The International Journal of Human Resource Management,

Vol. 20, No. 9, September 2009, 19451964

A multi-level examination of quality-focused human resource practices

and firm performance: evidence from the US healthcare industry
Mesut Akdere*
Department of Administrative Leadership, University of Wisconsin-Milwaukee, Milwaukee, WI, USA
In todays business world, the role of quality has become ever more significant for
organizations to compete in a global marketplace. Based on the quality management
theory, this study empirically examines the relationship between quality-focused
human resource practices (QHRP) and organizational performance outcomes. Data
from 69 healthcare organizations indicate a strong support for this relationship.
A Human Resource (HR) system focused on quality management was directly related
to multiple dimensions of organizational performance outcomes (i.e., intangible
employee satisfaction and customer satisfaction and tangible profit). Specifically,
two measures of QHRP, knowledge management and strategic management, were
found to be positively related to the financial performance of firms implementing
quality management. Process management is found to be negatively related to
employee satisfaction. General Human Resources were positively related to both
employee and customer satisfaction. Employee focus of the firms is also positively
related to employee satisfaction. In addition, employee satisfaction is also related to
both customer satisfaction and financial performance while customer satisfaction is
found to be positively related to employee satisfaction. The findings indicate a
generally strong positive relationship with the organizational performance outcomes.
The results of this study are particularly important in showing HRs contribution to the
organizations bottom line.
Keywords: knowledge management; leadership; performance; process management;
quality management; strategic management

Introduction
The challenge of becoming a strategic partner and participating in the strategic planning of an
organization has been significant for Human Resource (HR) scholars and practitioners as a
way to help the organization gain competitive advantage. In many HR departments, strategic
partnering has become one of the goals of the overall HR function and serves as a source of
motivation and rationale for HRs bottom line contribution to organizational performance.
In their annual reports, most organizations state that their people employees are their
most important assets (Barney and Wright 1998). However, a major challenge for the field of
HR remains in finding ways to effectively and efficiently utilize organizations human
capital. Similarly, HR needs to move beyond performing the many administrative and legally
mandated tasks that traditional personnel functions have performed to adding value through
directly improving the performance of the business (Lawler 2005).
Organizations are becoming flatter, more decentralized, and are moving from
individual-based to team-based methods of production (Arvey and Murphy 1998). In an

*Email: akdere@uwm.edu
ISSN 0958-5192 print/ISSN 1466-4399 online
q 2009 Taylor & Francis
DOI: 10.1080/09585190903142399
http://www.informaworld.com

1946

M. Akdere

era when business and workplace conditions and dynamics change so rapidly and
competition is at its peak, organizations find themselves in a constant struggle to achieve
higher quality and increase performance in order to be productive, and meet customer
expectations. Consequently, quality management and performance improvement
initiatives in todays business environment and workforce have emerged as tools for the
goal of achieving organizational competitiveness, strategic alignment, innovation,
adaptability, and the maximum utilization of human capital available to the organization.
Achieving but one of these goals has proven to be insufficient: managing quality that
does not lead to better performance or improving performance that lacks quality does not
work and should not be treated separately (Anderson, Rungtusanatham and Schroeder
1994; Sousa and Voss 2002).
The challenge of performance improvement has been intensified with the struggle
to manage quality in the workplace. Broadly defined, quality is the conformance to
requirements (Crosby 1979). Increased competition, international trade, and globalization
have led multinational companies to focus on the concept of quality in the last few
decades. The increasing role and significance of quality in business led many
organizations to conclude that effective quality management can enhance their
competitive abilities and provide strategic advantages in the marketplace (Anderson
et al. 1994). Consequently, many organizations ranging from large to small,
manufacturing to service, profit to nonprofit adopt available quality improvement and
management tools to change their existing work designs, performance improvement
efforts, and strategic planning.
It may be argued that successful implementation of quality management initiatives
will positively affect employee achievement and output, customers product acceptance,
and organizational survival. Quality management processes and tools enable individuals to
manage the development, introduction, and support of quality improvement process (Dale
and Bunney 1999). According to Wesner (1995), quality management is needed to help
employees use their knowledge and skills to effectively manage todays modern
organizations. Quality management processes and tools impose a certain set of disciplines
(Dale and McQuarter 1998) in which they assist organizations to improve effectiveness by
building, modifying, and sustaining positive and direct interactions. Consequently, the
applications of quality management help organizations to efficiently utilize and optimize
their limited resources, especially their human capital. In a related vein, it may be argued
that quality management processes and tools, when integrated in HR practices, can help
employees reduce work-related errors and redundancies through increasing collaboration
and cooperation, and creating synergy at all levels of the organizations and among all
employees.
In summary, quality management approaches call into question the traditional reactive
approaches to HR. It argues for a more proactive, performance-focused approach in which
HR professionals adopt quality management to become strategic organizational partners
(Briggs and Keogh 1999) to manage a set of resources such as human capital skills,
employee commitment, culture, and teamwork that are most likely to be sources of
sustained competitive advantage into the next century (Barney and Wright 1998). HR
functions integrated with quality management processes and tools will highlight the role
and responsibility that HR professionals play as a strategic business partner in the
organization. This is directly relating HR to improving performance and increasing
productivity.
The ultimate goal of research in this realm is to assist organizations to succeed in their
performance improvement efforts. The purpose of this research is to empirically

