reciprocity.
Generalized norms of reciprocity lead to greater efficiency by reducing monitoring costs.
Generalized norms are in essence a form of social control (e.g., Ouchi, 1980) that regulates

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766 Journal of Management / October 2005

exchange relationships. Relationships characterized by generalized norms and trust produce a


greater willingness to participate in social exchange and cooperative behaviors (Gambetta,
1988; Tsai & Ghoshal, 1998) and a greater frequency of cooperative interactions (Lewicki &
Bunker, 1996). Also, these norms are a type of “goodwill” that results in a sense of solidarity
among employees (Adler & Kwon, 2002). This climate of cooperative interdependence
among employees can reduce unproductive behaviors and interpersonal conflict (Tjosvold &
Johnson, 2000). Thus, if bridging weak ties provide the conduit for information exchange as
we have argued, generalized norms of reciprocity help ease the flow of information and other
resources. From an efficiency standpoint, there is less need for monitoring and control as (a)
employees are less likely to engage in purely self-enhancing behaviors at the expense of others
or the organization, and (b) managers devote less time and resources to resolving conflicts.
The cooperative interaction characterizing generalized norms of reciprocity also has impli-
cations for organizational flexibility. The ability to transfer knowledge diminishes as its com-
plexity increases (Hansen, 1999) and repeated interactions are required (Nonaka, 1994). The
most daunting aspect of resource coordination involves instilling cooperation among individ-
uals who may have divergent interests (Grant, 1996), especially in instances where the knowl-
edge to be transferred is more tacit. For instance, an organization seeking to develop a sophis-
ticated customer relationship management system would likely draw on its experts in
information technology and its experts in customer relations. If the information technology
experts and the customer relations experts do not integrate their respective knowledge bases,
the chances for developing a customer relationship management system are quite dubious.
Arduous relationships, with difficult and laborious interactions, are a significant impediment
to transferring knowledge (Szulanski, 1996). However, generalized norms of reciprocity
involve open-ended exchanges with less concern about immediate self-interest. It is thus
expected that generalized norms should result in less arduous interactions, thereby enhancing
the willingness of individuals to coordinate knowledge or other resources.

Shared Mental Models

Shared mental models (SMMs) involve overlapping, similar, compatible, or distributed


knowledge regarding tasks, teammates, and attitudes/beliefs that is used to coordinate behav-
ior (Cannon-Bowers & Salas, 2001). Individuals with SMMs have similar perceptions of the
environment and compatible performance expectations that lead to more effective teamwork
(Cannon-Bowers & Salas, 2001; Mathieu et al., 2000). SMMs create a strong situation
(Bowen & Ostroff, 2004) that exhibits a relatively powerful influence over individual
behavior (Mischel, 1997).
HPWS instill SMMs by creating a strong organizational climate (Bowen & Ostroff, 2004).
HR practices are a means for management to communicate messages to employees. HR prac-
tices that are distinctive, consistent, and create a consensus of employee perceptions result in a
strong organizational climate in which employees have “a shared perception of what the orga-
nization is like in terms of practices, policies, procedures, routines, and rewards—what is
important and what behaviors are expected and rewarded” (Bowen & Ostroff, 2004: 205).
HPWS use an extensive number of congruent practices (Becker & Huselid, 1998; Huselid,

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Evans, Davis / Organizational Performance 767

