Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry

Abstract

Using a unique international data set from a 1989–90 survey of 62 automotive assembly plants, the author tests two hypotheses: that innovative HR practices affect performance not individually but as interrelated elements in an internally consistent HR “bundle” or system; and that these HR bundles contribute most to assembly plant productivity and quality when they are integrated with manufacturing policies under the “organizational logic” of a flexible production system. Analysis of the survey data, which tests three indices representing distinct bundles of human resource and manufacturing practices, supports both hypotheses. Flexible production plants with team-based work systems, “high-commitment” HR practices (such as contingent compensation and extensive training), and low inventory and repair buffers consistently outperformed mass production plants. Variables capturing two-way and three-way interactions among the bundles of practices are even better predictors of performance, supporting the integration hypothesis.