Bridging the Gap Between High-Performance Work System and Organizational Performance: Role of Organizational Agility, Transformational Leadership, and Human Resource Flexibility

This study emphasizes the significance of people management and strategic human resource management (SHRM) in shaping dynamic capabilities to promote organizational performance and sustained competitive advantage. Data for this research were gathered from 548 respondents from the banking sector in India. Covariance-based structural equation modeling was utilized for hypotheses testing. This study contributes to bridging the “black box” between high-performance work system (HPWS) and its outcomes. The research utilizes the ability–motivation–opportunity framework to formulate the HPWS bundle and confirms that HPWS is a crucial enabler of organizational agility, allowing banking organizations to adjust quickly to market needs. By using the dynamic capability view, this research considers organizational agility as a critical dynamic capability to elucidate the mechanism by which HPWS is linked to organizational performance. Furthermore, this work attempts to bring management and leadership literature closer by investigating the moderation effect of transformational leadership. The findings indicate that a higher degree of transformational leadership is essential to promote the positive association between HPWS and organizational agility. Transformational leadership can help in implementing HPWS to manage workforce adaptability, which enables the workforce to react according to the dynamic environment. Additionally, the study empirically validates that in the presence of a greater level of HR flexibility, HPWS is significantly effective in promoting agility in banking firms.