The International Journal of Human Resource Management

1947

investigate the relationship between quality-focused Human Resource practices and

organizational performance outcomes in long-term healthcare organizations. In this
study, organizational performance is considered an outcome of Quality-focused Human
Resource Practices (QHRP), and quality is treated as a process that is expected to lead to
higher performing organizations.
Theory and hypotheses
A number of theoretical approaches have been developed to explain the role and outcomes
of quality management within organizations. Anderson and colleagues (1994) propose a
theory of quality management which underlies Demings management method. The
proposed theory is based upon conceptual synthesis of Demings writings, available
literature on the Deming management method, observations of practice, and more
specifically, on the result of a Delphi study on the Deming management method (p. 473).
Figure 1 illustrates the proposed theory of quality management. According to this theory,
quality management involves a number of organizational functions including visionary
leadership, internal and external cooperation, learning, process management, continuous
improvement, employee fulfillment, and customer satisfaction.
Visionary leadership refers to the role of top management in defining and establishing
a long-term vision of an organizations development, communicating this vision,
implementing a plan of action, and inspiring and motivating the entire organization
toward the fulfillment of this vision (p. 482). The next two constructs of the theory
internal and external cooperation, and learning are defined within the organizational
system theory perspective. First proposed by Bertalanffy (1968), systems theory is
simply a theory concerned with systems, wholes, and organizations (Ruona 2001,
p. 114). Systems theory is constructed on the notion that systems are open to, and interact
with, their environments, and are capable of acquiring new properties through
emergence, which may result in continual evolution. As a result, systems theory proposes
the arrangement of and relations between the parts, connecting them to the whole. When
applied to an organizational setting, systems theory focuses on the organization as a
whole, emphasizing the input-process-output cycle within a larger context. Within this
organizational system approach, internal and external cooperation can be defined as

Figure 1. A proposed theory of quality management underlying the Deming management method.
Source: Anderson, Rungtusanatham and Schroeder 1994.

1948

M. Akdere

collaboration among different individuals, groups, or organizations, where all entities

are engaging in noncompetitive, mutually beneficial, win-win activities (p. 483).
Internal, within this context, refers to all units/departments of an organization. External,
on the other hand, involves the organization and its suppliers of products and services.
The second construct of this organizational system is learning. It is the ability and
willingness of the organization to engage in learning or knowledge-seeking activities at
the individual, group, and organizational levels (p. 485).
Process management construct of the proposed quality management theory refers to
a set of practices that combine methodological approaches with human recourse
management and these are implemented in order to manage and improve processes that
produce products and services (p. 486). Continuous improvement is a defining function in
quality management theory. It implies constantly striving to improve quality in all
products and services. It recognizes that quality concept is fluid and not static. In other
words, once an organization reaches the quality standards, there is always the risk that it
might deviate from this level of achievement. In addition, the defined quality standards
should also be subjected to the continuous improvement process, and be re-defined and
re-implemented organization-wide.
The next construct of the quality management theory is employee fulfillment. It is
defined as the degree to which employees of an organization believe that the organization
continually satisfies their needs, arises fundamentally from employees being able to derive
pride of workmanship, satisfaction, and commitment from the work they do (p. 489). The
final construct of the quality management theory is customer satisfaction, highlighting
the importance of the customer. The notion behind customer satisfaction is that quality
management practices strive to achieve and exceed existing standards of quality in
products and services. Consequently, these standards of quality ultimately aim to achieve
customer satisfaction.
Organizations may be viewed as human systems. The domain of HR may be described
as the development and management of people in an organization through a framework of
activities and practices that design, develop, organize, support, and execute employees
work while ensuring compliance with legislation and regulations governing the
employer/employee relationship. As a result, fostering and maintaining professional
relationship between employers and employees and among employees themselves are
crucial in attracting, motivating, developing, maintaining, and retaining employees as well as
HRs bottom line contribution to the organization. Bowen and Lawler (1992) proposed total
quality-oriented Human Resource Management and argued that quality management
provides Human Resource Management (HRM) with a golden opportunity to help move
from just HRM to strategic HRM. They concluded that a major role in the quality
improvement efforts puts HR in a position to contribute directly and visibly to the bottom
line, add value to the companys products and services in the same way that other functions,
such as sales, accounting, and production, add value (p. 31). Simmons, Shadur and Preston
(1995), on the other hand, provided a case study where quality management and HRM
practices are integrated in a large manufacturing company. They concluded that one of the
outcomes of this integration process was improved organizational competitiveness. They
further argued that there is a symbiotic relationship between quality management and HRM.
Drawing on the quality management theory, this study utilized the Human Resource
Practice Index (Macy and Izumi 1993) to construct the Quality-focused Human
Resource Practices (QHRP) model. Figure 2 illustrates the proposed relationships
between QHRP and organizational performance outcomes. QHRP model includes
leadership, knowledge management, strategic management, process management, general

The International Journal of Human Resource Management

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Figure 2. Quality-focused human resource practices (QHRP) and organizational performance

outcomes framework.

