HUMAN RESOURCE MANAGEMENT,

CORPORATE PERFORMANCE AND

EMPLOYEE WELLBEING: BUILDING
THE WORKER INTO HRM
DAVID GUEST*

T wo main approaches to human resource management (HRM) are identied: one

focusing on the organisational concern for the relationship between HRM and
performance, the other mounting a critique of HRM. It is argued that both pay lip
service to, but largely neglect worker reactions to HRM. The case is made for building
the worker into the analysis of HRM, on the one hand, by incorporating worker attitudes
and behaviour in the study of the HRM-performance relationship, and on the other, by
paying serious attention to the association between HRM and worker-related outcomes.
Evidence is presented to suggest that worker attitudes and behaviour mediate the
HRM-performance relationship and that certain HR practices are associated with higher
work and life satisfaction. These practices include job design, direct participation and
information provision that are associated with higher performance; but work satisfaction
is also associated with equal opportunities, family-friendly and anti-harassment
practices. It is suggested that a more worker-friendly HRM can best be applied in the
context of a partnership or mutual gains framework.

HRM AND THE NEGLECT OF WORKERS

The view that people are an organisations most important assets and that their
effective development and deployment offers a distinctive and non-imitable
competitive advantage, has spurred interest in the effective management of
human resources. That interest has been enhanced by a growing number of
studies reporting a positive relationship between human resource practices and
corporate performance. In parallel, a number of writers have been critical of the
growing interest in human resource management (HRM) and of its impact on
workers. A feature of both advocates and critics of HRM is their neglect of direct
evidence about the role and reaction of workers. The aim of this paper is to
re-focus attention on the worker, in other words, to bring the worker centre-
stage in the analysis and study of HRM.

* Professor, Organizational Psychology and Human Resource Management, The Management

Centre, Kings College, University of London. Email: david.guest@kcl.ac.uk I would like to
acknowledge the support and hospitality of staff in the Discipline of Work and Organisational
Studies at the University of Sydney during my sabbatical visit and in particular David Grant and
John Shields who organised the workshop at which an earlier version of this paper was presented.
I would also like to thank Neil Conway who helped in the collection and analysis of the new data
presented in this paper.

THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 44, NO. 3, SEPTEMBER 2002, 335358
336 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

The neglect of workers in the analysis of HRM and performance is easier to

understand if we trace one stream of interest in the HRM-performance link to
business schools and the role of HRM in business strategy. While a narrow
unitarist view could argue that what is good for the organisation is good for the
worker, it is unlikely to cut much ice with those in Europe, Australia and indeed
in the USA who have approached the topic from an employment relations
perspective and within a more pluralist framework. Furthermore, the neglect of
employee attitudes and behaviour leaves partly unexplained the process whereby
HRM may have an impact on corporate performance.
Those writing from a critical perspective have focused much of their
attention on the business approach to HRM. General concerns about the
nature of HRM and its implications for workers can be variously captured in
distinctions between soft and hard HRM (Storey 1987), between a high road
and a low road approach (Milkman 1997) and between a more American uni-
tarist perspective and a European pluralist perspective (Guest 1994; Strauss 2001).
The assumption is that one is potentially better from a workers perspective than
the other.
Two main kinds of criticism are typically directed at management. The rst is
that managers too often take the low road, seeking efcient exploitation of human
resources rather than acting in partnership with workers in what the Americans
might term a mutual gains model (Kochan & Osterman 1995). In other words,
they fail to implement the sort of HRM that might engage the commitment of
workers. A second and more subtle criticism, raised in particular by a number of
British writers, is that even where a high road appears to be pursued, it is often
largely a sham and reects little more than the subtle use of HRM techniques
to support a careful but essentially manipulative management of organisational
culture (Legge 1995; Keenoy 1997). As a result, workers may feel committed and
involved, but they do so at the price of greater effort and at some cost in terms
of personal stress and quality of life. Either way, the implication is that HRM
exploits workers. However, as noted elsewhere (Guest 1999), this critique has
been presented without much evidence about how workers react to HRM.
In seeking to understand how HRM may affect performance and develop a
critical perspective which might be considered to reect a worker-oriented per-
spective, workers need to be placed centre-stage in the analysis of HRM. This
implies that while we can retain an interest in managerial outcomes, we need to
build into the analysis a stronger focus on employee-centred outcomes that may
or may not relate to corporate performance. The main aims of this paper are,
therefore, to extend our ideas about the focus of research on HRM to incorpor-
ate a worker-oriented perspective, explore the role of worker attitudes and
behaviour as intervening variables in the HRM-performance relationship and
identify the kind of HRM practices most likely to be associated with positive
worker outcomes.

THREE DIFFERENT PERSPECTIVES ON HRM AND PERFORMANCE

There is still no consensus in the literature about what we mean by HRM (Guest
2001). While acknowledging the potential importance of strategic perspectives,
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 337

of strategic contingencies and of a resource-based view of people management,

only limited progress can be made if we remain unclear about the forms of HRM
that may be linked to particular business strategies. It is possible to identify three
dominant approaches in dening the key way in which HRM might enhance
corporate performance, namely the high performance work system, the high
commitment system and the strategic t model. After reviewing the relevant
evidence about the role of the worker in these various models of the HRM-
performance relationship, a later section will develop what can be provisionally
termed a worker-friendly system. One implication of these distinctions is that
HRM becomes a broad generic term used to describe a range of possible
perspectives.

