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The flexible HRM and firm The flexible

HRM and firm
performance nexus: performance
nexus
can empowering leadership
play any contingent role?
Munwar Hussain Pahi Received 7 September 2021
Revised 1 March 2022
School of Business Management, Universiti Utara Malaysia, Sintok, Malaysia 2 September 2022
Umair Ahmed 4 December 2022
Accepted 21 December 2022
Department of Business Studies, Arab Open University Kingdom of Bahrain Branch,
Manama, Bahrain
Sohel M. Imroz
David B. O’Maley College of Business, Embry-Riddle Aeronautical University,
Daytona Beach, Florida, USA
Syed Mir Muhammad Shah
Department of Business Administration, Sukkur IBA, Sukkur, Pakistan, and
Irene Seok-Ching Yong
Centre for Internship Training and Academic Enrichment (CITrA),
Universiti Malaya, Kuala Lumpur, Malaysia

Abstract
Purpose – The purpose of this empirical research was to investigate the individual effects of three dimensions
of flexible human resource management (HRM) practices – skill flexibility, behavioral flexibility and human
practice flexibility on firm performance and to what extent these relationships are strengthened/weakened
when there was the moderation of empowering leadership in small- and medium-sized enterprises (SMEs) of the
Kingdom of Bahrain.
Design/methodology/approach – The data were collected from chief executive officers (CEOs) through a
questionnaire survey method to test the hypothesized relationships. A final dataset of 315 valid responses was
utilized for data analysis, and results were analyzed using the Smart partial least squares structural equation
modeling (PLS-SEM) technique.
Findings – The findings revealed positive effects of skill flexibility, behavioral flexibility and human practice
flexibility on firm performance. The moderating role of empowering leadership further strengthened the effects
of employee skill flexibility and employee behavioral flexibility had on firm performance. However,
empowering leadership did not pose any moderating effect on human practice flexibility and firm performance
relationship.
Research limitations/implications – This paper offers implications for theories on HRM and leadership. It
also provides valuable insights for organizations and leaders seeking to boost firm performance across SMEs.
Practical implications – This paper offers implications for theories on HRM and leadership and also
contributes in the understanding of the modern managers.
Originality/value – This paper investigated the effects of flexible HRM practices on firm performance and
the role of empowering leadership across SMEs in Bahrain. It also explored how the performance of SMEs can
be improved using flexible HRM practices followed by the presence of empowering leadership.
Keywords Skill flexibility, Behavioral flexibility, Human practice flexibility, Empowering leadership,
Firm performance
Paper type Research paper
International Journal of
1. Introduction Productivity and Performance
Management
Existing strategic human resource management (HRM) theory refers “flexible HRM” as a © Emerald Publishing Limited
1741-0401
dynamic capability that facilitates a firm’s rapid response to changing market and economic DOI 10.1108/IJPPM-06-2021-0360
IJPPM environments, thus creating value (Bhattacharya et al., 2005). Other researchers view that
flexible HRM is derived from flexible policies and practices in similar fields of HRM that helps
employees to balance job, family, and livelihood (Michel and Michel, 2012). The prospect of
flexible HRM derives unique characteristics from the traditional HRM practices such as
strategic position, management objectives and management roles (Javed et al., 2017; Sabuhari
and Irawanto, 2020).
Wright and Snell (1998) suggest three dimensions of HRM flexibility – flexibility in
skills, flexibility in behavior and flexibility in human practices. The first dimension refers to
the usage of various alternatives to apply employees’ skills and how quickly these
employees can be redeployed (Sekhar et al., 2016). The second dimension refers to the
adapting behavior – the range of changing behaviors used for specific demands. The third
dimension refers to the extent at which a firm’s HR practices are adapted and capitalized for
various situations, sites, or units of a firm with agility. HRM practices help organizations
increase their performance through reduction in cost, improvement in quality of products,
and differentiation in products and services. For this purpose, the realization of “human
capital” plays a vital role for companies in achieving competitive advantage. Human capital
is also considered to be the most important organizational asset instead of technology,
infrastructure, or large-scale manufacturing. This shifted focus on human capital has
directly impacted the functioning of HRM. However, importance of human capital can only
be recognized when HRM practices are flexible (Way et al., 2018). Flexible HRM practices
help employees adapt to new practices and develop new knowledge, skills, and behaviors.
Despite such importance, there is a lack of clarity on the relationship between the
dimensions of HRM flexibility and firm performance, particularly across small- and
medium-sized enterprises (SMEs). Extant literature in the domain struggles to specify the
nature and relationship of different HRM prospects with performance entities. Due to this,
Michel and Michel (2012) strongly recommended investigating the effects of the dimensions
of flexibility HRM on firm performance. Therefore, the first objective of the present
research is to investigate the influence of the three dimensions of HRM flexibility on firm
performance.
Accordingly, evidence in literature shows that initiatives of empowering employees
enhance employee performance, attitude and well-being (Hempel et al., 2012; Maynard et al.,
2012). Typically, the prospect of empowering is a leadership trait of organizational heads
(Bowers and Seashore, 1966; Cheong et al., 2019). Empowering leadership brings
meaningfulness to work for employees, encourages participation in decision making, and
supports autonomy and individual development (Amundsen and Martinsen, 2015).
Therefore, the presence of empowering organizational culture encourages and motivates
employees as it brings opportunity of sharing power and working responsibilities (Cheong
et al., 2019). Empowering leadership motivates employees to acquire task-related knowledge
and skills that are important for innovation (Anderson et al., 2014; Dong et al., 2017). As a
result, it is asserted that organizations in general and SMEs in particular with flexible HRM
can enhance their performance through empowerment. Therefore, the second objective of this
research is to investigate how the moderating role of empowering leadership influences the
relationships between flexible HRM dimensions and firm performance. Thus, following what
some scholars indicate as of high significance in the HRM literature (Sekhar et al., 2018,