HR practices, customer focus, and employee focus. The organizational performance

component of this model, on the other hand, includes employee satisfaction, customer
satisfaction, and financial performance.
Anderson et al. (1994) argue that many organizations have arrived at the conclusion
that effective quality management can enhance their competitive abilities and provide
strategic advantages in the marketplace (p. 472). It is important to note that the essence
of quality management is leadership and employees humans of the organizations. Thus,
quality management should not be treated as a separate organizational process, but rather
as part of the Human Resource (HR) process in the organization. However, this model has
not empirically been tested due to the initial complications in basing the model on a sound
quality management theory. This paper attempts to achieve this through testing the
relationships between QHRP and organizational performance outcomes. This argument
provides the following hypotheses:
Hypothesis 1: There is a positive relationship between Quality-focused Human Resource
Practices (QHRP) and organizational performance outcomes of employee
and customer satisfaction.
Hypothesis 2: There is a positive relationship between Quality-focused Human Resource
Practices (QHRP) and financial outcomes of organizational performance.

Method
The survey method included two survey instruments: Organizational Quality Survey; and
Service Quality Resident Survey. Informed by prior studies, the main proposition of this study
is that QHRPs are vital to increasing organizational performance, productivity, and achieving
the strategic partnership of Human Resources (HR) with its host organization. This study is
about the ability of QHRP to improve performance in long-term healthcare industry building
upon the theoretical aspects of existing HR, quality management, systems, and performance
improvement theories. The questionnaire items used in the survey instruments are drawn from
existing instruments on quality management processes and Human Resource practices.
Data and sample
A sample of 69 long-term healthcare organizations and their patient residents was included
to assess QHRP at the individual and facility levels. Organizational Quality Survey

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M. Akdere

instrument was used for QHRP variables and employee satisfaction. The Service Quality
Resident Survey was used to measure customer satisfaction. Both surveys were
administered to all staff levels within each facility, including top management, shift
and professional nursing staff, and front-line staff (nursing assistants, dietary staff, and
housekeeping), and to all residents (customers) in these facilities during the data
collection. The population of this study was selected from the organizations which
implemented QHRP over a period of 2 years, and was composed of the employees of longterm healthcare organizations and their resident patients in the US.
The study was conducted in 69 long-term healthcare facilities belonging to two large
long-term healthcare corporations operating in the US. The characteristics of these two
corporations were similar. They were both non-profit organizations which have been in the
long-term healthcare business for over 75 years. Given that almost 70% of all long-term
healthcare organizations are non-profit in nature (Rhoades and Sommers 2001; Strahan
1987, 1997), the implications of the sample of the study in limiting generalizability to the
broader long-term healthcare field was minimal.
The data were collected through surveys mailed to the employees and resident patients
in these long-term healthcare organizations. The response rate for the Organizational
Quality Survey was 3598 of 6425; for the Service Quality Resident Survey it was 1272 of
2494. The financial data used in this study were based on the organizational financial
records of the time the survey was conducted. The descriptive statistical analysis also
revealed some important information about the employees who participated in the study.
Almost 50% of the respondents, for example, were nurses. The majority of the respondents
were women (89.9%); and about 40% completed a high school degree.
Variables
The variables examined in this study were divided into two categories: QHRP as
performance driver-related independent variables and organizational performance
outcomes-related dependent variables. Therefore, based on the quality management
theory, the components of the independent variable of QHRP include organizational
leadership, knowledge management, strategic management, process management, general
HR functions, and customer and staff focus. The dependent variable of organizational
performance was represented by three sub-variables: employee satisfaction; customer
satisfaction; and financial outcomes-related variables. Employee and customer satisfaction
were based on employee and customer perceptions of satisfaction and measured by the
instruments used in this study. Financial performance-related outcomes were assessed by
the financial well-being of the corporations. The relationship between HR practices and
corporation financial performance has been documented in the literature (Black and Porter
1996; Neumark 2001; Ichniowski and Shaw 1999). By accessing the financial data of the
long-term healthcare organizations in which the study was conducted, the following were
obtained to measure the organizational financial performance outcomes: 1) operating
margin; and 2) net margin. The data helped understand how well organizations were doing
financially at the time of data collection, and helped determine the degree of relationship
between financial outcomes, the QHRP, and other organizational performance outcomes.
The assumption here is that when all of these variables function as expected, then it
would lead to certain organizational performance outcomes such as increased employee
and customer satisfaction, improved quality of care, and increased financial returns
on investment. Table 1 illustrates the items used in the survey to measure the QHRP
dimensions.