High performance work systems

The concept of a high performance work system covers a number of different
approaches. In The New American Workplace, Appelbaum and Batt (1994)
identied two main approaches in production systems. One was top-down
quality driven; the other more bottom-up and employee-centred. The former is
associated with the Japanese-inuenced lean production system, the latter builds
on an industrial relations tradition that emphasises some notion of partnership
between management and unions and has been captured in many respects in
Kochan and Ostermans (1995) mutual gains model. Appelbaum and Batt write
in general terms about the role of HRM but they spell out three main areas that
need to be addressed. These are selection, training and compensation and their
role is largely to support what could be termed a high involvement, high
discretion work system.
MacDufe (1994) takes this analysis a step further. He distinguishes between
the production system, work system and human resource system and makes the
important argument that they should each form coherent bundles of mutually
reinforcing practices. He also theorises about the key components of a bundle
of human resource practices based on what amounts to a variant of expectancy
theory. This suggests that high discretionary effort will be a product, rstly, of
workers skills and abilities, leading to an emphasis on selection and more
particularly training; secondly, of motivation, which requires incentives and
notably an appropriate nancial reward system; and thirdly, of sufcient
autonomy and discretion, which will be a function of work systems design. Issues
relating to job design, involvement and quality are seen by MacDufe as part of
the work system.
Both Appelbaum and Batt, and MacDufe, and indeed other early writers such
as Ichniowski, Shaw and Prennushi (1997) and Arthur (1994), are all concerned
with choices about production systems and conclude that an approach based on
a high involvement work system providing worker discretion and supported by
a set of appropriate human resource practices will usually result in superior per-
formance. It should be noted that all are concerned with manufacturing systems,
start from a concern for superior performance and focus on a limited range of
human resource practices designed to support the effective operation of a
particular production and work system. While there is some acknowledgement
338 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

by most of these writers, most notably by Appelbaum and Batt, that workers
themselves may have different priorities, reected in the case for a mutual gains
model, the primary focus of HR policy is on creating the conditions where the
social system will support the technical system. Worker concerns are not a top
priority and the starting point is the technical rather than the social system.

High commitment model

In some important respects, this manufacturing model can be contrasted with
a high commitment approach to HRM. This has rather different roots in
analyses of changing values and the need to engage or re-engage workers in their
work organisations and has been presented by writers such as Walton (1985),
Lawler (1986) and even Peters and Waterman (1982). Importantly, their
analysis is presented as relevant to all workplaces and in this sense offers a
universalistic model. Behind this approach to HRM lie a set of complex and not
always coherent arguments. One theme is that the traditional systems of control
no longer succeed in attracting, retaining and motivating the kind of workforce
many organisations need to compete effectively. At the same time, it is suggested
that expectations among an increasingly well-educated workforce are rising and
values relating to the centrality of work are changing, an argument that nds
some resonance in concepts such as Generation X (Tulgan 1996). As Walton in
particular has argued, there is therefore a need to move away from a top-down
command and control model to one based on high involvement and reciprocal
commitment. This reciprocal commitment implies a new kind of psychological
contract (Rousseau 1995) based on trust, fairness of treatment and delivery of
promises and therefore requires sophisticated human resource management. In
practice, this approach can entail applying to the whole workforce a set of
practices that in the past had been restricted to managerial and professional
workers. Part of the inspiration for this model in the 1980s was Japan with its
distinctive employment system emphasising, among other things, training,
security, internal labour markets and team-working. Peters and Waterman
(1982), Ouchi (1981) and others offered a distinctively American version of this,
drawing partly on elements of the human relations tradition and driven by an
emphasis on the importance of managing organisational culture to ensure high
commitment.
Human resource practices within a high commitment model are built around
attempts to manage organisational culture and ensure that workers operate
effectively within and for this culture. A good example of this from the UK can
be found in the distinctive variant of the Japanese model developed at Toshiba
(Trevor 1988) and Nissan (Wickens 1987). In these UK plants, human resource
practices place great emphasis on selection, training, communication, employ-
ment security and internal promotion, a range of involvement and quality
improvement practices and team-working and team-based job design. It is worth
noting again that both examples are drawn from manufacturing. The outcome
of this is a workforce that displays high commitment and motivation, high exi-
bility and high quality (Guest 1987). This approach has given rise to extensive
criticism for its implicit manipulation of the workforce (Legge 1995; Garrahan
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 339

& Stewart 1992). While these criticisms have some force, there are still questions
about whether or not working under these conditions is preferable to more
traditional alternatives. There is no doubt that it is very much a management-
controlled system within which the apparent emphasis on the human side of
enterprise serves the interests of the organisation rst and foremost. This raises
questions about where the balance of advantage lies in any debate about the mutual
gains to be derived from this system (Guest & Peccei 2001).

Strategic t model
The third approach to HRM and performance is primarily concerned with
strategic t. Its roots lie in the strategic contingencies literature and to some
extent, in the work of institutional economists. Part of the analysis, drawing on
Barney (1991; 1995) and others, is that effective utilisation of human resources
provides perhaps the major source of sustainable competitive advantage. The key
to this is to manage the t between the business strategy and the human resource
strategy (Miles & Snow 1984); the empirical challenge is then to demonstrate
that those who achieve this strategic t will also gain superior performance. The
research of Huselid (1995), Delery and Doty (1996) and others ts within this
perspective. Given the focus on external t, the role of workers is largely neglected
(though Becker et al. 1997, have speculated about applying the expectancy model)
and the precise HR practices are not clearly specied. This is overcome by
setting out core areas of practice, typically selection, development, appraisal and
reward. An alternative is to draw on the work of institutional economists such
as Lazear (1995) who focus on a relatively narrow set of traditional core issues
such as training and incentives. Because of this uncertainty about the nature of
HRM, practices identied by Huselid and Delery and Doty are the product of
factor analysis and display a relative lack of coherence. Ironically, their research
shows a stronger association between performance and a universalistic internal
t model than with external or strategic t. Not surprisingly, there have been
attempts, reected for example in the work of Wright and Snell (1998), to give
this general perspective more conceptual coherence. Despite this, the role of the
worker in the HRM-performance model remains unclear and the approach is
almost silent about the concerns of workers.
This brief review of different approaches to HRM and performance highlights
that there is little interest in outcomes of concern to workers. Indeed workers
are either largely ignored or it is recognised that steps need to be taken to
use them as efcient human resources or to win their discretionary effort and/or
their hearts and minds. At best, they are a means to an end. Good HRM then
becomes aligned with the business strategy or efcient use of human resources
or effective management of culture to win workers commitment. This is,
perhaps, an honest acknowledgement of the role of business and its essentially
capitalist characteristics and provides the basis for the critique of HRM. It
may be less easy to sustain in public sector organisations. It leaves unexplored
the question of how the human resource practices affect employee attitudes
and behaviour. It also raises the questions of what might constitute good
HRM from a workers perspective. This issue has been largely ignored, even
340 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

by critics of HRM. To begin to answer it, we need to build the worker back
into HRM.

