The Hr Competencies Vs Hr Effectiveness Link

Transcript

THE HR COMPETENCIES–HR EFFECTIVENESS LINK: A STUDY IN TAIWANESE HIGH-TECH COMPANIES J I A N H A N , PA U L C H O U , M I N S T O N C H A O , A N D PAT R I C K M . W R I G H T This article explores the relationship between HR competencies and HR effectiveness as perceived by line managers and employees within 39 surveyed Taiwanese high-tech firms. The data were collected from multiple constituencies in the form of four targeted surveys, and the analysis was conducted at the firm level. Respondents included 182 high-level executives, 152 HR managers, 320 line managers, and 1,262 employees. Results suggest that in the Taiwanese high-tech context, HR competencies of field expertise and change management are strongly related to HR effectiveness as perceived by line managers and employees, while business knowledge is not. Managerial implications and future research direction are also discussed in the article. This study contributes to a better understanding of HRM competencies and HR effectiveness within an international context. © 2006 Wiley Periodicals, Inc. O ver the past decades, scholars in the HRM field have conducted a range of conceptual and prescriptive work regarding the competencies of human resource professionals. Publications have focused on the types of competencies that HR managers should hold to be effective (e.g., Burke, 1997; Ulrich, Brockbank, Yeung, & Lake, 1995), the roles that HR managers play in organizations (Beer, 1997; Mohrman & Lawler, 1997), and the sources of HRM competencies (Buckley & Monks, 2004). The purpose of the current article is to explore the relationships be- tween HR competency and HR effectiveness in a sampling of Taiwanese high-technology firms. The issue of what comprises a particular “competency” is ubiquitous within the HRM literature, and the construct is not defined consistently. Hoffmann (1999) provided a recent overview on the various meanings of competency. He cited three definitions: (1) observable performance (Boam & Sparrow, 1992; Bowden & Masters, 1993); (2) standard or quality of the outcome of the person’s performance (Hager, Athanasou, & Gonczi, 1994; Rutherford, 1995); and (3) un- Correspondence to: Jian Han, Department of Organizational Management, Guanghua School of Management, Peking University, Beijing, China 100871, Phone: +86 1062756275, Fax: +86 1062751463, E-mail: [email protected] Human Resource Management, Fall 2006, Vol. 45, No. 3, Pp. 391–406 © 2006 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/hrm.20114 392 HUMAN RESOURCE MANAGEMENT, Fall 2006 derlying attributes of a person (Boyatzis, 1982; Sternberg & Kolligian, 1990). He also argued that the rationale for the use of competencies could determine the definition given to the term in a particular instance. In this article, we define and measure HR competency using Hoffman’s third perspective. In this view, we relate competency to a person’s underlying attributes, such as their knowledge, skills, or abilities. This definition foFor the past two cuses on the efforts required by individuals in order for them to decades, the fastbe competent or effective in their workplace performance. changing business This definition differs from the marketplace in other definitions of competency in which the term is treated as a Taiwan has forced measure of individual output (Hoffmann, 1999). companies on the The approach that defines island to competency as individual knowledge, skills, and/or abilities is not increasingly exhibit new. American scholar David Uldynamic capabilities rich and his University of Michigan colleagues (i.e., Wayne to maintain their Brockbank, Dale Lake, and Arthur Yeung) have taken similar edge. approaches when defining and measuring competencies (e.g., Becker, Huselid, & Ulrich, 2001; Ulrich et al., 1995). From 1988 to 1998, they continually developed and empirically tested dimensions of HR competency. Their resulting data supported at least three competency “domains”—knowledge of business, field expertise, and change management. Because this competency stream is so far the most comprehensive within the literature, we chose to adopt it as our framework to assess HR competency in the study we conducted in Taiwan. HRM and HR Competency Research in Taiwan For the past two decades, the fast-changing business marketplace in Taiwan has forced companies on the island to increasingly exhibit dynamic capabilities to maintain their edge. These attributes include agility, flexi- bility, self-renewal, and the ability to quickly develop and learn new commercial applications. While Taiwan has become an important source for a variety of products and services in the global marketplace, the nation has faced keen competition from other developed and developing countries. In order to maintain its competitive advantage, Taiwanese firms have increasingly recognized and emphasized HRM’s importance in meeting their objectives. HRM’s history as a major profession in Taiwan is not long. Its emergence there has been driven by environmental changes such as globalization and the rapid pace of technological change. Since multinational companies, including RCA, General Instruments, and Motorola, entered Taiwan in the 1970s, the nation’s enterprises began practicing industrial relations (IR) management. Although such foreign firms brought knowledge of employee relations into Taiwan, most HRM over the past decade simply focused on traditional personnel administration practices (Zhu, Chen, & Warner, 2000). However, continuing technological advancement moved the Taiwanese economic structure from a labor-intensive to a more technology- and/or capital-intensive marketplace. Enterprises gradually began to realize they could not compete in world markets without maintaining competent human capital. Consequently, companies have become more willing to invest in people and have utilized HRM practices to enhance their human capital (Huang, 2003). Winning the war for talent has become a pragmatic issue of survival, and as this need has become more critical, well-trained HRM professionals have moved from foreign-invested companies to local firms. This movement has accelerated the diffusion of HRM knowledge and practices within the Taiwanese business community. In addition, some leading universities such as the National Central University and National Sun Yat-Sen University moved to establish HRM graduate programs in the early 1990s. The programs have provided a steady supply of HRM professionals to Taiwanese