 Customer Focus (4)

Employee Focus (4)

General Human Resource Functions (20)

Strategic Management (5)

Process Management (9)

Knowledge Management (12)

Leadership (17)

Quality constructs and selected items related

to human resources

Focused visionary (items La-Ld)

Visible presence (items Le-Lg)
Supporting change (items Lk-Ln)
Commitment to quality (items Lo-Lr)
Communication (items Ls-Lt)
Structure (items KMa-KMd)
Use (items KMe-KMh)
Benchmarking (items KMi-KM1)
Strategic planning (items SMa-SMe)
Learning organization (items PMa-PMc)
Problem solving (items PMd-PMf)
Evaluation (items PMg-PMi)
Supervision (items HR-HRD)
Empowerment (items HRe-HRh)
Job design (items HRi-HRl)
Coordination/communication (items HRm-HRp)
Training & development (items HRq-HRt)
Patient focus (item CFa-CFd)
Well-being (item EFc)
Mission and values (item EFi-EFk)

Factor

Table 1. Item of the survey used in the survey instrument measuring QHRP dimensions.

Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval
Interval

Scale of
measurement

4
3
4
4
2
4
4
4
5
3
3
3
4
4
4
4
4
4
1
3

Number of
items

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M. Akdere

Validity and reliability

Additional assessment of the instruments relied on previous instruments that have
established validity. The analysis measurement items of this study were adapted from the
two instruments developed to assess quality management practices in long-term healthcare
organizations. The survey instruments were drawn and developed based on the quality
management theory. A panel of nationally renowned experts in the field of long-term
healthcare and quality management reviewed the instruments for validity purposes and
solicited additional components and items to the instruments. In addition, the research
advisory team participated in the validation of the study. A pilot study was conducted to
further ensure internal validity of the instrument. Using the Human Resource Practice
Index (Macy and Izumi 1993), out of 145 items of these two instruments, 71 items were
adopted from the Organizational Quality Survey instrument for the QHRP variables.
In that the two instruments were modified slightly, their reliability was assessed. For
the overall QHRP reliability, alpha values for the 71 scales ranged from .80 to .96.
Cronbachs coefficient alpha value for employee satisfaction was .69, and .65 for
customer satisfaction, respectively. Table 2 reports reliability assessment for each
variable. The dependent variable financial outcomes of organizational performance were
measured by two financial indicators: operating margin and net margin. The data for each
facility were obtained from corporate financial annual reports.
Data analysis
Given the conceptual framework, the proposed research question under investigation
addresses the interrelationships between Quality-focused Human Resource Practices
(QHRP) and organizational performance outcomes. To investigate the research question
and test the hypotheses, the study used several methods of data analysis, including
descriptive statistics, hierarchical linear modeling (HLM), and stepwise multiple linear
regression. The frequency of responses was conducted to assess the distribution of the
participant organizations. Means and standard deviations were calculated for each item
and scale to assess potential central tendencies. Cronbachs alpha was used to conduct
reliability analysis to determine the reliability of all scales adopted in the study. The
obtained alpha scores were then compared to the reliability estimates existing in
the literature. The level of significance was set at p , .01 and .05, respectively.
This study is interested in understanding how QHRP variables (leadership, knowledge
management, strategic management, process management, general HR functions,
customer focus, and employee focus) are associated with organizational performance
outcomes (employee and customer satisfaction, and financial). But given that scores on
QHRP, employee satisfaction, and customer satisfaction were gathered at the individual
level, and financial outcomes variables at the facility and corporate level, hierarchical
linear modeling (HLM) was used to investigate the impact of the QHRP on organizational
performance outcomes (Raudenbush and Bryk 2002).
Results
Descriptive statistics for all study variables are reported in Table 2. To control common
method variance, a cross-level design was used to eliminate the potential for response
bias. Bivariate correlation results for QHRP variables were significant at less than 0.001
(2-tailed) at both levels. Variance explained reports the proportion to which the HLM
model accounts for the variation of the data used in this study. The facility correlations

17
12
5
9
20
4
4

Number of
items
3.79
3.61
3.63
3.74
3.66
3.66
3.93

Mean
.66
.73
.80
.75
.79
.79
.78

SD
.96
.95
.92
.93
.95
.85
.87

*p , .01 (2-tailed). (1 6 Individual level; a f Facility level).

Leadership
Knowledge management
Strategic management
Process management
General HR functions
Customer focus
Employee focus

Variable
55
65
75
65
52
69
73

Variance
explained
.76* .84*
.61* .74*
.61* .65*
.62* .69*
.59* .79*
.76* .82*

1-a

Table 2. Means, standard deviations, reliability estimates and correlations for all variables.

