Increasingly, firms are considering the adoption of new work practices, such as problem-solving teams, enhanced communication with workers, employment security, flexibility in job assignments, training workers for multiple jobs, and greater reliance on incentive pay. This paper provides empirical evidence to address the question: do these human resource management practices improve worker productivity? For this study, we constructed our own data base through personal site visits to 26 steel plants which contained one specific steelmaking process, and collected longitudinal data with precise measures on productivity, work practices, and the technology in these production lines. The empirical results consistently support the following conclusion: the adoption of a coherent system of these new work practices, including work teams, flexible job assignments, employment security, training in multiple jobs, and extensive reliance on incentive pay, produces substantially higher levels of productivity than do more 'traditional' approaches involving narrow job definitions, strict work rules, and hourly pay with close supervision. In contrast, adopting individual work practice innovations in isolation has no effect on productivity. We interpret this evidence as support for recent theoretical models which stress the importance of complementarities among a firm's work practices.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5333.
Length: Date of creation: Nov 1995 Date of revision: Handle: RePEc:nbr:nberwo:5333
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Find related papers by JEL classification: J4 - Labor and Demographic Economics - - Particular Labor Markets J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
McAfee, R Preston & McMillan, John, 1991.
"Optimal Contracts for Teams,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 561-77, August.
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