The Diversity of Personnel Practices and Firm Performance∗

Personnel economics tends be based on single-firm case studies. Here we examine the personnel practices of 4,792 firms, typically over a period of 20 years, using detailed matched employer-employee panel data from Portugal. In the spirit of Baker et al. (1994a,b), we consider different dimensions of personnel management within each firm: the size of worker turnover, the role of job levels and human capital characteristics as wage determinants, the dispersion of wages within job levels, the importance of tenure in terms of promotions and exits, and the scope for careers. We find a large degree of diversity in most of these practices across firms. Moreover, some personnel practices are shown to be significant and robust predictors of higher firm performance, including low wage dispersion at low and intermediate job levels and a tight relationship between human capital variables and wages.