.70* .72*
.51* .59*
.59* .67*
.68* .80*
.63* .81*

2-b

.54* .61*
.66* .71*
.65* .81*
.71* .83*

3-c

.67* .74*
.70* .82*
.72* .79*

4-d

.62* .74*
.75* .77*

5-e

.59* .76*

6-f

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M. Akdere

were reported to be higher than the individual scores. This was an expected outcome as
correlations are usually higher at group levels compared to individual scores. The results
are shown in Table 2.
Hypothesis 1 tested the relationship between the QHRP and satisfaction variables.
Each QHRP sub-variable is tested for a relationship with each satisfaction sub-variable,
respectively. First, in order to gauge the magnitude of variation between facilities in the
satisfaction sub-variable, the HLM analysis estimated the unconditional model baseline
with no predictors at either level for the dependent variable. Second, an initial model
testing the relationships between all QHRP and the satisfaction sub-variable is established.
Third, those QHRP variables reported to have significant relationships with the
satisfaction sub-variable are tested again for the final model. Fourth, after identifying
the QHRP variables with significant relationships to the satisfaction sub-variable, an initial
full model was formulated to test the level of relationships between the QHRP variables
that reported a significant relationship with the satisfaction sub-variables and all other
organizational performance outcomes variables. The fifth and final step included the final
full model analysis for all variables that presented a significant relationship in the previous
step with the satisfaction sub-variable under investigation. A separate HLM analysis
measuring the relationship with all QHRP variables was conducted for each satisfaction
sub-variable, respectively. The relationship between the QHRP sub-variables and
satisfaction sub-variables were measured using HLM data analysis method. Hypothesis
testing for both employee satisfaction and customer satisfaction was separately conducted.
Employee satisfaction
According to the unconditional employee satisfaction model, coefficient value for
employee satisfaction was reported as 3.738945. Standard deviation at the individual level
was .719 and .214 at the facility level. Chi square for standard deviation was 321.274 and
reported significant p value (p , .000). Two-tailed t-test for means was also significant
(p , .000). Overall, there was significant variation for employee satisfaction both at the
individual and facility levels.
According to the HLM analysis with all QHRP scores included at level-1, there was a
significant positive relationship between employee satisfaction and strategic management;
and a significant negative relationship with process management. Employee satisfaction
also reported a significantly positive relationship with general HR functions, and
employee focus. At the facility level (level-2), HLM reported a significantly positive
relationship between employee satisfaction and general HR functions, and employee
focus.
After eliminating the nonsignificant QHRP sub-variables, the final model to test the
relationships between employee satisfaction and the QHRP sub-variables was obtained. At
level-1 (individual level), there was a significant positive relationship between employee
satisfaction and strategic management. Process management, however, was reported to be
negatively associated with employee satisfaction. General HR functions and employee
focus were also positively related to employee satisfaction. At level-2 (facility level), there
was a significant positive relationship between employee satisfaction and general HR
functions, and employee focus. The analysis also reported that 87% variance was
explained by the QHRP sub-variables included in the final model at the facility level.
The relationship between employee satisfaction and other organizational performance
outcomes variables and the QHRP sub-variables which were reported to have significant
relationships with employee satisfaction were also tested. At the individual level, the

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1955

QHRP sub-variables measured to be significantly positively associated with employee

satisfaction were strategic management, general HR functions, and employee focus. The
analysis on the relationship between employee satisfaction and process management,
however, resulted in a significantly negative relationship.
At the facility level, the initial model reported that the organizational performance
outcomes sub-variables of operating margin, net margin, customer satisfaction, and the
QHRP sub-variables of general HR functions, and employee focus were reported to have a
significantly positive relationship with employee satisfaction.
According to the final employee satisfaction full model, at the individual level, the
QHRP sub-variables of strategic management, general HR functions, and employee focus
reported significant positive relationships with employee satisfaction.
Again, in this analysis, process management yielded a significant negative relationship
with employee satisfaction. At the facility level, the financial performance outcomes
sub-variables of operating margin and net margin, customer satisfaction, the QHRP subvariables of general HR functions, and employee focus were significantly related to
employee satisfaction. Results are reported in Table 3.
Customer satisfaction
Based on the unconditional customer satisfaction model, coefficient value for customer
satisfaction was reported as 4.332910. Standard deviation at the individual level was
.74478 and .23538 at the facility level. Chi square for standard deviation was 187.46170
and reported significant p value (.001). Two-tailed t-test for means was also significant.
Overall, there was significant variation for customer satisfaction across facilities.
According to the HLM analysis of customer satisfaction and the QHRP scores, only
the QHRP sub-variable of general HR functions reported a moderately positive
relationship with customer satisfaction. The analysis also reported 92% variance explained
by general HR functions at the facility level. The relationship between customer
satisfaction and other organizational performance outcomes variables and general HR
functions were also tested using a full model. At the facility level, the HLM analysis
reported that there was no relationship between customer satisfaction and financial
outcomes of organizational performance. The relationship between customer satisfaction
and employee satisfaction, on the other hand, was also reported to be positively significant.
The analysis also reported that 80% variance was explained by general HR functions and
employee satisfaction variables included in the full model at the facility level. At the
facility level, the null hypothesis was rejected and the alternative hypothesis was accepted
in that there was a positive relationship between the QHRP sub-variable of general HR
functions and customer satisfaction as an organizational performance outcome variable.
Table 4 reports the customer satisfaction full model at the facility level.
Financial performance outcomes
Hypothesis 2 tested by two sub-variables: operating margin and net margin. Stepwise
multiple regression analysis was used to measure the level of relationship between
financial outcomes of organizational performance variables and QHRP variables at the
facility level. Stepwise multiple regression results reported significant relationships
between both of the financial outcomes of organizational performance and the QHRP subvariables. Therefore, the null hypothesis was rejected and the alternative hypothesis
was accepted; thus, concluding that there was a positive relationship between the QHRP

