MANAGING CUSTOMER SERVICES: HUMAN RESOURCE PRACTICES, QUIT RATES, AND SALES GROWTH

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1 Academy f Management Junal 2002, Vl. 45, N. 3, MANAGING CUSTOMER SERVICES: HUMAN RESOURCE PRACTICES, QUIT RATES, AND SALES GROWTH ROSEMARY BATT Cnell Univesity This study examined the elatinship between human esuce pactices, emplyee uit ates, and ganizatinal pefmance in the sevice sect. Dawing n a uniue, natinally epesentative sample f call centes, multivaiate analyses shwed that uit ates wee lwe and sales gwth was highe in estahlishments that emphasized high skills, emplyee paticipatin in decisin making and in teams, and human esuce incentives such as high elative pay and emplyment secuity. Quit ates patially mediated the elatinship hetween human esuce pactices and sales gwth. These elatinships wee als mdeated hy the custme segment seved. Reseach in stategic human esuce management has made cnsideable pgess in dcumenting a link between ganizatinal pefmance and human esuce (HR) stategies that invest in the human capital f the wkfce (Becke & Gehat, 1996; Huselid, 1995; Ichniwski, Kchan, Levine, Olsn, & Stauss, 1996). These stategies, ften efeed t as high-invlvement high-pefmance systems, geneally include cheent sets f HR pactices that enhance emplyee skills, paticipatin in decisins, and mtivatin (Appelbaum, Bailey, Beg, & Kallebeg, 2000; Deley, 1998). Recent eviews, hweve, have identified seveal theetical and methdlgical weaknesses in this liteatue (Becke & Gehat, 1996; Deley, 1998; Wight & Sheman, 1999). Fist, pi eseach is theetically undevelped and has nt specified the mediating emplyee behavis that explain the elatinship between HR pactices and pef-' mance. Secnd, althugh the stategic human esuce they pedictin is that extenal facts such as business stategy shuld mdeate the human esuces-pefmance link, nly a few studies suppt this view (Athu, 1992; Wight, Smat, & McMahan, 1995; Yundt, Snell, Dean, & Lepak, 1996). In additin, despite the fact that thee-uates f emplyment is in sevices, empiical evidence f a HR-pefmance link is based lagely n blue-clla wkes in manufactuing plants (Appelbaum et al., 2000; Ichniwski et al., 1996). F a vaiety f easns, manufactuing studies may nt genealize t sevice settings; diffeences in demgaphy, ccupatinal gups, technlgies, wk pcesses, the level f technically euied intedependence amng wkes, and the le f the custme in the pductin pcess may all be elevant (Bwen & Schneide, 1988; Mills, Ghase, & Maguiles, 1983; Zimmeman & Enell, 1988). Thus, extensin f pevius findings t the sevice sect is needed. This study cntibutes t the stategic human esuce liteatue in thee ways. Fist, I elabate a they f hw high-invlvement human esuce pactices allw fims t build the kind f fimspecific human capital that leads t bette pefmance, and I test whethe the effects f HR pactices n pefmance ae mediated by emplyee uit ates. Secnd, dawing n a natinally epesentative sample f establishments in the U.S. telecmmunicatins sevices industy, I extend the study f high-invlvement pactices t a new cntext that has gwn damatically in emplyment and stategic imptance technlgy-mediated custme sevice and sales peatins, call centes. Thid, I cnside whethe the HR-pefmance link is mdeated by custme segment, an imptant cmpnent f business stategy in sales and maketing. PRIOR RESEARCH High-invlvement systems have been defined in vaius ways, but they geneally include thee dimensins: elatively high skill euiements; wk designed s that emplyees have discetin and pptunity t use thei skills in cllabatin with the wkes; and an incentive stuctue that enhances mtivatin and cmmitment (Appelbaum et al., 2000; Deley & Dty, 1996; Huselid, 1995; Mac- Duffie, 1995). Glassic mass pductin appaches, by cntast, emphasize lw skill euiements, naw jbs with lw discetin, and few incentives f discetinay efft. Empiical studies have shwn that high-invlvement systems ae assciated with bette pefmance in manufactuing plants (Appelbaimi et al., 2000; 587

2 588 Academy f Management Junal June Athu, 1992, 1994; Ichniwski et al., 1996; Mac- Duffie, 1995; Yundt et al., 1996). Few uantitative studies f high-invlvement pactices in sevice settings exist, but ne study f bank lan ffices did find that thee HR pactices (esults-iented appaisals, emplyment secuity, and pfit shaing) wee assciated with highe financial pefmance (Deley & Dty, 1996). In this eseach, I extend past wk by develping the agument that high-invlvement HR pactices allw a fim t build fim-specific human capital, which in tun influences ganizatinal pefmance in tw ways: diectly, via its effect n emplyee pefmance, and indiectly, via emplyee attachment t the fim. Belw, I elabate hw this they applies t custme-cntact sevice emplyees in call centes. HR Pactices, Fim-Specific Capital, and Pefmance The agument f a diect link between human esuce pactices and emplyee pefmance in custme sevice settings hinges n the idea that high-invlvement pactices help emplyees develp the kind f fim-specific human capital knwledge f a fim's pducts, custmes, and wk pcesses that enables them t inteact effectively with custmes. Fim-specific human capital is imptant because these custme-cntact emplyees manage