The Effects of Human Resource Management Systems on Economic Performance: An International Comparison of U.S. and Japanese Plants

TLDR

Japanese steel plants use a comprehensive HRM system that includes problem‑solving teams, extensive training, information sharing, job rotation, employment security, and profit sharing, whereas most U.S. plants have only one or two of these features and few have a full system. To assess how Japanese and U.S. HRM practices affect worker productivity in steel production lines.

Abstract

This study uses personally collected data from 41 steel production lines to assess the effects of Japanese and U.S. human resource management (HRM) practices on worker productivity. The Japanese production lines employ a common system of HRM practices including: problem-solving teams, extensive orientation, training throughout employees' careers, extensive information sharing, rotation across jobs, employment security, and profit sharing. A majority of U.S. plants now have one or two features of this system of HRM practices, but only a minority have a comprehensive system of innovative work practices that parallels the full system of practices found among the Japanese manufacturers. We find that the Japanese lines are significantly more productive than the U.S. lines. However, U.S. manufacturers that have adopted a full system of innovative HRM practices patterned after the Japanese system achieve levels of productivity and quality equal to the performance of the Japanese manufacturers. This study's evidence helps reconcile conflicting views about the effectiveness of adopting Japanese-style worker involvement schemes in the United States. United States manufacturers that have adopted a definition of employee participation that extends only to problem-solving teams or information sharing do not see large improvements in productivity. However, U.S. manufacturers that adopt a broader definition of participation that mimics the full Japanese HRM system see substantial performance gains.