Influence of Human Resource on Employee Commitment

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1.1 Introduction

Strategic human resource management (SHRM) has been defined as "the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals" . Strategic HRM provides an improved lens, than 'traditional' HRM, to look at the relationships between organizational strategy, human resources and performance. The improvement may be attributed to two major factors; first HR theorists start taking into consideration the role of external factors such as legal and political environment, technology, strategy etc. in designing HRM systems as contrasted to more traditional HRM approach of focusing on alignment between internal factors such as person-job or person-organization fit. For example, strategic HR theorists have observed that for any HR system to deliver effectively it must be aligned with a number of variables external to it . Taking advice from these theorists a number of studies, for example, Youndt, Snell, Dean and Lepak , Arthur , McMahan, Bell and Virick and more recently Chaung and Liao have tested the relationship between an organization's strategy, human resources and performance in the domain of strategic human resource management.

Second, the focus has shifted from more 'traditional' individual performance indicators to more 'strategic' firm level performance criteria as dependent variable in strategic HRM research. Traditionally HR research usually focused on individual performance variables such as absenteeism , withdrawal, turnover etc. as ultimate dependent variables in a typical HR study; however this trend has been significantly changed as now studies are more focused on organizational performance indicators like gross rate of return (GRATE) and Tobin's Q , return on asset (ROA) and return on equity (ROE) , service quality and customer satisfaction .

As performance is one of the major organizational goal, it is unsurprising that the human resource researchers and practitioners have amassed a commendable amount of research on the human resource practices - performance link in the last two decades . Though, generally such research has supported the notion that if properly designed and implemented human resource practices improve organizational performance , the mechanism or process through which such relationship occurs is still not clear . Owing to little knowledge of the nature of variables and process, SHRM theorists have termed the mediating process between human resource practices and firm performance a "black box" . Many researchers have recently emphasized the need to understand what lies within the 'black box'. .

Figure 1-1: The Black-Box Phenomenon in SHRM Research



Human Resource Practices

What lies inside the Black-Box?

One of the major theoretical frameworks used to analyze what lies inside the black-box is 'behavioral perspective' of strategic human resource management put forward by Schuler and Jackson . Behavioral perspective propagates that specific (and of course required) employee behavior can be elicited through carefully crafted organizational human resource practices . Behavioral approach to the study of employer-employee relationship is one of the original perspectives in the field of strategic human resource management with other approaches like resource based view (RBV), cybernetic systems coming from fields like organizational economics and systems theory . Basic tenets of behavioral perspective are rooted in the logic that different organizational strategies require different employee behavior to successfully implement them, and HR practices are the tools through which employer tries to elicit those required behavior. The 1984 study of Miles and Snow categorizing businesses as defender, prospector, analyzer and reactor on the basis of their operational strategies and then proposing a different set of HR practices for every strategy type is a classic example of use of behavioral perspective for designing firm's personnel practices. It is pertinent to note that by its very nature the behavioral perspective emphasizes the role of work-behavior in effective implementation of strategy and the resulting organizational performance. Despite its originality and importance in SHRM domain very few studies have empirically investigated the mediating role of employee behavior in HRP-Performance relationship as envisaged by the behavioral perspective. Further, the behavioral perspective does not outline the mechanics through which HR practices stimulate behavior and exactly which and how employee behaviors lead to improved organizational performance.

Social exchange theory (SET) and 'norm of reciprocity' provides useful framework to understand the mechanics of how organizational human resource practices transform into employee behavior. SET views employment as a social exchange . As such employer and employee not only transact tangible resources as money and service rather they also exchange intangible resources as respect and support . The concept of 'social exchange' is different from that of 'economic exchange' as the formal is of more contractual nature where certain reward is contingent upon the performance of a certain behavior. Usually the responsibilities of both employer and employee are legally defined and enforceable under the law of the land . The example of 'economic exchange' is paycheck received by employees for the performance of their duties as per agreed terms and conditions. In contrast, social exchange is based on the trust between two parties - employer and employee -, without any explicit definition, means or timing of reciprocation. The nature of social exchange on other hand is unspecified, not defined by law and based on mutual trust that both the partner in exchange process will live up to expectation of their counterparts in bargain process at some point in time. As Blau noted, "the basic and most crucial distinction is that social exchange entails unspecified obligations" . Reciprocation as defined by social exchange can take many forms, or social exchange relationships, in organizational settings including perceived organizational support (POS), leader-member exchange (LMX), psychological contract, and organizational citizenship behavior. In a nutshell "social exchange relationships evolve when employers "take care of employees", which thereby engenders beneficial consequences" . Similarly 'norm of reciprocity' also implies that if organizations treat their employees well, they will reciprocate by reacting in a manner favorable to their organizations.

1.2 Purpose of the Study:

Rooted in 'behavioral perspective' of strategic human resource management and utilizing the theoretical foundations provided by 'social exchange theory' and 'norm of reciprocity', this study investigates the role of employee attitudes and behavior on the HRM practices and organizational performance relationship.

In particular this research is aimed at providing answer to the following questions:

How do the organizational HR practices influence employees' work-related behavior?