the bunday between the fim and its custmes (Mills et al., 1983), and the behavi f these emplyees shapes custmes' buying behavi. T pesuade custmes t buy a fim's pducts and sevices, emplyees need a clea undestanding f specific pduct featues, sevice ageements, picing, packaging, pmtins f paticula custme segments, and legal egulatins. They need custme-specific knwledge egading the demand chaacteistics f paticula individuals segments and need t knw hw t use that knwledge t negtiate custmized ffeings. Emplyees als euie specific knwledge f the stuctue and cntent f the fim's infmatin systems, the wk flw fm pint f sales t delivey, and hw the cmpany's pcessing capabilities affect each custme and pduct ffeing. The thee dimensins f high-invlvement HR systems help emplyees acuie this fim-specific human capital. Fist, high-invlvement systems emphasize the selective hiing f emplyees with high geneal skills ( fmal educatin) plus a fim investment in initial taining. This cmbinatin pvides a fim with a skilled wkfce capable f nging leaning. The capacity t lean is citical because in cuent makets, intense cmpetitin and plifeatin f new pducts lead t cnstant change in maketing, picing, and packaging. Emplyees need t integate new pduct and sales infmatin int thei existing knwledge and t explain these changes t custmes. The secnd dimensin f high-invlvement systems invlves the design f wk t pvide pptunities f individual discetin and nging leaning thugh cllabatin with the emplyees. Gustme-cntact emplyees with high individual discetin ae able t espnd immediately t custme demands and t take advantage f sales pptunities when inteacting with custmes. High-invlvement systems als pvide pptunities f cntinuus leaning thugh paticipatin in "ff-line" pblem-slving gups (in which emplyees and supeviss meet peidically) and "n-line" gups (such as self-diected teams in which gups athe than individuals fm the basic unit f pductin and ae espnsible f many decisins). Reviews f the teams liteatue shw significant, psitive elatinships between semiautnmus wk gups and pefmance utcmes (Ghen & Bailey, 1997). F custme-cntact emplyees, paticipatin in bth types f teams is likely t pay ff because it ceates pptunities f nging leaning nt because paticipatin changes the cntent f thei wk (f instance, sales agents still inteact individually with custmes). Batt (1999), f example, fund that sales epesentatives in self-diected teams had the same jb duties as thse in taditinally supevised gups, but the fme had highe sales pductivity because they benefited fm bette leaning and pblem slving n hw t handle custmes and new technlgy. The thid dimensin f high-invlvement systems includes HR incentives such as nging investment in taining, emplyment secuity, high elative pay, and pefmance management systems that build tust. Fim-pvided taining ewads emplyees with additinal skills and pptunities f highe-paying jbs. Emplyment secuity allws wkes t suggest lab-saving impvements withut fea f jb lss. Efficiency wage they psits that emplyees with high elative pay and lw pefmance mniting will be me pductive in de t avid the pspect f a wse jb n the extenal maket (Kuege & Summes, 1987). The use f electnic mniting f pefmance management is a cmmn pactice in call centes, and extensive eseach shws that it ceates emplyee disaffectin and stess (Gaayn, 1993), which can have negative spillve effects n inteactins with custmes.

3 2002 Batt 589 Quit Rates as Mediating Mechanisms High-invlvement pactices als may influence ganizatinal pefmance indiectly, thugh lwe emplyee uit ates. Sme empiical studies, f example, have shwn a significant, invese elatinship between high-invlvement pactices and uit ates (Athu, 1994; Shaw, Deley, Jenkins, & Gupta, 1998) and uit ates and pductivity (Huselid, 1995). F example, fims that ae less selective hie lwe-skilled emplyees ae likely t expeience highe uit ates. The design f wk is likely t influence uit ates thugh its impact n intinsic mtivatin, as demnstated in the lage bdy f eseach n jb chaacteistics (Hackman & Oldham, 1980). Geate autnmy is assciated with highe satisfactin and lwe intentins t uit at the individual level f analysis (Gttn & Tuttle, 1986; Hm & Giffeth, 1986). Emplyees in pblem-slving and self-diected teams expeience geate autnmy and satisfactin (Ghen & Bailey, 1997), which in tun shuld educe uit ates (Gttn, 1993). Finally, human esuce incentives such as taining, emplyment secuity, high elative pay, and pactices that build tust ae likely t induce emplyee attachment and cmmitment. Sme empiical eseach has shwn significant, negative elatinships between individual tunve and emplyment secuity measued at an individual level (Gttn & Tuttle, 1986; Shaw et al., 1998) and between tunve and highe cmpensatin levels (Lenad, 1987; Pwell, Mntgmey, & Gsgve, 1994; Shaw et al., 1998). Pevasive use f electnic mniting ceates dissatisfactin and stess amng emplyees, pviding incentives f wkes t uit, as demnstated in pi eseach (Gaayn, 1993; Shaw et al., 1998; Wilsn & Peel, 1991). In custme-cntact settings, high uit ates nt nly incease the csts f ecuitment and selectin, but negatively affect sales gwth because new emplyees face a leaning cuve. Lng-tem emplyees have the tacit fim-specific