firms. Human Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 393 The field has also become of far greater interest to the management research community, indicating its importance to both academia and business. Liu, Pang, and Lin (2003) analyzed Taiwanese HRM trends by reviewing 117 HRM articles from seven local management periodicals (five of them are listed in the Taiwan Social Science Citation Index) from 1993 to 2002. Results indicate that the number of HRM articles more than tripled, growing from seven in 1993 to 23 published in 2002. This dramatic increase within a decade reflects HRM’s prominence within the management field in Taiwan. We have developed our study with the following factors in mind. First, while the HR function has become an important factor in helping organizations achieve a competitive advantage (e.g., Becker & Huselid, 1998; Wright & Snell, 1998), the knowledge, skills, and capabilities of professionals who develop and implement HRM practices have not been thoroughly studied within Asia. HRM as a management field is in its relatively early stages in Asia compared to its Western counterparts. Second, we acknowledge that HR effectiveness is a very broad construct, and conceptually it should reflect diverse needs and desires. Most related studies offer HR effectiveness ratings only from high-level executives and not from other organizational constituencies. In this study, we take a different perspective and use HR effectiveness rated by line managers and employees as the dependent variables. In other words, we assess the performance of HR professionals as internal service providers to employees and line managers. Third, in practice, Taiwanese companies have learned and adopted considerable HR knowledge, techniques, and methods from Western counterparts and multinational firms to formalize their HR practices since the 1970s (Zhu et al., 2000). Yet there is limited evidence that Western HR competency models are transferable to the Taiwanese context. These Western models may have limited implications for recruiting, selecting, and educating Taiwanese HR professionals. Human Resource Management DOI: 10.1002/hrm Finally, our study design has some methodological advantages in that we have directly collected HR competency and HR effectiveness data from multiple sources. They include executives, HR managers, line managers, and employees. This provides a more balanced and less biased view, with the aim of providing incremental insights into the research and development of Taiwanese HR professional competencies. Hypothesis Development …the knowledge, Our study analyzes the relationskills, and ship between HR competencies and perceived HR effectiveness capabilities of within Taiwanese firms. The hyprofessionals who pothesized relationship is based on both scholarly studies and develop and practical considerations. In previous strategic HRM research, sevimplement HRM eral studies considered the effectiveness of HRM professionals in practices have not enhancing business planning been thoroughly processes and organizational effectiveness. studied within Asia. For example, based on institutional theory, Huselid, Jackson, HRM as a and Schuler (1997) argued that HRM could gain legitimacy and management field is acceptance from stakeholders by in its relatively early meeting or exceeding expectations. Specifically, organizations stages in Asia can maximize HR effectiveness by compared to its having HR professionals who possess field expertise such as recruitWestern ing, training, and compensation in order to provide the best possicounterparts. ble internal services to employees and line managers. HR professionals should also have business competencies that enable them to design a series of internally consistent HR policies and practices that contribute to their firm’s business objectives. Furthermore, drawn from theories of organizational life cycles, structures, power, population, and ecology, Welbourne and her colleagues measured HR’s value in part by examining whether firms had human resource departments (Welbourne & Andrews, 1996) 394 HUMAN RESOURCE MANAGEMENT, Fall 2006 and whether such firms had HR executives who directly reported to CEOs (Welbourne & Cyr, 1999). Their study results suggest that firms in actively changing or fastgrowing companies most likely benefit from having HR departQuestions remain ments or by having senior HRM regarding whether executives reporting to a firm’s CEO, thus implying that HRM HR functions may serve as a catalyst to add respond adequately value for such organizations. The relationship between HR to help organizations competency and HR effectiveness is also of great concern to corpoadjust to changing rate executives and HR professionals. As the strategic role of business HRM is emphasized and investment in HRM practices is inenvironments, creased, organizations begin to conduct business seek answers about the effectiveness of their HR departments. effectively, and/or Questions remain regarding whether HR functions respond provide services adequately to help organizations that meet internal adjust to changing business environments, conduct business efcustomer needs. fectively, and/or provide services that meet internal customer Because the needs. Because the function is function is made up made up of a number of HR professionals, one would expect of a number of HR competencies to be related to HR effectiveness. professionals, one Any profession consists of a would expect body of knowledge and/or a set of skills by which the profession is competencies to be defined, and the field of HR is no different. Again, HR competency related to HR in this study is defined as HR staff members’ knowledge, skills, and effectiveness. capabilities that directly influence HR functions and performance. As noted, Ulrich et al. (1995) identified three general competencies required of HR executives: business knowledge, field expertise, and change management. In our study, we discuss how these three competencies affect HR effectiveness perceived by HR internal customers: line managers and employees. If, in fact, the human capital within Taiwanese businesses is becoming more and more important to success in a competitive marketplace, then one would expect that those tasked with the responsibility for designing, developing, and, in some cases, delivering the systems that attract, select, train, motivate, and retain human capital would be a critical resource. As such, others within the organization would develop reasonably strong opinions regarding the performance of the HR function. In forming