IMPLICATING AND INTEGRATING THE WORKER IN THE

HRM-PERFORMANCE RELATIONSHIP
There are two main ways of building the worker into HRM. One is to focus
explicitly on worker outcomes and is explored later in this paper. The second
builds the worker into the HRM-performance relationship. This extends the
model from a simple analysis of the relationship between human resource
management, however it is represented, and aspects of organisational performance
to one in which employee attitudes and behaviour are viewed as a key mediator
of this relationship. There is a strong implication in building the worker
into the analysis in this way that a positive association between HRM and per-
formance depends partly on workers responding positively to their experience
of HRM.
A limited number of studies have explicitly incorporated workers attitudes and
behaviour into analyses of the relationship between HRM and performance. As
implied in the preceding analysis, these focus primarily on commitment-based
attitudes or behaviour associated with discretionary effort. As such, they differ
from research on employee satisfaction and wellbeing. On the other hand, if a
set of HR practices was found to be associated both with high performance and
employee satisfaction/wellbeing, then we would be closer to making progress in
the search for the elusive happy and productive worker (Staw 1986).
One of the original reasons for the rise of interest in the concept of organis-
ational commitment was the persistent inability to nd a strong association
between satisfaction and performance (Iafaldano & Muchinsky 1985). What was
needed was a more organisation-centred and potentially more stable concept and
commitment to the organisation seemed to offer this promise. However, after
more than two decades of research, organisational commitment appears to be
no more strongly associated with performance than job satisfaction, though both
show a consistent association with lower labour turnover (Mathieu & Zajac 1990;
Meyer & Allen 1997). This second result provides a rationale for the view
that the goals of HRM might be dened in terms of commitment, quality and
exibility (Guest 1987). Where these are achieved, the performance will come
from the quality and exibility of workers rather than their commitment. Despite
consistently high correlations between satisfaction and commitment, most
analyses indicate that they are distinct factors. Given apparently similar conse-
quences, a key question will therefore be whether they appear to have different
antecedents. Meanwhile, in the discourse of human resource management, it is
the concept of commitment that has assumed the dominant position, presumably
reecting the primacy given to management concerns. In other words, organis-
ational commitment is important mainly because it increases the chance of
retaining workers and persuading them to accept change rather than because
it leads to more satised or motivated workers.
Two of the three approaches to HRM and performance presented in the
previous section potentially build workers into the HRM-performance
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 341

model. Both in practice adopt some variant on expectancy theory (Vroom 1964;
Lawler 1971). The high performance work system model, with its manufacturing-
oriented production focus, emphasises the importance of discretionary effort
and, therefore, proposes that HRM will be linked to performance via the
positive exercise of discretionary effort by motivated and well-trained workers.
Scope for autonomy together with an appropriate incentive scheme should lead
to intrinsic and extrinsic rewards for workers. On the other hand, as critics have
noted, it might also lead to intensication of work and higher levels of stress.
The commitment model emphasises the importance of developing a sense of
identity through involvement in a shared activity and shared organisational goals.
It argues that the goal of HRM is to ensure committed and competent workers.
The commitment comes through the processes of investment in workers reected
in HR practices such as training and development and information sharing as
well as through a careful management of organisational culture. Committed
workers can then be trusted to exercise responsible autonomy and to be moti-
vated towards organisational goals thereby contributing to corporate performance.
Again, there may be costs in terms of work pressures and possibly competing
commitments.
One of the very few major American studies to incorporate an employee
perspective has been reported by Appelbaum et al. (2000). Their study compared
the effects of high performance work systems in three manufacturing sectors,
steel, clothing and medical products, collecting data from almost 4000 workers.
They found consistent evidence of a positive association between greater use
of various practices and positive employee outcomes. The practices they
focused on included autonomy over task-level decision-making, membership
of self-directed production and off-line teams, communication with people
outside the work group, training and development for skill enhancement and
nancial incentives for motivation. The employee outcomes were measures
of trust, intrinsic satisfaction, commitment, general job satisfaction and stress.
In particular, they found a consistent positive association between their core
opportunity to participate measure, which they see as central to the notion
of a high performance work system, and each of the four positive worker-
related outcomes. In addition, they nd a modest negative association
between opportunity to participate and job stress. They conclude by way of
summary:
Our results . . . suggest that HPWSs do affect worker attitudes, and that these effects
are generally positive ones. We nd little, if any, support for the view that these
systems have a dark side, at least as far as negative worker attitudes are concerned
(p. 202).