skills and knwledge and ften the pesnal elatinships with custmes needed t me effectively inteact with custmes. Sme case studies have shwn that emplyee tunve (, cnvesely, lyalty) is celated with custme tunve ( lyalty) (Heskett, Sasse, & Schlesinge, 1997). Lyal custmes ae citical t sales gwth because they tend t buy a wide ange f pducts and me value-added pducts (Reichheld, 1996). Lng-tem emplyees have the accumulated tacit knwledge f pducts, custmes, and wk pcesses needed t pvide high-uality sevice t these lyal custmes. Thus, high uit ates ae likely t negatively affect sales gwth. In sum, high-invlvement pactices ae likely t cntibute t highe sales diectly by ceating a wkfce capable f custmizing sevice and sales t its paticula custme segment. They als ae likely t induce emplyee attachment, and lngtem emplyees with fim-specific skills ae likely t be me pductive. These aguments ae cnsistent with a esuce-based they f the fim (Baney, 1995): by building a wkfce with deep tacit knwledge f pducts, custmes, and pcesses, high-invlvement pactices ceate esuces that ae valuable, ae, and had t imitate, theeby cnfeing cmpetitive advantage. The aguments ae als cnsistent with theies f scial capital (Leana & Van Buen, 1999): it is nt nly that each individual has fim-specific knwledge, but als that the scial capital, stable elatinships and cllabatin amng emplyees, allw them t cntinually deepen thei knwledge and sevice and sales capabilities. An altenative appach t sevices wuld fllw the engineeing lgic f mass pductin manufactuing. In such an altenative t the high-invlvement mdel, individual efficiency is high because wkes lean standadized tasks thugh epetitin (Levitt, 1972). Lab csts ae minimized thugh lw investment in selectin, taining, paticipatin, and cmpensatin. Infmatin technlgy is used pimaily t autmate tasks and electnically mnit pefmance. Hweve, custme satisfactin and lyalty ae likely t suffe because emplyees have little discetin t meet custme needs and because the geate divisin f lab inceases the numbe f emplyees custmes must deal with (Heskett et al., 1997). In sum, existing liteatue suggests thee hyptheses: Hypthesis 1. High invlvement human esuce pactices will be negatively elated t emplyee uit ates. Hypthesis 2. High invlvement human esuce pactices will be psitively elated t sales gwth. Hypthesis 3. Emplyee uit ates will patially mediate the elatinship between highinvlvement human esuce pactices and sales gwth. Expling the Mdeating Effect f Maket Segment If the custme-emplyee elatinship is the citical fact in custme-cntact sevice wk, then a

4 590 Academy f Management Junal June cental uestin is whethe high-invlvement pactices cnfe geate cmpetitive advantage when emplyees seve sme custme segments athe than thes. T cnfe cmpetitive advantage, esuces must be valuable, ae, and had t imitate (Baney, 1995). One way t cnside the uestin f custme segments as mdeating facts is t view highinvlvement pactices as a stategy f uasipfessinalizing nnmanages enhancing skills, pptunity f independent judgment, and mtivatin. In manufactuing, f example, highinvlvement pactices enhance the capability f high schl educated blue-clla wkes, nt enginees technical staff. In custme-cntact settings, hweve, "pductin-level" jbs ange fm thse held by high schl educated wkes selling t mass-maket cnsumes, t thse f cllege-educated pfessinals seving as accunt executives. In makets seving custmes f high-value-added pducts, such as lage businesses, custmes may demand pfessinal attentin. Hence, use f high-invlvement pactices is likely t be viewed as the pice f maket enty: a fim needs them if it is t cmpete (they ae valuable), but thei use is nt sufficient t cnfe any special cmpetitive advantage (they ae nt ae inimitable). F lwe-value-added esidential and small business cnsumes in the mass maket, hweve, the wkfce is cmpaable t blue-clla wkes in manufactuing. Fims typically adpt a pductin line appach t sevices, emphasizing highvlume, lw-cst tansactins. High-invlvement pactices may be peceived as cstly and as nt sufficiently valuable t cnfe cmpetitive advantage. Nevetheless, the liteatue n mass custmizatin (e.g.. Pine, 1993) suggests that such pactices indeed ae sufficiently valuable in mass makets because cnsumes ae inceasingly demanding custmizatin and "sevice bundling." In telecmmunicatins sevices mass makets, f example, custmes demand bundled billing and pvisin f sevices f lcal and lng-distance calling, wieless sevices, high-speed data lines, Intenet access, and enhanced featues such as call waiting, call fwading, vice messaging, and the like. If emplyees have the skills and discetin t ceate custmized packages f multiple sevices, athe than being limited by standadized menus, they will sell me and sell me value-added sevices. This line f agument suggests that the chaacteistics f mass custmized makets make highinvlvement HR pactices valuable; but cst pessues and the cnventinal fcus n a tansactinal appach make high-invlvement pactices ae and difficult t imitate. This line f agument suggests the fllwing hypthesis: Hypthesis 4. The psitive effect f highinvlvement human esuce pactices n sales gwth will be stnge f establishments seving lw-value-added (esidential and small