What is the role of employee attitudes and behavior in the relationship between human resource practices and performance of an organization?

What is the mediating mechanism/process through which human resource practices influence organizational performance?

Thus the major aim of the study is to investigate that what and how a firm's human resource practices influence its organizational performance. As a corollary to the aim of investigating HR practices-performance linkage, following purposes are identified for this research.

First, to propose and test a model explaining the role of mediating variables and intermediary process through which firm's human resource practices influence its performance.

Second purpose of this research is to identify the HR practices which are contextually more important in eliciting positive work attitudes and behavior in our social, cultural, and economic environment.

1.3 Significance of the Study:

The study has the potential to contribute to the existing body of literature on human resource management - firm performance relationship in the following ways. First, by proposing a model that explain the intermediate linkages through which human resource practices exert their influence on firm performance, this dissertation will address an HRM research area which has been termed high priority by the scholars. Although researchers now almost agree that firm's HR practices are related to its performance, the theoretical underpinnings of such relationship is still far from clear . Need for further research to explore the mediating variables is stressed by many . In fact Ferris, Hochwarter, Buckley, Harrel-Cook, & Frink consider this to be a high priority area for HRM researchers. Emphasizing the need for research focused on explaining HR-performance relationship they noted that:

". . ., if there is indeed an impact of HRM systems on firm performance, how do these effects occur? What are the mechanisms through which these effects manifest themselves?. . .These questions call for theory refinement and the development of more comprehensive models of the HRM-firm performance relationship that include intermediate linkages and boundary conditions. . . . this type of research should be given a high priority by HRM scholars."

As its foremost aim, this dissertation is a response to the call made for the development of more comprehensive models of the HRM-firm performance relationship by Ferris, et al. . This study is an attempt to enhance our understanding of the intermediary process through which human resource practices manifest their effects on performance. The proposed model is especially mindful of the role of boundary spanners (employees) in this process.

Second, by taking into consideration the role of employees' perception in the relationship between firm's human resource practices and employee attitude, this study will integrate the human resource and organizational behavior stream of researches. Uhl-Bein, Graen & Scandura have noted that despite the fact that human resource management (HRM) and organizational behavior (OB) are highly interrelated areas, there is little cross-disciplinary research in these areas, which needs to be expanded. This lack of integration in research is apparent from the fact that though human resource practices are meant to elicit employees' responses which optimizes firm's performance, most of the HR researches are focused on HR practices-performance relationship while to date very few have investigated the mechanism through which such practices influence employees' attitudinal and affective responses. By suggesting 'Perceived Organizational Support' (POS) as the intermediately link between firm's HR practices and its employees' attitude and behavior, this study has attempted to use a behavioral lens to view the human resource practices, thus integrating both streams of literature.

Third, the need to undertake empirical research exploring the role of employees' perception of HR practices in the HR-performance relationship has recently been emphasized by scholars of the field . This study has the potential to contribute in this direction. Instead of getting the HR practices data from organizational managers, which in most cases reveal the data about human resource policies rather than actual practices or at best managers' own perception about firms' human resource practices, this research has asked the employees to express what they perceive about their firms' human resource practices; data thus gathered was then empirically tested to find the role of 'employee perceptions' in HRP-performance relationship.

Finally, which HR practice is perceived favorable or unfavorable is not only the function of practice itself rather it has to do with a larger socio-cultural context in which organization is operating and implementing its HR system. The logic used by individuals to perceive the environmental events is rooted in early socialization and conditioning process which in turn are influenced by macro institutions like family, religion, and educational structures . These macro institutions differ from county to country, as a consequence the human resource practices successful in eliciting positive perceptions in one culture may fail in another. Given the fact that cultural values have found positively correlated with employee outcomes , this study will enhance our understanding of the organizational practices which are more effective at improving organizational performance in our culture.

1.4 Organization of Thesis

Chapter 2 is review of literature. In this chapter based on literature about behavioral perspective of strategic human resource management, social exchange theory, and organizational support theory I have developed a parsimonious conceptual framework for this research.

Chapter 3 deals with 'model development and hypotheses'. In chapter 3 based on review of literature in chapter 2 and other relevant theoretical and empirical studies, I develop specific hypotheses about various conceptual relationships envisaged in the research model. Several HRM practices are proposed to be antecedent of employee behavior which in turn is proposed to be antecedent for organizational performance.

Chapter 4 elaborates the context of the study, i.e. baking sector of Pakistan. The chapter deals in detail about the evolution of banking in Pakistan. It outlines the features of banking firms and importance of studying the role of human resource management practices prevalent in the banking sector.

Chapter 5 describes the research methods used for the collection and analysis of data in this study. This chapter outlines the procedures carried out for selection of sample and why specific methods were preferred over others.

Chapter 6 presents the result of the study, based on the tests of the data collected and verification of the research model developed in chapter 3 of this study. It further presents the results of individual hypotheses.

Chapter 7 concludes this study by discussing the major findings of this research, its contributions to the field of strategic human research management, its theoretical and managerial implications, and scope of future research.