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Introduction
The world market is becoming an increasingly difficult place in which to operate for today's businesses, making creativity a valuable virtue. This has caused the corporate focus to shift from financial resources to intellectual resources. The employees have evolved from a resource to be exploited to an asset that needs to be nourished, guarded and developed. This is in line with experiences from leading companies that "maintain a work environment conducive to the well-being and growth of all employees and they measure employee satisfaction" (Evans & Lindsay, 1999). The change is also reflected in the move from personnel administration/ management to human resource management (HRM) (Cornelius, 1999). But does HRM in its present form have an effect on employee satisfaction and loyalty?
The aim of this paper is first to construct a structural model that describes the causal linkage between the subsystems of HRM, employee satisfaction and loyalty as well as corporate performance based on theoretical considerations.
Second, the aim of this paper is to test the structural model empirically through a survey conducted among 670 human resource managers from Denmark, in which 215 responded. These managers cover private and public companies as well as all the relevant sectors.
The statistical technique used is known as partial least squares (PLS), which is a technique well suited for structural equation modelling when the focus is on prediction (Joreskog & Wold, 1982). This analysis will show to what extent the theoretical model corresponds with the mental models of the managers and also reveal the areas in which Danish companies need to improve their performance regarding HRM.
The subsystems of HRM
A common definition of HRM is that it encompasses the philosophies, policies and practices that affect the employees working for the organization (Hellriegel et al., 1999). This is a very broad definition that includes activities related to hiring, education and training, performance review, compensation, etc.
In order to operationalize this definition, it is appropriate to relate it to the subsystems theory of Glasl and Lievegoed (1997). According to this theory, an organization consists of the following three subsystems: the cultural subsystem, the social subsystem and the technical subsystem.
The cultural subsystem consists of the identity and the overall policies of the organization (Glasl & Lievegood,...