Do High Performance Work Systems Improve Workplace Well-Being in SMES? Implications for Financial Performance

Abstract

SMEs that create employment and wealth in economies face ever-more turbulent environments, such that they need to manage their employees by using advanced systems which enable them to gain a competitive advantage and generate financial performance. Based on the link between HRM and financial performance, this paper first explores their direct relation and then analyses the mediating variables involved in workplace well-being, reputation, and the creation of social value, which play a key role in said relation, drawing on the postulates of HPWS since these are proactive and well-developed HRM practices. This is a key research topic as it allows us to understand better the antecedent variables of well-being, reputation, and social value associated with HPWS and how they affect financial performance. For the empirical analysis, we use a sample of 1,136 Spanish SMEs and model a system of structural equations using Partial Least Squares (PLS). Results show the firm’s capacity to enhance workplace well-being, create a better reputation and create social value, and how these function as an intervening mechanism in the relation between HPWS and financial performance, exerting an individual as well as a joint mediating effect that explains how the former has a positive impact on the latter.