Do "high-performance" work practices improve establishment-level outcomes?

Studies of how different work practices affect organizational performance h ave suffered from methodological problems. Especially intractable has been the difficulty of establishing whether observed links are causal or merely reflect pre-existing differences among firms. This analysis uses a national probability sample of establishments, measures of work practices and perfo rmance that are comparable across organizations, and, most important, a uni que longitudinal design incorporating data from a period prior to the adven t of high-performance work practices. The conclusion most strongly supporte d by the evidence is that work practices transferring power to employees, o ften described as "high-performance" practices, raise labor costs per emplo yee, suggesting that they may raise employee compensation. Higher compensat ion is a cost to employers, although some statistically weak evidence point s to these practices raising productivity. The authors find little effect o f high-performance work practices on overall labor efficiency, which they m easure as the output per dollar spent on labor.