Nature of mediating linkages between human resource practices

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This dissertation explicates the nature of mediating linkages between human resource practices and organizational performance, often termed as "black box". Although researchers in the past have recognized the mediating role played by employee attitudes and behavior in HR practices - performance relationship , it was only in this decade that empirical examination of such a role is undertaken by the researchers . Nevertheless, none of the studies so far have tested the role played by employee perceptions of organizational human resource practices in developing employee outcomes, and the mediating role of such outcomes in eliciting organizational performance.

The role of perceptions is of much importance in understanding human action, or says reaction. Every stimulus is first decoded before it can be responded to by individuals. This applies to organizational actions too. Organizational human resource practices undertaken by the firm and directed towards its employees must first be perceived, positively, negatively or neutrally, before they can be reciprocated by the employees. For example Schneider, et al noted that, "No behavior in, or of, organizations occurs in the absence of perceptions. To conceptualize an organization requires a consideration of human behavior, and human behavior does not exist without perception." Despite this and similar calls for paying attention to the role of employee perceptions in the process of explaining mediating link between human resource practices and organizational performance, only a few studies so far have incorporated their role in HR-Performance models. An exception is the study published by Nishi and her colleagues in 2008. However, Nishi and her colleagues have not collected the employees' perceptual data about the HR practices themselves; rather they have studies the perceptions about reason for existence of HR practice in the organization, thus leaving the fundamental question about the role of employees' perception in the HR-Performance relationship unanswered. This study contributes to the existing body of knowledge on strategic human resource by providing possible explanation of variance in organizational performance by reflecting upon the role of employees' perception of HR practices and the resulting employee attitude and behavior in this context.

Specifically the results of the study support the assertions made by behavioral perspective about the role of employee outcome as mediating mechanism in HR-Performance relationship . The study provides statistical evidence about employees' perceived organizational support, their affective commitment and customer oriented behavior are significant mediators in the relationship between an organization's people practices and its performance. In addition, this study is also amongst the first few studies to examine the mediating role of POS in the connection between human resource practices and employee outcomes like affective commitment and customer oriented behavior.

Employees' perceptions about a total of seven human resource practices were examined in the study, of which, five were found to be significantly related to customer satisfaction. The practices which were found related to the customer satisfaction were supervisor support, internal career opportunities, training opportunities, result oriented appraisal, and participation in decision making. The two which were not related to customer satisfaction were employment security and compensation. One reason that these two practices were found not related to the customer satisfaction might be the time of data collection. Data was collected during 2008 which lies in the booming period for Pakistani banking industry due to huge capital inflow and increased direct financial investment (DFI). As a result, a number of new banks as well as new branches of existing banks were incorporated during this time period which consequently translated into heightened demand for experienced bank employees. This scenario resulted in a large inter organizational movement of employees in banking industry at that time. A number of experienced individuals from small banks move to higher positions in newly opened branches of foreign banks or local banks owned by foreign investors at substantially higher than their existing salaries. As the numbers of jobs were abundant at good salaries for the working bank employees, the employment security and compensation may be of low concern to the employees from whom data were collected. Resultantly perceptions about these two people practices, i.e. employment security and compensation, were found unrelated to the satisfaction level of banks customers. Except for these two practices all other human resource practices were significant predictor of customer satisfaction; however the predictive power of supervisor support become insignificant when controlled for the effect of result oriented appraisal and participation in decision making. Note that both these practices are more directly related to immediate supervisors than overall organizational structure. Employee performance appraisal is in a sense more than 80 percent dependent on immediate supervisor's rating of his/her work; similarly whether a specific employee is involved in decision making is a decision which is most routinely made by the branch manager rather than higher bosses of the firm. This finding indicates the of all the human resource practices tested in this study, employees' perception about result oriented performance appraisal and participation in decision making are to a greater degree influenced by their perception of supervisor support rather than overall organizational human resource practices.

As already note before, Whitener , while identifying the possible causes of different employee outcomes towards same HR practice, stressed upon the future researchers to ". . . measure employees' perceptions of the characteristics of human resource practices as an intervening variable between managers' descriptions of human resource practices and employees' perceptions of support." . All the seven human resource practices employed in this research were found positively and significantly related to the employees' perceived organizational support. This indicates the important role of employee perceptions in their interaction with the organization. The finding is supportive of the fact the employees' sense of being taken care of by the organization is the outcome of what they perceive about the organizational actions and practices rather than what actually organization is doing in reality. As a matter fact the perceptions of employees are of real importance to organizational outcomes, such as customer satisfaction, rather than perceptions of human resource or general managers about the existence of human resource practices. Moreover, in line with the findings of Rhoades and Eisenberger supervisor support was found to be most significantly related to the perceptions of organizational support indicating the important role played by the immediate supervisors or managers in chain of service deliver. The influence of result oriented appraisal was weakest on the perceptions of organizational support. This finding about result oriented appraisal coupled with another one about its high correlation with supervisor support indicates that employees' perception of result oriented appraisal are more influential in developing notions of supervisor support than they are in development of POS.

