Truss 2001

Journat of Management Studies 38:8 December 2001
0022-2380
COMPLEXITIES AND CONTROVERSIES IN LINKINC HRM WITH

ORGANIZATIONAL OUTCOMES*
CATHERI^fE T R U S S
Kingston Business School, Kingston University
ABSTRACT
Our understanding of the way in which human resource management (HRM) is

linked to organizational performance is still limited, despite recent advances that
use a quantitative approach to argue for a strong positive relationship between
'High Performance Work Practices' and firm financial performance. These studies
are limited by their reliance on a single informant in each organization, and their
emphasis on financial performance at the expense of a broader range of outcome
variables. This paper contributes to the debate by analysing in detail the human
resource policies and practices of one case-study organization over a two-year time
period, using a variety of methodologies and drawing on a broad range of informants across the organization. Instead of devising a list of 'best practice' HRM
from the literature and testing its impact on performance, we instead invert the
question and take a firm that is financially successful and ask what HR policies
and practices it uses. We also examine the way in which these policies are enacted.
This methodology enables us to show that even successful organizations do not
always implement 'best practice' HRM, and that there is frequently a discrepancy
between intention and practice. Outcomes at the individual and organizational
levels are complex and often contradictory; we question the extent to which is it
possible or meaningful to attempt to measure the interrelationship between HRM,
at the level of the formal system, and organizational performance, without taking
into consideration the role played by the informal organization in the process and
implementation of HR policies.
INTRODUCTION
The question of how human resource management (HRM) policies and practices
are linked to organizational performance has been a subject of great interest to
both academics and practitioners (Wright et al., 1999). Although much has been
made of recent contributions, especially in the American literature, which set out
to demonstrate the positive impact of some 'High Performance Work Practices'
on the financial performance of the firm, there is still a great deal of uncertainty
around the precise nature of these linkages (Mueller, 1996). Ulrich (1997, p. 304)
Address for reprints: Catherine Truss, Kingston Business School, Kingston University, Kingston Hill,
Kingston-upon-Thames, Surrey K T 2 7LB, UK.
Blackwell Publishers Ltd 2001. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 lJF, tJK
and 350 Main Street, Maiden, MA 02148, USA.
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C. TRUSS
summarizes the situation as follows: 'HR practices seem to matter; logic says it is
so; survey findings confirm it. Direct relationships between investment and attention to HR practices are often fuzzy, however, and vary according to the population sampled and the measures used'.
This paper sets out to make a contribution in three key areas of this debate.
Firsdy, through a review of the literature, we separate out the various components
of the HRM-performance linkage: how performance is measured; how HRM is
evaluated; and how the link between the two is conceived and operationalized.
This review highlights a number of ambiguities within the relationship.
Secondly, through adopting a longitudinal, case-study methodology we are
able to contribute to existing empirical and theoretical understandings of the
HRM-performance linkage through the lens of a more holistic and contextualized view of the HR process. Instead of taking the usual route adopted in this literature of devising a list of 'best practice' HRM from the literature and testing its
impact on firm performance, we invert the question and take a firm that is financially successful in conventional terms, and ask what human resource policies
and practices it uses to achieve this level of performance. We extend the more
financially-based performance measures favoured in some US studies to include
a broader range of outcomes at both the individual and the organizational levels,
along the lines of the 'balanced scorecard' (Kaplan and Norton, 1992, 1993). This
enables us to question, through our data, the extent to which it is feasible to achieve
'excellence' in all outcome areas.
Thirdly, and most crucially, we use the data and the analysis provided in the
paper to question the validity of adopting a universalistic list of 'high performance'
or 'best practice' HRM policies. In the light of the significant role played by the
'informal' organization, we argue that the success, or otherwise, of HRM policies
ultimately depends on their organizational context, and on the way in which policies are interpreted and enacted in practice.
HUMAN RESOURCE MANAGEMENT AND PERFORMANCE
Theories have been developed in three main areas concerning HRM and performance: the kinds of performance measures that are appropriate to studies
of human resource management; which HR processes and practices should be
studied and how they should be measured; and the nature of the linkages between
the two. We examine each of these in turn.
Performance Measures
The early literature on HRM tended to posit the notion that introducing HRM
within an organization would lead to improvements in organizational efTectiveness, without specifying exacdy what these might be, although the implication frequendy was that this meant enhanced financial performance (Cook and Ferris,
1986; Devanna et al., 1984; Tichy et al., 1982). Another strand within the literature explicidy focused on improved financial performance as the ultimate measure
of the effectiveness of HRM, but did not explain exacdy how this relationship
worked (Lengnick-Hall and Lengnick-Hall, 1990; Schuler and MacMillan, 1984).
One of the earliest attempts to measure performance in a broader sense was
Beer et al. (1984), who differentiated between short-term outcomes, including
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HRM AND ORCANIZATIONAL OUTCOMES
1123
increased commitment and competence at the individual levels, cost-effectiveness

(of the HR function) and congruence, and a range of longer-term outcomes,
including individual well-being, organizational effectiveness and societal well-being
(Truss and Gratton, 1994). Some commentators have been critical of this 'checklist' approach as being inappropriate to measuring HRM outcomes (Evans, 1986),
although it does represent a move towards recognizing that HRM, potentially, has
a role at several levels, not just that of the firm. More recently, Cuest (1999) has
made a strong case for considering the 'workers' views' when evaluating the success
of HRM.
Attention has turned in the US to establishing a link between outcomes and
so-called 'High Performance Work Pracdces' (HPWPs). Huselid, in his series of
papers on this subject, uses quandtative techniques to demonstrate a link between
HPWPs and a range of outcome variables, including, at the individual level,
improved employee knowledge, skills and abilides, increased motivation, decreased
turnover and improved retention of quality employees, as well as sustained competitive advantage at the organizational level, although the ultimate focus of this
body of work is on financial performance as the dependent variable (Delaney and
Huselid, 1996; Huselid, 1995; Huselid et al., 1997).
Many scholars have highlighted the problems associated with seeking to establish a reladonship between particular human resource practices and organizadonal
outcomes, for instance: determining which are the most appropriate criteria of
success, accounting for any time-lag between formulation, implementation and
effect, and deciding on which perspective should be adopted (Guest, 1997;
Hrebiniak et al., 1988). Generally speaking, it is recognized that adopting financial measures as the sole criterion of success is too limited, and a broader perspective should be considered that additionally takes account of success in terms
of the customer and employee constituencies, along the lines of the balanced
scorecard (Benkhoff, 1997; Guest, 1997; Hiltrop and Despres, 1994; Kaplan and
Norton, 1992, 1993; Purcell, 1999; Ulrich, 1997; Yeung and Berman, 1997).
Measures of Human Resource Practices
The literature to date is very unclear on the subject of how human resource pracdces themselves should be measured and related to firm performance. Early writings tended to focus on a limited range of generic human resource activities, such
as selection, training and development, appraisal and rewards, merely nodng that
these should all be linked to the overall strategic objectives of the organization
(termed 'verdcal integration'), rather than seeking to specify what could constitute
best practice in each area (e.g. Cook and Ferris, 1986).
More recently, empirical efforts have been based on the best pracdces perspective and have focused on identifying bundles or configuradons of 'High Performance Work Pracdces' and sought to establish how these are related to firm
performance through the use of quandtative techniques; the so-called 'universalist' approach (Pfeffer, 1994; Purcell, 1999). However, views differ as to which practices can be considered 'High Performance' (Guest, 1997). Becker et al. (1997)
include rigorous recruitment and selection, performance-contingent compensation
systems, and management development and training activides linked to the needs
of the business. Delaney et al. (1989), on the other hand, argue that ten HRM
practices in the areas of selecdon, appraisal, incentive compensadon, job design,
grievance procedures, informadon sharing, attitude assessment and labour man Blackwell Publishers Ltd 2001
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C. TRUSS
agement participation represent 'sophisticated' HRM. Huselid (1995) extended