Ubeda-Garc
ıa et al., 2017), the present study aspires to contribute towards flexible HRM and
its significance towards firm performance and how empowering leadership can help enrich
these relationships. To the best of our knowledge, a framework which the present study
attempts to test, is yet to receive empirical attention—particularly in the SME sector.
Through investigating the nexus between flexible HRM, firm performance, and the
contingent role of empowering leadership, the present study strives to fill a major gap in the
existing literature particularly in the SME context.
 This article is structured as follows. The first section lays down the theoretical The flexible
foundations by providing relevant literature on flexible HRM. The second section presents HRM and firm
six hypotheses. The third section discusses the execution process of sample, variables, and
data collection (methodology). The fourth section presents data analysis with PLS-SEM. The
performance
fifth section discusses the results and presents the theoretical and practical implications of nexus
research. The final section presents the limitations and future research directions.

2. Theoretical framework and hypotheses

This study empirically investigates separate effects of three dimensions of flexible human
resources management practices – skill flexibility, behavioral flexibility, and human practice
flexibility – on a firm’s performance. It also investigates the moderating role of empowering
leadership in the SMEs of the Kingdom of Bahrain. Figure 1 presents a conceptual framework.

3. SMEs in context
SMEs play a substantial role in most economies globally (Asgary et al. 2020; Susman, 2007),
particularly across developing nations like Bahrain. According to the World Bank, SMEs
contribute up to 40% of national income in the emerging economies (https://www.worldbank.
org/en/topic/smefinance). Bahrain is a small island and a developing nation that has a major
focus on improving its prospects through better performance of SMEs and their contribution
to Bahrain’s national income. As per national statistics, a total of 957 SME registrations were
approved in Bahrain during 2021. This is a 6.4% increase compared to 2020. This not only
highlights the eagerness of the country towards SMEs but also indicates towards potential
rise and contribution of SMEs in future (https://www.moic.gov.bh/en/MediaCenter/Annual%
20Reports/Annual%20Report%20infographic%202021.pdf).
Notably, the SME sector can be pulsating for economies striving to improve and recover
from the recent COVID-19 crisis which spared no single nation worldwide including Bahrain.
With this understanding, it appears important to understand how SMEs in Bahrain can work
to sustain through maintaining and improving their end performance. Interestingly, scholars
have been working on this to outline what really causes SMEs to thrive and maintain
performance (Forth and Bryson, 2019; Gomezelj et al., 2008). For example, critical appraisal of
some prominent studies indicates the role of various organizational (Rehman and Anwar,
2019), governmental (Zulu-Chisanga et al., 2021), and leadership prospects (Graafland and
Bovenberg, 2020) can improve SMEs’ performance. Some studies have also emphasized on
the role of HR practices for SMEs (e.g. Allen et al., 2013; Georgiadis and Pitelis, 2012; Sardi
et al., 2021). Sadly, the stream of research on SME performance seemed to have overlooked
how flexible HRM can be of value. Typically, HR flexibility is reported to have significant
contribution towards organizational performance in all aspects (e.g. Sekhar et al., 2018;


Way et al., 2018; Ubeda-Garc
ıa et al., 2017), however, to what length it can be instrumental for
SMEs is yet to be unveiled. Harney and AlKhalaf (2021), in their review of 25 years of studies

Empowering Leadership

Skill Flexibility

Behavioral Flexibility Firm Performance

Figure 1.
Human Practice Flexibility Conceptual framework
IJPPM on HRM in SMEs, have also indicated a major gap in connection to flexible HRM. Moreover, in
connection to Bahrain, extant literature outlines very limited credible research studies on
SMEs (e.g. Bunagan and Sison, 2019; Joshi and Ramadhan, 2002; Khan and Khan, 1992), and
an absolute absence of scholarly evidence on flexible HRM, empowering leadership, and firm
performance associations. Henceforth, the present study responds to substantial gaps in the
body of knowledge on the aforementioned factors and helps interested readers guide and
educate about SME performance.

