The Impact of Human Resource Management strategy and practice on firm performance is an imperative subject in the fields of human resource management, industrial relations and organizational psychology (Huselid, 1995). The scope to which, if any, human resource management (HRM) effects on organizational performance has appeared as the vital research query in the employees/HRM field. Though consequences specify that some human resources practices may have a affirmative outcome on organizational performance, most researchers propose that more theoretical and experimental work is required. For the instant, even though Human resources (HR) are considered as the most priceless asset in an organization, they make a distinction only for a few organizations (Vlachos, 2008) The human prospective in a corporation is usually much more complicated for competitors to replicate than the plant, tools or even products that companies manufacture (Flanagan, 1996). As a result, the nature and welfare of a company's employees can become its key potency to figure out a profitable continuation. HRM practices can be mainly imperative for small firms (Marlow, 1993).Investigation designate that insufficient and incompetent administration of employees in small firms has resulted in low efficiency and elevated turnover rates (Mathis, 1991) and is one of the foremost sources of small firm malfunctioning (McEvoy, 1984).Theoriticians have disagreed that the human capital of the firm are potentially one of the most influential foundations of sustainable competetive advantage for organizations and have sought to articulate that there is an affirmative association among HRM and firm performance (Ferris, 1999). High performance employment policies gives a number of noteworthy causes of enhanced organizational performance (Pfeffer J. V., 1999).HR methods have significant realistic impacts on the endurance and finanacial performance of firms and on the production and superiority of work life of people in them (Casio, 2006). Human resources must be measured a strategic factor ,not only for the function they play in positioning administrative strategy into effect but also for their prospective to develop into a foundation of sustainable competitive advantage,that is to say these and the method in which they are supervised can have a noteworthy influence on the firm's accomplishment and its competitive positioning in the market.Human resource management polisies when suitably configured,influence organizational performance considerably.The reason for this is that more effectual systems of human resource management practices,which obtain improvement of the prospective for complementarities or synergies among such practices and at the same time,make simple the accomplishment of the firms competitive strategy ,constitute a source of sustained competitive advantage.Nevertheless,the mainstream of emperical studies have focused on the analysis of individual human resource practices to the ruling out of overall human resource management systems (Huselid, 1995). The impact of HRM on performance depends winning personnel,s reaction to HRM practices,so the impact will move in direction of the awareness of HRM practices by the workers (Guest, 2002). Employee turnover remains one of the most extensively investigated subject matter in organizational psychoanalysis. (Dalton, 1981)
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Regardless of important exploration expansion there still remains a great deal of uncertainty as to what features in reality cause human resources to leave/remain in the organizations.Among these aspects are outside factors,institutional factors,workers personal characteristicsand employees reaction to his/her job (Knowles, 1964).
1.1 Objectives of the study
The main objective of the study was to assess the human resource management practices being practiced in banking sector and their impact on the commitment level and the intention to stay in the organization. To achieve the main objective the following sub objectives were set:
1. To assess the practices regarding human resources in banking sector
2. To assess the effect of training on the commitment and turn over intentions of employees
3. To assess the effect of performance appraisals on the commitment and turnover intentions of employees.
4. To assess the effect of career planning on the commitment and turnover intentions of employees
5. To assess the effect of compensation on the commitment and turnover intentions.
6. To assess the effect of Job definition on the commitment and turnover intentions of employees.
7. To assess the effect of selections on the commitment and turnover intentions of employees.
1.2 Research Hypothesis:
P1: HR practices have a relationship with employee commitment.
Always on Time
Marked to Standard
H1.1: Training has relationship with employee commitment
H1.2: Performance appraisal has relationship with employee commitment
H1.3: Career planning has relationship with employee commitment
H1.4: Employee participation has relationship with employee commitment
H1.5: Job Definition has relationship with employee commitment
H1.6: Compensation has relationship with employee commitment
H1.7: Selection has relationship with employee commitment
P2: HR practices have a relationship with turnover intent.
H 2.1: Training has relationship with turnover intent
H 2.2: Performance appraisal has relationship with turnover intent
H 2.3: Career planning has relationship with turnover intent
H 2.4: Employee participation has relationship with turnover intent
H 2.5: Job Definition has relationship with turnover intent
H 2.6: Compensation has relationship with turnover intent
H 2.7: Selection has relationship with turnover intent
The study presents practical results from a sample of 100 employees who are working in organizations where all the areas of human resource management are being practiced.. The study involves variables which are purely related to human resources. These variables play a vital role in the improvement of overall organizational performance. By knowing the HRM practices that influence employee commitment and turnover intentions positively organizations can emphasis on them to achieve higher employee performance that will cut the cost of hiring which will ultimately lead to better employee retention and their commitment to the organization.