The study shows an association between a high performance work system

and organisational performance, and between the system and more positive
worker outcomes. However, it does not integrate these into a model exploring
the relationship between organisational performance and worker outcomes.
Therefore, although the ndings may imply a possible role for employee
attitudes and behaviour in the HRM-performance relationship, this is neither
342 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

tested nor claimed. However, what is claimed on the basis of these ndings is
that a high performance work system is good for both the organisation and its
employees.
Research that tests more explicitly for the role of worker attitudes and
behaviour in the HRM-performance relationship has been reported in the UK.
In particular, there has been analysis of the 1998 Workplace Employee Relations
Survey which, for the rst time, and following the Australian model, incorpor-
ated an employee survey. Ramsay et al. (2000) have reported a thorough test of
various competing explanations of the relationship between HR practices,
employee attitudes and corporate performance. They distinguish three HR
systems, derived from factor analysis of the large number of practices and pro-
cedures covered in the survey. System 1 covers mainly traditional employment
relations including representation, consultation committees, equal opportunities
and family-friendly practices; System 2 covers items such as grievance procedures,
formal teams, training and downward communication; System 3, labelled High
Performance Work Practices since in their view it appears to come closest to this,
includes prot-related pay, employee consultation, team autonomy, job control,
total quality management, upward communication and job security.
Their analysis shows some support for an association between High
Performance Work Practices and management ratings of workplace performance
and some association between these same practices and worker reports of higher
job discretion, commitment, pay satisfaction, good workermanagement relations
and perceived job security but also higher reported job strain. There was little
support for any link between Systems 1 and 2 and performance. A regression
analysis including the High Performance Work Practices and employee responses
showed that both the practices and commitment were associated with higher
labour productivity, nancial performance, product/service quality and lower
labour turnover. Positive employeemanagement relations were associated with
labour productivity. This implies some support for the model, despite the absence
of a signicant association between job discretion and outcomes. However, the
authors are cautious about accepting this as support for a mediation model since
the size effects of commitment are small. They extend their analysis to explore
a labour process model. The only evidence that might support it was the associ-
ation between a High Performance Work System and job strain. In contrast,
System 1, which contains the more formal elements of an employment relations
system, was the most likely to be associated with negative employee outcomes.
The same data have also been analysed by Guest et al. (2000a; 2000b; see also,
Guest 2001). They separate their analysis of the public and private sectors and
unlike Ramsay and his colleagues, analyse the results at the establishment rather
than the individual level. One consequence is that the responses of workers in
each establishment are averaged to provide a composite score that corresponds,
in terms of level of analysis, to the managers establishment level information
on HR practices and performance. They do not nd coherent factors in their
analysis of the human resource practices and therefore use a set of representative
practices and adopt the method of counting the number reported by
management to be in place. They also combine the items on job satisfaction
and commitment since they emerge together in the factor analysis and are highly
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 343

inter-correlated. On this basis, they do nd that the commitment/satisfaction

measure acts as a mediator between their measure of HR practices and ratings
of establishment level performance.1 It should be emphasised that these results
do not contradict those of Ramsay et al. The samples and the variables used
differ somewhat, as does the method of analysis. The results obtained by
Ramsay and his colleagues, particularly with respect to the role of commitment,
are signicant in the same direction as those reported by Guest et al. On this
basis, and with the provisos about cross-sectional data and small size effects, there
is some indication that employee commitment and satisfaction are associated with
higher workplace performance. The ndings t a model suggesting that HRM
has an effect on workers attitudes and behaviour and that it is through this that
it has part of its effect on performance. In addition, Guest et al. found evidence
in their private sector sample of an additional direct link between the number of
HR practices reported by managers and their reports of workplace performance.
Further support for the possible mediating role of employee attitudes and
behaviour can be found in the longitudinal analysis of HRM and performance
in a set of manufacturing organisations reported by Patterson et al. (1997). They
collected data from employees as well as extensive information on HR practices
and various performance indicators over several years. They were able to
show that rms adopting a greater number of HR practices had superior
performance. They also showed that HR practices appeared to be more impor-
tant in improving performance than investment, research and development and
various other general factors. In addition, they found a link between aggregate
measures across the workforce of both satisfaction and commitment and higher
corporate performance. Since commitment and satisfaction are both linked to
HR practices (and, in this study, very highly inter-correlated), it appears that
HR practices affect both employee and organisational outcomes and that the
relationship between HRM and performance is at least partially mediated by
employee attitudes and behaviour.
Bringing these studies together, they present a reasonably consistent picture.
While the analysis and conceptual framework presented by Ramsay et al. (2000)
is sceptical about the role of high performance work practices, the results are
still supportive of a modest mediating role. This is reinforced in the analyses
presented by Guest et al. and Patterson et al. What all the studies show is that
HR practices associated with high performance work practices, and centering
around job design, are related to both superior performance, as rated by
managers, and higher satisfaction and commitment, as rated by workers. There
is also some evidence that on a longitudinal basis, and using actual nancial
performance data rather than management estimates, they are linked to rm
performance, at least in the manufacturing sector.

HRM, WORKER SATISFACTION AND WELLBEING

The second way that workers can be implicated in HRM is by exploring the link
between HRM and aspects of worker satisfaction and wellbeing. This assumes
that worker outcomes are viewed as an end in themselves rather than a means to
an end. This research is in its infancy and only a very small number of directly
relevant studies have been reported.
344 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