3.1 Flexible human resource management

The term “flexibility” refers to a system’s measurement ability that is flexible in dynamic/
changing environmental conditions (De Toni and Tonchia, 1998; Sanchez, 1995; Sekhar et al.,
2018; Wilhelm et al., 2014). Sanchez (1995) found that flexibility in product competition
depends on resource flexibility and coordination flexibility of using resources in product
markets. Evidence in literature shows that flexible HRM practices began in 1990s (Chen and
Li, 2015) and were based on resource and core competency theories. These theories suggest
how enterprises manage in changing environments to maintain the competitive edge through
flexible HRM. Researchers define flexible HRM as the extent to which certain management
practices directly influence employees’ skills, learning, and behavior capabilities (Chen and
Li, 2015). Another definition of flexible HRM regards it like the capability, enabling an
organization to frequently adapt to changes in the operating environment (Camps et al., 2016).
HRM flexibility objects to how HR practices can be dissected, redeveloped, and implemented
timely and effectively to respond to changes in the environment (Wright and Snell, 1998). The
results may be achieved through certain managerial initiatives that include structural
flexibility, changes in employment mode, changes in organizational training plans, and
changes in the employee performance incentives. The flexibility mode of HRM derives unique
characteristics from traditional HRM practices such as strategic position, management
objectives, and management roles (Javed et al., 2017). Thus, the concept indicates to how
organizational goals and objectives can be attained even during evolving conditions without
any compromise with the help of flexible HR capabilities. The three dimensions of HRM
flexibility recognized by Wright and Snell (1998) have already been defined in this paper. To
summarize, flexible skills of employees refer to usage of various alternatives to apply their
skills and how quickly they can be redeployed (Sekhar et al., 2016). Flexible behavior of
employees refers to the adapting behavior – the range of changing behaviors used for specific
demands. Lastly, flexible HR practices refer to the degree to which firm’s HR practices are
adapted and capitalized for various situations, sites, or units of a firm with agility.

3.2 Flexible HRM (skill, behavioral and human practice flexibility) and firm performance
As mentioned earlier, “flexibility” is a measurement of a system’s ability which is flexible in
dynamic/changing environmental conditions (De Toni and Tonchia, 1998; Sanchez, 1995;
Sekhar et al., 2018; Wilhelm et al., 2014). There is a huge debate on work-life balance of
employees when they are on a job. Researchers firmly believe that flexible HRM is closely
associated with flexible policies and practices which are similar to HRM that helps employees
to balance job, family, and livelihood (Michel and Michel, 2012). According to Sanchez (1995),
flexibility in product competition depends on resource flexibility and coordination flexibility
of using resources in product markets.
This study contends that a firm’s flexible employee skills enhance its performance. Firms
can have employees who possess broad level of skills which they can use in changing and
challenging environments. Such broad level of skills is likely to play important role in
creating value for possible alternative requirements. Employees possessing certain skills,
even without using them recently, can open opportunities for a firm and influence strategic
choices (Bhattacharya et al., 2005; Javed et al., 2017). According to Wright and Snell (1998), The flexible
flexibility of employee skills is the “number of potential alternative uses to which employee HRM and firm
skills can be applied” and “how individuals with different skills can be redeployed quickly”
(pp. 764–765). The present study suggests that employees with diverse skills and ability of
performance
redeploying them can enhance the performance of a firm. Notably, recent investigations have nexus
also attributed skill flexibility with performance prospects (Diamantidis and Chatzoglou,
2019). Another study of Sekhar et al. (2016) from the perspective of IT industry found the skill
flexibility dimension of HR flexibility having the “front runner” relationship with firm
performance. Pertaining to SMEs, some scholars have recently hinted the significance of
flexible employee skills for better organizational outcomes (c.f., Anser et al., 2022). Therefore,
employees’ skill flexibility could aid to requirements for multi-tasking in a resource-
constrained context of SMEs. Thus, we propose that skill flexibility of employees will be
instrumental in facilitating firm performance.
H1. Skill flexibility of employees has a positive influence on a firm’s performance.
Employees’ flexible behavior refers to an adapting behavior used for specific demands
especially in changing business environments (Michel and Michel, 2012). Organizations are
currently experiencing changing and challenging external environments (Chen and Li, 2015).
Dynamic external environment poses many opportunities and threats for organizations. It
may threaten organizations that rely on developing and marketing similar products or
services in the markets. However, such changing environment could present opportunities
for organizations that are innovative and have human capital capable of making adjustments
with the change. To sustain in such environment, organizations will have to rely on the


