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Effects of Human Resource Systems on Manufacturing Performance and Turnover

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* Academy o/ Managetnenl Journal 1994, Vol. 37. No. 3. 670-687. EFFECTS OF HUMAN RESOURCE SYSTEMS ON MANUFACTURING PERFORMANCE AND TURNOVER JEFFREY B. ARTHUR Purdue University Using an empirical taxonomy identifying two types of human resource systems, "control" and "commitmeni," this study tested the strategic human resource proposition that specific combinations of policies and practices are useful in predicting differences in performance and turnover across steel "minimills." The mills with commitment systems had higher productivity, lower scrap rates, and lower employee turnover than those with control systems. In addition, human resource system moderated the relationship between turnover and manufacturing performance. Long a …show more content…

These objectives, often stated in terms of desired employee characteristics, attitudes, and behaviors, are [or should be) derived from a firm 's overall business goals and may he moderated by factors internal and external to the organization (Schuler, 1992; Wright & McMahan. 1992). However, because these typologies have not been consistently measured, their validity and predictive power have not been assessed. Control and Commitment Human Resource Systems My earlier research (Arthur, 1992) is one of the first puhlished attempts to develop an empirical classification of firms based on human resource system characteristics. Applying a cluster analysis technique to data from human resource managers, I found that the variety of human resource policies and practices in 30 U.S. steel minimills could be meaningfully described by six clusters, or systems. Further, I grouped those systems into two broad categories hased on their characteristics and the functions they served and labeled them "cost reducers" and "commitment maximizers." To maintain consistency with previous research on human resource strategy (Lawler, ^ Minimills are relatively small steel-producing facilities in which metal scrap is melted in electric furnaces and continuously cast into a variety of shapes and grades of steel. Detailed discussion of minimills can be found in Barnett and Grandall (1986) and Hogan (1987). 672 Academy of ManagemenI

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