Employment relationships and firm sustainability: does the strength of the HRM system play a role?

Abstract

The aim of the present study, based on the framework of social exchange theory and sustainability, is twofold: first, to show how distinct employment relationships (ERs) can have different effects on sustainability outcomes; and second, to demonstrate how such an impact is mediated by the strength of the HRM system. The proposed model was tested using the multivariate method of partial least squares structural equation modelling (PLS-SEM) on a sample of 206 companies in the chemical and metallurgical industries. Data were collected via a questionnaire composed of measurement scales previously validated in the reference literature. Each company’s production and HR managers were asked to complete the questionnaire. Our results showed that mutual investment ERs can indeed produce better sustainability results, and organisations with quasi-spot contract (QSC) relationships are unable to achieve sustainable organisational outcomes. The results also confirmed that a strong HRM system reinforces the positive effects of mutual investment ERs. Moreover, a strong HRM mitigates the negative effects of QSCs. In essence, our paper shows that the strength of an HRM system is a major driver of sustainability. Therefore, when implementing working relationships, managers should foster shared perceptions of the firm’s values among its employees, thus clearly defining which behaviours are expected and rewarded.