these evaluations of how well HRM contributes to business success, HR stakeholders would likely consider general acquisition, motivation, and retention of employees an important part of the HR function. Thus, the extent to which stakeholders believe that systems and processes for accomplishing such objectives are effectively developed and implemented strongly relate to their beliefs of HR effectiveness. Hypothesis 1: Firm-level HR staff’s field expertise is positively related to HR effectiveness as perceived by employees and line managers. Second, while the general acquisition, motivation, and retention of talent is important, these processes must be aligned with business needs. In one sense, this step deals with fitting practices to strategy, but more generally, it entails respondents believing that HR professionals understand the important levers of the business (e.g., product demand cycles, cost concerns, and other factors) and are acquiring, motivating, and retaining people in ways that enable the business to achieve its operational and financial objectives. Accordingly, the extent to which respondents believe that those in the HR function have “knowledge of the business” will rate them more favorably in terms of effectiveness. Hypothesis 2: Firm-level HR staff’s knowledge of business competency is positively related to HR effectiveness as perceived by employees and line managers. Third, drawn from scholarly and practitioner literature (Lawler & Mohrman, 2000, 2003; Ulrich et al., 1995), HR change-manHuman Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 395 agement competency must include knowledge of and being sensitive to the organization’s internal and external environment, involvement in organizational planning, design and development of strategies, and being able to apply HR information systems to gather and analyze employee data in ways that contribute to forming and implementing organizational development or change. Rapid economic development in the wider Asia Pacific region and increasing competition beyond this region has prompted Taiwanese firms to continue to develop their dynamic capabilities such as flexibility, selfrenewal, and the ability to learn quickly. As a consequence, Taiwanese firm HR stakeholders expect the HR function not only to fulfill their traditional administrative role, but also to perform as an internal change agent or leader to support strategic initiatives, to help upgrade employee skills and knowledge, and eventually to help to create an overall capacity to change and develop the organization. Hypothesis 3: Firm-level HR staff’s change-management competency is positively related to HR effectiveness perceived by employees and line managers. Methods Survey Procedure and Sample Using a survey, we collected data from 39 companies in Taiwan during the fall of 2004. We began by sending invitations and making phone calls to executives in 65 companies. Forty companies agreed to participate. At the time of data analysis, 39 companies returned their documents. More than 90% of participating companies are local firms in the technology sector. The firms produce a diverse array of products, including computer software, computer hardware, semiconductors, telecommunications, and bio-tech products. More than 65% of the firms have survived more than a decade, while 35% are less than ten years old. Fifty-one percent of the firms have more than 500 employees, 41% have 100–500 staffers, and 8% employ fewer than 100 people. Human Resource Management DOI: 10.1002/hrm We asked company contacts to estimate the surveys required and sent packets containing appropriate numbers of four survey versions to be distributed to four sets of respondents within each firm: executives, HR managers, line managers, and employees. HR competency data were collected from executives and HR professionals, because we believed these groups held the best understanding of HR knowledge, skills, and abilities. HR effectiveness ratings were collected from line managers and employees, since these groups are internal HR customers with the most to say about its effectiveness. Our survey design To better separate the survey versions for analysis, we used sepallowed us to avoid arate titles and different paper colors to distinguish each. We single-response bias also provided sealed envelopes to and ensured more help ensure confidentiality of returned documents. reliable measures We sent 2,281 surveys. Among the 1,916 returned, 182 by collecting data were completed by high-level exfrom multiple ecutives, a response rate of 73.4%; 152 were from HR managers (response rate of 87.4%); 320 were respondents in each line managers (response rate of group. 77.3%); and 1,262 were nonmanagerial employees (response rate of 87.4%). The final overall sample included 39 firms and more than 1,900 observations at the individual level. These response rates are unusually high in strategic HRM research. Our survey design allowed us to avoid single-response bias and ensured more reliable measures by collecting data from multiple respondents in each group (Gerhart, Wright, McMahan, & Snell, 2000). Two issues have plagued much of firm-level HRM research. First, a number of studies have used single respondents for all study measures (both independent and dependent variables), resulting in the possibility of common method or percept-percept bias in observed relationships. Second, using only single respondents has been demonstrated to result in unreliable organizational-level measures (Wright, Gardner, et al., 2001). In 396 HUMAN RESOURCE MANAGEMENT, Fall 2006 our study, the average numbers of executives, HR managers, line managers, and employees who returned the survey from each firm were five, four, eight, and 32, respectively. These numbers allowed us to examine relationships without concern for common method variance, and to provide more reliable measures than would have been possible with single respondents. In later sections, we will assess firm-level variable reliability and discuss related issues. HR Competency HR competencies measured 33 items adapted from the HR professional competency items developed by Ulrich et al. (1995). These items cover three aspects of HRM competencies, including business knowledge, field expertise, and change management. These items are listed in Appendix A. HR Effectiveness HR effectiveness was assessed by ten items (see Appendix B) generated by Wright, McMahan, Snell, and Gerhart (2001). These items were used to evaluate line-manager and employee perceptions of HR effectiveness. Instrument