this list to include intensity of recruiting efforts, average number of hours training per employee per year, and promotion criteria to represent the domain of
HPWPs. Delery and Doty (1996) in their review identified seven alternative 'strategic' HR practices found to be empirically or theoretically related in other studies
to overall organizational performance. Of these, their research found support for
the effectiveness of just three aspects: results-oriented appraisals, profit sharing,
and employment security.
Becker and Gerhart (1996, p. 784), in their review of the literature on HPWPs
conclude: 'studies of so-called high performance work systems vary significantly as
to the practices included and sometimes even as to whether a practice is likely to be
positively or negatively related to high performance'. For instance, Arthur (1994)
included a low emphasis on variable pay, whereas Huselid (1995) and MacDuffie
(1995) place a strong emphasis on variable pay (Becker and Gerhart, 1996).
Whilst the HPWPs approach has clearly given us a greater insight into some
of the mechanisms by which organizations can generate improved performance
through their human resources, there are a number of weaknesses which need to
be addressed. Firstly, the reliance on quantitative techniques means that highly
complex interventions are reduced to one single dimension in order that they
might be subjected to statistical manipulation; one example from Huselid's (1995)
study is training, which is measured by the number of days training per employee.
Adopting this somewhat crude measure means that other highly significant factors
such as the content and quality of that training are ovedooked, as are other means
potentially used by an organization to develop its human resources, such as mentoring, coaching and development. From a methodological perspective, Purcell
(1999) argues that the use of large-scale data sets that rely on a single respondent
completing a 'tick-box' questionnaire is not the most appropriate way of measuring the complex interrelationship between HRM and performance. He makes the
further point that using such methods means that we are not able to capture important issues of process; nor, indeed, are we able to collect any data on the possible
dichotomy between policy and implementation.
Similarly, adopting the universalist approach involves discounting the role
played by the organizational context within which the practices are enacted
(Purcell, 1999). Gonsequently, the possible variation in the relationship between
practices and performance in different contexts is overlooked (this issue is debated
further in the following section).
Some recent research from the UK has also shown that it is not only companies that adopt 'bundles' of High Performance Work Practices that perform well.
One study by Wood and de Menezes (1998) discovered that the control or 'cost
minimization' approach to HRM could generate equally good firm performance.
Theories of Linkage between HRM and Performance
Early attempts to link human resource management with organizational performance relied on the common-sense belief that improving the way people were
managed inevitably led to enhanced firm performance (Ulrich, 1997), without
seeking to justify this linkage in theoretical terms.
However, sufficient work has now been carried out for Ulrich (1997, p. 306) to
conclude: 'evidence now exists to show that investment in HR practices impacts
business results, both financial results and the market value of firms.'
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In tbe wake of tbese researcb projects, it was argued in one review that the
subject was no longer atheoretical, and that a variety of different theories, including general systems theory, role behaviour theory, institutional theory, resource
dependence theory, human capital theory, transaction cost economics, agency
theory and the resource based theory of the firm had been used to explain the
HRM-performance linkage (Jackson and Schuler, 1995). The most commonly
used of these are outlined below.
According to human capital theory, people possess knowledge, skills and abilities
(KSAs) that are of economic value to the firm and, therefore, firm investments to
increase these, for example, through training programmes, are only justified if they
produce future returns to the firm in the form of increased productivity. Therefore, the higher the potential for employees to contribute to the firm, the more
likely it is that the firm will invest in human resource management activities specifically aimed at increasing individual productivity and overall firm performance
(Youndt et al., 1996).
An alternative view is the resource-based theory of thefirm,which is based on the
notion that a firm's HRM system can constitute on source of competitive advantage (Barney, 1991; Becker et al., 1997; Lado and WUson, 1994; Pfeffer, 1994;
Wright et al., 1995). A resource can be considered to be a source of sustained competitive advantage if it meets the criteria of non-substitutability, inimitability, rarity
and value (Wright et al., 1994). Whilst some commentators argue that the practices
used to manage human resources are a potential source of sustained competitive
advantage (Becker and Gerhart, 1996; Schuler and MacMillan, 1984; Ulrich,
1991), others argue that it is the human resources themselves that meet the four
resource criteria (Wright et al., 1994, pp. 318-19): 'it is through the human capital
pool and employee behaviour that human resources can constitute a sustained
competitive advantage.' HR practices, they argue, are possible to imitate across
organizations, although their effect may vary across contexts.
The essential argument is that individuals' cognitive ability allows them to devise
the most effective strategy for performing required tasks, thereby increasing productivity Therefore, in a static environment, a firm with greater human capital
resources in terms of cognitive ability should have a productive advantage relative
to other firms (Wright et al., 1994). In more dynamic and complex environments,
they argue that the human capital pool can improve firm performance through its
fiexibility The important role played by HRM practices in improving firm performance is through attracting, identifying and retaining high quality employees,
and then getting them to behave in a way that supports the organization: 'thus,
HR practices moderate the relationship between the human capital pool and firm
effectiveness, such that the pool is effective only when combined with the right
practices that capitalize on the advantage through eliciting employee behaviour'
(p. 320).
.
Becker and Gerhart (1996) present the opposite view. According to them, it
is not the human resource pool that is a source of competitive advantage, but the
human resource system; individual policies or practices have little value in themselves, but in combination can create a synergistic effect (Barney, 1995).
Mueller (1996, p. 776) proposes an 'evolutionary resource-based approach',
arguing that strategic HRM can lead to competitive advantage only if effective
resource mobility barriers exist - what is especially valuable in a firm is its informal social architecture, including tacit knowledge, co-operation, informal learn Blackwell Publishers Ud 2001
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ing, that emerge over a long period of time and are largely unplanned. The role
of HRM therefore becomes that of harnessing the skills and competencies held
within the informal system.
One potential problem with the resource based view of the firm is its emphasis on the importance of synergy and fit between the various elements of the HR
system. As Becker and Gerhart (1996, p. 789) argue: 'one of the elements of a
high performance HR system, under changing circumstances, must be flexibility'
(see also Matusik and Hill, 1998). This raises the question of how compatible the
systems approach of the resource-based view is with flexibility. However, some
interpretations of the resource-based perspective do also allow for the integration
of the notions of fit and flexibility Wright and Snell (1998, p. 758), for example,
introduce the idea of 'sustainable fit', where HR practices are linked to the flexible organization. 'Fit' itself is viewed as a snapshot in time with regard to how
firms achieve internal fit and environmental fit; flexibility, on the other hand, is
conceptualized as an organizational characteristic and the two can, therefore,
co-exist.
These arguments present a strong theoretical basis for the linkage between
HRM and performance, but are still founded on the assumption that simply having
the appropriate HRM policies inevitably means that they will be effectively implemented and will produce the intended results in terms of individual behaviour
and, at one remove, firm performance.
Another approach that has been widely adopted is the contingency framework.
According to this, the impact of HRM on firm performance is mediated by the
organization's business strategy (Youndt et al., 1996). Within this perspective, the
behavioural view argues that there is a unique set of employee attitudes and role
behaviours required for the successful implementation of the organization's strategic objectives. The role of HR activities is, therefore, to elicit and reinforce the
kinds of behaviours required by the firm (Jackson et al., 1989; Schuler and
MacMillan, 1994). Becker and Gerhart (1996) argue that this approach is limited
because all it permits us to state is that for a given corporate strategy, the HR
system has a universal or constant effect on organizational performance. We can
only assert whether a particular dimension is 'high' or 'low'. It also implicidy advocates the development of a tighdy-coupled system which may not be consistent
with the potential need for an HR system to be flexible.
Another addition to the debate is the configurational perspective. According to this
view, HR practices should be 'bundled' to be most effective (Delery and Doty,
1996). Thus, the effectiveness of any HR practice depends on its interrelationship
with others; they do not stand on their own. Wright et al. (1999) suggest that participative management is a key ingredient in the bundle. However, the view that
it is possible to devise a universalistic 'bundle' of best practice HRM is contested
through the debate on idiosyncratic contingency. Based on the dual notions of path
dependency, which suggests that strategy is an emergent concept for organizations,
and causal ambiguity, which highlights the numerous and intertwining connections
between factors that make each organization unique, the idiosyncratic contingency
argument suggests that the appropriate mix of HR policies can never be copied
from one context to another (Mueller, 1996; Purcell, 1999). Successful firms are
each successful in their own way, based on a unique mix of formal and informal
factors which is inimitable by other organizations.
HRM AND ORGANIZATIONAL OUTGOMES
1127
So far, the theories reviewed have focused on the relationship between HRM
and outcomes at the level of the firm. Few have attempted to explain the intermediary linkage between HRM and individual outcomes, such as productivity.