Guest and Conway (1999), based on a survey of 1000 UK workers, were able
to show that the presence of more from a list of conventional HRM practices,
as reported by workers, was associated with higher levels of satisfaction. This
study also explored alternatives such as a more traditional union-oriented indus-
trial relations environment or contexts where personnel practices were either very
limited or of a more traditional human relations/paternalistic type. The evidence
clearly showed that workers were more satised where more HRM practices were
in place. In some cases, workers reported both a large number of HR practices
and a strong union presence. The presence of the HR practices rather than the
union had the major positive inuence on levels of job satisfaction. This ts with
the nding of Ramsay et al. (2000) that high performance work systems were
more likely than their System 1 bureaucratic practices, including union
recognition, to be associated with positive worker outcomes. The fact that the
WERS study reaches this conclusion based on general management accounts of
HR practices while Guest and Conway base it on workers accounts of HR
practices suggests that the nding is quite robust.
This analysis was developed further in a paper by Guest (1999) which addressed
some of the critics of HRM by again showing, on the basis of data from surveys
of random samples of UK workers, that whether or not HRM might be con-
strued as manipulative, it was consistently preferred by workers to circumstances
in which few HR practices were present.
There is a large body of indirect evidence about employee attitudes to aspects
of HRM. For example, there have been a number of studies suggesting that
workers respond negatively and may become more dissatised when they
experience performance-related pay and where other aspects of performance
management are introduced (see for example, Marsden & Richardson 1994).
There are numerous case studies of poorly introduced initiatives dealing with
specic HR practices which provide evidence for those who are critical of
HRM (see for example, Mabey et al. 1998). However, most of these cases focus
on a specic practice rather than an attempt to introduce a coherent set of HR
practices. One of the features common to all approaches to HRM is that it should
be built around a coherent approach and some notion of strategic integration.
In other words, these poorly received, narrowly based initiatives cannot reason-
ably be described as human resource management.
What the few reported studies emphasise are worker outcomes within the con-
text of work. This is understandable and to some extent inevitable but one of
the issues that needs to be considered, especially where levels of organisational
commitment are so high that they may encourage workers to spend long hours
at work, is how the experience of work relates to life outside work. In other words,
we need evidence about both job satisfaction and life satisfaction. These wider
worker-centred outcomes were explored in the study described in the next
section.

FURTHER EVIDENCE ON HRM, WORK SATISFACTION AND LIFE

SATISFACTION
Since 1996, the UK Chartered Institute of Personnel and Development has
sponsored a survey of the state of the employment relationship. In 2001, for
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 345

the second successive year, this survey was extended to cover 2000 workers
including sub-samples from central government, local government and the health
service, resulting in 500 workers from each of these sectors as well as a further
500 from the private sector (Guest & Conway 2001). The data are collected
through telephone interviews. Care is taken to ensure that a representative
sample is obtained from each of the sectors.
The survey requested information from each worker about human resource
practices they might either have experienced themselves in the past year (e.g.
training and development or participation in employee involvement activities)
or knew currently applied in their workplace (e.g. an explicit promise of no com-
pulsory redundancy or procedures to ensure equal opportunities and deal with
harassment). Since these are all presented as dichotomous variables, they are not
appropriate for factor analysis and the normal procedure has been to count the
number reported by each worker. This provides one basis for analysis. However,
if we are interested in identifying which practices or which approach to HRM is
associated with particular worker outcomes, then it makes sense to treat each
practice as a separate variable. Each was therefore turned into a dummy variable
for the purposes of analysis. The full set of practices and the extent to which they
were experienced or reported as being in place is shown in Table 1.
Table 1 shows the results for each sub-sector and the total sample. One sur-
prise is the consistently high indication of the presence of some of the practices
and policies. Several of these are what might be described as conventional human
resource or employment relations practices of the sort often promoted and
endorsed by trade unions rather than those associated with a distinctive high
performance or high commitment system. There is some consistency in the
presence of these practices across sectors and only near the bottom of the list
do marked variations begin to emerge. When the combined set of practices is
considered, after controlling for other factors the results show that signicantly
more are reported to be in place in central government than elsewhere, while
the private sector reports signicantly more than health and local government
(Guest & Conway 2001).
The survey contained a number of items covering aspects of work and life
satisfaction. Responses were provided on a ten-point scale from extremely
dissatised (1) to extremely satised (10). For the purposes of this study, they
were separated into two overlapping groups. Group 1 contains three items
concerned with broad aspects of work-related satisfaction, namely satisfaction
with work, with the employer and worklife balance. Group 2 contains six items
concerned with life satisfaction. Satisfaction with work and with worklife
balance have been retained because they are assumed to be relevant to life
satisfaction. To these are added items about satisfaction with health, nances,
friends and family and life in general. The Cronbach alpha tests of reliability of
the scales based on these two sets of items are .75 and .74 respectively. Scores
on each of the items for the total sample and sub-groups is shown in Table 2.
The results in Table 2 indicate moderate to high levels of satisfaction across
all issues. Indeed, for the total sample the levels of satisfaction, on a ten-point
scale, range between 6.61 and 8.70, or between moderate and high satisfaction.
There are some variations across the four groups with workers in private
 346
Table 1 Experience of Human Resource practices

Question Response (% saying yes)

Central govt Local govt Health Industry Total

Does your organisation actively carry out equal opportunity practices in

the workplace? 97 91 95 92 94
Does your organisation take any active steps to prevent any kind of
harassment or bullying for people like you? 93 86 91 85 89

THE JOURNAL
Does your organisation keep you well informed about business issues and
about how well it is doing? 92 80 85 81 85
During the past 12 months, has your organisation provided you with any
training and development, such as on-the-job training or some sort of course
or planned activity, to update your skills? 90 85 87 67 82

OF
Does your organisation have a stated policy of deliberately avoiding
compulsory redundancies and lay-offs? 80 77 72 57 72

I N D U S T R I A L R E L AT I O N S
Have you received a formal performance appraisal during the past year? 95 62 58 56 68
Has your organisation provided any support that helps employees deal with
non-work responsibilities? These are sometimes termed family-friendly
policies, such as child-care facilities, counselling for non-work problems
and financial planning. 79 65 78 38 65
Is there any serious attempt in your organisation to make the jobs of people
like you as interesting and varied as possible? 63 58 68 68 64
When new positions come up in middle and senior levels of management,
does your organisation normally try to fill them with people from inside
(or outside) the organisation? 57 21 36 55 42
Some organisations are trying to get employees more involved in
workplace decision-making using things like self-directed work teams,