2.1 Employee Commitment
(Oscar, 1966) defines commitment as a belief which reveals "the potency of a person's connection to an organization. The strength of a person's commitment to an organization is subjective to the rewards he has received from the system and the variety of experiences he has had to undertake in order to be given the rewards. (Entrekin, 2005) state that commitment "has become a object of the change from an industrial age to an information society."Commitment refers to know-how and outcomes and a procedure of being devoted or associated.. According to (Meyer, 1991) organizational commitment is of three types i.e. affective, continuance and normative, Affective commitment is regarded as an employee's attachment to acknowledgment and participation in the organization. Employees having strong affective commitment remain with the organization. Continuance commitment is one's awareness of the outlays related to parting with the in attendance association. Employees who possess continuance commitment will remain in the organization. Normative commitment is the sentiment of responsibility of an employee to the organization on the basis of his personal norms and values. Employees with normative commitment remain with the organization because they believe they ought to. A relationship study has been conducted by several researchers between Human resource management practices and organizational commitment. According to (Paul, 2004) human resource management practices show an eminent optimistic relationship with organizational commitment. . Recent reviews of the literature on organizational commitment and organizational identification identified a range of possible antecedents to commitment to an organization. These included: job satisfaction and job involvement; job characteristics, such as variety and autonomy; a feeling of 'felt responsibility' for the organization; social, as well as occupational, involvement with the organization; consistency of career goals with organizational goals; a feeling by the individual that the organization will protect his or her interests; individual factors, such as sex, tenure and need for achievement; leader behavior; and alternative job opportunities. Organizational commitment will vary according to how strongly an individual believes in the basic value system practiced in and by the organization (N.A.Jans, 1998) Careers researcher should look at not just the individual in the career but also the occupational/ organizational setting in which that career takes place. One aspect of this setting is the person's view of the organization he or she is working for. A person's perception of the organization's future may affect his or her feelings about it. On the one hand, a threat to the organization may stimulate commitment: people may be willing to make sacrifices or work harder to help the organization survive in a critical period. One the other, they may see an organization which has an uncertain future as being an undesirable place to invest their own futures. The perceptions of the organization's future may arise from assessments either that the organization is poorly run (organizational effectiveness) or that the market support for that organization is declining (market support). This may be similar in its effects to those of career prospects argued earlier: that people may be reluctant to tie themselves to an institution in which the future is bleak (Van Maanen, 1977).According to Dornstein and Matalon (1998) eight variables are pertinent to organizational commitment. These are interesting work, associate's attitudes towards the organization, organizational reliance, age, edification, employment substitutes, outlook of family and friends. Organizational commitment has been described by several measures and definitions.. According to Beckeri, Randal, and Riegel (1995) the term organizational commitment refers to three dimensions: 1. a strong aspiration to stay a member of a challenging organization; 2. an enthusiasm to put forth elevated intensity of hard work on behalf of the organization; 3. a characterized conviction in and satisfactoriness of the principles and objectives of the organization. A number of factors determine organizational commitment, together with individual aspects i.e. age, residence in the institution, temperament, interior or peripheral control ascription. Another factor that is a determinant of commitment is the organizational factors. It includes job structure and the management approach manager. Third determinant of organizational commitment are non-organizational factors i.e. the accessibility to a substitute. These determinants effect the ensuing commitment (Nortcraft 1996).
