The Effects of Human Resource Development on Operational and Financial Performance of Manufacturing Companies: A Large-Scale, Longitudinal Analysis

Building on strategic human resource management (SHRM) literature, we investigate the effect of human resource development (HRD) on the operational and financial performance of manufacturing organizations. We identify four different approaches to HRD that reflect management-driven or employee-focused HRD efforts with either quantitative or qualitative focus. We further propose that HRD practices predict organizational performance by shaping the competence and commitment of employees that reflect the prevailing, untested assumption in the SHRM literature. Multi-source data collected from 207 manufacturing companies at three time points over a five-year period largely support our theoretical propositions. Financial investment and managerial support for HRD show positive effects on employee commitment but not on competence. Perceived benefits of HRD enhance both employee competence and commitment, whereas the amount of participation in HRD is not a meaningful predictor of those employee outcomes. A series of structural equation models confirms that HRD practices improve employee competence and commitment that have direct effects on operational performance of the organization, which ultimately shapes its financial performance. The present study elaborates distinct values of different HRD practices, and highlights the significance of employee outcomes as the mediating mechanism between HRD and organizational performance