Variance component
.005
.245

.077
.0496

Intercept 1, r0i
Level-1, r1i

.124
.121

Standard deviation

.410
.628

QHRP variables
General HR functions, g07
Employee focus, g08

.500
.473
.139

.0278
.028
.032
.027
.014

Standard error

Random effects

1.227
1.473
.517

.090
2.114
.416
.353
3.739

Coefficient

Financial performance outcomes variables

Operating margin, g01
Net margin, g02
Customer satisfaction, g06

For Strategic management slope, b1 Intercept g2

For Process management slope, b2, Intercept g2
For General HR functions slope, b3, Intercept g2
For Employee focus slope, b4, Intercept g2
For Intercept 1, g1
Intercept 2, g2

Fixed effects

Table 3. Results of hierarchical linear modeling analysis final employee satisfaction full model.

52

df

3.317
5.196

2.455
3.111
3.712

3.233
23.984
13.148
13.031
273.327

109.680

x2

52
52

52
52
52

2729
2729
2729
2729
52

df

.000

.002
.000

.009
.003
.001

.002
.000
.000
.000
.000

1956
M. Akdere

Intercept 1, r0i
Level-1, r1i

Random effects

Employee satisfaction, g06

QHRP variables
General HR functions, g07

Financial performance outcomes variables

Operating margin, g01
Net margin, g02

For Intercept 1, b0
Intercept 2, g0

Fixed effects

.194
.747

.008
.557

Variance component

.174

.473
Standard deviation

.139

1.154
1.256

.033

Standard error

.517

1.286
2 1.095

4.338

Coefficient

Table 4. Results of hierarchical linear modeling analysis final customer satisfaction full model.

52

df

2.725

3.712

1.114
2.872

132.190

129.912

52

52

52
52

52

df

.000

.009

.001

.271
.388

.000

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M. Akdere

Table 5. Stepwise regression analyses for financial performance outcomes and QHRP.
Variable
Knowledge management
Strategic management
R2

Operating margin

SEM

Net margin

SEM

.000
.000
.103

.093
.081

.000
.000
.275

.095
.083

sub-variables of knowledge management and strategic management and financial

outcomes of organizational performance. The results are shown in Table 5.
Discussion
The purpose of this study was to investigate the relationship between Quality-focused
Human Resource Practices (QHRP) and organizational performance outcomes in a sample
of long-term healthcare organizations. Table 6 illustrates a summary of the relationships
between QHRP and organizational performance outcomes tested in this study.
First, at the individual level, there was a significant relationship between strategic
management and employee satisfaction. This suggests that long-term healthcare
organizations faced with the challenge of high employee turnover should utilize strategic
management at the business planning level and focus on quality management to develop
practices to increase employee satisfaction. This result corresponds to what Chua and
Janssen (1999) reported in that quality management helped companies turnover
problems, reduced capital spending, made existing capacity available and new capacity
unnecessary, and produced greater results from investment when implemented
strategically (p. 15). In addition, a finding by Roulac (2001) examining corporate
business strategy suggested that organizational strategy could be integral to achieving
Human Resources objectives of attracting and retaining outstanding people through
employee satisfaction as well as enhancing productivity and achieving superior business
performance.
Second, the study reported a significant relationship at the individual level between
employee satisfaction and process management. Process management is often considered
Table 6. Summary of significant (/2 ) relationships between QHRP variables and organizational
performance outcomes variables.
Variables

Satisfaction

QHRP Variables

Employee
satisfaction

Leadership
Knowledge management
Strategic management
Process management
General HR functions
Customer focus
Employee focus
Satisfaction variables
Employee satisfaction
Customer satisfaction