2.2 Turnover Intent
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Interest in explaining employee turnover has long been a main concern of organizational scholars (Cornoy, 1957) .Employee turnover is one of the most widely investigated topics in organizational study (Dalton, 1981). Labor turnover is an unavoidable trend in the labor market. Controlled and uncontrolled turnover of employees involve costs of disjoining, recruitment and training and job hunt for both the firm and the employee (Cascio W, 1991). Retention and turnover are the reverse sides of a coin and features contributing to retention illustrate the reverse effect on turnover. Turnover is the eventual decision headed by opinions of parting the organization, that is, turnover intention (Isik U. Zeytinoglu, 2007). Management research using the turnover theory showed that turnover intention is the best predictor of whether an employee will leave the organization (Steel, 2002). Organizations must keep their capable and motivated employees if they want to be competitive. For that they should comprehend the relationships between HRM Practices and Employee Turnover (Abeysekera, 2007). Employee turnover takes place when an individual leaves an organization either willingly or unwillingly. Although some organizational turnover is inevitable, and may even be enviable, voluntary turnover is difficult to forecast and can reduce the overall efficiency of an organization (Smith and Brough, 2003). Turnover intentions refer to an individual's predictable probability that they will depart an organization at some point in the near future. The association between job satisfaction and employee turnover is one of the ways to better understanding employee turnover--organization connection. This connection of employee reaction has attracted the attention of researchers, because contented employees have a greater propensity to stay, and add to an organization's competitive advantage and efficiency (Lee, 1987) .Turnover might disturb performance when an employee who intends to depart becomes less proficient, when an qualified employee departs, or when time is lost in an effort to secure a alternate (Mobley, 1982). Employees with external destination intentions to leave the organization will probably be concerned with contrasting conditions between their present status and available opportunities. This theoretical dissimilarity presuppose that a proposed objective, it may be a similar job or different one, work unit, or organization, is the primary determinant of the intensity of intent required to shift within or leave the work association (Weisberg, 2002).
2.3 Human Resource Management Practices
Huselid (1995) states that human resource practices power employee skills through the achievement and growth of a firm's human assets. Recruiting measures that provide a large band of competent applicant harmonizing with a consistent and suitable selection schedule will have a considerable influence over the worth and nature of expertise new employees acquire. Huselid contended that "human resource management practices effect employee motivation by encouraging them to work both harder and smarter".
Arthur found evidence for an interactive effect of human capital investments through the use of commitment, human resource system and employee retention turnover on firm productivity (Arthur.J, 1994). HR practices focused on enhancing employee commitment, decentralized decision making, comprehensive training, salaried compensation, employee participation are related to higher performance.HR practices that focused on control, efficiency and reduction of employee skills and discretion are associated with increased turnover and poorer manufacturing performance (Aurther, 1992).
The training and development of employees is increasingly recognized as an important aspect of best HRM practices. Training and development are commonly considered to be different forms of human capital investment for individual and organizational improvements (Goldstein, 1991). An area where training may be used is in the enhancement of job specific skills. Another area of focus for training is in the correction of deficiencies in job performance and development that may be provided to employees with abilities the organization might need in the future (Gold, 2001) Studies have shown training to be important in enhancing competitive advantage (Fairfield-Sonn, 1987). In addition, training is seen as a useful means of coping with changes fostered by technological innovation, market competition, organizational structuring, and demographic shifts (Knoke and Kalleberg, 1994). There are three dimensions that have major relationships to training effectiveness: organizational environment, pre training motivation, and relevance of training to the job. These objects have been chosen because they provide as a kind of substitute for employers, trainees, and trainers (M.Schumaker,2004). An organization's choice whether or not to train its employees influences the overall economy, even if the organization does not considers the economy into its decision. If all firms of an industry fail to train their employees, the whole economy bears. Training employees is a type of public good. It is a sort that includes a broad range of social problem. The advantages of training ensue only to the amount that employees add to the organization. An organization should take into consideration how it anticipates a training program to influence employee effort as well as employee turnover. Even in the good times, organizations must fix on that trained employees manufacture at superior rates, which in turn may influence how much they add and how often they move around to other firms in contrast with untrained workers (Natalie S.Glance, 1997). Training may decrease the likelihood of job disjointing because the trained employee might be less probable to give up and an employer might be less probable to fire a particularly trained person. Hence explicit training should lessen turnover more so than general training, or training which increase efficiency in more than one firm (R.Veum, 1997). Training there for improves the stability of relationship between the employers and their employees (I.Theodossiou, 2004). Training programmes augment the firm specificity of employee expertise,which ,one after the other increase employee efficiency as well as reducing job discontent that result in employee turnover. (Huselid, 1995) Training and developing internal employees reduces the cost and threat of selecting,appointing and internalizing people from outside labour markets,which in return add to employee productivity and reduces turnover.Training and development necessitate a certain level of reciprocity.A firm that methodically trains and develop its employees inform them that their market worth develops more favourably than in other firms.This enhances employee prductivity ,commitment and turnover (Doyle, 1997). The investment of a firm in both technical and non-technical training will have a optimistic impact on the degree to which the firm really thrive in developing the skills/knowledge of its employees. Given the inadequate resources that all the firms have, a significant issue for firms is the proper distribution between technical and non-technical training. Firms that have better-quality training programmes may practice lesser staff turnover than companies that overlook staff development.In firms with good technical and non-technical training programmes,employees are expected to apprehend that their market worth increase more favourably than in other firms.Therefore,it is in their own interest to stay longer in the firm. (Carl F.Fey, 2000)