employees who can have flexible behavior and practice it accordingly (Ubeda-Garc
ıa et al.,
2017, 2018). Such flexibility of employees makes them more productive and enhance firm
performance. SME research also supports the evidence as employee behavioral flexibility
enable better integration (Haq et al. 2020) and achievement of organizational outcomes (Mesu
et al. 2013). Other researchers such as Sekhar et al. (2016) found behavioral flexibility having
the fifth-highest relationship with firm performance. The study of Ngo and Loi (2008) found
positive effects of behavioral flexibility on the market-related performance of multinational
firms in Hong Kong. Building on the above arguments, we speculate that employees with
flexible behavior are productive and contribute significantly to firm performance. Thus, it is
hypothesized that
H2. Behavioral flexibility of employees has a positive influence on a firm’s performance.
Flexible human practice refers to the degree at which a firm’s HR practices are adapted and
capitalized for various situations, sites, or units of a firm with agility (Michel and Michel,
2012). It creates value in various ways. Firms perform better when they practice and utilize
their employees in an optimized way. In this context, we assert that flexible human resource
practices encourage employees’ flexible behavior. Organizations may align employee
compensation plans with increase or decrease in profits. This will encourage employees to be
more adaptable with the changes in the business environment (Ketkar and Sett, 2009; Tuan,
2019). Similar assertions have been hinted by Sabuhari et al. (2020). Notably, in the context of
SMEs, they are required to be more flexible and responsive to changes to survive (Zheng et al.,
2009) and HR flexibility can help support structural changes in the business for optimal
performance (Anser et al. 2021). In addition, Ngo and Loi (2008) found positive effects of HR
practice flexibility on the adaptability culture of Hong Kong’s multinational firms.
Furthermore, adaptability culture was found to be affecting the firms’ market-related
performance in a positive manner (Ngo and Loi, 2008). While other researchers considered
flexibility-related HRM systems as a “double-edged sword for employees’ innovative
behaviors” (Zhang et al., 2023, p. 115), in the present research, we envisage that organizations
IJPPM that strengthen their human resource practice flexibility create resource bundle (valuable,
inimitable and rare) and will be able to respond rapidly to changing environments.
H3. HR flexibility of employees has a positive influence on a firm’s performance.

3.3 Moderating role of empowering leadership

Leadership has a noteworthy role in boosting organizational outcomes (McClean and Collins,
2019), whereas empowerment initiatives from top management augment positive attitude,
well-being and employee performance in organizations (Hempel et al., 2012; Maynard et al.,
2012). Flexible skills of employees refer to usage of various alternatives to apply their skills
and how quickly they can be redeployed (Wright and Snell, 1998). Flexible behavior of
employees refers to the adapting behavior – the range of changing behaviors used for specific
demands, whereas, flexible HR practices refer to the degree to which a firm’s HR practices are
adapted and capitalized for various situations, sites, or units of a firm with agility
(Bhattacharya et al., 2005; Wright and Snell, 1998). Despite having the dimensions of
flexibility HRM, firms require empowering leadership to optimize such flexibility to enhance
their performance.
Therefore, the present study asserts that the influence of empowering leadership will
moderate the effects of three dimensions of HRM flexibility – skill, behavioral and human
practice flexibility - on firm performance for the following reasons. First, empowering
leadership enhances employee motivation by delegating authority and responsibility
(Cheong et al., 2019). This, as a result, encourages employees to acquire task-related
knowledge and skills that are important for new product development (Anderson et al., 2014;
Dong et al., 2017). In connection to small and medium entities, leadership that supports and
facilitates is important to boost the utilization of HR prospects for better performance (see
further McClean and Collins, 2019). In the context of this research, individuals with adaptable
skills will further face changing business environments confidently when their leaders
encourage and share power with them. This will result in improved firm’s performance.
Second, we argue that empowered employees may utilize their adapting behavior to
increase firm performance. Empowering leadership builds the confidence of their
subordinates, as a result, employees use knowledge, skills and abilities for
commercialization and it enhances firm performance. Imparting the sense of power has
become an integral part of organizational effectiveness (Conger, 1989). Productive forms of
organizational power increase with superiors’ knowledge sharing and cooperating to solve
problems in an organization. Therefore, flexible behaviors of employees are likely to
contribute in firm performance when managers encourage trying new things.
Third, empowered employees feel motivated and enjoy finding solutions to complex
problems by creating new procedures for work tasks and improving existing processes and/
or products (Zhang and Bartol, 2010). It means that HR practices will be used well when
leaders provide opportunity and space to the employees through flexible HR practices to
perform in a way that contributes in firm performance. In other words, it requires managers
to exercise empowering leadership theories in practice to enhance employees’ confidence with
flexible skills, flexible behavior and flexible human resource practice so that they feel
encouraged to contribute to firm performance. Thus, we hypothesized that
H4. Empowering leadership moderates the relationship between skill flexibility and form
performance.
H5. Empowering leadership moderates the relationship between behavioral flexibility
and firm performance.
H6. Empowering leadership moderates the relationship between human practice
flexibility and firm performance.
4. Methodology The flexible
4.1 Population and sample HRM and firm
This empirical research specifically focused on the SMEs located in the Kingdom of Bahrain.
According to an estimate, the population size is in thousands, which is inclusive of
performance
“supermarkets, electronic shops, pharmacies, business centers, restaurants, pure water, and nexus
paint companies.” In these industries, nearly 700 firms operating in the Kingdom of Bahrain
met the criteria of this research requirement. The reason for considering the SMEs was their
substantial contribution to the Kingdom of Bahrain’s economy.
The data were collected through sources such as visiting the firms in person, sending the
Google doc link and sending the questionnaire survey hard copies to the CEOs via courier. It
was mentioned in the cover letter of the questionnaire survey that in the absence of the CEO,
anyone who is responsible for policies related to HR could fill out the questionnaire. After
three weeks interval, reminders were sent to those respondents who had not responded to the
questionnaire survey. In total, the present study distributed survey questionnaire to 540 SME
firms. In return, we received 321 responses (58% response rate). Six of these responses did not
have relevant information, so were not considered for subsequent data analysis. The
remaining 315 valid responses were considered for final data analysis.