Guest (1997) has recendy sought to bridge this gap by arguing in favour of building on theories of motivation, such as expectancy theory (Vroom, 1964) as a means
of providing a theoretical linkage between HRM and individual performance: 'it
proposes that high performance, at the individual level, depends on high motivation plus possession of the necessary skills and abilities and an appropriate role
and understanding of that role. It is a short step to specify the HRM practices that
encourage high skills and abilities. . .' (Guest, 1997, p. 268).
Delaney and Husclid (1996) and Huselid (1995) similarly argue that the role of
HRM practices is to tap into not only employees' knowledge, skills and abilities
(KSAs), but also their motivation, in order that their behaviour is directed towards
organizational goals. Thus, for instance, through using performance appraisals to
assess individuals' performance and linking these with incentive pay and promotion systems focused on merit, organizations can theoretically improve their performance through lower employee turnover and greater productivity (Huselid,
1995). These attempts to make the link between individual KSAs, HRM practices
and outcomes at the individual, group and organizational levels would appear to
present a step forward in theorizing about the linkages.
Summary
The uncertainties within the literature that have been highlighted in this review provide a fruitful basis for further research. In particular, the debate around
idiosyncratic contingency and issues around the inimitability of informal firm
characteristics, challenge the assumption within the HPWS literature that a universalistic set of HR practices suitable for all situations can be identified. Methodological questions that have been raised, for instance, by Purcell (1999) and Guest
(1999), suggest that seeking to collect data on the HRM-firm performance linkage
through a questionnaire issued to a single respondent per organization is fundamentally flawed, given that it does not allow for the investigation of qualitative
issues around process, practice and implementation. It is these issues which form
the basis of the empirical study described below.
METHODOLOGY
It has been argued that broader, more qualitative methods are needed to study the
phenomenon of HRM, utilizing multiple sources that tap into the rationale behind
decisions that are made (Becker and Gerhart, 1996; Boxall, 1991; Gerhart, 1999;
Guest, 1997). Some of the limitations of existing studies are that they have almost
without exception used quantitative techniques, they have been cross-sectional,
and they have relied on one informant in each organization (Ichniowski et al.,
1996; Purcell, 1999). Becker and Gerhart (1996) point out that simultaneity bias
may occur if the same informant is asked for information about firm performance
and HR practice.
/
/
In this paper, we report on the findings of a longitudinal case-study in one firm,
Hewlett-Packard. This firm was chosen for analysis specifically because it is a suc/
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G. TRUSS
cessful organization in terms of financial performance, and because of its recognized sophistication in the area of human resource management. Keenoy (1999,
p. 5) describes Hewlett-Packard as an example of those companies that 'became
icons of the potential future promised by the discouse(s) of HRMism'. Laabs
(1993, p. 48) comments of HP's HRM: 'HP has discovered a winning combination'; the company was awarded the Personnel Journah award for General Excellence in HRM in 1993. It was hoped that by studying such an organization in
some depth, it would be possible to advance both our empirical knowledge of HR
practices and our theoretical understanding of how HRM and performance are
linked. Through a case-based analysis, we were able not only to adopt a longitudinal approach and track change over time, but we were also able to consult multiple informants and employ more in-depth, qualitative techniques than is possible
in a more quantitative study.
We adopted an exploratory approach towards collecting data; the recent trend
has been towards establishing a set of High Performance Work Practices from the
literature and seeking to prove their positive impact on firm performance. We
wanted to invert this question and ask instead: what HR policies does a successful firm have? How are these policies enacted and experienced by employees? How
are these interrelated with individual and organizational outcomes? This approach
meant that we were more open to the evidence of practice obtained from the organization. We therefore adopted a generic approach to analysing the human
resource practices themselves, and collected data on a wide range of HRM areas,
including recruitment and selection, training, development, career management,
appraisal, and reward management at both time points and from the perspectives
of both policy, from the HR department, and experience, from staff, line and
senior managers, recognizing that experiences are likely to vary between levels of
staff. As Guest (1999, p. 12) notes, HR practices 'may exist, but only have relevance to a minority of those working for the organization'.
Data were collected at two time points, January-March 1994 and May-^une
1996. Four principal research methods were used: interviews, questionnaires, fbcus
groups, and the collection of documentary evidence. We collected data from
employees at all levels of the firm, from 'operating core', middle managers, HR
department and senior executives, in order that we could access not only the
'rhetoric' of what the HR group was trying to achieve, but also the 'reality' experienced by employees (Legge, 1995; Truss et al., 1997). At both time points,
the research was carried out within a key division of the firm's UK oflices.
In 1994, 400 questionnaires were distributed to randomly selected employees at
middle manager level and below, representing around 20 per cent of the total
population; 215 were completed, a response rate of 56 per cent. A two-hour focus
group was held with senior members of the HR department, and 36 interviews
were carried out with senior managers, HR department members, line managers
and non-managerial staff. In 1996, 400 questionnaires were issued and 209
returned, a response rate of 52 per cent. A four-hour focus group was held with
the HR staff, and 20 interviews carried out within the organization. Appropriate
secondary data were collected at each phase.
In order to provide a point of comparison for the questionnaire data, we refer
to data collected from six other organizations at the same points in time and using
identical methods. These six organizations were from different sectors: fast-moving
consumer goods, an NHS Trust, banking, financial services, pharmaceuticals and
1 129
telecommunications, and were all members of the 'Leading Edge Research Consortium' (Gratton et al., 1999a, 1999b; Hope-HaUey et al., 1997; McGovern et
al., 1997; Stiles et al., 1997; Truss, 1999; Truss et al., 1997). A total of 1549 questionnaires were received and analysed from these six organizations in 1994 and
1582 in 1996. The data are intended to provide an indicative point of comparison with Hewlett-Packard (HP); it should be borne in mind that these six organizations were, themselves, top performers in their own sectors and therefore did not
constitute a random sample.
The findings are presented in five sections. In the first section we discuss the
company background to the study. In the second section we focus on the rhetoric
of HR policies and practices, and in the third section we examine individuals'
experiences of HR policies. We then explore outcomes at the individual level, in
terms of morale, motivation, commitment and inspiration to perform, as well as
stress and pressure, in the fourth section, and organizational performance in the
fifth section. In adopting this structure, we are building on Guest's (1997) recommendation that intermediary outcome measures at the individual level need to be
considered alongside broader, organizational and financial outputs.
The questionnaire data are presented in tables I, II and V. These tables show
the percentage of respondents agreeing with each statement in HP compared with
the other companies for both 1994 and 1996. In order to give some idea of the
significance of difference between the responses, the mean and standard error statistics are given for the range of responses, together with the t-statistic showing difference of means. It should be noted that, because of the narrow range of possible
responses to each question (from 1 = strongly agree to 5 = strongly disagree) and
the difference in size of the sample between HP and the other organizations, the
t-statistic in this case may tend to overstate the significance of the difference.
However, it still provides a good indication of whether responses in HP are significandy different from those of the other organizations. Tables III and IV show
the results of the analysis of firm performance of HP.
FINDINGS
Background
Hewlett-Packard has grown dramatically from modest origins to become one of the
world's largest computer companies. At the time of the research, the company
employed over 96,000 staff, around 20,000 in Europe. As a company, their traditional focus has been on investing in research and manufacturing quality products,
rather than attempting to compete on price, although falling margins within the
computing industry have forced them to engage in relendess cost and price cutting.
Up until the late 1980s, Hewlett-Packard was a highly successful company. At
that time, however, they began to face financial problems. The company's founders
saw the difficulties Hewlett-Packard was in and stepped in to effect a turn-around.
A voluntary severance programme was put in place, and several thousand people
left the company, 500 in the UK. They set about decentralizing the structure and
giving individual business units back the freedom to run their own affairs, and
cutting costs. This cost-cutting continued, and in 1996 there was an enforced
recruitment freeze in some areas and some perks, such as foreign flights, were
cut back.
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By February 1994, the company recorded a 41 per cent rise in first quarter net
profits, and was able to achieve 20 per cent growth per annum for the three years
to 1996. 'We're a $40 billion company, the growth is almost unique. In fact, the
Vice-President Finance is on record as saying that there isn't much precedent for
companies this big growing that fast, so we're breaking some observable phenomena' (Senior Manager, 1996).
There is no doubt that Hewlett-Packard operates in a highly competitive and
rapidly changing business. One senior manager said, 'there is a thing called
Moore's Law, who said that the performance of computing equipment was going
to double at the same price every 18 months . . . so for the next 15 years the bulk
of our business products are going to undergo dramatic change. Response to this
change will put tremendous stress on our group' (1996).
HR Policies and Practices: Organizational Rhetoric
We cannot consider people management policy at Hewlett-Packard without