business) custmes than f thse seving high-value-added (lage business) custmes. Sample METHODS The sample f this study is a natinally epesentative statified andm sample dav«i fm the Dun & Badsteet listings f establishments. An establishment is defined as ne wk lcatin, such as a manufactuing plant, in this study, a call cente. A call cente pvides telephne-mediated sevice and/ sales t custmes. This study included nly centes custmes call int, nt utbund telemaketing centes. Establishments wee statified by size ( plus emplyees), industy segment (cellula, wie-line, cable, Intenet sevices), and lcatin (U. S. state). I vesampled establishments with ve 100 emplyees s that the esults wuld epesent a lage pecentage f the industy's wkfce. The sample beakdwn is as fllws: 53 pecent wee in wie-line cmmunicatin; 24 pecent wee in wieless; 16 pecent wee in cable TV; and 7 pecent wee in Intenet sevices. As Becke and Gehat (1996: 792) suggested, I analyzed cmpaable establishments (call centes) in ne industy and, because HR pactices vay cnsideably by ccupatinal gup, I fcused n the "ce" wkfce, defined as the lagest gup f nnmanageial emplyees (e.g., Athu, 1992; Deley & Dty, 1996; Osteman, 1994). In this study, the ce wkes wee custme sevice and sales epesentatives. Because the data wee fm a lage natinally epesentative sample f sevice centes, it was nt feasible t suvey multiple espndents in each establishment. Gehat, Wight, McMahan, and Snell (2000) nted that establishment-level suveys ae me eliable than cpate-level suveys because the numbes ae smalle, the manages ae vey familia with the HR pactices they ae espnsible f implementing, and the HR pactices ae me hmgenus. The aveage size f the ce wkfce in u study was 93. T impve eliability, I suveyed nly geneal manages, wh have been fund t be less ptimistic abut HR pactices than HR manages (Wight et al., 1998). T develp and petest the suvey used

5 2002 Batt 591 in the study, I did extensive site visits t 15 sevice and sales centes in fu distinct makets (lcal, lng distance, cellula, and cable) and thee custme segments (esidential, small business, and lage business) in six telecmmunicatins cmpanies in five gegaphic egins. Each visit included inteviews with the site's geneal manage, middle manages, supeviss, and sevice wkes. I als used utside infmatin as a andm check t veify suvey espnses. Fist, I cmpaed suvey items (the date an establishment was funded, its pimay maket, and its size) t data cntained in the Dun & Badsteet listing. The m'eans f each vaiable in the tw data sets wee nt statistically significantly diffeent. Secnd, I examined unin cntacts and fund that the wage ates and jb titles epted by manages at specific cmpanies wee cmpaable t thse in the cespnding unin cntacts. A suvey team administeed the suvey by telephne. The suvey aveaged 52 minutes and yielded a 54 pecent espnse ate. T check f espnse bias, I estimated a lgit mdel with the dependent vaiable set eual t 1 if the establishment paticipated in the suvey. Intenet sevice pvides wee smewhat less likely t espnd, and single establishments wee smewhat me likely t espnd, and these diffeences wee cntlled f in the data analysis. Measues As discussed abve, I cnceptualized highinvlvement pactices alng thee dimensins based n pi eseach: skill level, wk design, and invlvement-enhancing HR incentives. In my field eseach, I did nt find discete systems in telecmmunicatins sevice and sales centes that esembled the kind f "best pactice" mdel f lean pductin fund in the aut industy (e.g., Mac- Duffie, 1995). Fllwing Appelbaum et al. (2000), MacDuffie (1995), and Yundt et al. (1996), amng thes, I used theetically diven additive indexes. The use f additive indexes ests n the assumptin that high-invlvement pactices ae additive in elatin t pefmance and that diffeent pactices can be substituted f ne anthe t btain simila effects (Deley, 1998). An additive index pvides a cnsevative estimate that may undestate the synegies multiplicative effects f cmbining pactices. It implies that fims can achieve incemental esults by investing in sme high-invlvement pactices but that they will achieve me psitive esults using a full ange f high-invlvement pactices (e.g., Appelbaum et al., 2000; Ichniwski et al., 1996). T captue the basic skill euiements f the custme sevice sales jb at each call cente, I ceated a skill index based n the mean f tw vaiables: (1) the numbe f yeas f fmal educatin f the typical (median) ce emplyee and (2) the numbe f yeas f fmal and n-the-jb taining needed f a new emplyee t becme pficient. The vaiables wee tansfmed t z-sces. F the wk design index, I used tw measues f individual discetin and tw f emplyee cllabatin in teams. The individual discetin scales used a 1-5 Liket espnse fmat, whee 1 is "little n cntl" and 5 is "cmplete cntl." Discetin ve wk methds included eight uestins adapted fm MacDuffie (1995); these assessed degee f influence ve tasks, tls, wk methds, pace f wk, schedules, vacatins, and technlgy design (a =.79). I develped fu additinal uestins f this study t captue discetin ve custme inteactins. Tw f the fu wee highly celated and wee used in this analysis: cntl ve handling nnutine euests and cntl ve the pace f seving custmes (a =.60). Team