4.2 Scales and measures

This study adapted measurement scales from previous studies. All the constructs were
measured based on a seven-point Likert scale ranging from 1 5 strongly disagree,
3 5 neutral and 7 5 strongly agree. The variables in this study included the three dimensions
of HRM flexibility – skill, behavior and HR practice (independent variables), firm
performance (dependent variable) and empowering leadership (moderating variable).
These variables appeared in English and in the Western context where English reading,
writing and speaking is either native or very common to understand. In the context of the
Kingdom of Bahrain, Arabic is the national and dominant language. Therefore, we sent
questionnaire survey copies translated into Arabic and English. However, before sending out
the final questionnaire survey, this study did pilot testing by involving Master’s students to
ensure that languages are simple and understandable. Respondents recommended a few
jargon changes and a few grammatical confusions. After fixing the recommended changes,
the final questionnaire surveys were sent to the respondents.
4.2.1 HRM flexibility measures. We used three dimensions of HRM flexibility, namely skill
flexibility, behavioral flexibility and human practice flexibility. Previously, these dimensions
appeared in a study by Bhattacharya et al. (2005).
Employee skill flexibility: The dimension of employee skill flexibility measured how a firm
utilizes its employees’ skills in a changing business environment. This dimension has
seven items.
Employee behavioral flexibility: The dimension of employee behavior flexibility measured
the way employees of a firm change their working habits with the ongoing situations. This
dimension has eight items.
Human resource practice flexibility: The dimension of human resource flexibility measured
the flexibility of the HR-related parameters that help in changing business environments.
This dimension has seven items.
4.2.2 Firm performance measures. This study used firm’s financial performance as a
dependent variable. The variable was partially adopted from a study by McGuire et al. (1988)
and Bhattacharya et al. (2005). The variable was measured with seven items. The data for
firm’s financial performance were extracted from the COMPUSTAT database. In this study,
we used two measures of overall productivity on cost-efficiency and profitability ratio.
4.2.3 Empowering leadership measures. This study used “empowering leadership” as a
moderating variable on the relationship between the three dimensions of flexible HRM and
IJPPM firm performance. This variable was adopted from Zhang and Bartol (2010). The variable was
measured with six items. This variable measured how someone as a firm leader encourages
creativity, motivates employees, delegates power, offers rewards for performance and
applauds employee success publicly.

4.3 Validity and reliability of the measures

This study affirmed the goodness of the measures to the means to examining validity and
reliability (Sekaran and Bougie, 2003). Based on the explanations of Bordens and Abbot
(2011), validity of a measure explains to what extent it measures what it is subjected of
measuring. For this, following the recommendations of Hair et al. (2014), the present study
chose the scales through critically reviewing prior literature, expressing significant construct
validity. Moreover, it also examined the convergent validity of the measures through PLS
statistical tests, including individual item loadings composite reliability (CR) and average
variance extracted (AVE) scores in the measurement model section (see Table 2). Following to
this, discriminant validity was also examined for the measures (see Table 3), conclusively to
cover all prospects of validity of the measures. In parallel, to ensure the reliability of the
measures, the present study followed the recommendations of Hair et al. (2014) and Bacon
et al. (1995) when we assessed the CR scores (see Table 2). In addition, this study ensured that
the adapted measures are obtained from prominent studies to ensure they generate similar
results over the different courses of trials (Creswell, 2009).

