Human resource management on organizational performance

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Adnan Riaz and Dr. Jameel Qazi,2007, The Impact of HRM Practices on the Perceived Organizational Performance: A study of Telecom Sector in Pakistan

This study was conducted to investigate the affect of HRM practices on the organizational performance in the telecom sector that is growing at a rapid rate and contributing significantly to the GDP of Pakistan. In Total six HRM practices were studied within the research, these are the independent variables such as: Training, performance appraisal of employees, job design or definition, employee compensation, selection, career planning programmes. The basic assumption formulating the hypothesis statement was that the HRM practices discussed during the study have a positive relationship or association with the organizational performance in the telecom sector of Pakistan. H: 0- HRM practices are positively associated with perceived organizational performance. H: 1- HRM Practices are not positively associated with organizational performance.

The methodology used in the research attempts to investigate the relationship between the independent variables mentioned above and the dependant variable i.e. perceived organizational performance and determine how closely or directly they impact the dependant variable.

Non probability sampling method was used for the sampling purpose through floating a total of 450 questionnaires to 200 respondents in all the main telecom companies of Pakistan like Mobilink, Telenor, Warid PTCL etc.

Research findings showed that amongst all the HRM practices being implemented in this sector, the major contributor to improved organizational performance was Training and selection and that progressive HRM practices positively impacted organizational performance and were a source of sustained competitive advantage. Other variables were seen to have a relatively weaker or insignificant relationship with the dependant variable.

Brian Becker, 1999,The impact of Human Resource Management Practices on Perceptions Of Organizational Performance : Progress and Prospects

The study mainly highlights the idea that HR elements that were previously considered a cost to be minimized and a potential source of efficiency gains has evolved over time and is now considered a means to competitve advantage and revenue growth. The study takes into account the theoretical framework constituting the evolving and contemporary HR systems.

The research methodology studies the impact of HR system on the dependent variable i.e. organizational performance and shows the degree to which these variables and are related with each other. Based on this assumption it draws its hypothesis that human resource management practices have a positive relationship with organizational performance. It treats HR as an intangible and invisible asset that is used for value creation and enhances a firm's capabilities. According to the study the main independent variables impacting the perceived organizational performance are selection and various employee compensation programmes but more importantly, a High Performance HR strategy is crucial to organizational success as effects of different HR systems is additive in nature.

This new perspective suggests that HR contributes directly to the implementation of the strategic objectives of firm. The strategic approach depends mainly on psychology, economics, finance, and strategy. However, a potential advantage in this respect is that the direct impact of HR decisions on performance outcomes has more relevance to managers, such as stock performance, productivity, profits, quality, and organizational survival.

The study suggests that one of the key elements of a high performance HR system must be flexibility, especially in a rapidly changing environment of today. The HR system's effectiveness and efficiency can be potentially measured through the use of various natural and meaningful metrics e.g., share- holder return, profits, organizational survival, productivity, cycle time, customer complaints. Capital market measures of performance and market value measures are generally used at the corporate level. Therefore, the research findings suggest that the best practice to be considered for a firm is the alignment of its HR systems with the organizational needs

Gedaliahu H. Harel and Shay S. Tzafrir, 1999, The effect of resource management Practices on the perceptions of organizational and market performance of the Firm

The key purpose of this study was to investigate the relationship between HRM activities and both, the organizational and market performance. The key HRM practices that were treated as independent variables throughout the study were employee recruitment, selection, compensation programmes, employee involvement/ participation, labor market and training programmes. The study hypothesized that organizations that viewed employees as potential partners and important assets would have a higher perception of organizational performance. A national sample was taken that included a random sample of 215 organizations from both private and public sectors of Israel, each having 200 employees.

The results indicated a positive relationship among several HRM practices that stress the capability and ability of the individual (training), that allow employees to participate in the organizational activities (employee participation),opportunities that provide them with the progression within the organization (internal labor market), and the perception of greater organizational performance.

Statistical analysis of the impact of various independent variables on the perceived organizational performance and perceived market suggested that training activities were the only variable that had a positive and significant impact on the perceived organizational performance. It was found that employee selection activities, in addition to the training activities played a significant role in studying and explaining the impact on the perceived market performance. The overall ability of those organizations is increased and enhanced that place greater emphasis on employee training as it increases the human capital of employees that in turn generates a higher perception of performance on the internal organizational dimension as well as on the market performance dimension.

Garry A.Gelade, 2003,The impact of resource Management and Work Climate on Organizational Performance

This research study examines relationships between HRM, work climate, and organizational performance. It examines how work climate and HRM function jointly impact business performance. Based on this assumption, the hypothesis of the research study is that: HRM and work climate together positively impact the Organizational Performance. During the course of the study, reference was made to productive entities, decision-making units called DMUs. Reference was also made to various other researchers too who have found close relationships between various psychological factors that exist in the work environment, like perceptions, attitudes, beliefs and employee satisfaction and performance at the DMU level. Results from the empirical evidence suggest that the two distinct correlates of improved DMU performance are favorable working climate and progressive or advanced HRM policies and practices.