paticipatin included the pecentage f emplyees that paticipated in egula ff-line pblem-slving gups and the pecentage that paticipated in self-diected teams. T ceate the index, I tansfmed the vaiables t z-sces and calculated the mean value f the fu vaiables. The human esuce incentives measued wee f fu types: nging taining, emplyment secuity, pay level, and electnic pefmance mniting. Onging taining indicated a fim's cmmitment t develping emplyees and was measued by the numbe f weeks f taining a typical ce emplyee eceived each yea. Pay was the natual lgaithm f the median annual base pay f the ce wkfce. Emplyment secuity was the pecentage f the ce wkfce that was pemanent and full-time, as ppsed t pat-time cntingent. Emplyes use pat-time and cntingent wkes t cut csts (Huseman, 2001) and, unde these cicumstances, full-time wkes wy that thei jbs will be tuned int pat-time cntingent nes, with lwe pay and benefits. The availability f tempay wkes as substitutes f ce emplyee als puts dwnwad pessue n the wages f incumbent emplyees (Katz & Kuege, 1999), pviding incentives f them t uit. Electnic mniting was measued as the pecentage f the wk pefmance f the typical emplyee that was electnically mnited (evese-cded). I tansfmed all vaiables t z-sces and tk thei mean value f the HR incentive index. In additin, I ceated a mean index f the ten HR pactices in de t test the mdels f mediatin

6 592 Academy f Management Junal June and mdeatin. The high-invlvement wk systems (HIWS) index was tansfmed int a z-sce and then inteacted with the z-sce f each custme segment vaiable. The use f standadized z-sces in inteactin tems allws f them t be diectly intepeted in elatin t the mean f the inteacted vaiable; it als educes multicllineaity (Ghen & Ghen, 1983: 325). Establishments wee dummy-cded as seving all custmes in thei maket (these ae called univesal centes) as seving a paticula segment (lage business, small business, esidential). If they seved tw segments, I asked thei espndents t answe all uestins as they petained t the segment with the lagest vlume f custmes. In all analyses, univesal cente was the mitted categy. The mass maket is cmpised f tw custme segments: esidential cnsumes and small businesses. Residential cnsumes demand standadizatin with sme ptential f custmizatin via sevices such as call fwading, vice messaging, Intenet pvisin. Small businesses demand smewhat me cmplex pducts than esidential custmes and ae a slightly highe value-added tie in the mass-maket cente. Als, because this segment includes a lage pptin f "mm and pp" businesses and hme ffices, it esembles the esidential maket me than the lage business maket. Lage business custmes ae high-valueadded custmes that usually euie the bundling f cmplex pducts such as pivate banch exchange systems (PBX) and lcal aea netwks (LANs) t handle vice, data, and vide tansactins. This study des nt captue lage natinal glbal accunts because they ae ften based in small ffices inside lage establishments, and s they ae nt identifiable thugh Dun & Badsteet. I als sepaated ut peat sevice centes (f instance, diecty assistance) because they pvide a mass-maket sevice likely t geneate little n evenue (thus, they wee included in the analysis f uit ates but nt in the analysis f sales gwth). In this sample, 22 pecent f call centes seved all custmes; 19 pecent tageted lage businesses; 24 pecent tageted small businesses; 30 pecent tageted esidences; and 5 pecent wee in peat sevices. Dependent vaiables. Dependent vaiables wee the aveage annual uit ate and the pecent change in sales in the pi tw-yea peid. The measue f uits excluded dischages, etiements, tansfes, and pmtins. The measiu-e f sales gwth was the natual lgaithm f the pecent change in the value f sales t the paticula custme base seved by the cente. Cntl vaiables. I included seveal cntls that have been fund t influence HR pactices. F example, investment in human capital is likely t be geate amng fims that have me esuces ae seeking legitimacy (e.g., Osteman, 1994). Gntls f ganizatinal chaacteistics included whethe an ganizatin was a banch f a paent cmpany, whethe it was wned by a fme Bell system affiliate, and the pecentage f the wkfce cnstituted by wmen. A seies f dummy vaiables cntlled f industy segment: cellula, Intenet sevice, cable TV, wie-line (the mitted categy). Unin pesence was a dummy vaiable because the ce wkfce was nawly defined s that all ce wkes in an establishment wee eithe all unin all nnunin. RESULTS Table 1 pvides the means, standad deviatins, and "paiwise" celatins f the vaiables. F analyses f uit ates (Hypthesis 1), I estimated a Tbit mdel because the dependent vaiable (uit ates) is "left-censed" at ze, and dinay least suaes (OLS) egessin with censed data pduces biased estimates. The Tbit mdel uses all f the infmatin, including infmatin abut the censing, and pvides cnsistent estimates f the paametes (Lng, 1997: ). F the sales euatins, I used OLS egessin because thee was n censing f the data. High-Invlvement HR Pactices and Quit Rates F analyses f uit ates (Hypthesis 1), I estimated thee euatins. Table 2 epts these esults. The fist euatin, mdel 1, includes the base case f industy segment and ganizatinal cntl vaiables alne. The secnd