and Measures Whenever applicable, we use established measures. As noted, most HR competency items were adapted from the established measures of Ulrich et al. (1995). The instrument was first independently translated into Chinese by three HR researchers. They met to discuss their translations and provided a single version of a Chinese inventory. Two bilinguals who had no knowledge of the original English inventories then independently translated the Chinese inventory back into English. They met for a discussion and provided a single version of the translation. A native-English speaker then examined the two versions of the English inventories. Any discrepancies between the two versions were verified in the Chinese translation for accuracy. These procedures were followed to ensure the translated versions were comparable to the originals in English (Brislin, 1970). HR competency measures were included in the surveys provided to executives and HR managers. HR effectiveness measures were included in the executive surveys, the line manager surveys, and employee surveys. All four versions consisted of company and individual profile items. Results Our analyses consisted of two phases. In the first phase, we used confirmatory factor analysis (CFA) to reveal three-dimensional structures of the HR competency construct. CFA was conducted at the individual level. In the second phase, we aggregated individual responses from each firm at the firm level and conducted regression analysis to verify the hypothesized relationships between HR competency and effectiveness. Confirmatory Factor Analysis of HRM Competencies Since our survey items on HR competency were adapted from the HR professional competency items by Ulrich et al. (1995), we used CFA to confirm that our dataset collected from Taiwanese firms exhibited a three-dimensional structure. We first com- TABLE I Model Fit of CFA Model on HR Competency Data Collected from Executives and HR Managers (Analysis Conducted at Individual Level) Chi-square (CMIN) DF CMIN/DF NFI RFI IFI CFI RMSEA Three-factor correlated model 1662 492 3.38 0.958 0.952 0.970 0.970 0.086 Human Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 397 TABLE II Correlation Matrix from the CFA Analysis Factor 1 Factor 2 Factor 1. Field expertise Factor 2. Business knowledge Factor 3. Change management *** p < 0.001 0.542*** 0.797*** 0.458*** bined the survey results from executives and HR managers to form a single dataset in which each firm contained survey results from an average of eight individuals. We then used AMOS 4.0 to conduct CFA at the individual level over the 33 items on HR competency. Goodness-of-fit indices are included in Table I. The discrepancy/df (CMIN/DF) index is 3.38, which is marginal. Usually between 2 and 3 is considered acceptable (Carmines & McIver, 1981). The normal fit index is 0.96, which is acceptable (Bentler & Bonett, 1980). The relative fit index (RFI) and incremental fit index are 0.95 and 0.97, respectively. Both values are close to 1 and are reasonable. The comparative fit index (CFI) compares the model with the baseline independence model and is 0.97, above the 0.90 acceptable range. The root mean square error of approximation (RMSEA) of the model is 0.086, which is weakly acceptable (Browne, Cudeck, Bollen, & Long, 1993). Overall, we felt that the model fit of the HR competency with threedimensional data were acceptable, but the fit was not so strong. We further looked into reasons why the model fit is not strong. We found that one particular reason is that the “field expertise” factor has strong correlation with the “change management” factor (r = 0.797, p < 0.001) from the CFA result (Table II). Further analysis using exploratory factor analysis (EFA) from the executive data, and then CFA with data from the HR manager and staff, show that a two-factor structure in which “field expertise” and “change management” were combined into one factor had a better fit, but the advantage was not substantial. Therefore, for hypothesis testing, we still Human Resource Management DOI: 10.1002/hrm used the three-factor structure with existing items developed by Ulrich et al. (1995). The results for the above EFA and CFA on twofactor structure are available from the authors but are omitted from this article. Relationship Between HR Competency and Perceived HR Effectiveness To test the main hypotheses, we needed to regress perceived HR effectiveness measured from line managers and employees on the HR competencies measured from executives and HR managers. Since these measures were collected from difference sources, our regressions needed to be completed at the firm level. Thus, as a first step, we aggregated individual-level measures on the three HR competency dimensions as well as perceived HR effectiveness to the firm level. The aggregation process is displayed in Figure 1, with dotted arrow lines indicating the data aggregation from individual level to firm level and the solid arrow lines indicating the positive relationship between HRM competencies and HR effectiveness. We assessed the reliability of the data aggregation by analyzing the intraclass correlations (ICCs) of each measure. Results are reported in Table III. For our purposes, ICC(2) is a direct measure of aggregation reliability, since it reflects the reliability of the means of the firm-level measures aggregated from individual-level values. The results show that perceived HR effectiveness has excellent aggregation reliability (ICC(2) = 0.83), while HR competency measures have marginal reliability. The main reason is that perceived HR effectiveness is aggregated from an average 398 HUMAN RESOURCE MANAGEMENT, Fall 2006 FIGURE 1. Aggregation of the Individual Variables to the Firm-Level Variables of 40 individuals in each firm, while the HR competency measures are only aggregated from an average of eight individuals. Another possible reason is that the survey data do not reflect strong enough rater agreement within each firm and strong enough heterogeneity between the firms (as shown by low ICC(1) values), which is consistent with past research (Gerhart, Wright, McMahan, & Snell, 2000a). After aggregating individual-level measures to the firm level, we computed descriptive statistics of the measures (shown in Table IV). The Cronbach’s alphas show the reliability of measures when averaged among all survey items used to develop the corre- sponding measure. All measures have good reliability, indicating that the measures developed from survey items are reliable. We also tested the normality of