paying close attention to their visionary document. The HP Way, developed in
1957 by a group of senior managers, and which articulates HP's 'business philosophy'. The three central tenets of people management which are enshrined in the
document are:
(1) Belief in our people.
Gonfidence in, and respect for, our people, as opposed to depending upon
extensive rules, procedures, etc.
Depend upon people to do their job right (individual freedom) without
constant directives.
Opportunity for meaningful participation (job dignity).
(2) Emphasis on working together and sharing rewards, teamwork and partnership.
Share responsibilities; help each other; learn from each other; chance to
make mistakes.
Recognition based on contribution to results - sense of achievement and
self-esteem.
Profit-sharing, stock purchase plan, retirement programme, etc. aimed at
employees and company sharing in each other's successes.
Gompany financial management emphasis on protecting employees' job
security.
(3) A superior worVing environment which other companies seek and few achieve.
Informality - open, honest communications, no artificial distinctions between employees (first-name basis); management by walking around; and
open door communication policy.
Develop and promote from within - lifetime training, education, career
counselling to help employees get maximum opportunity to grow and
develop with the company.
Decentralization - emphasis on keeping work groups as small as possible for
maximum employee identification with our businesses and customers.
Management by objectives (MBO) - provides a sound basis for measuring
performance by employees as well as managers and is objective, not political.
This has embodied HP's stated approach to managing people since it was first
developed, and is the company equivalent of a HR strategy statement. However,
1131
it is important to note that 'The HP Way' is not associated with the personnel
function but, rather, is 'owned' by the whole organization: 'the HR function will
never be the owner of The HP Way, its guardian, its articulator, the real owners
are the managers' (Senior Manager, 1994). The fundamental principles behind
The HP Way are very much performance-driven whilst, at the same time, allowing for individual freedom in determining how those performance objectives are
achieved (McGovern and Hope-Hailey, 1997): 'Hewlett-Packard's core values are
about, you can achieve anything if you unleash the potential of the individual and
it's about making sure that the individual's potential is unleashed here' (Senior
Manager, 1996). This is an important point to which we shall later return. The
comment about 'protecting employees' job security' should also be noted, as this
was misinterpreted by employees as meaning 'jobs for life', and is discussed further
in the next section. We now look in some more detail at how this overarching
philosophy is translated into policies by the HR function.
At the time of our study in 1994, recruitment and selection were not an explicit priority for the company, since the headcount remained flat following the redundancy
programme that had taken place. When recruitment did occur, the company made
extensive use of assessment centres and psychometric tests for applicants, which
suggests a sophisticated approach (Huselid, 1995): 'the quality of the people
coming into the organization is a critical factor' (HR Dept, 1994). The company's
stated objective was to promote and develop from within, rather than recruiting at
all levels.
Once individuals had been recruited into the organization, however, we found
that most of the HR department's initiatives in both tranches of data collection
were structured around particular company-wide programmes, or initiatives, that
spanned the traditional breakdown of HR activity into training, development,
appraisal, career management, rewards, etc. typically adopted in the HR literature. For instance, the 'Framework' initiative which was in place in 1994 focused on
linking individual objective-setting closely with the corporate ten-step planning
process and the identification of the firm's 'Business Fundamentals' for the year,
i.e., the key process measures. One Business Fundamental in 1994 was the timely
completion of performance evaluations. The aim was that these Business Fundamentals would be reflected in individual managers' own annual objectives through
the mechanism of the 'Framework'. One member of the HR department said:
'implementing the Framework means that an employee's principal duties are
clearly deflned, with the Business Fundamentals against which the employee is
measured'. This links in very strongly with the focus within The HP Way on Management by Objectives (MBO). Outputs from the Framework process included job
profiles, ranking criteria to rank individuals' performance against others, level differentiators, and training and development plans. Closely connected with this was
the Total Quality Control process for reviewing and measuring quality. Part of the
HP ethos was giving people clear objectives, but allowing them freedom in determining how to reach these goals.
A third major initiative in place in 1994 was the Self-Development Scheme, aimed
at encouraging ownership of careers and self-development amongst employees,
with use of assessment centres, 'self-learning centres' and, at the senior level, 'lifelong portfolio career planning'. We found that the aim was to link training and
development into the needs of the business, and the 1994 study showed members
of the training department attended business meetings at least four times a year
1132
C. TRUSS
so that they could propose training solutions to particular business issues. This
accompanied the focus on lifelong, self-directed learning embodied in the SelfDevelopment Scheme. Because of the focus on building talent rather than recruiting it, there was a strong emphasis on the importance of training: "We cannot
really increase the number of people we have so there is a great need for more
leaning' (Line Manager, 1994).
The rewards system was closely bound up with the performance evaluation
system, the annual performance appraisal, and the ethos of The HP Way, which
explicitly states that recognition will be based on contribution to results. The
appraisal system included both assessing how people performed against their individual objectives, and a ranking system which was used to determine performancerelated pay Hewlett-Packard aimed to pay in the top quartile of its industry, but
the rewards structure was geared towards fostering long-term commitment to the
company and sustained rewards over time, rather than paying extremely high
bonuses: 'We want to bring in people who want a career, we pay good salaries, but
if you want to earn a lot of money selling computers, you work somewhere else
. . . we look for performance over time, that is the driving philosophy' (Senior
Manager, 1994). There was, therefore, an emphasis on fringe benefits rather than
bonuses, with profit sharing, stock purchase plans, pensions, and a holiday cottage
scheme. These were aimed at binding the employee to the company for the long
term, and were also available to all employees as part of the 'single status' culture
(i.e. everyone had equal rights to fringe benefits), the only difference being where
the company car cut in. Although there was this focus on binding people to the
company, pay was still very much geared around individual performance, with the
ranking system used as the means of differentiating levels of performance: 'salary
scales reflect performance' (HR Staff, 1994).
The main differences we noted between 1994 and 1996 are outlined below. By
1996, more recruitment was taking place (although some parts of the organization
were experiencing a recruitment freeze) and so we found that HR staff talked
much more at interview about the importance of recruitment, especially within
the context of 'building a pool of talent', bringing people in at the start of their
career and developing the skills they needed: 'It's incredibly difficult to recruit good
people with the skills that we require. In fact, they probably don't exist externally
anyway, so even if you brought in good people by today's standards, you would
still need to be able to develop them to where you wanted them to be' (Line
Manager, 1996).
Development continued to be a priority area in 1996; for instance, we found that
the HR function was attempting to plan ahead for skill development over the
coming two years through a series of brainstorming and workshop events with
managers to find out their business priorities. One example to come out of these
sessions was a recognition of the change in skill profile needed for the sales force
as they moved from managing a territory with multiple customers to managing a
relationship with one account customer. 'What we've done is we've tried to look
at managers about two years ahead and ask what sort of skills will individuals
need? . . . We've then tried to identify five key areas, what the deliverables should
be for that person in two years' time, what are the behaviours that person might
demonstrate' (HR Staff, 1996). In line with the tenets of The HP Way, in 1996
the company had introduced a scheme called 'Help Others Succeed' (HOS), aimed
Blackwcli Publishers Ltd 2001
1133
at providing managers with the skills to coach and develop their staff through their
careers.
In terms of the structure of the training function, much had been outsourced,
with the training department itself just providing basic management training in
The HP Way and induction training. There was also a new policy of charging for
training as an internal consultancy which further helped to focus attention on
priority areas. The role of the training function had changed very much into
that of training and development 'broker', with training professionals working
alongside line managers to develop tailored programmes to be delivered by outside
agencies.
In the area of career management, between 1994 and 1996, a new initiative called
the Flight Path Analysis had been introduced. Whereas, previously, the ranking
system had just been used to determine pay, through the Flight Path Analysis, top
('stars'), middle ('solid citizens'), and bottom performers ('passengers') and 'seedcorn' could be formally identified and this information could be linked into
the career management and training systems. Alongside this, a new scheme, the
Management Inventory, had also been brought in to track emerging talent within the
business units.
We also found that work had begun on developing new initiatives in the areas
of flexibility and work-life balance, following the emphasis placed on these
issues by the CEO, Lew Platt (Truss, 1999). For instance, one of the HR staff
explained: 'We have Mr Motivator and Steve Cramm in here; everybody's had
their blood pressure checked and their cholesterol level checked, and we've got
them all worrying about their health, because we think it's the single biggest thing
we can do'.
The flexibility issue was manifest, in part, through an increasing focus on the
use of flexible working contracts. Flexibility was not a topic on which we had
specifically focused when designing our research instruments, but it emerged as
important at HP in the second tranche of data collection. We found that the issues
of hot desking, outsourcing and subcontracting (up to 15 per cent in sales and
marketing), together with increasing numbers of employees working from home
emerged consistendy through the interviews with senior managers and HR staff.
There was an increasing emphasis on encouraging people to work from home, and
other forms of flexible employment: 'We're moving towards the core-periphery
model, and another dimension is that we also have a lot more flexible labour
than a few years ago . . . we have a lot more part-time work and job sharing' (HR
Staff, 1996).
This move was largely driven by business needs, for instance the need to provide
24-hour cover for customers, extending the working day through shift-working.
The move towards hot-desking was similarly driven by the need for front-line staff
to be based with the customer or work from home so that they could provide a
more immediate service. The implications of what this might mean for the company were just being raised at the time of our research.
From the data reported here, it is interesting to note the grouping of HR activities into segments based on outputs, rather than functions, as traditionally analysed
within the HRM literature (i.e. recruitment, selection, training, etc.) Thus, from
the firm's perspective, individual HR 'functions' are disaggregated and bundled
together as a means of achieving a particular goal. In this way, 'training' or
Blackwcli Publishers Ltd 2001
1134
C. TRUSS
'appraisal' are not viewed as activities in their own right, but as contributory
strands within a number of different programmes and initiatives, where outputs,
such as achieving individual and corporate objectives, are the main driver and
organizing factor. This does raise the question of whether academics, ourselves
included, are approaching the study of HRM in the most appropriate way
The Enactment of HR Policies: Employee Experiences
It is here that we start to go beyond the rhetorical level, which has been the focus
of much of the 'best practices' literature, and ask: what is really going on in HP?
The quantitative data relevant to this section are presented in table I.
Firsdy, we found evidence that the philosophical statement. The HP Way, was
embedded in the organization, and acted as a key driver for people's behaviour;
reference to it was a regular feature of organizational discourse at both time
periods. Typical comments were: 'you will never progress as a manager in this
company unless you practice management consistent with The HP Way' (Senior
Manager, 1994); 'The HP Way . . . is the ethos' (Operating Core, 1994).
However, we found that the underlying values and beliefs expressed in The HP
Way were open to differing interpretations (McGovern and Hope-Hailey, 1997).
For instance, when we carried out the first tranche of data collection in 1994, we
found that the belief had been widely held among employees that The HP Way
meant jobs for life, even though this was not explicit, and so the round of redundancies that took place in the late 1980s had been perceived as a great shock, and
went some way towards undermining the psychological contract between firm and
employees (Gratton et al., 1999a; Laabs, 1993), as evidenced in some of the interviews, for instance: 'During the downsizing, people thought The HP Way had gone
. . . HP being Mr Big and Nasty' (HR, 1994).
Another theme that was just beginning to emerge as we collected data in 1996
was the impact that the move towards fiexible working was having on The HP
Way and on the nature of the employment contract. Glearly, this was an issue that
was causing some concern to the HR department:
We don't socialize any more, communications are becoming very difficult, they
[employees] don't get the feeling they belong to Hewlett-Packard, they either
belong to their customer or they belong to themselves, and I think there are
loyalty issues around that. (HR Staff, 1996)
Purcell (1999) similarly noted that around three-quarters of HP's employees at
their Bristol manufacturing site were agency employees excluded from The
HP Way This notion of differing forms of relationships between individuals
and organizations raises vital issues about the boundaries of human resource
management and the limits of managerial control strategies. We return to this
theme later.
The strength of the value-set expressed in The HP Way was highlighted when
we discussed recruitment at the interviews. Typical comments were; 'one of our problems is that we're quite clone-like. We hire people in our own mould' (HR, 1994);
'you can tell when they walk through the door whether they are an HP person'
(HR, 1994). Thus, the ideology expressed within The HP Way is that of achieving employee commitment through shared values; the downside of this is that individuals with a different value-set cannot survive at the company, regardless of their
1135