September 2002
total quality management, quality circles, or involvement programmes.
Have you been personally involved in any during the past 12 months? 36 40 40 35 38
Is your pay related to your personal performance in any way through some
sort of performance or merit-related pay? 84 20 7 39 38
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 347

industry slightly more satised with the work-related items. It is also interesting
to note that overall, there is a signicant positive correlation between the
number of HR practices reported and levels of satisfaction (0.24 with work satis-
faction and 0.15 with life satisfaction; P = <0.001 in both cases). However,
central government workers report the highest number of HR practices, with
particularly strong endorsement of performance-related pay and appraisals, and
also some of the lowest levels of satisfaction. This suggests that in central
government there is either a problem with the greater emphasis on aspects of
performance management or a problem of delivering the commitments
embedded in the practices. It also points to the need for some caution in
generalising about an association between HRM and employee satisfaction.
The core aim of this analysis is to determine the relationship between specic
HR practices and aspects of satisfaction at work and in life as a whole. Surveys
have generally ignored satisfaction in favour of commitment as a worker out-
come and almost all studies have neglected satisfaction beyond the boundaries
of work. To ensure that the results do not reect specic characteristics of
individuals or organisations above and beyond the HR practices, we introduced
a range of control variables. These are set out in Tables 3 and 4. They include
a number of individual background items of the sort normally used in work-related
surveys. In addition, we have added a number of items that might affect life
satisfaction such as marital status and dependent children. Organisational
characteristics are more limited, and refer mainly to size. Sector is built into the
analysis. However, we have also added two further items. One is a set of indi-
cators of organisational climate. Since the informal work context is an impor-
tant component of the commitment-based models of HRM, it seemed sensible
to incorporate this element. It is impractical to measure organisational culture
in a short survey, so we used a simple measure of climate based on a set of descrip-
tive characteristics. These were factor analysed and in both the 2000 and 2001
surveys revealed three descriptive factors that we have labelled friendly, dynamic
and bureaucratic dimensions of organisational climate. The friendly climate
includes words such as trusting, supportive, fair-minded and public-spirited. A
dynamic climate includes words such as innovative, cutting-edge and forward-
looking. And a bureaucratic climate is described with words such as formal,

Table 2 Work and life satisfaction

Satisfaction with Central govt Local govt Health Industry Total

Your employer 6.21 6.43 6.68 7.12 6.61

Your work 6.51 6.99 7.16 7.20 6.97
The balance between work
and life outside work 6.78 6.22 6.55 6.98 6.63
Your life as a whole 7.69 7.75 7.92 8.05 7.85
Your family and friends 8.56 8.74 8.79 8.72 8.70
Your health 8.09 8.09 8.23 8.27 8.17
Your finances 6.62 7.02 6.72 6.71 6.77
Table 3 Factors associated with work-related satisfaction

348
Central govt Local govt Health Industry Total

Personal and organisational background

Age 12* 15** 07**
Educational level 10* 08**
Divorced 08* 04*
Dependent children 11*

THE JOURNAL
Ethnic minority 08+ 11**
Tenure 09+
Trade union member 05*
Organisation size 08+ 12** 06**
Establishment size 08+ 08+

OF
Part of management 11* 06*

I N D U S T R I A L R E L AT I O N S
Hours worked 17* 11***
Full-time 09+
Human resource practices
Equal opportunity practices 08+ 09* 06**
Anti-harassment practices 11* 10* 05*
Workers kept informed 08+ 07+ 06**
Training and development 08+
No compulsory redundancies 08+
Performance appraisal
Family-friendly practices 08+ 11** 06**

September 2002
Challenging/interesting jobs 15** 21*** 11* 20*** 17***
Vacancies filled from within 08*
Employee involvement activities 07+
Performance-related pay
Table 3 Continued

Central govt Local govt Health Industry Total

HRM, C O R P O R AT E P E R F O R M A N C E
Work experience and perceptions
Direct participation 12** 07**
Friendly climate 32*** 25*** 28*** 27*** 28***
Dynamic climate 07+ 16*** 11** 09***
Bureaucratic climate 08+
Job alternatives available 08+ 08+ 06**
n= 500 500 500 500 2000
Adj R2 .28 .33 .32 .32 .31
R2 .34 .38 .37 .38 .32
F 5.47*** 7.00*** 7.15*** 7.14*** 23.14***

AND
+P < 0.10; *P < 0.05; **P < 0.01; ***P < 0.001.

EMPLOYEE WELLBEING
349
Table 4 Factors associated with life satisfaction

350
Central govt Local govt Health Industry Total

Personal and organisational background

Age 12*
Educational level 09+ 13* 10***
Gender (male) 10*

THE JOURNAL
Single 16** 08+ 09***
Divorced 09* 12** 08***
Dependent children 14** 10* 07**
Ethnic minority 08+
Tenure 10*

OF
Hours worked 16* 08**

I N D U S T R I A L R E L AT I O N S
Full-time 13*
Fixed-term contract
Multiple job holder 07+
Part of management 13* 15** 08**
Human resource practices
Equal opportunity practices 08+
Anti-harassment practices 08+
Workers kept informed 07+ 05*
Training and development
No compulsory redundancies 07+ 09*

September 2002
Performance appraisal
Family-friendly practices
Challenging/interesting jobs 12** 17** 10***
Vacancies filled from within
Table 4 Continued

Central govt Local govt Health Industry Total

HRM, C O R P O R AT E P E R F O R M A N C E
Employee involvement activities
Performance-related pay 08+ 19** 07+
Work experience and perceptions
Direct participation 07+ 11** 09+ 07**
Friendly climate 23*** 13* 18*** 17** 18***
Dynamic climate
Bureaucratic climate 08+ 10*
Job alternatives available 15** 08+ 13** 08+ 11***
n= 500 500 500 500 2000
Adj R2 .18 .20 .14 .16 .15
R2 .25 .27 .21 .23 .17

AND
F 3.62*** 4.07*** 3.22*** 3.51*** 9.97***

EMPLOYEE WELLBEING
+P < 0.10; *P < 0.05; **P < 0.01; ***P < 0.001.