Financial outcomes of
organizational performance
Customer
satisfaction

Operating
margin

Net
margin

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1959

to involve planning and administering the activities necessary to achieve a high level of
performance in key business processes, identifying opportunities for improving quality
and operational performance, and ultimately, customer satisfaction (Evans and Lindsay
2005). This study identified a negative relationship between process management and
employee satisfaction. This finding, however, is consistent with the existing literature on
process management which does not necessarily include employee satisfaction as a
potential outcome.
In another study of general managers and quality managers from 20 US companies,
Saraph, Benson, and Schroeder (1989) reported a relationship between process
management and employee satisfaction within the quality management framework.
Seungwook Park, Hartley and Wilson (2001) studied the Korean auto industry and its
quality management practices and performance results, and reported that the highest
performance rated companies were found to emphasize process management and
employee satisfaction to a greater degree than the lowest performance rated companies.
The finding reported in this current study in regards to the relationship between process
management and employee satisfaction does not, however, support the findings of the
aforementioned studies.
Based on the HLM analysis, there is a negative relationship between process
management and employee satisfaction. Even though a significant level of relationship is
reported in the analysis, the relationship is negative. One reason for a negative relationship
can be explained by the fact that unlike the previous studies, this study examined the longterm healthcare organizations dealing with human care and maintaining human lives,
which is significantly different from the environment of an auto industry or engineering
production. What this study argues is that the reported negative relationship should be
taken into account to develop unique ways and techniques to approach process
management in long-term healthcare organizations in order to improve employee
satisfaction.
Third, the general Human Resource functions of supervision, empowerment, job
design, coordination/communication, and training and development were reported to be
significantly related to employee satisfaction both at the individual and facility levels. This
finding highlights the traditional contribution of Human Resource functions to employee
satisfaction and supports the results of Olivas study (2001) reporting significant
relationships with general HR functions and employee satisfaction. This study
investigated the employees reactions to work pressure in the service industry, which
was defined as a negative outcome of general HR functions, and suggested that how a
service organization responded to work pressure was a critical determinant of service
quality, employee satisfaction, and the overall profitability of the service firm (p. 27).
The reasons for the significant positive relationship between general HR functions
and employee satisfaction are twofold. First, as a field that focuses on developing and
managing human expertise and resources within the organization, one of the goals of HR
should naturally be achieving employee satisfaction as a business outcome. Second, these
findings are also important for the field of long-term healthcare where organizations face
problems in regards to employee development and management, which often result in a
decrease in employee satisfaction. Little (2003) reported that, in achieving quality,
employee satisfaction was considered as crucial and influential as customer satisfaction in
twenty-first century business and management practices. The current study confirms this
trend and calls for further emphasis on general HR functions integrating quality
management process in long-term healthcare organizations. Hyer and Brown (2003), on
the other hand, conducted a longitudinal study of 16 firms over a span of more than 10

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M. Akdere

years and investigated the concept of work cells. Their study reported that general HR
functions, defined as work cells, had tremendous potential for improving productivity,
throughput time, cost, quality, and employee satisfaction. This study also supports Hyer
and Browns findings and highlights HRs contribution to achieving a satisfied workforce.
Fourth, employee focus was reported to have a significant positive relationship with
employee satisfaction both at the individual and facility levels. This study argues that
valuing staff is an important factor in quality management and performance improvement,
and highlights the relationship between employee focus as one of the QHRP subvariables and employee satisfaction. In fact, it may be considered an expected outcome
that organizations practicing employee focus consequently achieve higher levels of
employee satisfaction. A study by Agus (2005) investigating the structural linkages
between quality management, product quality performance, and business performance in
the electronics industry in Malaysia suggested a similar finding in which employee
satisfaction was reported as an outcome of employee focus of the organization. In another
study, Riordan, Vandenberg and Richardson (2005) examined the relationship between the
perceived employee involvement and organizational effectiveness, and reported that
organizations with high levels of perceived employee involvement lead to organizational
effectiveness as measured through financial performance, turnover rate, and workforce
morale. Furthermore, building value through organization and people contributes to HRs
return on investment (Ulrich and Smallwood 2005).
Fifth, customer satisfaction, and financial performance outcomes of operating margin
and net margin reported significant relationships with employee satisfaction. Existing
literature on the relationship between employee satisfaction and financial outcomes of
organizational performance presents similar results. Harmon et al. (2003) conducted an
action research study, examining how changes to the work environment affected quality
and cost of service within the US Department of Veterans Affairs (VA). They surveyed
112,360 employees, and asked for employee observations and opinions on a wide variety
of topics surrounding their work experiences. The study reported that employee
satisfaction was related to decreased cost. Similarly, Ahire, Golhar, and Waller (1996)
used a survey of 371 manufacturing firms, and examined the constructs of quality
management and then empirically tested and validated their model of quality management
framework. They reported significant association between employee satisfaction and
organizational business results. The current study also reports the same relationship within
the long-term healthcare context. Furthermore, the findings of this current study also
support the notion of investing in organizations most precious assets their employees.
Sixth, at the facility level, HLM analysis reported only one significant relationship
between QHRP and customer satisfaction: general HR functions. A similar relationship
was also recently reported by Oakley (2005), who surveyed a sample of 5568 employees in
90 organizations in the US media industry and their customers which were over 37,000.
Examining the attitudes of employees, the study reported a direct correlation between
general HR functions and customer satisfaction, and customer satisfaction and financial
performance. It can be concluded that long-term healthcare organizations can utilize the
QHRP framework as a core business process to achieve employee and customer
satisfaction. This is important as customer satisfaction was reported to be related to
general HR functions within the organization.
Seventh, stepwise multiple regression analysis reported a significant relationship
between knowledge management and financial outcomes of organizational performance.
Shih and Chiang (2005) examined the impact of both corporate and human resource
strategies on knowledge management strategy, and their interactive influence on the