the measures, which indicates whether the data distribution of a measure is normally distributed, a requirement needed for regression analysis. All four measures passed the normality test. The correlations among HR competency measures match the analysis from CFA (Table II): all three measures positively correlate, with field expertise and change management highly correlated (r = 0.856, p < 0.001). The correlations between the HR competency measures and perceived HR effectiveness show that field expertise and change man- TABLE III Intraclass Correlations for Competency and Effectiveness Measuresa Field expertise Business knowledge Change management Perceived HR effectiveness a Within-Firm Variance σ2 0.638*** 0.666*** 0.728*** 0.847*** Between-Firm K = Number of Variance τ Raters per Firm 0.093* 8.31 0.088* 0.068* 0.104*** 8.31 8.31 39.90 ICC (1) 0.13 0.12 0.09 0.11 ICC(2) 0.55 0.52 0.44 0.83 * p < 0.05, ** p < 0.01, *** p < 0.001. ICC (1) = τ/(τ+σ2), ICC(2)= K * ICC1 / [ 1 + (K-1)* ICC1]. Human Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 399 TABLE IV Descriptive Statistics, Correlations, and Reliability Measures for the Constructs Mean 1. Field expertise 2. Business knowledge 3. Change management 4. Perceived HR effectiveness * p <0.05, ** p <0.01, *** p < 0.001. S.D. 0.432 0.435 0.445 0.363 Cronbach’s alphas 0.95 0.91 0.89 0.94 1 Correlations 2 3 4.827 5.228 4.908 4.829 0.614*** 0.856*** 0.572*** 0.395* 0.092* 0.483** N = 39. agement are positively correlated, while the correlation between business knowledge and perceived HR effectiveness is not significant. To test Hypotheses 1 to 3, we regressed the measure of perceived HR effectiveness on each of the measures of HR competency. For each regression, we added firm size as a control variable since the difference in a firm’s size may affect its HR profile and competency. Results are reported in Table V. Our results also show that field expertise and change management have strong positive relationships to perceived HR effectiveness after adding controls based on a firm’s size. The F-values of the regressions are 9.37 with p < 0.001 and 5.91 with p < 0.01, and the regression weights are 0.49 with p < 0.001 and 0.40 with p < 0.01. However, business knowledge has an insignificant relationship with perceived HR effectiveness (both the F-value and the regression weight are insignificant). Therefore, our regression results strongly support Hypotheses 1 and 3 but reject Hypothesis 2. Furthermore, we put all three HR competency measures together in a regression to test their combined effects on HR effectiveness. Results show that the effects are significant (F-value = 4.86 with p < 0.01), and among the three HR competencies, field expertise has a positive and significant effect on perceived HR effectiveness (regression TABLE V Regressions of the Measure of Perceived HR Effectiveness on HR Competency Measuresa Model 1. Field expertise to perceived HR effectiveness Field expertise Business knowledge Change management Firm size Adjusted R-square 0.041 0.306 9.367*** 0.488*** Model 2. Business knowledge to perceived HR effectiveness Model 3. Change management to perceived HR effectiveness Model 4. All competency measures to perceived HR effectiveness 0.678* 0.223 0.401** 0.014 0.025 1.490 0.041 0.205 5.914** –0.168 –0.095 0.054 0.289 4.856** F-value a * p < 0.05, ** p < 0.01, *** p < 0.001. Human Resource Management DOI: 10.1002/hrm 400 HUMAN RESOURCE MANAGEMENT, Fall 2006 weight = 0.68 with p < 0.05). The effects of business knowledge and change management are not significant. Business knowledge is not correlated with perceived HR effectiveness, while change management holds a high correlation with field expertise, and thus there is high collinearity in the regression. The HR function in Taiwanese firms has Discussion The data analysis of this study reveals several results. First, the a shorter HR competency of field expertise was a strong predictor of perdevelopment history ceived HR effectiveness. Within this sample, the results suggest than its American that in the minds of two major counterparts, and it constituencies, line managers and employees, the most effecmay take more time tive HR operations are those with professionals who are well skilled for Taiwan HR in HR basics. Second, business knowledge professionals to was virtually unrelated to perbecome strategic ceived HR effectiveness. This result runs counter to the basic HR decision makers. paradigm within the United States, which presupposes that business acumen among HR professionals is one of the most critical factors necessary for HR success. However, several possible explanations exist for this result. From the ICC analysis (Table III), we notice that business knowledge has low ICC(2) values, indicating that data aggregation is not reliable for firm-level, individual ratings of this competency. The correspondent between-firm variances are insignificant, implying that there is little within-firm agreement on the ratings. Such disagreement may be due to differing perceptions among individuals on HR business knowledge or simply difficulty in observing such knowledge in daily practice. Further, our stakeholder groups, line managers and employees, may not truly be in a position to evaluate HR business knowledge, because this competency is unlikely to be observed by them directly, and this knowledge would have an impact only at higher organizational levels. One could hypothesize that had we assessed effectiveness from the standpoint of executives, we might have found a stronger relationship between such business knowledge and effectiveness. Finally, the nonsignificant result between business knowledge and HR effectiveness may indicate that HRM in Taiwan is mostly a personnel management function rather than a strategic partner in firm operations. If HR staff mainly deals with field-specific functions such as recruiting and training without gaining much knowledge of the company’s operations, business knowledge would be perceived as less important. The HR function in Taiwanese firms has a shorter development history than its American counterparts, and it may take more time for Taiwan HR professionals to become strategic decision makers. In addition, the change-management competency in HR demonstrates mixed results across single and multiple regressions as a predictor of perceived HR effectiveness. Two insights might be drawn from these results. On the one hand, the analysis may indicate that the dimensional construct of HR competency distinctions, such as between the factors of field