4.4 Demographic profile

Table 1 below provides details on the demographic profiling of the respondents where 254
reported as male and 61 as female. Accordingly, majority reported to be married (207). In
terms of age, majority of the respondents (168) belonged to 30–40 years category followed by

Frequency Percent

Gender
Male 254 80.6
Female 61 19.4
Marital status
Married 207 65.7
Single 108 34.3
Age
25–30 106 33.7
30–40 168 53.3
30–50 31 9.8
50–60 10 3.2
Qualification
Masters 23 7.3
Bachelors 282 89.5
other 10 3.2
Years of experience
5–10 years 91 28.9
11–15 years 130 41.3
Table 1. 16–20 years 73 23.2
Demographic status 20 and Above 21 6.7
106 belonging to 25–30 years age bracket. In connection to education, 282 reported to have a The flexible
bachelors’ degree. In terms of years of experience, majority (130) reported to have 5–10 years HRM and firm
of experience.
performance
nexus
5. Analysis
5.1 Measurement model
In this study, data analysis was carried out by using the partial least square-structure
equation model (PLS-SEM) technique. PLS-SEM has received substantial attention by
scholars in management and social sciences domains (Kashif et al., 2018; Umrani et al., 2020).
The application of PLS allows researchers to analyze complex models (Becker et al., 2012) and
handle different types of constructs including reflective models (Henseler et al., 2018).
Moreover, according to Chin et al. (2003), it is also robust in measuring unobservable
variables and does not necessitate the normality of data. Accordingly, hierarchical latent
models have been getting more popular in recent years (Johnson et al., 2012). Furthermore,
PLS-SEM is reported to be more promising in testing mediation based models (Hair et al.,
2019). Based on the recommendations of Anderson and Gerbing (1988), our study followed
two-stage procedure for data analysis: measurement model and structural model. The
measurement model assesses the psychometric properties of the conceptual framework and
the structural model confirms the significance of the hypothesized associations.
The results of the measurement model, as detailed in Figure 2 and Table 2, outline
individual item loadings, CR, AVE and R-square. According to Hair et al. (2014), individual
loadings should be 0.5 or above. The result depicted in Table 2 shows that cross loading
values rage from 0.694 to 0.973 after deleting two items from empowering leadership and

Figure 2.
Measurement model
IJPPM Construct Item Loading CR AVE R-Square

Behavioral flexibility 0.944 0.781

BF1 0.855
BF2 0.704
BF3 0.863
BF4 0.866
BF5 0.863
BF6 0.733
BF7 0.816
BF8 0.869
Skill flexibility 0.908 0.713
SF1 0.913
SF2 0.694
SF3 0.917
SF5 0.835
Human practice flexibility 0.926 0.715
HPF1 0.781
HPF2 0.869
HPF4 0.820
HPF5 0.872
HPF7 0.882
Empowering leadership 0.968 0.884
EL1 0.917
EL2 0.973
EL3 0.935
EL6 0.934
Firm performance 0.944 0.709 0.781
FP1 0.852
FP2 0.869
FP3 0.884
FP4 0.862
FP5 0.709
Table 2. FP6 0.820
Measurement model FP7 0.886

human resource practice flexibility each and three from employee skill flexibility with
loadings lower than the suggested cut-off of 0.5. Likewise, as per Nunnally and Bernstein
(1994), the CR score of 0.70 can be considered sufficient. The results in Figure 2 and Table 2
show that CR values range from 0.968 to 0.908. According to Hair et al. (2014), the AVE should
be 0.7 or above. Table 2 and Figure 2 show that AVE values range from 0.884 to 0.678. Thus,
this study confirmed the internal consistency, validity and reliability of the measures and the
conceptual model.
This study also examined the discriminant validity of the measures to ensure they are
distinctive from each other in the framework (Duarte and Raposo, 2010). For this, we followed
the recommendations of Fornell and Larcker (1981) and Chin (1998) and compared each latent
construct against the reflective loadings of other constructs. In this, the square root of the
AVE scores should be greater in the cross loadings table. Results in Table 3 show that all
the latent variables are “unique and distinct” as square root of AVE is greater than
the correlating scores.
The results of the structural model in Figure 3 and Table 4 show the direct effects of three
dependent variables and moderating variable on firm performance. The present study
predicted the direct effects of skill flexibility, behavioral flexibility and human practice
flexibility on firm performance. Hypothesis 1 predicted the positive effects of skill flexibility
of employees on firm performance. The results revealed the statistically significant effects of The flexible
skill flexibility (β 5 0.397, t 5 9.936, p < 0.000) on firm performance. Accordingly, hypothesis HRM and firm
2 predicted the positive effects of employee behavioral flexibility on firm performance.
performance
nexus
Constructs BF EL FP HPF SF

Behavioral flexibility 0.824

Empowering leadership 0.072 0.940
Firm performance 0.805 0.083 0.842
Human practice flexibility 0.806 0.092 0.807 0.846 Table 3.
Skill flexibility 0.716 0.062 0.810 0.732 0.844 Discriminant validity
Note(s): Results in ITALIC indicate the discriminant validity scores for each of the construct of the constructs

