How Does Leadership Structure Affect the Bottom Line?

Abstract

Key Findings: Investment in High-commitment HR practices lead to key employee-based outcomes. When companies invest in employees with a system of high-commitment HR practices (see examples of these practices below) they are able to build a workforce with higher human capital and motivation to exert discretionary effort for the benefit of the organization. In particular, higher use of these high-commitment HR (HCHR) practices were significantly related to higher levels of employee education, company tenure/experience, collaboration, and helping behaviors. Higher employee human capital and motivation are resources that lead to competitive advantage. In return, these employee outcomes appear to be key organizational resources for driving competitive advantage. Specifically, higher levels of employee company tenure (i.e., firm-specific experience and knowledge), collaboration, and helping behaviors were all significantly related to higher company sales growth and perceived performance (performance relative to competitors as rated by the company CEO). Leaders make a diff in the extent to which these employee-based resources lead to competitive advantage. In general, these employee-based resources were related to higher performance, but CEOs with greater levels of human capital seemed to be able to leverage these resources for even greater performance. Compared to companies with CEOs with less experience, companies with CEOs with higher average industry and company experience and higher levels of employee human capital and motivation had significantly higher performance, suggesting that CEOs with higher experience seem to understand how to take advantage of the employee-based resources that have been built through the investment in HCHR practices.