expertise and change management, may require further exploration. Second, the significant result of the single regression shows that items measuring change management may be a strong predictor of perceived HR effectiveness. Therefore knowledge, skills, and abilities included in this dimension should also be considered as required competencies for successful HR professionals in Taiwan. Practical Implications For practicing managers in Taiwan and foreign firms who are willing to have business relationships with Taiwanese firms, our study results may bolster the argument that HR field expertise may be the most important factor in pleasing HR internal customers. As a consequence, our study suggests that professional training and education for such professionals should focus on “basics” such as field knowledge. This knowledge inHuman Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 401 cludes recruiting, staffing, training, and compensation, all of which are perceived as strong predictors of HR effectiveness by line managers and employees. Further, although change management is not a significant predictor of HR effectiveness in the multiple regression due to multicollinearity, the significant result of the single regression between change management and HR effectiveness suggests that HR professionals in Taiwan are also likely to increase their effectiveness if they master the skills and abilities necessary to support a company’s strategic planning and change management. Specific skills in this regard may include applying human resources information systems to collect and analyze data in ways that support strategic decision making; adapting HR activities to internal and external change; and building relationships necessary for change. Limitations and Future Research It is important to address our study’s relative strengths and weaknesses. First, with regard to sample size, the 39 firms we surveyed provide limited power for testing relationships at the firm level. However, despite limited statistical power, significant results were still observed. In addition, while the N of 39 seems small, it actually reflects the aggregation of more than 1,900 responses. Second, although we took great effort to increase reliability through the aggregation across multiple respondents, some reliability problems remained. As Gerhart, Wright, McMahan, and Snell (2000) and Gerhart, Wright, and McMahan (2000) have demonstrated, single-respondent measures of organizational phenomena are sometimes unreliable, and the use of multiple respondents can result in more reliable findings. In this study, we intended to increase the reliability of the study by using multiple responses from multiple sources within organizations. This intense data-collection effort enabled us to gather information from an average of five executives per firm, four HR managers, eight line managers, and 32 employees. However, the effort may have resulted in less Human Resource Management DOI: 10.1002/hrm than ideal data-aggregation reliability (i.e., ICC(2)). Future research could improve reliability from two perspectives. First, the questionnaires could be designed more carefully to improve within-firm agreement. In our survey, we asked about business knowledge among HR professionals. This factor may have been difficult for raters to assess as a competency dimension if they had not directly observed relevant behaviors during daily contact with HR professionals. Therefore, ratings are likely to be inconsistent across different raters from one organization, leading to low data-aggregation reliabil- …although we took ity. Second, although we colgreat effort to lected data from multiple sources within an organization, increase reliability we need to include additional through the respondents from each of the sources to achieve greater reliaaggregation across bility. And, in future studies, we may need to include both permultiple ceptual and objective measures (cost per hire, time to hire, respondents, some and/or turnover) to better measreliability problems ure HR effectiveness. Third, to some extent, our remained. data confirmed the three-factor construct of HR competency developed by Ulrich et al. (1995)— namely, knowledge of business, field expertise, and change management. However, additional EFA and CFA show that a two-factor construct, with business knowledge as one factor and a combination of field expertise and change management as another factor is a better fit for our dataset. This result may be due to the raters in our sample perceiving that both HR field expertise and change management represent the “people side” of the organization, whereas business knowledge in general represents the “strategy side.” We remain uncertain. Finally, a related issue is that in this study we used some items created in the Western context a decade ago to measure HR competencies. Additional items should be included to measure current HR professional competencies in Taiwan, in part to see whether the 402 HUMAN RESOURCE MANAGEMENT, Fall 2006 construct is bound by social or cultural concerns. In addition, it would be useful to have some objective, non-questionnaire-based measures of HR effectiveness to gauge the validity of the perceptual measures. Conclusion While HRM has become more important in the increasingly competitive business environment that characterizes Taiwan, our study reveals that the strategic side of HRM may currently be of limited value. Important HR stakeholders seem to consider effectiveness of HR as consisting of delivering traditional HR services and programs. This situation certainly existed in the United States up until 10 to 15 years ago. We expect that such a transformation in Taiwan may mirror that of the U.S. situation, with an increasing emphasis on business knowledge and the “strategic side” of HR being observed by HR professionals within the notso-distant future. JIAN HAN is an assistant professor of human resource management and organizational behavior in the Guanghua School of Management, Peking University, China. She earned her PhD in human resource studies from the School of Industrial and Labor Relations, Cornell University. Dr. Han’s research interests include strategic human resource management, employee recruitment, employer brand, diversity management, human resource competency, and multilevel analysis. Her research has been accepted for publication in journals such as Personnel Psychology, Organizational Research Methods, and the Academy of Management Best Paper Proceedings. Dr. Han is also one of the key