2.3.2 Performance Appraisal
Performance is amorphous to the evidence of result created on a particular job rationale or doings during a precise time phase (Bernardin, 1993). It has been known that performance appraisal plays a significant role in organizations (Borman, 1979). In the last decades there has been an addition in the number of studies which explore the characteristics of successful performance appraisal systems. Performance appraisal provide a variety of functions such as providing the foundation for making selection decision, formatting salary increases, and providing a medium for feed-back between supervisors and employees (K.Mount, 1984). Performance has become a prevalent prescribed organizational process with mangers determining and appraising subordinates' performance using formal rating tools on an yearly or semi annual basis (Ludwig, 1990). Performance management is not just once -a-year appraisal:efficient managers integrate performance appraisal and feedback as part of their of day to day communication with employees (Webb, 2004). Performance appraisal can identify who should be retained, and a pay for performance compensation plan can be applied appropriately to reward and encourage high and average performers to remain with the company (Berry, 2004). Performance appraisal systems are dependent on subjective ratings of performance given by supervisors, peers, subordinate, and job incumbents. Regardless of a heavy reliance on performance ratings, it is usually recognized that they are too often infected by systematic errors i.e. leniency, central tendency, halo, and contrast errors (Source, 1986).
A totally objective performance appraisal is virtually impossible to achieve. Subjectivity is tolerated in the system if the system includes administrative safeguards. Typical safeguards include review of the completed document by upper management, training for the rater, and appeal procedures for the employee being rated (EEOC v.IBM Corp). The first step of the performance appraisal procedure necessitate that the rater be given the chance to observe a representative sample of a ratee's work performance. The rater must be able to recognize and attend to those behaviors that are appropriate to the ratee's performance efficiency. The focal point of the second step of the procedure is the assessment of each behavior, autonomous to other behaviors. The evaluation of each behavior should not be subjective to a global impression about the ratee's overall efficiency. It is only in the final step of the rating procedure that broader ratings should be established. At this point, the evaluation of each conduct is subjective to single rating for either a performance measurement or for a rating of overall performance efficiency (Borman W. C., 1975). Employee performance appraisal has been experienced by many organizations since decades.although performance appraisal has been discussed by many,though ,generally,it is analysed that performance appraisal is an inseparable part of organizational life (Islam, 2006). Performance management is a multifaceted dilemma and it involves a variety of judgements about which performance measure to use (Wu, 2005).
2.3.3 Career Planning
A career is a succession of positions apprehended by a person during the path of a lifetime.It encompasses a series of work associated activities that offer stability ,order,and meaning to a person's life. (Schien, 1996) The above definition is thought-out as an onjective analysis of a person's career (Subash C.Kundu, 2007). A career comprises of the changes in values,mind-set and motivation that take place as people grow older (Hall,1976). An individuals career is formed by many compound factors e.g.,performance ,education,knowledge,powerful parents,social group links and a certain amount of luck (Sullivan, 1999). Career planning is delibrate effort by an person to become more conscious of his or her own abilities,interests ,values ,opportunity ,restriction,choice, and outcomes.It involves career associated goals and establishing plans for accomplishing those goals. (Hall, 1986). Interest in career development at the individual level comes from difference in communal values away from an apprehension with disbursement and other security paybacks to emotional rewards like chances for development (Debrah, 1993). Career planning comprises both organizational procedures and individual efforts intended at setting career goals,putting together and implementing strategies and scrutinizing the results (Greenhaus, 1986). Companies may employ career supervision programmes to help their employees in career planning.When a company offers this service ,one significant intend is to recognize succession of job assignments that assist employees increase the skills and understanding viewed as vital in the company.A company career planning scheme that works well may also give confidence to employees to take additional responsibility for their own growth,together with the development of skills viewed as significant in the company (Dolye.M, 1997). A career planning system not only helps ensure that empployees have the skills they need to advance in the company :it may also help ansure that employees have the skills need to advance in the company;it may also help ensure that employees possess the mix of skills that the firm believes are important for its furure success.In other words,the provision of career planning assiatance may have apositive effect on the level and type of skills and knowledge in the company (Carl F.Fey,2000). Hall (1976) disagree that employee career efficiency is directly associated to organizational efficiency and that career development actions can guide to a additional devoted work force. Individuals who account for additional extensive career planning were also superior in the career efficiency magnitude of pay, career participation, identity resolution and compliance (Gould, 1979). Pazy (1988) also observed the relation amid individual and managerial career planning and career efficiency. Pazy stated that two magnitudes of individual career supervision, planning and reactivity, add to career efficiency.
