Organizational Performance and Complementarity in Human Resources Management Practices

For more than ten years, much published material has argued that human resource management (HRM) can play a major role in improving organizational performance. Several researchers claim that to exert a significant impact on organizational performance, HR practices need to be integrated or complementary with each other. However, the concept of complementarity suffers from a lack of operational clarity and has been essentially approached from a statistical standpoint that has limited our understanding of the architecture of the overall system of HR practices. On the other hand, several authors assert that the complementarity of HR practices cannot be studied outside its organizational context, especially in the industrial sector. They argue that differences in the nature of activity between service organizations and manufacturing companies are likely to have implications on which practices are adopted and how these practices impact the human and corporate performance of the organizations in question.

In its first phase, this study proposes an operational definition of the concept of complementarity that can be used to select which practices to include in an organization’s HRM system. This complementarity has been defined as “the set of practices originating from various areas of HRM activity whose combined application can be rationally justified and empirically demonstrated to have a synergistic effect on organizational performance in a given sector.” Thus, on the basis of this definition, the authors developed a number of “complex items,” incorporating HRM practices from four major operational areas : staffing, remuneration, training and performance assessment. Each of these combinations embodies a link of complementarity between practices, and the additional impact of each combination is our way of measuring its complementarity. This study has the dual purpose of first verifying the hypothesis that “the more practices from different areas of HRM are complementary, the more they will improve organizational performance” (H. 1) and, second, that “it is likely that the impact of complementary practices will vary depending on whether the organizations concerned belong to the manufacturing or service sector” (H. 2).

The items to measure organizational performance come from a previous study. These data were derived from questionnaires completed by 177 Canadian firms and the internal reliability varies from .77 to .90. To measure the degree of complementarity between HRM practices, 22 items were developed with an internal reliability of .84. The data were obtained from 238 manufacturing companies and 325 service organizations. The results corroborated Hypothesis 1, indicating that the complementarity of HR practices was responsible for a significant increase in productivity/efficiency, competitive positioning and client acquisition/growth. The results also corroborated Hypothesis 2, showing that, when the two different economic sectors are compared in terms of dependant variables, a higher degree of complementarity is particularly associated in service companies with increased productivity and efficiency, better competitive positioning and a greater number of clients and increased market share. In the case of manufacturing companies, the results indicate that the higher degree of complementarity has particular impact on the first two factors. The results are discussed in the light of current research and the limitations of the research are presented.