351
352 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

rule-bound and bureaucratic. The other variables cover direct participation, which
Appelbaum et al (2000) found to be associated with job satisfaction; and ease of
nding another job at least as good as the present one. This is an indication of
security in the labour market that extends job security beyond possible promises
of no compulsory redundancies.2
The HR practices and background variables were entered into a regression
analysis, rst, using the measure of work satisfaction and, second, the measure
of life satisfaction as the dependent variable. The results after all the items were
entered are shown in Tables 3 and 4. Given the rather idiosyncratic results for
the central government workers, we have included the analysis by sector as well
as for the sample as a whole. However, it should be noted that sector does not
appear as an independent variable in the analysis of the full sample because in
the regression analysis it was not signicantly associated with either outcome.
We can start by examining the results in relation to work satisfaction. These
show that one HR practice, the deliberate attempt to make jobs as interesting
and varied as possible, is strongly and consistently associated with higher work
satisfaction across all four sectors. For the sample as a whole, a set of practices
of the sort rarely identied in the literature on HRM and performance are also
signicantly associated with higher work satisfaction. These are keeping people
well informed about developments, equal opportunities, practices to limit
harassment at work and family-friendly practices. It is notable that performance
management items such as performance appraisals, performance-related pay and
even training and development do not feature as practices associated with work
satisfaction. This suggests that with the exception of the job design measure, the
practices associated with work satisfaction are those often emphasised by unions
and reluctantly acceded to by organisations, rather than those emphasised in any
models of the HRM-performance relationship.
One of the features of the analysis is the importance of the climate measures.
It appears that a friendly work climate is very strongly and consistently associ-
ated with work satisfaction. So too is working in a dynamic climate in all sectors
apart from health. The positive association between scope for direct participation
and work satisfaction reinforces the importance of job design. Together with the
signicant role of information provision, it lends further support to the impor-
tance of the high performance work system emphasised by Appelbaum et al (2000).
The signicant result for perceived employment alternatives suggests that employ-
ment security and the notion of employability is important to some workers.
There are a number of associations between work satisfaction and background
factors. For example, long hours are associated with lower satisfaction; so too is
being part of management and having higher educational qualications. It is
important to bear in mind that this sample is biased towards the public sector
and contains a high proportion of well-educated professional workers in areas
such as teaching and nursing.3 In showing that it is those who are better educated,
part of management and work long hours that are less satised, the results
challenge some popular assumptions.
The results in Table 4 conrm that HR practices are less likely to be associ-
ated with the wider measure of life satisfaction. Nevertheless, the job design item,
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 353

described in terms of providing challenging and interesting work, again emerges

as signicantly associated with life satisfaction for the whole sample along with
the practice of keeping workers informed. Direct participation and a friendly
climate are also associated with life satisfaction. The presence of perceived job
alternatives is associated with life satisfaction, perhaps as an indicator of the impor-
tance of employment security for overall wellbeing. It is more important for life
satisfaction than for work satisfaction and is signicantly associated with life
satisfaction in every sector.
As we might expect, a number of more personal variables are associated with
life satisfaction. They fall into two groups. In the rst, having higher educational
qualications, longer hours and being part of management are associated with
lower levels of life satisfaction. They are also associated with lower work satis-
faction but two of the three size effects have increased slightly suggesting that
the effects at work spill over into life outside work. The second group shows that
workers who are single, divorced/separated or have dependent children are less
satised than those who are married but with no dependent children. The sources
of dissatisfaction may be different for those with dependent children. It is notable
that those who are divorced are also more dissatised with work suggesting a
rather different kind of spill-over. Leaving these issues aside, it appears that in
this sample, HR practices have only a limited direct association with life satis-
faction.
In a separate analysis of the same data, we found that a measure of the state
of the psychological contract, dened, from an employee perspective, as per-
ceptions of whether the organisation has kept its promises and met its obligations,
whether they are fair and whether management can be trusted to keep them in
the future, mediates the relationship between the number of HR practices in place
and both work and life satisfaction. It therefore provides a form of cognitive evalu-
ation of the HR practices and related policies and practices. Workers in central
government were most likely to report a poor state of the psychological con-
tract. This suggests that the presence of HR practices is not enough. Effective
delivery of those practices that have particular salience for workers is possibly
more important. Workers do not passively accept HR practices but actively
evaluate and respond to them. Failure by management to deliver on promises
implied in HR policies and practices is likely to lead to a negative evaluation and
in such circumstances, as the case of central government workers illustrates, the
association between the presence of more HR practices and work satisfaction
breaks down.

DISCUSSION AND CONCLUSIONS

In this paper a broad distinction has been made between two streams of liter-
ature on HRM. The rst is generally sceptical and has presented a critical
analysis of the HRM phenomenon and its possible role in the exploitation of
workers. As noted elsewhere (Guest 1999), this is exemplied in the work of
writers such as Keenoy and Legge. However, it was noted that while there are
useful critical accounts of specic HR initiatives, often linked to aspects of per-
formance management, and while this work draws on a wide range of empirical
354 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