The HRM indicators (independent variables) considered are staffing level, working hours, and professional development of employees. During the study it was also found that HRM decisions affect performance both directly and indirectly. In the model discussed within the study, HRM decisions indirectly affect either by improving or adversely affecting the work climate which eventually affects DMU performance.

According to the Research findings, significant correlations were found in the study between work climate, HR practices and organizational performance. Moreover, the correlations between work climate and business performance cannot be explained by the dependence of both on HRM practices discussed in the study.

John T.Delaney,1996, The impact of Human Resource Management Practices on Perceptions Of Organizational Performance

The literature basically studies how progressive HRM practices positively affect and improve performance and outcomes in an organization. These HRM practices treated as independent variables include training, information sharing, staffing, employee participation and empowerment, job design and incentive compensation. The dependant variables include both perceived organizational performance and perceived market performance as they jointly assess or determine organizational success and growth. Two hypothesis have been generated in the course of the study. Hypothesis 1: Progressive HRM practices are positively related to organizational performance. Hypothesis 2: Compliance or synergies among progressive HRM practices will be positively related to organizational performance. Data collection was based on a national probability sample. Sampling frame was 1427 organizations out of which 1127 could be successfully contacted.

Various HRM practices can be adopted by organizations to enhance employee skills. Efforts can be possibly made to enhance the skills of the existing workers or to improve the quality of workers hired at the time of recruitment and selection. Research shows that effective staffing is positively related to organizational performance. Selective, effective and sophisticated staffing procedures can minimize the entry of a wrong or inappropriate candidate into the firm and filters the incompetent candidates. Second, organizations can improve the quality of current employees by providing comprehensive training and development activities after selection. Therefore, investments in training and development would produce beneficial organizational outcome. Finally, the organizational structure of a firm also positively affects organizational performance to the extent that workers are motivated by being involved directly in running of all the operations of the firm.

The results and findings of all the empirical testing carried out in the research supports the hypothesis that progressive HRM practices mentioned in the study are positively related to organizational performance.

Muhammad Asif Khan, 2010, Effects of Human Resource Management Practices on Organizational Performance - An Empirical Study

of Oil and Gas Industry in Pakistan

Various studies in the past few years focused on numerous individual HRM practices but that approach is now changing to entire HRM system and its impact on organizational performance. The study focuses on the impact of five key HRM practices (independent variables) on a firm's performance in Oil and Gas Industry in Pakistan, namely; selection and recruitment, training and development, performance appraisal programmes, compensation and reward system, and employee participation. Throughout the study, it was reinforced that effective use and implementation of these practices enhanced performance at not only individual but also organizational level. Based on the study, the following general hypothesis was tested: 'HRM Practices have a significant relationship with organizational performance.'

H 1: Recruitment and selection has significant relationship with organizational performance.

H 2: Training and development has significant relationship with organizational performance.

H 3: Performance appraisal has significant relationship with organizational performance

H 4: Compensation and rewards has significant relationship with organizational performance.

H 5: Employee relations have significant relationship with organizational performance.

Data was collected from 20 randomly selected companies from Pakistan's Oil and Gas Industry, both public and private. Questionnaire was floated in these firms to 150 managers and the response rate was 75%. Both financial and non financial indicators were used to gauge a firm's performance. Financial metrics include market share, sales and profit. Whereas non financial metrics include quality, efficiency, satisfaction and productivity. Statistical analysis indicated a significantly positive relationship of the HRM practices with the organizational performance.

The study aimed to highlight the already limited understanding and knowledge of HRM in general that exists in the Pakistani context and show how effective and integrated use of these practices can be used as a strategic tool to obtain superior performance in the not so stable business environment of Pakistan.

Anastasia A. Katou, 2008, Measuring the impact of HRM on organisational performance

The study measures the impact of HRM on a firm's performance in the context of Greece. The paper discusses that HRM policies will only bring positive and progressive organizational outcome if it's in compliance with the business strategies. The variables discussed in the study can be categorized into HRM policies( compensation, incentives, job design and resourcing), HRM outcomes (attitudes, skills and behaviour) and business strategies (quality, innovation and cost structure). It explains how HRM policies and a firm's performance is somewhat mediated through HRM outcomes and impacted by a firm's business strategies. The main aim of the study is to look into the relationship between HRM and organizational performance and examine any possible business strategies that affect HRM in the manufacturing context of Greece.

The hypothesized statements derived from the study include the following:

Hypothesis 1: Business strategies influence HRM policies in determining business performance. Hypothesis 2: A relationship exists between HRM policies and HRM outcomes. Hypothesis 3:Improvements in HRM outcomes mediates the relationship between HRM policies and organisational performance. Hypothesis 4: A positive relationship exists between HRM policies and organisational performance (Anastasia A. Katou, 2008).