1995), leading to an HR system that is a distinctive and salient component of the organization
(Bowen & Ostroff, 2004). We argue that extensive staffing, training, self-managed teams,
decentralization, open communication, and performance-contingent compensation are each
likely to result in SMMs.
Extensive staffing procedures that include person-organization fit as a selection criterion
can lead to SMMs. For instance, Rentsch and Klimoski (2001) found that allowing individuals
to participate in the selection process by choosing their own team members is positively
related to SMMs. Beyond selection, providing extensive training that focuses on employee
expectations and KSAs necessary to function effectively results in greater fit and adjustment
to the prevailing organizational climate (Cable & Parsons, 2001). Self-managed teams tend to
develop productivity norms (Chatman & Flynn, 2001) and mutual beliefs of group potency
(Lester, Meglino, & Korsgaard, 2002). Self-managed teams also facilitate greater participa-
tion that results in increased perceptions of fairness (Konovsky, 2000). Participative decision
making (i.e., decentralization) appears likely to facilitate the development of overlapping
knowledge that is characteristic of SMMs. Active participation ensures that information is
openly exchanged and evaluated collectively among employees. Participation programs pro-
viding “voice” also increase perceptions of fairness (Konovsky, 2000), leading to greater
consensus.
Employees in HPWS companies often openly communicate and share information about
business strategy, performance, and goals (Lawler, 1992; Pfeffer, 1998), a practice that is
likely to increase the perceived relevance of the HR system (Bowen & Ostroff, 2004). For
example, open book management provides access to company financial information so that
employees understand how their own goals align with organizational goals (Aggarwal &
Simkins, 2001). Finally, performance-contingent compensation practices (e.g., profit sharing,
gain sharing, and performance incentives) represent a distinctive and highly visible message
regarding desired behavior (Schuster, 1984). Gain-sharing plans and management by objec-
tives align individual goals with organizational goals (Rodgers & Hunter, 1991; Schuster,
1984). Furthermore, objective performance standards increase perceptions of fairness
(Konovsky, 2000) that lead to greater consensus among organizational members (Bowen &
Ostroff, 2004).
SMMs are likely to favorably affect organizational efficiency. By creating an overlapping
knowledge structure among employees about expected and rewarded behaviors, SMMs func-
tion as another form of social control similar to Ouchi’s (1980) perspective of clan control. In
dynamic, uncertain, and interdependent environments, which are now commonplace, tradi-
tional bureaucratic controls are inefficient. However, when employees have congruent goal
perceptions (i.e., SMMs), there is an increased likelihood of cooperative interaction (Ghoshal
& Moran, 1996; Ouchi, 1980). SMMs lead to greater cooperation and communication among
team members (Mathieu et al., 2000) and similar beliefs about team performance goals
(Chatman & Flynn, 2001). In such instances, the need for formalized controls is reduced due
to less self-interested opportunistic behaviors (Adler & Kwon, 2002; Ghoshal & Moran,
1996), which in turn lowers organizational transaction costs. SMMs may therefore greatly
reduce administrative overhead and improve organizational efficiency.
SMMs are also likely to enhance organizational flexibility by increasing absorptive
capacity, the ability to recognize the value of new information, assimilate it, and then apply the

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768 Journal of Management / October 2005

information for organizational gain (Cohen & Levinthal, 1990). Absorption is more success-
ful when new information is expressed in a common language relating to a preexisting knowl-
edge base (Cohen & Levinthal, 1990; Grant, 1996). Overlapping or similar knowledge
enables individuals to draw on their compatible knowledge bases to interpret and respond to
information (Cannon-Bowers & Salas, 2001; King & Zeithaml, 2001). Absorptive capacity
facilitates both resource flexibility (i.e., less time to switch to alternative uses) and coordina-
tion flexibility (i.e., ability to reconfigure resources). Employees who understand the cause-
and-effect relationships embedded within critical knowledge resources are better able to syn-
thesize resources in response to environmental changes (King & Zeithaml, 2001). Therefore,
SMMs that provide a consensus understanding of the linkages among critical knowledge
resources should facilitate the ability of the organization to reconfigure, redeploy, and align
resources with market opportunities.

Role Making

Roles are those activities that individuals define as comprising their work responsibilities
(Katz & Kahn, 1978). Role making is the process by which an individual actively negotiates
his or her role definition with a set of role senders (Graen & Scandura, 1987; Katz & Kahn,
1978). Role senders are those individuals who communicate expectations regarding a focal
individual’s responsibilities. In traditional organizations, the primary role sender who com-
municates job expectations is the supervisor. These expectations tend to be fairly static, for-
malized by written job descriptions, and exist independently of the job incumbent (Murphy &
Jackson, 1999). However, as role expansion, ambiguity, conflict, and flexibility become inher-
ent to today’s changing organizations (Murphy & Jackson, 1999), many individuals must nec-
essarily engage in role making to establish their role in each relationship and in the overall or-
ganization (Uhl-Bien et al., 2000). Successful role making is initiated when one party offers to
go beyond formally defined behaviors or responsibilities, which produces a series of role epi-
sodes involving testing, developing, and maintenance of a relationship based on increasing
trust, respect, and mutual obligation (Graen & Scandura, 1987; Uhl-Bien et al., 2000).
Several HPWS practices create and nurture an environment in which employees are
expected to actively define their work roles. HPWS provide an “environment in which individ-
uals can assume a more active, rather than passive role in an organization” (Spreitzer, 1996:
499). HPWS motivate this active role behavior by empowering employees (Lawler, 1992;
Pfeffer, 1998) with increased levels of autonomy, authority, and resources to act and make
decisions about various aspects of their work (Delery & Shaw, 2001; Lawler, 1992). Decen-
tralized decision making, team-based policies, participative management, and performance-
based rewards are positively related to perceptions of empowerment (Kirkman & Rosen,
1999; Spreitzer, 1996). Therefore, HPWS psychologically empower employees to assume an
active work orientation and proactively define their own role within the organization.
Flexible work and self-managed teams provide greater opportunities for engaging in role
making (Uhl-Bien et al., 2000). These practices encourage, or even require, individuals to
develop relationships that might not form in traditional organizations with static, defined work
roles. Flexible work and self-managed teams require employees to manage the expectations of