2.3.4 Employee Paticipation
The writing of worker participation, mainly which has appeared in the last decades or so, gives comparatively little concentration to organization efficacy, directing instead on philosophies and structural plans. Even where the investigation has been experiential, the focal point is more often on participants' feelings,' the temperament of the participation, or the level of institutionalization (Rosenstein, 1980). Participative supervision has been described as the "third administrative revolution" (Preston, 1974). There are three major organizational approaches to participation: the cognitive approach, the emotional approach and the eventuality approach. (Miller, 1986) These approaches guide to different forecasts with respect to the main effects of participation, i.e. efficiency and contentment. On the other hand, owing to the continuation of multiple considerable and methodological mediators, experiential research has not so far permitted us to illustrate perfect conclusion about these effects, and the instruments under lying participation stay mostly uncharted (Black, 1997). Amongst the significant mediating variables, the foundation of participation, its structure, its outline, the decision question involved the level of participation and the decision procedure can be talked about (Cotton, 1988). It is the performance, not the content of participation that gives contentment. As a result, little experienced workers are forecasted to profit most from participation, as their early motivation is anticipated to be lesser in the initial place. The job itself is an indication to the workers that their job is actually not worth it. Furthermore, participation has turned into almost useless if workers are motivated by other resources (Erez.M., 1993). It has been disagreed that participation involves some of those control methods as peer pressure, societal forces, recognition with the company, that decrease the incentives to avoid, and enhance employee devotion and incentives for collaboration (Doucouliagos, 1995).
Compensation is all type of monetary income and substantial services and reimbursement employees obtain as part of an employment association (Milkovich, 1999). An efficient set of alternatives concerning compensation syatem occupy a foremost position in determining firm performance (Dreher, 2005). An indirect compensation specified to an employee or group of employees as an element of organizational relationship is a fringe benefit,which influence performance and retention of employees (Mathis, 2004). In consequence of their huge costs and monetary commitment which is prepared for future,assisted in planning has become a serious constituent of HR planning practice (Bernardin H. R., 1993). The application of abilities or capabilities direct to performance and performance is a decisive factor for appraising efficiency.Therfore,a pay-for-proficiency plan augment efficiency and product quality,decrease absenteesim,turnover,and calamity rates (Jyothi, 2006). If competencies are the steering wheel for supervising knowledge and work,extrinsic and intrinsic rewards are the engine (Kochanski, 1999). Compensation is the introductory reward that are first and foremost monetary in nature and satisfy monetary requirements for returns (Worldatwork, 2000). Rewards connect the space linking organizational objectives and individaul prospects and objectives.Efficient,organizational reward scheme should offer four things: a adequate degree of rewards to fullfill primary requirements,fairness with the exterior labor market,fairness within the organization,and dealing of each member of organization in terms of his or her individual requirements (Lawler, 1989). Performance-oriented compensation is the main HR practice that companies use sequentially to evaluate and reward employees' achievements (Collins, 2003). Employee inspiration based on apparent anticipation,can offer the relation amid compensation and performance.Expectencey theory states that pay rank will affect employee performance when an employee recognize that an association exists between their efforts and performance and employees gain explicit benefits if they execute well (Ngo, 1998). Emperical studies on the association between performance-linked compensation and company performance have usually established an optimistic association,but an increasing body of emperical proof propose that it is not just compensation rank that matters,but also compensation structure (P. Vlachos, 2009). Performance related reimbursement is solitary strongest forecaster of firm performance (Delery, 1996). Compensation is mainly significant for small firms for the reason that it influences recruiting and retention efforts as well as it signals authority to external stakeholders (Cordon, 2004). Compensation and incentives directly effect operational performance (Paul, 2003).