Building strategic human capabilities that drive performance

Abstract

In the current study, we contend that one way in which the management of people and work impacts organization performance is through building capabilities. More specifically, expanding beyond the traditional HR systems–organization performance research literature, we examine how HR flexibility, technical HRM, strategically-oriented HRM, and workforce strategic importance build a specific type of capabilities, namely organization strategic human capabilities, which in turn drives organization performance. Within a global, cross-industry sample composed of 9,923 individuals from 505 for-profit organizations, HR flexibility, strategically-oriented HRM, and workforce strategic importance were found to have positive effects on organization strategic human capabilities. Our findings also indicate that both technical and strategically-oriented HRM affect organization strategic human capabilities indirectly through HR flexibility. Furthermore, in addition to its positive effect on organization strategic human capabilities, workforce strategic importance was found to moderate HR flexibility’s positive effect on organization strategic human capabilities. Finally, within a subsample composed of 8,060 individuals from 284 for-profit organizations, organization strategic human capabilities were found to be a key proximal precursor of organization performance.