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© 2005 Southern Management Association. All rights reserved. Not for commercial use or unauthorized distribution.
Evans, Davis / Organizational Performance 769

multiple constituencies, or role senders, but also allow more freedom to determine which con-
stituencies must be served to obtain resources needed for task or project success (Uhl-Bien
et al., 2000). Use of flexible work and teams is also likely to result in employees experiencing a
greater level of on-the-job embeddedness (Lee, Mitchell, Sablynski, Burton, & Holton, 2004).
On-the-job embeddedness, reflecting a desire to participate in an organization, results in inter-
personal behaviors such as volunteering for nonrequired activities and engaging in positive
communications (Lee et al., 2004) that are consistent with role making.
Selection for relationship potential should also facilitate role making because the initiation
of role making depends on the perceived potential for respect, trust, and mutual interest (Uhl-
Bien et al., 2000). This potential is greater when organizational members have both relation-
ship-building skills and compatible traits and values. After organizational entry, HPWS train-
ing practices typically focus not only on technical skills but also on interpersonal skills
(Lawler, 1992) that may enable role-making behaviors (Uhl-Bien et al., 2000) and that pro-
duce higher quality relationships (Treadway et al., 2004; Uhl-Bien et al., 2000). In summary,
HPWS foster proactive role makers who are expected to actively develop and nurture a net-
work of productive relationships. This is especially beneficial in instances requiring connec-
tions across departments. Role makers can be expected to establish the required cross-depart-
mental ties (e.g., information technology and customer relations), reducing the need to funnel
requests and information up and down traditional organizational hierarchies—which can be
slow and ineffective (Galbrith, 1973).
Role making produces tangible positive economic benefits for organizations (Graen &
Uhl-Bien, 1995; Uhl-Bien et al., 2000). Mayfield and Mayfield (1998) reported that role mak-
ing results in substantial increases in employee performance and job satisfaction. Higher pro-
ductivity directly benefits financial performance, whereas lower turnover (resulting from
greater job satisfaction) provides an indirect benefit via lower administrative expenses by
reducing costly search and replacement activities. Role making also results in more open and
frequent communication (Graen & Uhl-Bien, 1995), which may minimize the need for exten-
sive controls as well. Additional administrative savings are likely to result from the willingness
of employees to take on extra tasks or assignments (Lee et al., 2004; Uhl-Bien et al., 2000).
Role making should also lead to greater organizational flexibility. In fluid role environ-
ments, new and perhaps unexpected role demands will emerge over time (Murphy & Jackson,
1999). These emergent role demands may require job or organizational redesign. Formal
changes to job descriptions or the organizational structure are time-consuming and may not
occur in time for the organization to respond to environmental changes. Proactive role making
enables individuals to more quickly respond to changing role demands. As a result, the organi-
zation is able to respond to emergent threats and opportunities in a timelier manner.

Organizational Citizenship Behavior

Many organizations are moving away from strict hierarchies to more autonomous work
environments with less well defined jobs (Murphy & Jackson, 1999). Hence, behaviors such
as employee cooperation and initiative are becoming more essential. Citizenship behaviors
are believed to improve organizational effectiveness because they enrich the social structure of

