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118 Monthly Lab. Rev. 29 (1995)
High Performance Work Systems and Firm Performance

handle is hein.journals/month118 and id is 511 raw text is: I 0lig -Prorac Sysem High performance work systems and firm performance Benefits of employee involvement, skill training, and other high performance work practices tend to be greater when new methods are adopted as part of a consistent whole, rather than in isolation In today's competitive world economy, the strength of U.S. firms is increasingly depen- dent upon product quality and rapid adapta- tion to changing conditions. To survive in this environment, firms may choose to rely upon the creativity, ingenuity, and problem-solving abili- ties of their workers. To do so, they attempt to provide workers with the information, skills, in- centives, and responsibility to make decisions es- sential for innovation, quality improvement, and rapid response to change. Firms taking this ap- proach often are referred to as high performance work organizations. By way of example, take the case of delivery truckdrivers. Drivers can be assigned loads and routes by a supervisor. Alternatively, they can be made responsible for scheduling their own routes and for making changes. They can use their knowledge of customers and routes to inform ex- isting customers of new services, acting as assis- tant sales representatives. They can participate in problem-solving groups to identify bottlenecks in processes, such as the morning's sorting of packages, that slow delivery. Installing commu- nications equipment in trucks can facilitate team- work to allow balancing of routes between couri- ers with unexpectedly large shipments and those with lighter loads, without the intervention of a supervisor. These work practices have been used by Federal Express couriers, and both the com- pany and the workers appear to have benefited from converting ordinary driving responsibilities into jobs that require higher skills.' While this example helps illustrate the types of work practices firms may adopt, the anecdotal experiences of a few firms are unlikely to be rep- resentative. The goal of this literature review is to ascertain whether high performance work practices are more generally associated with bet- ter firm performance. Scope of the study Many firms have implemented at least some high performance work practices.2 In a nationally rep- resentative sample of 700 private sector estab- lishments, 37 percent had a majority of front- line workers engaged in two or more high per- formance work practices.3 Firms themselves largely look upon high performance practices as having been successful. Among Fortune 1000 companies using at least one practice that in- creased the responsibility of employees in the business process, 60 percent reported that these practices increased productivity and 70 percent reported that they improved quality.4 Many company initiatives, however, are piecemeal rather than systemic. The existing evidence suggests that it is the use of compre- hensive systems of work practices in firms that is most closely associated with stronger firm per- formance. This review of the effects of high performance work practices focuses on studies that use quan- titative measures of productivity, quality, and fi- nancial performance that are comparable across firms. Many of these measures can be assessed at the plant or work group level, which allows detailed analysis of effects from changes in work practices. The review consists of two basic parts. First, it examines the effects on labor productiv- ity of three specific practices-training, compen- sation linked to firm or worker performance, and employee involvement in decisionmaking. Sec- ond, it examines high performance systems in which such practices are implemented together. Monthly Labor Review May 1995 29 Jeffrey Kling Jeffrey Kling is a Ph.D candidate in the Department of Economics at the Massachusetts Institute of Technology.

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