Table L Individual experiences of HRM, HP and other companies compared
No.
Tear
Statement
HP
Others
statistic
vvv
\l t'Lv t vj
%
agree
Mean
Standard
error
agree
Mean
Standard
error
1994
1996
My organization
recruits the people it
needs to meet its goals
74.8
71.6
2.220
2.274
0.056
0.065
49.6
49.3
2.692
2.746
0.026
0.028
7.64
6.62
1994
1996
Days training this

year: none
13.7
21.9
2.363
2.289
0.064
0.074
29.0
34.5
2.148
2.049
0.028
0.029
3.08
3.00
1994
1996
Days training this

year: 10 or more
10.8
13.9
2.363
2.289
0.064
0.074
12.2
10.3
2.148
2.049
0.028
0.029
1994
1996
I receive the training

I need to do my job
well
45.8
45.5
2.701
2.770
0.062
0.064
39.0
31.5
2.988
3.161
0.027
0.027
3.08
3.00
4.24
5.61
1994
1996
The appraisal system

enables an accurate
assessment of people's
strengths and
weaknesses
44.9
40.4
2.893
2.933
0.071
0.068
33.4
35.1
3.235
3.145
0.031
0.029
4.41
2.85
1994
1996
My pay is fair
compared with others
doing a similar job in
other organizations
41.8
30.0
2.836
3.084
0.064
0.071
40.3
31.6
2.947
3.247
0.031
0.032
5.61
2.11
1994
1996
My pay is fair
compared with others
doing a similar job in
my organization
41.6
45.1
2.981
2.883
0.076
0.082
53.2
45.0
2.756
2.963
0.030
0.032
2.75
0.91
1994
1996
The rewards I receive

are not fair in relation
to my contribution
27.9
26.1
3.181
3.251
0.071
0.075
41.6
38.9
2.841
2.891
0.028
0.030
4.45
4.46
1994
1996
The rewards I receive

are directly related to
my performance at
work
40.5
43.5
2.967
2.836
0.070
0.069
31.4
27.4
3.228
3.286
0.028
0.030
3.46
5.98
1994
1996
'Satisfied' or 'very
satisfied' with career
management
29.1
34.8
3.127
2.965
0.066
0.070
25.4
29.7
3.327
3.134
0.029
0.027
2.77
2.23
10
1994
1996
I do not have the

opportunities I want
to be promoted
33.2
31.4
2.958
3.063
0.071
0.075
48.3
41.3
2.673
2.789
0.030
0.028
3.70
3.43
jVbte: Scale: 1 = strongly agree, 5 = strongly disagree.
potential contribution. As Guest (1999, p. 6) notes: 'you either have to buy wholeheartedly into the culture or get out'.
Table I shows that, in the questionnaire survey in 1994, 75 per cent of respondents agreed with the statement, 'the organization recruits the people it needs to
meet its goals', compared with 72 per cent in 1996. These were far higher than
the figures of 50 per cent in 1994 and 49 per cent in 1996 obtained from the six
Blaekwell Publishers Ltd 2001
1 136
C. TRUSS
comparator organizations, and suggest a very positive perception of the effectiveness of recruitment on the part of employees. This was summed up by one line
manager at interview in 1996: 'by and large, we've got pretty good people'. Thus,
the outcome of the recruitment process, in terms of staff calibre, is perceived to be
positive. This may, in part, reflect the firm's tendency to recruit similar personalities, comfortable with each other's personal style. However, the actual process of
recruitment was not viewed as effective at either time points by interviewees from
the HR department: 'we have lost CVs in the past and interviewed people for the
wrong job, not many, but it's embarrassing' (HR Staff, 1994).
With regard to individual training and development, item 2 in table I shows that
more Hewlett-Packard employees had, in practice, received at least some training
in the current year than the average for the other six companies, which fits with
Huselid's (1995) criteria for High Performance Work Practices. This generally
positive view was reflected in several of the interviews: 'training is excellent both
from a technical and an interpersonal standpoint' (Operating Core, 1994); 'development is very good . . . you can go to Personnel and have your skills assessed and
they will suggest new ways of doing things' (Operating Core, 1994).
However, when we probed beneath the surfkce, we found a number of more
negative features of training at HP We noted earlier that a system of charging
business units for training had been introduced between the two time periods.
At interview, we learned that some managers were more prepared to allocate
funds for training than others. Consequently, managers were acting as a powerful
mediator between the individual and the training and development provision
of the company Some individuals were unable to attend courses and, at interview,
commented on the perceived unfairness of this situation: 'the pressure is so
much on doing the day job, training is at the bottom of everybody's list; it is
perceived as a nice-to-have, but is it really important?' (Operating Core, 1996);
'development is the stumbling block that everyone runs into . . . like training, it gets
left behind because there are too many other things happening' (Line Manager,
1994).
Table I also shows that the proportion of those receiving no training had risen
from 14 per cent to 22 per cent over the two-year period, accompanied by a slight
increase in the number receiving more than ten days' training. Taken together with
the implications of the budgeting allocation discussed above, this perhaps suggests
that training and development were increasingly being targeted at particular
groups of employees rather than the employee cohort as a whole. We return to
this theme later, when we discuss appraisal.
The questionnaire data in table I also show that, despite the focus on training
and developing talent from within, fewer than half of Hewlett-Packard respondents felt they had had the training they needed to do their job well, although this
was slightly more than the average for the other six companies (item 3 in table I).
This illustrates the point that, even though a company might be carrying out a
large quantity of training, the quality of that training may not be appropriate for
the jobs people carry out. It is therefore insufficient to look simply at measures
of the quantity of training an organization carries out when assessing the quality
of training provision as has been done in some of the Best Practices studies
(Huselid, 1995).
With regard to performance appraisal, we found that formal performance appraisal
took place annually for each employee but that, informally, people were continu Blaekwell Publishers Ltd 2001
1137
ously appraised. This is in line with Huselid's (1995) High Performance Work Practices. Some typical interview quotes were: 'my experience of appraisal is formally,
annually, continually' (Operating Core, 1996); 'nothing comes as a surprise at the
formal performance evaluation' (Operating Core, 1994). This is in line with the
ethos of" The HP Way and the stated policy of Management by Objectives. We
also found evidence in the interviews that performance evaluation was taken very
seriously by many managers in the company. As one manager said: 'HewlettPackard takes Performance Evaluations seriously, we are measured on it, it goes
on your file and it follows you around' (Line Manager, 1994).
However, again, once we tapped beneath the surface and asked in the questionnaire whether the appraisal process enabled the organization to accurately
assess people's strengths and weaknesses, fewer than half of respondents agreed
in either Hewlett-Packard or the other organizations. These figures were achieved
despite Hewlett-Packard's espoused focus on performance management and the
importance attached to the appraisal process, and suggest that simply finding out
whether an organization has an appraisal system is not an adequate means of
assessing the quality of appraisal. We found some clues as to the reason for this in
the interviews:
In theory, appraisal is very good; in practice, it is not. The rules of appraisal at
HP are that they should, 1) not be pre-written; 2) not contain any surprises; 3)
always end in agreement. These rules are not always followed. This happened
to me; my first appraisal was pre-written . . . I know of others who have disagreed with their appraisals and who asked for them to be amended, and
nothing had been done. (Operating Core, 1994)
Ranking . . . has become a real political football in the company . . . I think it's
failed because people haven't been clear about setting objectives and explaining measures. (HR StafT, 1994)
A number of themes emerge from these comments. Firsdy, the line manager plays
a key role in enacting and interpreting appraisal policy; an individual's experience
of company policy is, inevitably, coloured by the way the manager carries out the
appraisal. Secondly, the ranking system in use in the company appeared to be at
odds with the emphasis in The HP Way on teamworking.
HP's stated policy was to relate rewards closely to performance. Their relative
success at this was reflected in the questionnaire data (table I, item 8), which
shows that far more Hewlett-Packard respondents believed the rewards they
received were directly related to their performance than in the other companies,
although still fewer than half However, individual perceptions clearly were that
salaries at HP were falling compared with other organizations, as the numbers
agreeing that their pay was fair compared with that of people working in other
organizations fell from 42 to 30 per cent over the two-year period. A similar fall
was noted in the other organizations. This was the subject of comment in many
interviews:
If it's not remedied, it's going to be a huge problem. It will be a quality problem,
because we'll end up with the people who can't go anywhere else because they
can't get jobs. (Senior Manager, 1996)
1138
C. TRUSS
As discussed earlier, part of the HP ethos was that the company would adhere to
a single status, so that salaries and benefits were pegged to the same level across
the whole firm. In 1994, this was regarded as a positive benefit for the company
but, by 1996, was viewed by some as a millstone dragging pay levels down to
uncompetitive levels for areas such as computer sales:
We're not convinced we will continue to have just one sales range in the future
because there is some evidence that particularly in our CSO business, sales
people are being paid more, and we may need to create a separate range for
those people, but this has enormous political implications, which is why we're
holding out on that. (HR Staff, 1996)
The increasing levels of pressure on people brought about by the company's rapid
growth with a static headcount, which is discussed further in the following section,
was refiected in people's apparendy increasingly negative views on rewards that
we noted between 1994 and 1996. One typical comment at interview was:
It [profit sharing] is motivational, but everybody knows the blood, sweat and
tears that everybody is putting in these days. . . Yes, it's a motivation, but then
it had better be there because we are all bloody tired of running at 200 miles
per hour. (Line Manager, 1996)
Following the delayering and downsizing initiatives in the late 1980s, career management issues had come to the fore, with the introduction of self-managed careers,
where the employee was expected to take responsibility for their own career progression within the company We found in the interviews that perceptions of career
management and individuals' career prospects within HP were quite negative:
Self motivation is an HP word, but it is difficult to divert into another area even
if you are self-motivated. (Operating Core, 1994)
As table I, items 9 and 10 show, perceptions of career management within both
HP and the other companies were quite negative, with only around one-third of
respondents satisfied with career management.
Traditionally, career management at Hewlett-Packard had been largely informal with no formalized career planning system in place, and worked on the basis
of people making themselves 'visible' through self-promotion:
People are expected to own and manage their own career but often haven't
the power to do so. Promotions are through networking, meeting people in
the coffee area rather than during the interviews. Networking is part of the
culture. It's who you know and how you network that will get you on in HP.
(HR, 1994)
Despite the introduction of more formalized career management systems by 1996,
it was still clear that the average perception was that informal channels continued
to predominate: 'Network is the primary rule. It's not just a matter of being competent and performing well but other people who could effect a move for you need
to know that that is the case' (HR Staff, 1996). The difficulties associated with
1139
operating within such an informal system in a large organization were explained