Figure 3.
Structural model

Relationships Beta- value S.E T-value p-values Decision

SF→FP 0.397 0.040 9.936 0.000 Supported

BF→FP 0.279 0.043 6.441 0.000 Supported
HPF→FP 0.293 0.041 7.087 0.000 Supported
Moderating effect 3 SF→EL→FP 0.120 0.043 2.758 0.003 Supported Table 4.
Moderating effect 1 BF→EL→FP 0.189 0.062 3.049 0.001 Supported The results of the
Moderating effect 2 HPF→EL→FP 0.062 0.054 1.150 0.125 Not-supported structural model
IJPPM The data revealed the positive effects of behavioral flexibility (β 5 0.279, t 5 6.441, p < 0.000)
on firm performance. In parallel, hypothesis 3 predicted the positive influence of human
practice flexibility on firm performance. The results displayed positive influence of human
practice flexibility (β 5 0.293, t 5 7.087, p < 0.000) on firm performance, thus, supporting
hypothesis 3.
This study analyzed the moderating effects of empowering leadership on relationship
between three dimensions of HRM flexibility and firm performance. Hypothesis 4 predicted
the moderation of empowering leadership on the relationship between skills flexibility and
firm performance. The data revealed that the moderation of empowering leadership
strengthened the effects of flexible skills (β 5 0.120, t 5 2.758, p < 0.003) on firm performance,
supporting Hypothesis 4. Similarly, hypothesis 5 predicted that the moderation of
empowering leadership would strengthen the effects of employee behavioral flexibility
(β 5 0.189, t 5 3.049, p < 0.001) on firm performance, supporting hypothesis 5. However, the
results of the structural equation modeling for hypothesis 6 on the moderation of empowering
leadership on the human practice flexibility and firm performance relationship did not find
any statistical support (β 5 0.062, t 5 1.150, p < 0.125). Figures 4 and 5 provide interaction
effects of empowering leadership.

Figure 4.
Interaction Plot
SF*EL*FP

Figure 5.
Interaction Plot
BF*EL*FP
6. Discussion The flexible
The purpose of this empirical research was to investigate how the dimensions of flexible HRM and firm
HRM – skill, behavioral and human practice flexibility – impact firm performance and the
moderating role of empowering leadership in the SMEs of emerging markets of the Kingdom
performance
of Bahrain. Six hypotheses were formulated in this research. Three of these hypotheses nexus
analyzed the direct effects of the dimensions of HRM flexibility on firm performance, and the
remaining three investigated the moderating role of empowering leadership. To test
hypothesized relationships, data were collected from CEOs of the SMEs and data analysis
was carried out using the PLS SEM technique. The results revealed positive effects of the
three dimensions of flexible HRM on firm performance. The findings are in line with the prior
studies of strategic HRM in which researchers investigated the influence of HRM on firm’s
productivity, profitability and cost efficiency performance (Becker and Gerhart, 1996; Becker
and Huselid, 1998; Bhattacharya et al., 2005). Those researchers further emphasized that the
firms intending to improve their performance require to enhance employee productivity
through increased cost-efficiency and value addition in human capital (Becker and Huselid,
1998). This is because a firm’s efficient HR systems facilitate acquiring, inspiring and
strengthening intellectual capital that can become the source of competitive advantage
(Becker and Huselid, 1998). Likewise, in the context of Bahrain, the results indicate flexible
HR prospects termed fruitful for SMEs to bolster their performance. This offers a learning for
SMEs in the region in particular to strive for acquiring, inspiring and strengthening
intellectual capital to enhance firm performance. Notably, in the wake of Covid-19 Pandemic,
flexible HR practices turned out to be highly significant for small firms (Alves et al., 2020).
The results of the present study hence confirm the need for small and medium enterprises to
tackle economic challenges for business sustainability and survival.
Moderating results suggest that empowering leadership enhances the influence of
employee skill flexibility and behavioral flexibility on firm performance. It may be interpreted
that employees feel more comfortable and confident to apply available skills when they are
empowered and trusted by their managers. Empowered employees enhance the firm’s
performance by applying their skills for creative and innovative solutions. Employees with
behavioral flexibility have the habits of responding to changing market demands, working
environments, adjusting to work requirements, or changing customer requirements
(Bhattacharya et al., 2005). When employees with flexible behavior are motivated and
encouraged through delegation of power and authority by the leaders, this boosts their
morale to utilize expertise for enhanced firm performance.
Surprisingly, the moderation of empowering leadership failed to interact with the flexible
HR practice and firm performance association. Typically, flexible HR practices assist in
adjusting to the dynamic environment, changing business conditions, evolving work
requirements and business scenarios (Bhattacharya et al., 2005). Thus, one possible
explanation of this insignificant outcome could be that flexible HR practices may have proven
to offer employees adequate empowerment to perform better in dynamic environments.
Therefore, offering more empowerment or delineating further authority to the employees
might put them in a state where they might take things for granted. This may even later affect
their contribution towards firm performance. Another possible explanation of the results is
the direct relationship between empowering leadership with team performance (Bunderson
and Sutcliffe, 2002; Srivastava et al., 2006).