investigators in a strategic HRM project funded by the National Science Foundation of China. PAUL CHOU is a doctoral candidate in human resource management in the School of Management, National Central University, Taiwan. He has worked as an HR practitioner for 28 years in several multinational companies, such as Arthur Andersen, Payless Shoe Source, Dow Chemical, Motorola, and General Instruments. Before enrolling in the PhD program in 2002, he was senior HR vice president of Compal Computer Co., a local Taiwanese company that is ranked fifth in the manufacturing section in Taiwan. His current research interests include human and social capital development, competency-based management, performance management, and leadership development. He has published two articles in Chinese about social capital and community development. MINSTON CHAO is a PhD candidate in human resource management at National Sun Yat-Sen University, Taiwan. He was a visiting student at the School of Industrial and Labor Relations, Cornell University. He has authored numerous articles and conference papers on strategic human resource management and labor relations. He has worked for multinational companies as an HR manager for many years. Now he is an associate director at KPMG Taiwan. His current research interests include strategic human resource management, competence management, and labor relations. He has worked with organizations in the areas of staffing, performance management, compensation management, training and development, organizational survey, 360-degree feedback, competence management, labor-management relations, and labor laws. He has taught HRM in the Health Care Department at Chang Gung University, Taiwan, since 1997. An awardwinning teacher and trainer, he is active in consulting and executive development activities for corporations and health care organizations. Human Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 403 PATRICK M. WRIGHT is a professor of human resource studies and director of the Center for Advanced Human Resource Studies in the School of Industrial and Labor Relations, Cornell University. He holds a BA in psychology from Wheaton College and an MBA and PhD in organizational behavior/human resource management from Michigan State University. Dr. Wright teaches, conducts research, and consults in the area of strategic human resource management, particularly focusing on how firms use people as a source of competitive advantage. He has published over 50 research articles in journals, as well as more than 20 chapters in books and edited volumes. He currently serves on eight editorial boards. REFERENCES Becker, B. E., & Huselid, M. A. (1998). High performance work systems and work performance: A synthesis of research and managerial implications. In G. Ferris (Ed.), Research in personnel and human resources management (pp. 53–101). Stamford, CT: JAI Press. Becker, B. E., Huselid, M. A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy and performance. Boston, MA: Harvard Business School Press. Beer, M. (1997). The transformation of the human resource function: Resolving the tension between a traditional administrative and a new strategic role. Human Resource Management, 36, 49–36. Bentler, P . M., & Bonett, D. G. (1980). Significance tests and goodness-of-fit in the analysis of covariance structures. Psychological Bulletin, 88, 588–600. Brislin, R. W. (1970). Back-translation for cross-cultural research. Journal of Cross-Cultural Psychology, 1(3), 185–216. Boam, R., & Sparrow, P . (1992). Designing and achieving competency. London: McGraw-Hill. Bowden, J., & Masters, G. (1993), Implications for higher education of a competency-based approach to education and training. Canberra: AGPS. Boyatzis, R. (1982). The competent manager: A model for effective performance. New York: Wiley. Browne, M., Cudeck, R., Bollen, K., & Long, K. (1993). Testing structural equation models. Newbury Park, CA: Sage Publications. Buckley, F ., & Monks, K. (2004). The implications of meta-qualities for HR roles. Human Resource Management Journal, 14(4), 41–57. Burke, W. (1997). What human resource practitioners need to know for the twenty first century. Human Resource Management, 36, 71–79. Carmines, E. G., & McIver, J. P . (1981). Analyzing models with unobserved variables: Analysis of covariance structures. In G. W. Bohmstedt & E. F . Borgatta (Eds.), Social measurement (pp. 65–115). Thousand Oaks, CA: Sage. Gerhart, B., Wright, P ., & McMahan, G. (2000). Measurement error and estimates of the HR—Firm performance relationship: Further evidence and analysis. Personnel Psychology, 53, 855–872. Gerhart, B., Wright, P ., McMahan, G., & Snell, S. (2000). Research on human resource decisions and firm performance: How much error is there, and how does it influence effect size estimates? Personnel Psychology, 53, 803–834. Hager, P ., Athanasou, J., & Gonczi, A. (1994). Assessment technical manual. Canberra: AGPS. Hoffmann, T. (1999). The meanings of competency. Journal of European Industrial Training, 23(6), 275–285. Huang, J. C. (2003, January). Human capital investment system, innovation strategy and organizational performance: A test of alternative forms of fit. Management Review (in Chinese), pp. 99–126. Huselid, M. A., Jackson, S. E., & Schuler, R. S. (1997) Technical and strategic human resource management effectiveness as determinants of firm performance. Academy of Management Journal, 40, 171–188. Lawler, E. E., III, & Mohrman, S. A. (2000). Beyond the vision: What makes HR effective? Human Resource Planning, 23(4), 10–20. Lawler, E. E., III, & Mohrman, S. A. (2003). HR as a strategic partner: What does it take to make it happen? Human Resource Planning, 26(3), 15–29. Liu, N., Pang, P ., & Lin, C. (2003). Human resource management research in Taiwan (1993–2002): Re- Human Resource Management DOI: 10.1002/hrm 404 HUMAN RESOURCE MANAGEMENT, Fall 2006 view and prospect. Journal of Human Resource Management (in Chinese), 5(3), 107–137. Mohrman, S. A., & Lawler, E. E. (1997). Transforming the human resource function. In D. Ulrich, M. R. Casey, & G. Lake (Eds.), Tomorrow’s HR management (pp. 241–249). New York: Wiley. Rutherford, P . (1995). Competency based assessment. Melbourne, AUS: Pitman. Sternberg, R., & Kolligian J., Jr. (1990). Competence considered. New Haven, CT: Yale University Press. Ulrich, D., Brockbank, W., Yeung, A. K., & Lake, D. G. (1995). Human resource competencies: An empirical assessment. Human Resource Management, 34, 473–495. Welbourne, T. M., & Andrews, A. O. (1996). Predicting the performance