by one interviewee: 'about ten years ago, you knew everybody's name here. It was
much smaller. Now I don't know half the people here. Some jobs might be offered,
and I won't know about it' (Operating Core, 1996). One senior manager explained
how the development process typically worked:
It sort of works like this; every now and again, various groups around HP will
meet and various names will drop into an unwritten list. . . it's a consensus thing
. . . it has enormous drawbacks, not least being in view of diversity efforts.
(Senior Manager, 1996)
This informal approach may not be directly at odds with HP's espousal of selfmanaged careers, but it would appear to be at odds with HP's aspiration to be a
meritocracy (how can you be sure the best person gets the job by relying on wordof-mouth in a large, fiat organization?) as well as conflicting with the emphasis on
diversity (networking notoriously favours some people in the working population
at the expense of others).
In summary, if we look at the quantitative and qualitative data on individuals'
experiences of' HRM, a number of key themes emerge. Firsdy, we saw that, in
most cases, employees at HP felt significantly more positive about their employment than those at other organizations. However, we also found through both the
questionnaires and the interviews that, even at HP, experiences were not uniformly
positive. We found substantial differences between the 'rhetoric' of what the HR
function was seeking to achieve, and the 'reality' experienced by employees, for
instance, in the area of self-managed careers, appraisals and recruitment. Through
adopting a holistic, case-based methodology, we have been able to show that
even HP cannot get it right all the time. We have also been able to track changes
over the two-year time span of the research, and found that change takes
place relatively slowly in the area of HRM (Cratton et al., 1999a, 1999b). In particular, in the area of career management, we found that informal processes of
networking continued to override formal career management processes. This highlights the role of the line manager as mediator between formal policy and individual experiences. In the next section, we move on to consider outcomes at the
individual level.
Outcomes at the Individual Level
In this section, we look at the question of how employees actually felt about
working for Hewlett-Packard. The relevant quantitative data are presented in table
II. The essential questions here related to morale, intent to turnover and motivation to perform.
We asked two questions about employee morale in the questionnaire survey in
1996 (items 1 and 2). Over half of respondents in both Hewlett-Packard and the
other companies stated that morale was 'worse' than two years ago, 52 per cent
and 63 per cent respectively Significandy more Hewlett-Packard respondents than
in the other organizations agreed that 'morale is high', 35 per cent compared with
14 per cent, but this still represents around one-third of employees and, taken with
the earlier figures, suggests that overall levels of morale in Hewlett-Packard were
quite low, although not as low as in the other organizations. These figures need to
be explored in relation to the findings presented below.
1140
C. TRUSS
Table II. Individual outcomes, HP and other companies compared

No.
rear
Statement
HP
%
Others
Mean
agree
Standard
error
t
statistic
Mean
Standard
error
agree
1994
1996
Morale is worse than

2 years ago
N/a
52.3
3.436
0.070
62.7
3.679
0.026
3.25
1994
1996
Morale is high
43.3
34.5
2.865
3.046
0.064
0.076
10.0
13.9
3.926
3.658
0.026
0.027
15.36
7.56
1994
1996
This organization
really inspires the
best in me by way of
job performance
53.0
51.4
2.600
2.549
0.067
0.073
20.0
24.0
3.406
3.200
0.027
0.026
11.16
8.39
1994
1996
I am willing to put in
a great deal of effort
beyond that normally
expected in order to
help this organization
be successful
91.6
90.8
1.656
1.705
0.046
0.055
78.7
74.9
1.990
2.116
0.026
0.024
6.32
6.88
1994
1996
I want to stay with

this organization for
the rest of my career
N/a
2.175
0.072
2.843
0.033
8.46
1994
1996
How likely is it that

you will leave this
organization for
another employer in
the next 2 years? (%
likely or very likely)
N/a
3.912
0.077
3.432
0.035
5.66
1994
1996
Pressure of work has

inereased in the past
2 years
N/a
1.696
0.060
1.861
0.026
2.52
1994
1996
Working hours have

increased in the past
2 years
N/a
2.111
0.066
2.542
0.022
6.21
1994
1996
There is less job

security now
compared with 2
years ago
N/a
3.632
0.070
3.783
0.025
2.03
66.0
11,3
89.5
66.1
61.4
N/a
N/a
41.0
N/a
23.9
N/a
80.9
N/a
39.5
N/a
64.8
Nok: Scale: 1 = strongly agree, 5 = strongly disagree.
Two of the questions were direcdy related to motivation to perform and, for both
of them, Hewlett-Packard scored far more highly than the other organizations at
both time points (items 3 and 4). Almost all respondents in HP agreed that they
were willing to put in a great deal of effort to help their organization be successful, although only just over half felt HP inspired the best in them by way of job
performance. This generally positive view of HP was confirmed by the data on
intention to quit (items 5 and 6), where far more HP respondents wanted to stay
with their company for the rest of their career than was the case at the other or Blackwell Publishers Ltd 2001
1141
ganizations. We therefore found some potentially conflicting messages from the