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770 Journal of Management / October 2005

the organization. Organizational citizenship behavior (OCB) is employee behavior that indi-
rectly contributes “to the maintenance and enhancement of the social and psychological con-
text that supports task performance” and that, in aggregate, promotes the performance of the
organization (Organ, 1997: 91). Meta-analysis by Podsakoff et al. (2000) identified seven
dimensions of OCB: (a) helping behavior, (b) sportsmanship, (c) organizational loyalty, (d)
organizational compliance, (e) individual initiative, (f) civic virtue, and (g) self-development.
HPWS create an environment that is supportive of OCBs. Factors contributing to OCBs
include lower task routinization, higher cohesiveness, perceived organizational support (POS)
(Podsakoff et al., 2000), and perceptions of procedural justice (Konovsky, 2000). HPWS prac-
tices have been found to affect each of these factors. Flexible work roles that broaden
employee skills (Way, 2002) may be expected to reduce task routinization. Self-managed
teams require greater collaborative interaction, which leads to greater cohesion (Seers, Petty,
& Cashman, 1995). Participation in decision-making processes offers the opportunity for
voice and is positively related to perceptions of procedural justice (Konovsky, 2000). Com-
pensation systems tied to objective performance goals may reduce perceptions of subjectivity
as the procedures for determining rewards are clear and absent of bias, resulting in higher per-
ceptions of procedural justice (Konovsky, 2000) and POS (Rhoades & Eisenberger, 2002).
Furthermore, investments in training and development can signal an organization is support-
ive of its employees and values their contribution, resulting in greater POS (Rhoades &
Eisenberger, 2002). These findings suggest that HPWS are likely to encourage and facilitate
OCBs.
Empirical results are supportive of Organ’s (1997) assumption that aggregate levels of
OCB favorably affect organizational performance (Podsakoff et al., 2000; Schnake & Dumler,
2003). Much of the reasoning underlying the positive OCB–organizational performance rela-
tionship is predicated on more efficient resource utilization (Podsakoff et al., 2000). OCBs
lead to efficiencies when employees offer assistance to others, exert more effort to satisfy cus-
tomers, generate ideas to overcome work problems, and resources free up for more productive
uses that were previously devoted to control and maintenance functions. In other words, oper-
ating efficiency is improved because of better worker productivity and lower administrative
overhead expenses.
OCBs are also likely to facilitate organizational flexibility by facilitating the flow of knowl-
edge. In response to dynamic environments, employees must be able to understand changing
conditions and generate appropriate responses. Coordination flexibility requires employees to
understand the value and linkage between knowledge resources and organizational perfor-
mance (King & Zeithaml, 2001; Teece et al., 1997), which is hindered when casual ambiguity
obscures cause-and-effect factors (Szulanski, 1996). OCBs may be especially helpful for
facilitating the flow of tacit knowledge. The capacity to transfer and reconfigure tacit knowl-
edge may be especially difficult as it is frequently revealed only through its observance or
implementation (Grant, 1996; Nonaka, 1994). This often requires multiple interactions
among parties exchanging information. For instance, the information technology and cus-
tomer relations experts working on the customer relations management system likely have
nonoverlapping KSAs that need to be integrated. OCBs are especially beneficial in such cir-
cumstances. Employees who are “good citizens” are likely to devote their time and energy to
ensure knowledge is exchanged, understood, and integrated. This is manifested by both

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Evans, Davis / Organizational Performance 771

greater willingness to engage in helping behaviors and more “sportsmanship” behaviors such
as not complaining about inconveniences created by coworkers (Podsakoff et al., 2000).
Two other categories of OCB appear suited to reduce the effects of casual ambiguity.
Employees exhibiting civic virtue keep abreast of industry developments, monitor the external
environment, and participate in organizational planning. Employees exhibiting self-development
will continue to develop and update the KSAs needed to respond to changing role environ-
ments. These two OCBs will likely result in greater absorptive capacity, as employees who
keep informed of organizational developments while also honing their KSAs should be better
able to recognize, assimilate, and apply new information (cf. Cohen & Levinthal, 1990). Ulti-
mately, OCBs should improve the ability of individuals to recognize and understand threats
and opportunities in the environment and respond accordingly, resulting in greater organiza-
tional flexibility.

Implications and Future Directions

The framework we propose provides further illumination of the relationship between