euatin estimates the thee HR pactices dimensins (skill, wk design, and incentives) tgethe; and the thid, the full additive HR pactices index. The esults pvide patial suppt f Hypthesis 1. In mdel 2, the wk design index is significant; the incentive index is maginally significant (p <.10); and the skill index is insignificant. T estimate the effect sizes f cefficients in Tbit mdels, the cefficients must be decmpsed int changes in the pbability f bseving an utcme abve the left (censed) limit and changes in utcmes abve the left limit, the latte f which pvides an intepetatin euivalent t OLS estimates (McDnald & Mffit, 1980). In this case, the effect sizes f the Tbit cefficients ae eual t 0.51 f the OLS cefficients. A ne-standad-deviatin change in the wk design index is assciated

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8 594 Academy f Management Junal June TABLE 2 Aggegate Quit Rates as a Functin f HR Pactices" Vaiable Industy segment Wieless maket Cable TV maket Intenet maket Oganizatinal featues Bell cmpany Pat f lage ganizatin Female (pecent) Unin pesence Custme segment Lage business Small business Residential sevices Opeat sevices HR pactices Skill index Wk design index HR incentives index High-invlvement wk index Cnstant Sample Likelihd ati x' Pbability > x^ Pseud R^ Mdel ** ^ ** ^ 6.60* 14.90** Mdel * ^^ ^ *** 5.85"^ *** -1.98^ Unstandadized Tbit estimates ae epted. "^p <.10 * p <.05 ** p <.01 *** p <.001 Mdel * ^ * *** 6.52* *** with a uit ate that is 2.27 (0.51 X 4.45) pecentage pints lwe, and a ne-standad-deviatin change in the high-invlvement wk systems index is assciated with a uit ate 3.22 pecentage pints lwe (p <.001). The elatinship between the custme segment tageted, HR pactices, and uit ates is ntewthy. Residential and peat sevices centes have significantly highe uit ates than univesal centes (a Tbit-adjusted estimate f 3.36 pecentage pints highe in esidential and 7.6 pecentage pints highe in peat sevices). Als, the cefficients n esidential and peat sevices becme smalle and insignificant when the HR indexes ae added, suggesting that it is the vaiatin in HR pactices acss segments, nt the segment itself, that influences uit ates. Hweve, f the lage businesses, the cefficient n the segment becmes me significant in the pesence f the HR index. That is, nce HR pactices ae cntlled f, the uit ate in establishments seving lage business custmes is 3.3 pecentage pints (Tbit-adjusted) highe than that in univesal centes. High-Invlvement Pactices and Sales Gwth Table 3 epts the esults f the analysis f Hypthesis 2. The thee indexes tgethe in mdel 2 explain an additinal 2.9 pecent f the vaiance ve the base case. The HR incentive index has the mst highly significant, psitive elatinship with sales gwth (0.18, p <.01), and the wk design index is als significant (0.11, p <.05). The skill index is insignificant. Finally, with industy segments and ganizatinal facts cntlled f, a ne-standad-deviatin change in the high-invlvement index is assciated with a 16.3 pecentage pint incease in sales (Table 3, mdel 3). Othe Analyses Test f mediatin. Fllwing the pcedue utlined in Ban and Kenny (1986:1176), I fund that the esults pvide suppt f a patially mediated mdel (Hypthesis 3). The high-invlvement wk index is a significant pedict f uit ates (Table 2, mdel 3) and sales gwth (Table 3, mdel 3), and uit ates ae a significant pedict f sales gwth (Table 3, mdel 4). In the pesence f uit ates, hweve, the size and significance f the high- invlvement wk index is significantly educed (fm j3 = 0.17 t j3 = 0.13, p <.01), thugh its effects emain significant (Table 3, mdel 5). Thus, uit ates patially mediate the elatinship between high-invlvement HR pactices and sales gwth. Futhe analyses (nt shwn) evealed that the patial mediatin was paticulaly accunted f by the wk design index athe than the skill index the HR incentive index. Test f mdeatin. T test whethe custme segment mdeates these elatinships (Hypthesis 4), I examined a seies f inteactin tems. The esults (Table 3, mdel 6) shw that the segment tageted mdeates the elatinship between highinvlvement pactices and sales gwth. The use f high-invlvement pactices is assciated with significantly highe sales gwth in esidential centes (0.29, p <.001) and small businesses (0.15, p < 05), but nt in lage business centes (cmpaed t univesal centes). DISCUSSION AND NCLUSIONS The findings in this study can be summaized as fllws: Fist, geate use f high-invlvement pactices is assciated with lwe uit ates and highe sales gwth in custme sevice and sales