6.1 Implications – theoretical and managerial

The present study offers implications for strategic HRM, empowerment and leadership
theories and insights for today’s managers. The theoretical implications are multifold. First,
this study conceptually developed and tested a model that investigated the separate effects of
three dimensions of HRM flexibility – skill, behavior and HR practice – on firm performance
IJPPM and also analyzed the moderating role of empowering leadership. Second, flexible HRM has
significantly contributed to the firm performance. We considered HR flexibility as a
competitive advantage. Thus, to measure the effects of HR flexibility at the firm level, we
combined cost efficiency, productivity and profitability in an operationalized definition of
firm financial performance. The findings are in line with prior studies. Other researchers of
strategic HRM investigated the influence of HRM on a firm’s productivity, profitability and
cost efficiency performance (Becker and Gerhart, 1996; Becker and Huselid, 1998;
Bhattacharya et al., 2005). The findings of their studies identified that when firms decide
to enhance their performance, it is equally essential for them to enhance the productivity of
their human capital and the value of human resources (Becker and Huselid, 1998). The firm’s
efficient HR systems facilitate acquiring, inspiring and strengthening intellectual capital that
can become the source of competitive advantage (Becker and Huselid, 1998).
Third, empowerment has proved to be an important ingredient for employees with flexible
and behavioral skills to bolster firm performance. Empowerment is considered a solution to
the long awaited problem in bureaucratic organizations where creativity was discouraged
and employees used to show such discontent individually and collectively (Chen et al., 2007;
Wilkinson, 1998). Employees with skill and behavioral flexibilities unleash their knowledge
and expertise when they are empowered which further translates into increasing firm
performance. Empowerment enhances employees’ job satisfaction and decreases turnover
rate (Dewettinck and Van Ameijde, 2011; Idris et al., 2018), therefore showing more employee
commitment to organizational targets. Empowering organizational culture signals
employees that the system in which they are operating is not complex which results in an
increase in their efficiency. Fourth, although empowering has been considered an important
ingredient of enhancing the effects of skill and behaviorally flexible employees on firm
performance, such empowerment has inverse effects on firm performance when HR practices
are in place. Empowerment is seen as an elastic and flexible term (Chen et al., 2007). Further
flexibility in HR practices demonstrated inverse effects on firm performance.
The managerial implications of this study are fourfold. First, today’s managers will have
to understand the importance of having employees with flexible skills, behavior and human
practice flexibility to enhance the performance of their firms. Therein, managers need to
ensure recruiting employees with such capabilities and the willingness to adopt similar
prospects at work through training interventions. Second, it was found that the effects of
employees’ flexible skills strengthen when they are empowered and trusted to perform their
skills in changing business environments. Similarly, employees’ behavioral flexibility
displayed more substantial effects when moderated by empowering leadership. This
contributes to the managers’ understanding to develop an environment that is conducive for
employees to use their abilities without fear of failure. Empowering leadership provides an
opportunity for the employees to try something new or innovative and enhances firm
performance. Third, today’s managers operating across SME sectors must know that
delegating authority and empowering employees operating in flexible environments need
proper accountability. Managers must keep the HR practices to the extent where it pays off
financially as too much flexibility in the HR practices has adverse effects on firm
performance. Training interventions (Ho and Kuvaas, 2020) may be used by organizations to
develop needed competencies in this regard. Fourth, empowering leadership may serve in a
similar way across all entities and sizes of the organizations since the skill, behavior and
flexibility and their impact of firm performance may vary. Thus, every organization may
need to critically analyze and understand its significance to avoid any disenchantment.

6.2 Limitations and future research

There are certain limitations of this study. For example, it analyzed the separate influence
of three dimensions of flexible HRM practices only on the firm performance of SMEs.
However, future research may consider extending the conceptual framework by testing how The flexible
flexible HRM facilitates other vital factors such as organizational ambidexterity (i.e. the HRM and firm
ability of a firm to efficiently manage and simultaneously adapt to changes) and innovation
generation and adoption. In addition, researchers may also consider testing the intervening
performance
and interacting effects of these variables. Flexibility of skills, behavior and human practice nexus
have been identified as an organizational capability; therefore, we believe that further studies
on this topic will help better understand performance of SME firms. In addition, this study
used empowering leadership as a moderating factor. Although it moderated the association
of some of the dimensions, further studies should be conducted before generalizing the
results. Finally, since the sample population of this study came from diversified business
units like supermarkets, electronic shops, pharmacies and paint companies, we cannot
assume similarity in the flexible behavior or human resource practices in these companies,
therefore, the findings of this study may not be generalizable.

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Corresponding author
Umair Ahmed can be contacted at: umairahm@gmail.com

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