HPWS and organizational performance by specifying how HPWS influence the internal
social structure of organizations. This model serves as response to the call for a deeper and
more theoretical approach to HPWS research (Bowen & Ostroff, 2004; Delery & Shaw,
2001). The resource-based view indicates human capital and social relationships may be a
competitive advantage, yet this perspective does not explain the process, that is, the how or
why. The resource-based view is limited by its inability to account for the informal social con-
text (Truss, 2001) and the generation, transfer, and exploitation of knowledge (Wright et al.,
2001). Recently, Bowen and Ostroff (2004) considered the impact of HR fostering a collective
climate that influences organizational performance. Other works consider HR practices and
their impact on social networks (Collins & Clark, 2003; Leana & Van Buren, 1999; Uhl-Bien
et al., 2000). Yet still lacking has been an in-depth theoretical consideration of the internal
social structure in the context of HPWS. Thus, we believe our most significant contribution is
incorporating the aggregate internal social structure into strategic human resources manage-
ment research and illustrating its influential role in organizational performance outcomes.
Understanding the relationship between HPWS and organizational outcomes is compli-
cated by the need to consider multiple levels of analysis. HPWS are typically implemented at
the organizational level under the assumption that their impacts will also be felt at the organi-
zational level (e.g., flexibility or financial performance). However, an understanding of the
process by which HPWS lead to firm-level outcomes must incorporate constructs at the level
of the individual and relationships among individuals. Micro-level theories are useful in con-
texts where individual behaviors influence organizational actions (House, Rousseau, &
Thomas-Hunt, 1995; Staw, 1991). In our framework, flexible individual behavior (i.e., role
making and OCB) and the nature of the dyadic and group relationships (i.e., bridging ties, gen-
eralized norms of reciprocity, and SMMs) lead to organizational efficiency and organizational
flexibility.
Our model argues that HPWS are effective in dynamic environments requiring knowledge
resources. Another implication is that knowledge workers supporting organizational flexibil-

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© 2005 Southern Management Association. All rights reserved. Not for commercial use or unauthorized distribution.
772 Journal of Management / October 2005

ity are likely considered more unique and valuable than others not directly involved with the
strategic core. As such, dynamic environments and reliance on knowledge management may
represent boundary conditions to the proposed framework. The framework may be less appli-
cable to organizations in stable environments and those that rely less on knowledge manage-
ment. However, dynamic environments appear to be more of the norm than the exception for
organizations (Lengnick-Hall & Lengnick-Hall, 2003; Wright et al., 2001), limiting the
applicability of this boundary condition.
The issue of multiple HR management systems within organizations is more complicated.
Research shows that organizations do implement differently configured HRM systems (Lepak
& Snell, 2002) and that HPWS are not always implemented equally throughout an entire orga-
nization (Truss, 2001). Moreover, relational ties providing novel sources of knowledge are
increasingly important to the ability of an organization to innovate and to bolster core compe-
tencies (Hansen, 1999; Nahapiet & Ghoshal, 1998; Nonaka, 1994), which would seemingly
blur the ability to clearly demarcate employment modes or determine which employees con-
stitute part of core competencies. Furthermore, dynamic environments may lead to varied
types of employees being strategically valuable and unique over time. If organizations use dif-
ferent types of HR management systems, this implies such organizations must alter their
implementation. When and how such changes occur requires future study.
In a related issue, many of today’s jobs lack well-defined job duties. Employee contribu-
tions to organizations are increasingly described in terms of roles rather than jobs or tasks.
This suggests that traditional HR practices that focus solely on enhancing task performance
may miss a greater opportunity to facilitate individual role performance. As roles become
more ambiguous, fluid, and socially embedded (Murphy & Jackson, 1999), HR practices that
facilitate role management are likely to take on greater importance. HPWS appear to be espe-
cially suited to affect role making. However, role making and building relationship networks
may not always lead to desired outcomes. Employees occupying central network positions or
connecting critical parties have greater individual social capital and may have greater power to
appropriate rent from the organization (Blyler & Coff, 2003; Burt, 1997). In such a situation,
organizational flexibility is not likely negatively affected, but financial efficiency could be
impaired.
In closing, we agree with the recent impetus for better theory to more fully understand the
impact of HPWS on organizations. Without theoretical roots, the risk of improper assump-
tions and conjectures is magnified in both academic and practitioner circles. Ultimately, the
proposed framework and related propositions should serve to guide empirical studies and to
illuminate understanding of the intermediate linkage—the internal social structure—in the
relationship between HPWS and organizational performance.

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Biographical Notes

W. Randy Evans is currently a management Ph.D. student at the University of Mississippi. His research focuses on the
intersection of individual characteristics and organizational performance goals, including the areas of corporate social
responsibility, strategic human resource management, and employee work roles. Prior to his current studies, he worked
for a number of years in the commercial lending industry.

Walter D. Davis (Ph.D., Georgia Institute of Technology) is an assistant professor of management at the University of
Mississippi, where he teaches courses in strategic human resource management, compensation, and selection. His
research interests include self-management, goal orientation, role making, and strategic human resource management.

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