of initial public offerings: Should human resource management be in the equation? Academy of Management Journal, 39, 891–919. Welbourne, T. M., & Cyr, L. A. (1999). The human resource executive effect in initial public offering firms. Academy of Management Journal, 42, 616–629. Wright, P ., Gardner, T., Moynihan, L., Park, H., Gerhart, B., & Delery, J. (2001). Measurement error in research on human resources and firm performance: Additional data and suggestions for future research. Personnel Psychology, 54, 875–902. Wright, P ., McMahan, G., Snell, S., & Gerhart, B. (2001). Comparing line and HR executives’ perceptions of HR effectiveness: Services, roles, and contributions. Human Resource Management Journal, 40, 111–124. Wright, P . W., & Snell, S. (1998). Toward a unifying framework for exploring fit and flexibility in strategic human resource management. Academy of Management Review, 23, 756–772. Zhu, Y., Chen, I., & Warner, M. (2000). HRM in Taiwan: An empirical case study. Human Resource Management Journal, 10(4), 32–44. Human Resource Management DOI: 10.1002/hrm The HR Competencies–HR Effectiveness Link: A Study In Taiwanese High-Tech Companies 405 APPENDIX • 1. 2. 3. 4. 5. 6. 7. 8. 9. • 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. • 27. 28. 29. 30. 31. 32. 33. A HR Competency Measures (Items Adapted from Ulrich et al., 1995) Knowledge of Business The HR professionals in our company are knowledgeable about our company’s business model. The HR professionals in our company are knowledgeable about our company’s profit chain. The HR professionals in our company are knowledgeable about our company’s organizational structure. The HR professionals in our company are knowledgeable about the high-tech industry in Taiwan. The HR professionals in our company are knowledgeable about our company’s short-term strategy. The HR professionals in our company are knowledgeable about our company’s long-term strategy. The HR professionals in our company are knowledgeable about the functional roles and responsibilities of other departments within this company. The HR professionals in our company are knowledgeable about the company’s external environment (e.g., customers, government legal regulations, competitors, third-party business partners, etc.). Overall, our company’s HR department has strong knowledge in our company’s business operation. HR Functional Expertise The HR professionals in our company are effective in recruiting, promoting, and placing appropriate people who fit the job description and requirements. The HR professionals in our company are effective in recruiting, promoting, and placing appropriate people whose values match the organization’s values. The HR professionals in our company can develop and organize training programs that meet the needs of other functional departments. The HR professionals in our company can offer career planning services to employees in need. The HR professionals in our company can develop a competitive compensation system with line managers to improve on recruiting and retention objectives. The HR professionals in our company can design a nonfinancial motivational system with line managers to improve recruitment and retention of internal and external talented individuals. The HR professionals in our company can design an employee benefits system. The HR professionals in our company can develop a performance evaluation system that assists other departments in achieving their business goals. The HR professionals in our company can assist in establishing and communicating clear performance standards to employees. The HR professionals in our company can develop performance appraisal systems that differentiate between employee performance levels (good vs. bad?). The HR professionals in our company can work with managers to communicate clear and consistent messages for internal communication. The HR professionals in our company can explain why business practices exist. The HR professionals in our company can provide line managers with valuable insights or advice to improve management of their staff. The HR professionals in our company can help line managers handle problem employees. The HR professionals in our company can assist in facilitating the process of restructuring the organization. The HR professionals in our company can assist in facilitating the integration of different business functions. Overall, the HR staffs in our company have strong HR field expertise. Managing Change The HR professionals in our company can use up-to-date methods and technologies to accomplish my functional goals (e.g., online recruiting, e-learning). The HR professionals in our company can adapt HR practices and services in response to changes in internal conditions (e.g., structural change, strategy change, size, mergers and acquisitions). The HR professionals in our company can adapt HR practices and services in response to changes in external conditions (e.g., labor market conditions, competitor retaliation, labor laws and regulations). The HR professionals in our company can use information data as a source to influence colleagues. The HR professionals in our company can take a proactive role in bringing about change. The HR professionals in our company can establish relationships necessary for change. Overall, the HR department in our company has strong skills to cope with various changes within the organization. Human Resource Management DOI: 10.1002/hrm 406 HUMAN RESOURCE MANAGEMENT, Fall 2006 APPENDIX 1. 2. 3. 4. 5. 6. 7. 8. 9. B Perceived HR Effectiveness Measures Overall, I am satisfied with the service and support provided by the HR professionals in our company. The HR professionals in our company are efficient (i.e. timely, cost-efficient) when recruiting candidates needed for business development. The HR department is performing its job the way I would like it to be performed. The HR department is very responsive to meeting line managers’ and employees’ needs. The HR department provides me with useful and timely information regarding HR issues. The HR department has helped to enhance the firm’s competitive position. The HR department provides value-added contributions to the firm’s bottom line. The HR department contributes to building the firm’s human capital as a source of competitive advantage. The policies, practices, and procedures coming from the HR department help line managers and employees perform their jobs well. 10. The HR policies, practices, and procedures help support the firm’s business plan. Human Resource Management DOI: 10.1002/hrm