How environmental changes and cooperation moderate labour flexibility and firm performance?

Abstract

Purpose – The purpose of this paper is to further explore the relationship between several dimensions of human resource (HR) flexibility and firm performance by introducing two moderator effects: inter-organizational cooperation and environmental changes. There is need for such studies because the relationship between HR flexibility and firm performance remains ambiguous and inconclusive. Whereas some theoretical perspectives and empirical evidences suggest the need to develop and support full-time and permanent employees, others argue that flexible labour relations are beneficial to firm performance. One of the reasons that could explain the lack of conclusive evidences is the scarce use of moderator effects. Design/methodology/approach – Research hypotheses are tested by structural equation analysis with data from a sample of 156 Spanish companies from different sectors. Findings – The results confirm the positive influence of internal HR flexibility on firm performance whereas the influence of external flexibility depends of each dimension in relation to the level of knowledge involved. However, the main finding is that environmental changes and cooperation moderate positively the relationship between functional flexibility and financial performance, as well as between external high skilled expertise and performance (at total level and its subcategories) which focus the importance of flexibility in their contribution to accessing and deploying knowledge into the firm. Research limitations/implications – Main limitations are the small sample size, the use of cross-sectional data and a structured questionnaire. Longitudinal studies and larger samples should test the causal relationships suggested by the results of the paper. The assessment of flexibility at the enterprise level could also be extended in future studies at the network level since some firms may obtain functional and numerical flexibility through its relationships with other companies in networks. The study of the relationships between different combinations of flexible work and firm performance, considering different groups of employees, could follow from the recommendations of moderator effects found in this research. Practical implications – Executives need to consider how the different units in the organizational structure interface with the contextual environmental, and they also need to understand the performance implications of different HR flexibility practices because their implications may change according to the exogenous business environment. The authors have found that the contribution of high skilled expertise from consulting/contracting firms is going to be more important than the contribution of short-term hires and temporary agency workers. Experts from outside not only bring knowledge of industry best practices into the firm that supports the innovative output, but they can also contribute to improve financial and relational performance. The results also suggest that external high skilled expertise may be more beneficial to the firm in highly changing environments than in more stable environments. Originality/value – Two are the main contributions of the paper: first, it analyses the influence of a comprehensive group of HR flexible practices on three different dimensions of firm performance which helps to understand in greater detail the causal mechanisms that link HR flexibility and firm performance in comparison to other studies that are more focused on singular flexible practices and measures of firm performance; and second, the paper analyses the moderator effect of both environmental dynamism and inter-organizational cooperation, which advances the theoretical understanding of flexibility and firm performance by studying different scenarios of HR flexibilities with these two moderators. The results of the paper could help managers to take advantage of different combinations of flexibility dimensions according to contingent situations and in order to improve firm performance.

The extent of EFQM effectiveness in routine and non-routine organizations based on multivariate techniques: an empirical study

“…(3) show that H2 hypothesis is supported which means that in non-routine organizations employees shall have high level of experience, skills and flexibility. The results of research studies conducted by Tracey, Vela-Jiménez, and Romero (Tracey 2012;Vela-Jiménez et al 2014;Romero et al 2015) confirm this fact. Based on the coefficients associated with the measures in Eq.…”

“…Thus, one of the differences between organizations with more non-routine activities and processes and routine organizations is the high level of human resource flexibility (Schafermeyer et al 2010;Lillrank 2003;Lillrank et al 2011;Romero et al 2015). Several studies have been conducted to measure the level of human resource flexibility and its effects on the performance of organizations (Ketkar and Sett 2009;Vela-Jiménez et al 2014;Sawhney 2013;Beltrán-Martín et al 2008) and in those studies two factors, including skill flexibility and behavior flexibility have been mainly introduced by them for internal human resource flexibility (Ketkar and Sett 2009;Beltrán-Martín et al 2008;Bhattacharya et al 2005;Wright and Snell 1998;Beltrán-Martín and Roca-Puig 2013;Way et al 2012;Ketkar and Sett 2010).…”

“…In other words, ''the higher this human resource flexibility is, the higher is the level of innovativeness'' (Martínez-Sánchez et al 2011). In fact, the more environmental changes an organization faces, the higher level of human resource capability and flexibility are required (Tracey 2012;Vela-Jiménez et al 2014;Pagell and Krause 2004). Hall et al believe that people involved in artistic processes shall be high-skilled and capable of making right decisions to be able to manage variable conditions (Hall and Johnson 2009).…”

HR flexibility and firm performance in professional service firms

“…For instance, Swart and Kinnie (2013) observed that versatile employees allowed law firms to identify and offer new services to their clients, such as assistance in cases of medical negligence. Third, several scholars argue that skill flexibility increases employees' motivation and satisfaction (Vela-Jiménez et al, 2014), which in turn leads to greater employee effort (Cordery et al, 1993). In a PSF context, employee effort affects clients' perceptions of the service owing to the dyadic relationship between the employee and the client.…”

“…In the service encounter, clients' satisfaction is partly explained by their perceptions of the employee's effort, which they interpret as reflecting the employee's commitment to providing a high quality service (McClean and Collins, 2011). Fourth, employees with skill flexibility can improve understanding of customers, which contributes to building trust in the firm (Vela-Jiménez et al, 2014) and helps to develop shared meanings between the customer and the firm. For PSFs, customers' trust in the service providers is one of the most important resources in explaining firm success (Hitt et al, 2006).…”