The International Journal of Human Resource Management

1961

effectiveness of the knowledge management. Using a sample of 147 Taiwanese large

companies in the banking, services, and manufacturing industries, the results of their study
reported a relationship between knowledge management and organizational financial
outcomes. In another study, Kyriakopoulos and de Ruyter (2004) investigated how
organizations utilized stored knowledge and acquired market information. Their study of
product development activities reported that there was a positive relationship between
knowledge management and financial performance outcomes.
The findings presented in these studies are very similar to those of this study.
Knowledge management is becoming increasingly important in the bottom line
contribution of HR practices to organizations. The finding of this study on the
relationship between knowledge management and financial outcomes of organizational
performance is even more meaningful for long-term healthcare organizations which suffer
dramatically as a result of high employee turnover and the consequent failure in the
organization-wide implementation of knowledge management practices.
Finally, the data analysis of stepwise multiple regression reported a significant
relationship between strategic management and financial outcomes of organizational
performance. Hatch and Dyer (2004) sought to identify the sources of wide and persistent
variations in learning performance in the semiconductor manufacturing industry. The
findings revealed a correlation between knowledge management and financial
performance outcomes. A recent study by Reeves and Ford (2004) sampled 81 healthcare
service providers listed in the same Standard Industrial Classification codes for Health
Services Organizations. Their findings reported that strategic management was
significantly related to financial outcome variables.
This study also reported a similar relationship between strategic management and
financial outcomes of organizational performance. Quality management focuses on the
execution of strategic management in healthcare which should address organizational
agility based on contingency plans, or if circumstances require a shift in plans and rapid
execution of new or changed plans. Furthermore, strategic management includes overall
organizational strategy to address changes in healthcare services and programs. In a
rapidly changing technologically advanced healthcare environment, organizations should
expect changes in services and programs as quality of care is rapidly increasing through
advancing technology. The findings highlight the need for long-term healthcare
organizations to capitalize on strategic management as a competitive and sustainable
advantage and adopt management practices that integrate strategic management as a core
business function within the QHRP framework.
Implications for human resource management practice and research
One of the goals of this study is to provide a framework for the field of Human Resources
(HR) to measure its contribution to organizational performance outcomes. The framework
validated in this study can serve as a reliable tool to link HR practices to organizational
performance within a quality management environment. The demand for higher performance
is a reality of todays business. Using the QHRP framework, HR practitioners and scholars
can view and position HR as a major business process.
The survival of the field of HR as a strategic and competitive business partner lies in
its ability to develop new approaches and sound measurement systems to demonstrate its
financial benefit to organizations bottom line. This notion is supported by researchers in the
field. American Society for Training and Development reported that only 3 percent of T&D
programs were evaluated for financial impact (Bassi, Benson and Cheney 1996, p. 12).

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M. Akdere

Huselid (1995), on the other hand, pointed out the lack of systematic research investigating
HRs ability to provide companies with a source of competitive advantage. Thus, the
framework validated in this study not only measures HRs relationship with organizational
performance outcomes but introduces a new realm of practice and research by integrating
quality management as a major HR process. The findings of this study highlight and
recommend that the relationships between the QHRP and organizational performance
outcomes are all significant in contributing to the argument of HRs bottom line
contribution to the organization. Furthermore, these findings present evidence that
investment in HR will very likely return to the organization.
This study further suggests that HR managers can advocate and champion the QHRP
framework as a strategic business process. A previous study by MacDuffie (1995) reported
strong evidence that supports the results presented in this study in which organizations
bundling HR practices into a system that was integrated with production/business strategy
outperformed companies using traditional mass production systems. In addition, education
managers and employees in the range and meaning of the expected performance
dimensions can help them recognize desired behaviors, evaluate performance accurately,
and provide meaningful feedback, as well as guide their own goal setting and performance
tracking (London, Mone and Scott 2004). Future research is needed to test this framework
for HR practices in other industries.
Acknowledgements
An earlier version of this research was named 2005 American Society for Training & Development
Dissertation of the Year Award.
Prior versions of this research have been presented at: the 2006 American Society for Training &
Development (ASTD) International Conference & Exposition, Dallas, Texas; the 21st Annual
(2006) Society for Industrial and Organizational Psychology (APA Div. 14) Conference, Dallas,
Texas; and the 2007 Human Resource Management Association of Southeastern Wisconsin Spring
Conference, Milwaukee, Wisconsin.
I would like to thank my dissertation advisor Dr. Richard A. Swanson, and committee members,
Dr. Sandra J. Potthoff, Dr. Ross E. Azevedo, Dr. Gary N. McLean and Dr. Rosmerie J. Park. Special
thanks to friend and colleague Dr. Toby M. Egan for his many helpful suggestions on this research.

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