questionnaire data, where people were very highly motivated, but felt that levels
of morale were low. One possible explanation for this lay in the findings on the
subject of stress and pressure. As items 7 and 8 show, people's perceptions of both
pressure and stress had increased far more at HP over the two years to 1996 than
at the other organizations. Indeed, the topic of stress and the sheer amount of
work people felt they had to do was a recurring theme at the interviews carried
out in 1996. One typical comment was: 'I think the issue we face is that we downsized so dramatically that we got away with it for a few years, but now we're struggling. I do four jobs now' (Manager, 1996).
Partly in response to an awareness of these issues, the HR Department had
begun to put in place various initiatives to combat levels of stress, as we saw earlier.
However, some employees at interview expressed their scepticism about the
company's actions and intentions: 'We work until 7.30pm at night, we work on a
Sunday, because there aren't enough people, you have a head-count freeze on. We
accept all that. But don't keep teDing us you're making the work-life balance better'
(Operating Core, 1996).
We therefore have a picture emerging of a company that inspires great loyalty
and motivation in its employees, but where levels of stress and pressure are rapidly
increasing to what would appear to be an unacceptable level with associated poor
morale.
Outcomes at the Organizational Level
In this section, we look at organizational performance in terms of employees' perceptions of company effectiveness, and also at firm financial performance. We
measured this along two dimensions, return on assets and profit per employee,
which is basically a measure of firm efficiency. These are both accounting measures, which have generally been regarded as inferior to capital market measures
(Huselid, 1995), but we were restricted by the fact that Hewlett-Packard is a whollyowned subsidiary of a US company and is not quoted on the London Stock
Exchange, so we could not calculate measures such as Tobin's q, which is considered a good measure of firm financial performance (Hirschey and Wischern,
1984). We measured both return on assets and profit per employee for the period
1994-1997 and, additionally, took two points of comparison for each. Firstly, we
calculated the mean return on assets and profit per employee for eight key competitors in the same industry as Hewlett-Packard and, secondly, we did both calculations for a sample of ten randomly chosen companies from the London Stock
Exchange FTSE 100 index.
As tables III and IV show, Hewlett-Packard outperformed both its competitors
and the ten FTSE 100 companies on both measures over the whole period. The
only exception was profit per employee in year ending 1995, where results were
the same for both Hewlett-Packard and the FTSE 100 companies. The only discernible trend picked up in the analysis was Hewlett-Packard's steadily increasing
return on assets between 1995 and 1997.
With regard to perceptions of organizational effectiveness, we found that the
views of Hewlett-Packard employees were much more positive at both time points
than those of employees in the other companies. Items 4 and 5 in table V show
that a significantly larger percentage of HP employees believed their company was
better placed than its competitors to meet challenges, and that their organization
1142
C. TRUSS
Table III. Return on assets (%), 1994-1997
HP
Rivals
FTSE 100
1994
1995
1996
1997
17.0
9.7
7.2
12.5
7.8
9.2
19.1
3.4
22.6
5.6
11.6
10.7
Table IV Profit per employee ('OOOs), 1994-1997
HP
Rivals
FTSE 100
1994
1995
1996
1997
20.4
18.2
10.6
13.3
9.8
13.4
25.1
1.2
17.3
21.2
5.8
19.3
Table V Organizational outcomes - HP and other companies compared

No.
Year
Statement
HP
%
Others
Mean
agree
Standard
error
agree
Mean
Standard
error
1994
1996
My boss is good at
his/her job
59.5
64.2
1.484
2.376
0.070
0.083
62.1
65.4
2.459
2.351
0.027
0.027
0.33
0.28
1994
1996
Work is carried out

efficiently
57.9
49.4
2.547
2.730
0.055
0.074
51.8
49.9
2.696
2.705
0.024
0.025
2.48
0.33
1994
1996
Managers take the

long-term view
35.3
32.0
3.042
3.093
0.069
0.080
28.7
35.1
3.219
2.963
0.027
0.027
2.39
1.53
1994
1996
My organization is
better placed than its
competitors to meet
the challenges of the
1990s
91.2
80.5
1.772
1.994
0.045
0.062
59.5
61.3
2.402
2.343
0.022
0.023
12.58
5.25
1994
1996
I believe my
organization will
achieve its aims
87.8
87.9
1.934
1.908
0.043
0.052
71.7
75.7
2.251
2.132
0.020
0.020
6.68
4.03
1994
1996
My organization is
flexible enough to
cope with change
80.0
79.1
2.107
2.064
0.057
0.066
60.1
65.3
2.520
2.355
0.024
0.023
6.68
4.16
1994
1996
I have confidence in
management's ability
to copy with an
unforeseen crisis
62.0
65.9
2.474
2.439
0.062
0.074
46.8
36.7
2.817
2.993
0.026
0.028
5.10
6.96
1994
1996
People are afraid of

taking risks
47.4
42.8
2.758
2.850
0.068
0.078
59.3
47.8
2.446
2.654
0.024
0.025
4.33
2.39
Note: Scale: 1 = strongly agree, 5 = strongly disagree.