9 2002 Batt 595 TABLE 3 Sales Gwth as a Functin f HR Pactices and Quit Rates" Vaiable Mdel 1 Mdel 2 Mdel 3 Mdel 4 Mdel 5 Mdel 6 Industy segment Wieless maket Cable TV maket Intenet maket Oganizatinal featues Bell cmpany Pat f lage ganizatin Pecentage f wmen Unin pesence Custme segment Lage business Small business Residential HR pactices Skill index Wk design index HR incentives index High-invlvement wk index Annual uit ate Inteactins Lage business X high-invlvement wk index Small business X high-invlvement wk index Residential x high-invlvement wk index *** 0.37*** -0.16* 0.13* ^ 0.13^ ** 0.36*** -0.15* 0.13* * 0.15* * 0.18** ** 0.35*** -0.16** 0.12* * 0.15* 0.17** *** 0.39*** -0.15* 0.15* ^ 0.15* 0.15* -0.17** ** 0.37*** -0.16* 0.14* * 0.16* 0.13* -0.14* ** 0.35*** -0.17** 0.13* ^ 0.16* 0.19** * 0.26*** Sample size F Adjusted R^ A adjusted R^ *** *** * *** ** *** *** *** * *** * ' Standadized cefficients ae epted. ^p <.10 * p <.05 **p <.01 '**p <.001 centes. Secnd, uit ates patially mediate the elatinship between high-invlvement pactices and sales gwth. The findings ae cnsistent with the idea that high-invlvement pactices have a diect effect n emplyee pefmance as well as an indiect effect n pefmance via lwe uit ates. Thid, the elatinship between high-invlvement pactices and sales gwth is mdeated by the identity f an establishment's pimay custme base. High-invlvement pactices ae assciated with highe sales gwth in small business and esidential centes. In lage business centes, highinvlvement pactices appea t be the pice f enty and t affect sales gwth pimaily indiectly, thugh uit ates. These esults ae cnsistent with a esuce-based view f the fim: highinvlvement pactices ae ae in me cstcnscius makets, but they cnfe value because emplyees ae bette able t meet the demand f custmizatin and sevice bundling. It culd be that the mdeated elatinship between HR pactices and sales gwth is a functin f vaiatin in sales pptunities f distinct custme segments. Hweve, manages epted much geate pptunities f gwth in sales evenues in lage business makets than in esidential small business makets because f the fme's demand f high-value-added infmatin systems f handling intenal cmmunicatins, data tansfe, and vide. The data in the cuent suvey ae cnsistent with that view: the lage business centes had the highest aveage sales gwth (38 pe-

10 596 Academy f Management Junal June cent); small business centes wee next, with 37 pecent, fllwed by esidential, with 28 pecent. This explanatin, hweve, may accunt f the utcmes fund f univesal centes. They invest cnsideably in high-invlvement pactices (at a level secnd t the lage business centes) and benefit thugh lw uit ates (11 pecent), but they have the lwest aveage sales gwth (22 pecent). A eview f the establishments. that fllw this appach shwed that they wee dispptinately me likely t be small, t define thei makets as lcal, and t be lcated in small twns and ual aeas. These facts suggest that thei investment in high-invlvement pactices des nt pay ff because the esticted scpe f thei makets limits sales pptunities. Thee ae seveal limitatins t this study. As in all css-sectinal studies, the issue f causality is pblematic. T exple altenative explanatins, I examined the vaiables that might accunt f the esults, including the lcal 1998 unemplyment ate f each establishment indicated in the U.S. Bueau f Lab Statistics Lcal Aea Unemplyment Seies (ftp.bls.gv/pub/time.seies/la.) and the lcal cst f living, given in the 1999 Gegaphic Refeence Rept fm the Ecnmic Reseach Institute. I cnsideed facts such as size, age, wneship changes, size f custme base, maket shae, maket scpe, and age f paent cmpany. These measues, hweve, ae highly celated with thse aleady in the study and did nt pduce any significant diffeences in the esults. This study cntibutes t the liteatue n stategic human esuce management by examining the le f high-invlvement wk systems in ceating fim-specific human capital. It identifies ne type f emplyee behavi uitting that mediates the elatinship between HR pactices and pefmance. The wk design dimensin accunts f mst f the mediatin esults, suggesting that it may be useful f futue eseaches t examine hw diffeent dimensins f the HR system affect diffeent types f emplyee behavis. The study als fcuses n an inceasingly stategic but neglected cntext technlgy-mediated custme cntact centes. These call centes have becme a pimay pint f cntact f custme sevice and sales delivey in many industies. The cuent study is based n a natinally epesentative sample f establishments in the telecmmunicatins industy, s that the findings ae genealizable t call centes in that industy. Hweve, given that call cente management has becme an industy in itself, seving many the sevice and manufactuing ganizatins, the findings f this study have implicatins f thse cntexts as well. Because mass custmizatin aguably chaacteizes makets in banking, insuance, ailines, cmpute sftwae, and gds-pducing industies, investing in the human esuce capabilities f custmecntact emplyees in call centes seving these industies is als likely t have an ecnmic payff. Futue empiical wk is needed t assess this uestin in a wide aay f industy cntexts. REFERENCES Appelbaum, E., Bailey, T, Beg, P., & Kailebeg, A Manufactuing advantage. Ithaca, NY: ILR Pess. Athu, J The link between business stategy and industial elatins systems in Ameican steei minimiils. Industial and Lab Relatins Review, 45: Athu, J Effects f human esuce systems n manufactuing pefmance and tunve. Academy f Management Junal, 37: Baney, J Lking inside f cmpetitive advantage. Academy f Management Executive, 9(4): Ban, R. M., & Kenny, D. A The mdeat-mediat vaiable distinctin in scial psychlgical eseach. Junal f Pesnality and Scial Psychlgy, 51: Batt, R Wk ganizatin, technlgy, and pefmance in custme sevices and sales. Industial and Lab Relatins Review, 52: Becke, B., & Gehat, B