The Effects of Human Resource Management Practices on Productivity

We investigate the productivity effects of innovative employment practices using data from a sample of 36 homogeneous steel production lines owned by 17 companies. The productivity regressions demonstrate that lines using a set of innovative work practices, which include incentive pay, teams, flexible job assignments, employment security, and training, achieve substantially higher levels of productivity than do lines with the more traditional approach, which includes narrow job definitions, strict work rules, and hourly pay with close supervision. Our results are consistent with recent theoretical models which stress the importance of complementarities among work practices.