The study used the 'structural equation modelling' methodology to analyze data that was collected from 178 Greek organizations. Questionnaires were floated in 23 industries of Greece and a sample of 600 firms was used. Response rate was 30%.

The results and findings of the study support all the hypotheses stated above.

The operational model used in the study shows that HRM policies directly affect

HRM outcomes such as collective attitudes, skills and behaviours, and, indirectly through HRM outcomes improve organisational performance. Moreover, the results show that HRM policies are positively related to organisational performance but are also influenced by business strategies.

Luc Sels, 2006, Unravelling the HRM-Performance Link: Value-Creating and Cost-Increasing Effects of Small Business HRM

A majority of previous studies on the HRM-performance subject have portrayed a positive relationship but unfortunately the costs associated with the high performance work practices (HPWP) have usually been ignored. The primary purpose of this study is to show both sides of the story: The value-enhancing side and as well as the cost-raising affect of HPWP and also study its overall impact on the financial performance of a company. This study deals specifically with the small businesses as the topic under discussion is crucially important to them since they lack financial resources or capital to adopt and implement HPWS and very seldom benefit from the economies of scale as compared to large or established companies. Although the use of HPWP systems within an organization leads to increased productivity but it also increases the labour costs that offsets the gains. However, the research finds an overall positive impact on the profitability of a firm.

The Hypothesis statements derived from the study include the following :

Hypothesis 1: HRM intensity has a direct positive effect on productivity. Hypothesis 2: HRM intensity has an indirect positive effect on productivity by lowering the voluntary employee turnover rate. Hypothesis 3: HRM intensity indirectly - through its positive impact on productivity lowers PC/VA (the share of personnel costs in value added). Hypothesis 4: HRM intensity directly increases PC/VA. (Luc Sels, 2006)

The methodology uses structural equation modelling technique that tests the overall effect of variables between HRM and financial performance. Organizations with a maximum of 100 employees were surveyed through an economy wide stratified sample. The response rate was 28%.

The results and findings of the study indicate that an effective HRM system can impact the financial position of small firms both positively and negatively. Although the cost-increasing impact offsets the gains in productivity but an overall positive effect on profitability was observed despite the lack of effect on the share of personnel costs in value added.

Hugh Mitchell, 2002, Strategic Worth of human Resources: Driving Organizational performance

This article focuses on the idea that how Human Resources by creating strategic worth has helped firms to achieve operational excellence and the different ways through which the impact of HR on organizational performance can be measured using various indicators. The article suggests that strategic worth should be measured not in absolute terms but according to the nature of a particular organization. 'Strategic worth is situational. Initiatives are only relevant if the improvements made have significance for the company (Hugh Mitchell, 2002)'.

According to the organizational performance framework suggested by the article, there are three different factors affecting organizational performance (independent variables) : Motivation, capacity and the external environment in which a firm operates. The study further states four different ways to measure organizational performance: Efficiency, effectiveness, relevance and financial viability. Relevance means the extent to which the company is relevant to the needs and requirements of its stakeholders or the people who have interest in an organization. Effectiveness refers to the degree to which a firm is meeting its objectives, goals and vision/mission. Efficiency means how well a firm is allocating and utilizing its resources. Financial Viability means how sound is the company to make future investments. The article further gives a few examples of places/firms where HR has lead to increased motivation: a pharmaceutical company, a Canadian bank and an international financial institution.

The article concludes by suggesting various ways through which a firm can create strategic worth e.g. by focusing on HR expertise and be currently updated with it, understanding the level of performance essential for a particular organization and measuring the impact of strategic worth.

Maddy Janssens,2009, HRM and Performance: A Plea for Reflexivity

in HRM Studies

The study, Counterpoint, gives new dimensions to the relationship of HRM and Performance. According to the article, rather than focusing on proposing alternatives, R(econstructive)-reflexivity is needed for developing a theoretical framework for HRM. The study argues that new research avenues would open if insights on studies on the notions of HRM and relationship between them is analyzed and interpreted. This demands reframing and reconstructuring the employment relationship. 'In particular, we emphasize practice-oriented research as one possible research path for the field of HRM as it allows for an examination of HRM as a set of practices, embedded in a global economical, political and socio-cultural context. We end our counterpoint by reflecting on reflexivity, proposing three practices that can guide HRM scholars in becoming reflexive in the ways they study HRM.'(Maddy Janssens,2009)

The article further explains that bringing employee back into HRM studies will improve and enhance the political nature of the employment relation both at the micro and macro level and will also form a basis for effective research later. This counterpoint would make scholars and HRM practitioners reconstruct their mindset and perception of 'performance' in their everyday lives and to think on the lines that how reflexivity can redirect HRM and give it a new direction as far as the field of research and practice is concerned.