and conceptual literature, it rarely includes accounts from workers of their

reactions to broader HRM programs proposed by advocates of HRM. Therefore,
while it may express legitimate concerns about what HRM might do to
workers, it does so in the absence of a workers voice. This stream of work is
dominated by UK writers with some support in mainland Europe and Australia.
The typical conclusion is that HRM is bad for workers; however, preferable
alternatives are rarely suggested.
The second stream has been far more concerned with the relationship between
HRM and corporate performance. Predictably, it has been heavily criticised by
those within the rst group (see for example, Legge 2000). An embedded assump-
tion is that what is good for business is also good for workers. This approach is
dominated by American writers although there is a strong presence in the UK
and a rather smaller one in mainland Europe, Australia and elsewhere. While
researchers in this group may sometimes make assumptions about the role of
workers in the HRM-performance relationship, their work invariably ignores
them. Nevertheless, it is the work of writers in this group that has formed the
point of departure for the present analysis.
The core argument in this paper is that we need to open up a third approach
to the study of HRM, which might be termed a worker-centred or worker-friendly
approach, which locates the worker at the heart of the analysis. An attempt has
been made to begin this by addressing some of the concerns expressed by both
groups of researchers and writers on HRM described above. With respect to the
former, it explores workers reports of their work and life satisfaction and
how these relate to their experience of HRM. The analysis presented here is
relatively crude but it does show a positive association between workers reports
of the presence of certain HR practices and their work and life satisfaction. With
respect to the second group, the analysis seeks to implicate the worker in the
relationship between HRM and performance. It is argued that only by doing so
will we begin to gain a better understanding of why HRM does or does not affect
performance. At the same time, the analysis recognises the diversity of approaches
to HRM and performance and begins to explore the relative merits of each with
respect to worker outcomes.
The analysis of the role of workers in the HRM-performance relationship pro-
vides some support for a model in which worker attitudes and behaviour serve
as a partial mediator. The limited evidence suggests that the same practices are
associated with higher worker satisfaction and appear to t both the high per-
formance work system and the high commitment models. The results suggest
that the way workers respond to the HR initiatives, reected perhaps in the
concept of the state of the psychological contract, is linked to their performance
and through this to organisational outcomes. In developing HR practices to
enhance performance, organisations therefore need to consider explicitly the
response of workers.
When we review the specic results, there is consistent evidence that
workers respond positively to practices associated with what is described as a
high performance work system. It is notable that jobs designed to make work as
interesting and challenging as possible, direct participation and extensive infor-
 HRM, C O R P O R AT E P E R F O R M A N C E AND EMPLOYEE WELLBEING 355

mation provision are associated with both higher work satisfaction and higher
life satisfaction. Evidence from the data presented in this paper shows that in
addition to practices associated with high performance work systems, a set of
more bureaucratic worker-oriented practices are also associated with higher
work satisfaction. These include family-friendly, equal opportunity and anti-
harassment practices. By implication, organisations need to focus on both
to attract a positive worker response. Wood (1999) has argued that family-
friendly practices fall into a different cluster to the high performance work
practices and these ndings remind us that HRM concerns more than high
performance.
Equally interesting are the practices that are not associated with worker
satisfaction. HR practices associated with performance management are less
well received. Performance appraisal shows no association with satisfaction
in any group. Performance-related pay also shows no association with work
satisfaction. It has a more complicated association with life satisfaction. Among
central government workers, where 80 per cent report that they experience
performance-related pay, it is weakly associated with greater life dissatisfaction.
However, in local government, where only 20 per cent experience performance-
related pay, the picture is reversed. Closer analysis reveals that many of the
teachers, who make up a large proportion of this group, received a signicant
pay award, nominally presented as performance-related, and this was linked
to a more positive assessment of satisfaction with nances that formed a
component of life satisfaction.
Training and development, which can form an important element of a resource-
based model, shows little link to satisfaction. Similarly, employee involvement
activities, lling vacancies from within and a stated policy of avoiding compulsory
redundancies, all of which can be seen as part of a high commitment model, also
show little or no association with work or life satisfaction.
Looking beyond work satisfaction, we need much more evidence about worker
wellbeing. The ndings of Appelbaum et al. (2000) and Ramsay et al. (2000) on
the relationship between high performance work systems and employee stress
are somewhat contradictory. However, the evidence linking longer hours, as well
as managerial responsibilities to lower satisfaction both at work and in life as a
whole, is some indication that the demands of work and more work overload are
not conducive to general wellbeing. As we might expect, HR practices have a
rather more tenuous link to satisfaction outside work. Yet job design and direct
participation were positively associated with life satisfaction in the survey results
suggesting that these should form the core of a more worker-friendly model of
HRM.
Taken as a whole, these ndings suggest that employee satisfaction and
wellbeing both inside and outside work may best be linked to HRM in the
context of a partnership or mutual gains system. This offers a greater chance of
focusing on job design, direct participation and information sharing as well as
ensuring the presence of the more bureaucratic policies and practices that trade
unions or some other form of representative system may be more likely to pro-
mote. Indeed, research on partnership and performance reported by Guest and
356 THE JOURNAL OF I N D U S T R I A L R E L AT I O N S September 2002

Peccei (2001) conrms that a form of partnership that emphasises a range of HR

practices, job design and direct participation is associated with higher organis-
ational performance. While much depends on the balance of advantage within
a partnership or mutual gains system, it appears to offer a context in which a
range of policies and practices associated with work and life satisfaction for
workers and higher performance for the organisation can effectively be
implemented.

NOTES
1. The analysis also found two factors providing acceptable measures of workers inuence over
the task and their perceptions of the extent to which they were consulted. We might expect
the measure of task inuence, which covered how the work was conducted, the pace at which
it was conducted and the range of tasks, to correspond in some respects to elements of a high
performance work system. In the event, it was not signicantly associated in the regression
analyses with the number of human resource practices in place in either the public or private
sectors. On the other hand, perceived consultation was strongly associated with a greater
number of HR practices in both sectors. It was also associated with lower ratings by
management of both comparative productivity and quality of goods and services.
2. There was a measure of job security in the survey. Responses were generally very positive in
2001 with over 80 per cent expressing moderate or high levels of job security. It is possible
that this has changed as recession appears more likely.
3. Although we do not report an analysis by occupation in this paper, it was notable that
teachers, located within the local government sector, stood out as the group most dissatised
with work (beta -.19*)

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