1143
would achieve its aims, than was true in the other organizations. Significantly more
HP employees also believed that their organization was flexible enough to cope
with change than was the case in the other companies.
Respondents were also asked about their perceptions of management effectiveness (items 1, 2 and 3). The fact that perceptions at Hewlett-Packard were, on the
whole, somewhat more negative than, or similar to, the other organizations was
surprising. The low numbers agreeing in all organizations that managers take the
long-term view perhaps reflects the short-term pressures referred to earlier. With
regard to perceptions of people's knowledge, skills and abilities within the firm, it
was striking that fewer than half of employees in Hewlett-Packard, 49 per cent in
the 1996 survey, agreed that work was carried out efliciently, whilst fewer than twothirds thought their boss was good at his/her job.'^'^
DISCUSSION
In this discussion section, we focus on three main areas: the data and the empirical aspects of the findings, the theoretical implications and, finally, the methodological issues arising out of the study.
Firsfly, from the point of view of the data themselves, we found that, despite
Hewlett-Packard's financial success and apparent application of 'High Performance Work Practices' in areas such as appraisals and training and development,
the results obtained were not uniformly excellent; in fact, some were highly contradictory. For instance, despite an espousal of the value of training and development from within, fewer than half of employees believed they received the training
they needed to do their job well. Similarly, despite a strong management by objectives system, fewer than half felt that the appraisal system enabled an accurate
assessment of strengths and weaknesses to take place. Although the company
aimed to pay in the upper quartile, fewer than one-third felt their pay was fair
compared with others doing similar jobs in other organizations (although this may
be due to individuals' perceptions). Whilst the company espoused career management through programmes such as the management inventory and flight path
analysis, just one-third of questionnaire respondents were satisfied or very satisfied with career management. These are all examples of a strong disconnect
between the 'rhetoric' of human resource management as expressed by the human
resource department, and the 'reality' experienced by employees (Legge, 1995;
Truss et al., 1997). The findings show that even a highly successful company with
a strong track-record of 'excellence' in people management practices cannot
achieve all-round success. Perhaps this is unavoidable, and lends some support to
the argument put forward by Keenoy (1999) that paradox and contradiction are
inevitable features of HRM.
The second theme to arise out of the data was the conflicting evidence on outcomes at the individual and organizational levels. Whilst staff were very loyal,
generally expressing low levels of intention to quit, this was coupled with feelings
of increasing stress and pressure of work and lowered morale over the time period
we studied. This may, in part, be due to their realization that the situation was likely
to be similar in other organizations. Also, whilst the perception was that the Organization as a whole was successful compared with its competitors and there
was faith in the ability of the organization to achieve its aims, only around half of
1144
C. TRUSS
respondents in 1996 agreed that work was carried out efficiently, and only onethird agreed that managers take the long-term view. Whilst more than treequarters of respondents felt the organization was flexible enough to cope with
change, fewer than one-third disagreed with the statement that 'people are afraid
of taking risks'. Thus, pursuit of the notion that we should examine a broader range
of outcomes than simply financial performance has led us to some seemingly paradoxical and incompatible conclusions. One possible interpretation of the disconnect between perceptions of organizational and individual performance might be
that people had faith in the organization as a whole due to its sustained financial
success compared with its competitors, but that, on a day-to-day basis, were able to
see for themselves that work was not always done efficiently and that managers operated on a more short-term basis. Again, this shows that even a successful company
cannot be uniformly excellent in the way it is organized and managed.
From a theoretical perspective, the data have also served to shed some light on
our understanding of the linkages between human resource management and performance. Firstly, the resource based view argues that having unique, inimitable
resources and the effective deployment of these resources are key to achieving sustained competitive advantage (Barney, 1991, 1995). However, our data show that
the influence of the external environment should not be discounted to the extent
suggested by the resource based view. This can be illustrated by the way HewlettPackard's environment was becoming increasingly competitive and hostile, leading
to the setting of ever more challenging targets, meaning that loyal and committed
employees felt obliged to work longer and longer hours under increasing pressure
to reach them. At the same time, both the financial and personal rewards they had
been used to receiving at Hewlett-Packard, for example, stable employment, highlevel pay and benefits, and an upward career trajectory, were being eroded due to
cost-cutting measures, such as delayering. This shows the way in which events and
conditions in the external environment can impact negatively on the deployment
of an organization's human resources.
Similarly, the resource based view suggests that synergy, or fit, within the HRM
system will have a beneficial effect on financial performance. Our data have shown
that Hewlett-Packard did not manage to achieve fit across all areas of the HRM
system, and yet still managed to achieve high levels of financial performance.
Our findings did lend strong support to the argument put forward by Mueller
(1996) that the informal organization has a key role to play in the HRM process,
such that informal practices and norms of behaviour interact with formal HR
policies. This draws on ideas well established within organizational sociology concerning individual agency and group dynamics. These can act to either enable or
constrain the realization of formal organizational policy. What we found in HP
was that, although the formal policies turned strongly around the notion of
measuring and rewarding individuals' work performance against targets that were
closely related to the company's objectives, informally what counted was visibility
and networking if people wanted to further their careers. Despite the increased
focus at the policy level in 1996 on formalized career management, the traditional,
informal method of career management that had evolved within the company
continued to prevail. This highlights, firstly, the importance and strength of the
informal organization as mediator between policy and individual and, secondly,
the slow speed of change within organizations and the length of time it takes for
organizational initiatives to become embedded (Gratton et al., 1999a, 1999b).
1145
This nexus between formal and informal organization is something that cannot
be captured within the High Performance Work Systems literature, with its exclusive focus on formal policy As Purcell (1999, p. 36) notes: 'the claim that the bundle
of best practice HRM is universally applicable leads us into a Utopian cul-de-sac
and ignores the powerful and highly significant changes in work, employment and
society'. Thus, any given policy, or bundle of policies, will be interpreted and
enacted differently in different organizational contexts, in the light of their culture,
structure and administrative heritage. To this important role of context we can
further add the role of each individual manager as agent, choosing to focus his or
her attention in varying ways.
Finally, we turn to the methodological implications of the study Firstly, we have
seen the value of carrying out an analysis using multiple methods and multiple
respondents. Had we merely relied on questionnaire data obtained from a single
informant (the HR director, as in other studies) and carried out a quantitative
analysis linking performance with human resource processes, we would have concluded that this organization was an example of an organization employing 'High
Performance Work Practices' to good effect. However, employing a contextualized,
case-study method has enabled us to see below the surface and tap into the reality
experienced by employees, which often contrasts sharply with the company
rhetoric. We are not seeking to assert that Hewlett-Packard is not successful;
indeed, our data show that it is very successful along many dimensions; what we
are suggesting, however, is firsdy that there is a gap between company rhetoric and
employee perceptions and, secondly, that it is possible for confiicting results to be
obtained that merit further investigation and which would not emerge through
conventional, quantitative analysis from a single respondent.
The fact that the study was longitudinal has also enabled us to start the process
of tracking change over time. In some cases, very little change was found to have
taken place and, in others, the change was quite considerable. For instance, there
was a marked move towards the use of more flexible employment contracts
between the two time points, together with more fiexible working arrangements,
for example, hot desking The rapid emergence of contracting as a major issue
between the two time periods raises some interesting questions about the Buid
nature of organizational boundaries, and the nature of the attachment of individuals to the organization. The HP Way as a tool of cultural control is clearly
being stretched when individuals are no longer part of the formal organization.
We also need to consider the boundaries of human resource management. Matusik
and Hill (1998) point out that contingent workers play a significant role in generating firm perfbrmance. If such workers are outside the remit of the company's
formal HR policies, this raises the question of the extent to which HR is actually
able to infiuence those behaviours that contribute to performance across all
members of staff, and also what exactly it is that we should be looking at when
we seek to measure the relationship between HRM and performance.
We have therefore found a rich tapestry of data and experiences from our examination of Hewlett-Packard. The conflicting results we have found and the discrepancies between rhetoric and reality suggest that we need to revisit some of the
theoretical frameworks that have been used to model the relationship between
HR processes and outcomes. Approaches such as the resource based view, human
capital theory and the contingency perspective only appear to capture one part of
the equation, since they focus on the issue of how inputs in terms of company
Blackwcli Publishers Lid 2001
1146
C. TRUSS
human resource policies are turned into outputs in the form of improved performance at the individual and organizational levels. What this study has shown is
that the concept of agency also needs to be considered. Guest (1997) touched on
this when he suggested that intermediary variables such as motivation act as a
rationale for why human resource processes might be transformed into individual
outputs and hence firm performance. We should not assume that simply having a
particular human resource policy will necessarily lead to a desired outcome. Problems of implementation and interpretation occur alongside people's sometimes
unpredictable responses and actions.
CONCLUSION
There are, inevitably, some limitations to this study Firstly, the analysis is based
on just one case-study, and there is the usual problem of generalizability, particularly in view of the fact that Hewlett-Packard is acknowledged as being a successful
organization. Secondly, through the use of qualitative techniques, many of the
dimensions investigated cannot be easily replicated. Thirdly, not all relevant
aspects of HRM were investigated through the data collection; some themes,
which were later found to be highly significant, only emerged by serendipity
through the interview programme. These clearly need further, systematic, investigation. However, this paper has brought to light some important issues for those
pursuing quantitative research in this area, notably the importance of adopting
broad measures of performance at the individual and organizational levels, and
of examining HRM not only at the level of policy, but also of practice.
A number of findings have emerged from this study Firstly, we have seen that
we cannot consider how HRM and performance are linked without analysing,
in some detail, how policy is translated into practice through the lens of the
informal organization. Secondly, we have discovered that the notion of what constitutes 'good performance' needs to be disaggregated, and that we need to
compare and contrast performance measures at a variety of individual and organizational levels if we are to gain a real insight into what 'performance' means.
Thirdly, we have raised the important question of what exactly we should be
looking at when we seek to measure 'human resource management' and link it to
performance. The issues around the changing boundaries of the organization,
together with the significant role played by the informal organization, suggest that
the traditional functional approach may be redundant in the face of organizational realities.
NOTES
*I would like to thank Norvald Instefjord for help with the financial analysis and statistics,
and Christine Edwards, Veronica Hope-Hailey and Jean Woodall for helpful comments
on an earlier draft. I would also like to thank the anonymous referees for their thoughtful
insights.
[1] Cady Fiorina's recent appointment as CEO and the corporate restructuring she has
put into place will undoubtedly mean that the company will have changed further
since this study was conducted.
Blackwdl Publishers Lid 2001
1147
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Journat of Management Studies 38:8 December 2001

COMPLEXITIES AND CONTROVERSIES IN LINKINC HRM WITH

Kingston Business School, Kingston University

Our understanding of the way in which human resource management (HRM) is

HUMAN RESOURCE MANAGEMENT AND PERFORMANCE

HRM AND ORCANIZATIONAL OUTCOMES

increased commitment and competence at the individual levels, cost-effectiveness

agement participation represent 'sophisticated' HRM. Huselid (1995) extended

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTGOMES

HRM AND ORGANIZATIONAL OUTCOMES

We cannot consider people management policy at Hewlett-Packard without

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTCOMES

Days training this

Days training this

I receive the training

The appraisal system

The rewards I receive

The rewards I receive

I do not have the

jVbte: Scale: 1 = strongly agree, 5 = strongly disagree.

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTCOMES

operating within such an informal system in a large organization were explained

Table II. Individual outcomes, HP and other companies compared

Morale is worse than

I want to stay with

How likely is it that

Pressure of work has

Working hours have

There is less job

Nok: Scale: 1 = strongly agree, 5 = strongly disagree.

HRM AND ORGANIZATIONAL OUTCOMES

ganizations. We therefore found some potentially conflicting messages from the

Table IV Profit per employee ('OOOs), 1994-1997

Table V Organizational outcomes - HP and other companies compared

Work is carried out

Managers take the

People are afraid of

Note: Scale: 1 = strongly agree, 5 = strongly disagree.

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTCOMES

HRM AND ORGANIZATIONAL OUTCOMES

B. (1994). 'Effects of human resource systems on manufacturing performance

and WISCHERN, D. W. (1984). Accounting and market-value measures of

Blackwell Publishers Ltd 2001

HRM AND ORGANIZATIONAL OUTCOMES

(1996). 'Human resources as strategic assets: an evolutionary resource-based

Blackwell Publishers Ltd 2001

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