Special eseach fum: Human esuce management and ganizatinal pefmance. Academy f Management Junal, 39: Bwen, D. E., & Schneide, B Sevices maketing and management: Implicatins f ganizatinal behavi. In B. M. Staw & L. L. Cummings (Eds.), i?eseach in ganizatinal behavi, vl. 10: Geenwich, CT: JAI Pess. Caayn, P Effect f electnic pefmance mniting n jb design and wke stess: Review f the liteatue and cnceptual mdel. Human Facts, 35: Chen, J., & Ghen, P Applied multiple egessin/celatin analysis in behavial sciences (2nd ed.). Hillsdale, NJ: Elbaum. Ghen, S., & Bailey, D What makes teams wk: Gup effectiveness eseach fm tbe shp fl t tbe executive suite. Junal f Management, 23: Gttn, J. L Emplyee invlvement: Methds f impving pefmance and wk attitudes. Newbuy Pak, CA: Sage Publicatins. Gttn, J. L., & Tuttle, J. M Emplyee tinnve: A meta-analysis and eview with implicatins f eseach. Academy f Management Review, 11: Deley, J Issues f fit in stategic human esuce

11 2002 Batt 597 management: Implicatins f eseacb. Human Resuce Management Review, 8: Deley, J., & Dty, H Mdes f theizing in stategic hvunan esuce management: Tests f univesalistic, cntingency, and cnfiguatinal pefmance. Academy f Management Junal, 39: Gebat, B., Wight, P. M., McMahan, G. G., & Snell, S. A Measuement e in eseacb n the buman esuces and fim pefmance elatinsbip: Hw much e is thee and bw des it influence effect size estimates? Pesnnel Psychlgy, 53: Hackman, J. R., & Oldbam, G. R Wk edesign. Reading, MA: Addisn-Wesley. Heskett, J., Sasse, W. E., & Scblesinge, L The sevice pfit chain: Hw leading cmpanies link pfit and gwth t lyalty, satisfactin, and value. New Yk: Fee Pess. Hm, P. W., & Giffetb, R. W Emplyee tunve. Gincinnati: Sutb-Westen Gllege Publishing. Huseman, S Why emplyes use flexible staffing aangements: Evidence fm an establishment suvey. Industial and Lab Relatins Review, 5: Huselid, M The impact f human esuces management pactices n tunve, pductivity, and cpate financial pefmance. Academy f Management Junal, 38: Ichniwski, G., Kcban, T., Levine, D., Olsn, G., & Stauss, G Wbat wks at wk: Oveview and assessment. Industial Relatins. 35: Katz, I. F., & Kuege, A. B The bigb pessue U.S. lab maket f tbe 199O's. Bking's Papes n Ecnmic Activity, 1: Kuege, A. B., & Summes, L. H Reflectins n tbe inte-industy wage stuctue. In K. Lang & J. S. Lenad (Eds.), Unemplyment and the stuctue f lab makets: New Yk: Blackwell. Leana, G. R., & Van Buen, H. J Oganizatinal scial capital and emplyment pactices. Academy f Management Review, 24: Lenad, J. S Gats and sticks: Pay, supevisin, and tunve. Junal f Lab Ecnmics, 5: sl36-sl52. Levitt, T Pductin line appacb t sevices. Havad Business Review, 50(5): Lng, J. S Regessin mdels f categical and limited dependent vaiables. Thusand Oaks, GA: Sage. MacDuffie, J. P Human esuce bundles and manufactuing pefmance: Oganizatinal lgic & flexible pductin systems in tbe wld aut industy. Industial and Lab Relatins Review, 48: McDnald, J. F., & Mffitt, R. A The uses f tbit analysis. Review f Ecnmics and Statistics, 62: Mills, P. K., Gbase, R. B., & Maguiles, N Mtivating the client/emplyee system as a sevice pductin stategy. Academy f Management Review, 8: Osteman, P Hw cmmn is wkplace tansfmatin and wh adpts it? Industial and Lab Relatins Review, 47: Pine, B. J Mass custmizatin. Gambidge, MA: Havad Business Scbl Pess. Pwell, I., Mntgmey, M., & Gsgve, J Gmpensatin stuctue and establisbment uit and fie ates. Industial Relatins, 33: Reicbbeld, F. F The lyalty effect. Bstn: Havad Business Scbl Pess. Sbaw, J., Deley, J., Jenkins, G., & Gupta, N An ganizatin-level analysis f vluntay and invluntay tunve. Academy f Management Junal, 39: Wilsn, N., & Peel, M. J Tbe impact n absenteeism and uits f pfit-shaing and tbe fms f emplyee paticipatin. Industial and Lab Relatins Review, 44: Wight, P. M., McMahan, G. G., Snell, S. A., & Gebat, B Gmpaing line and HR executives' peceptins f HR effectiveness: Sevices, les, and cntibutins. Human Resuce Management Junal, 40: Wigbt, P. M., & Sbeman, S Failing t find fit in stategic buman esuce management: Theetical and empiical pblems. In P. M. Wight, L. Dye, J. Budeau, & G. Milkvich (Eds.) Reseach in pesnnel and human esuce management (supplement 4): Geenwich, GT: JAI Pess. Wigbt, P. M., Smat, D., & McMaban, G. G Matcbes between buman esuces and stategy amng NGAA basketball teams. Academy f Management Junal, 38: Yundt, M., Snell, S., Dean, J., & Lepak, D Human esuce management, manufactin-ing stategy, and fim pefmance. Academy f Management Junal, 39: Zimmeman, G., & Enell, J Sevice industies. In J. M. Juan & F. Gyna (Eds), Juan's uality cntl handbk (4th ed.): New Yk: McGaw Rsemay Batt is an assciate pfess f human esuce studies at the Industial and Lab Relatins Scbl, Gnell Univesity. Sbe eceived be B.A. fm Gnell Univesity and be Ph.D. fm the Slan Schl f Management, Massachusetts Institute f Technlgy. He eseach inteests include stategic human esuce management, sevice sect pductivity and cmpetitiveness, wk ganizatin and teams, and lab maket analysis. Sbe bas witten extensively n sevice management stategies and tbe estuctuing f tbe telecmmunicatins sevices industy.

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