OPTIMIZING PERFORMANCE THROUGH HR FORMALIZATION AND LINE MANAGER INVOLVEMENT

Abstract

The objective of our study was to examine the extent to which formalization of HR processes can influence organizational performance. This relationship was examined through the mediating effect of line managers' involvement in HR decision-making processes. To examine this relationship, structural equation modeling was conducted in Stata and R using the Lavaan package. The research was conducted on a sample of 3,502 medium-sized and large companies from the CRANET database. The results of our analysis confirmed the mediating effect of decentralizing HR decision-making authority to line managers on the positive relationship between HR process formalization and organizational performance. We point out that an appropriate level of formalization, where boundaries are set, but line managers are given a certain degree of freedom, positively affects company performance. Our results suggest that formalized HR policies provide a structured framework that ensures consistency and fairness across the organization, thereby increasing trust and compliance. Decentralizing decision-making power to line managers increases their ability to respond to emerging problems, thereby improving the effectiveness of HR interventions. Our findings demonstrate that organizations should design HR systems that combine clear formalized rules with sufficient autonomy for line managers to adapt HR practices to specific situations. The study contributes to the existing literature by empirically demonstrating the mediating role of line managers’ involvement in the relationship between HR process formalization and organizational performance.