Further as expected, perceived organizational support was revealed to be a very strong predictor of employees' affective commitment. This result is consistent with the earlier findings . This indicates that perceptual map of the employee regarding organization and its practices play a significant role in eliciting positive response towards it. Moreover, POS acted as the mediator between perceptions of organization's people practices and their level of affective commitment. More specifically, POS was found to be strong mediator for all of the seven HR practices and employees' affective commitment independently, i.e. perceptions of organizational support mediates the HR practice-Affective Commitment relationship for each of the seven human resource practices examined in this dissertation. As noted in the chapter on literature review, mediatory role of POS in HR practices - affective commitment relationship was rooted in social exchange theory, the fact that POS signified as the mediator in the said relationship lends support to existence and equal applicability of social exchange theory in this part of the world. Although the reciprocation mechanisms based on social exchange perspective were earlier found significant in American and European contexts, this study is the first one to test its validity in the unique socio-cultural context of South-Asia. This evidence also suggests the extension of social exchange perspective to this part of the globe indicating the social exchange theory is essentially non-ethnocentric in its foundation and is applicable to social settings across the different cultures.

Furthermore, in line with the expectation of the research model affective commitment significantly predicted the customer oriented behavior of the employees. As affective commitment is defined "employee's emotional attachment to, identification with, and involvement in the organization" , it is unsurprising to find that those employees who are more affectively committed to their organization exhibit better customer oriented behavior than weakly committed individuals. This result indicates that behaviors are preceded by the attitudes. Although a number of previous studies have examined the influence of affective commitment in eliciting employees' organizational citizenship behavior, this study is the first one to specifically measure its influence on customer oriented behavior. Further, affective commitment also signified as the mediator between perceived organizational support and customer oriented behavior of employees. Though the role of affective commitment as mediator between perceived organizational support and work outcomes such as job satisfaction, organizational citizenship behavior has been previously documented in the literature this study is the first attempt to measure the role of affective commitment as mediator between perceived organizational support and customer oriented behavior of employees. Thus literature in the field of organizational and work psychology is been extended to some extent due to this finding.

Finally, customer oriented behavior of employees was found to be significantly related to the satisfaction level of interacting customers. This finding is in line with previous studies of similar nature . Further, customer oriented behavior fully mediated the relationship between employees' affective commitment and customer satisfaction asserting customer oriented behavior as an integral part of mediating mechanism between human resource practices - organizational performance relationship. Summarily, the findings of this research extends the 'black-box' research by offering new insights about the possible mediating variables in the link between an organization's people management practices and its performance.

7.2 Limitations of the Study

The results of this study should not be generalized without considering its limitations. First, the data was collected from the employees of a single industry, i.e. banking. While this approach is recommended for controlling between-industry variance it is a tradeoff that limits its external validity. Thus, caution should be exercised while generalizing the findings of this research to other industries.

Second, due to the nature of variables in this study, specifically organizational performance indicator, i.e. customer satisfaction, I collected data only from customer contact employees of the banks excluding those employees of the same banks who do not directly deals with the customers. Such employees include IT personnel, employees of bank's internal audit team and so on. This exclusion dictates that the caution should be exercised when generalizing the results of the study and the results shall be considered as more conservative estimation of the relationship between organizational human resource practices and organizational performance.

Third, despite the logical flow of research model which points to the existence of causal nature of relationship among variables, the data for all the variables is collected at a single point in time, i.e. cross sectional design was used for collection of data. This concern is, however, minimized by the fact that the data obtained from the customers regarding their satisfaction with the services provided by the employee logically cannot precede the respective employee's customer oriented behavior. Similarly the data regarding the customer oriented behavior logically cannot precede employee's attitude (affective commitment) because the behavioral data was collected from other source, i.e. manager.

Fourth, though the problems associated with same common-method bias were controlled to a greater extent by collecting the data from three different sources, i.e. employees, managers and customers, the data collected from employees included statement about human resource practices, organizational support and affective commitment of the employees. It is conceivable that responses to all three variables are influenced by a single underlying variable unknown to the researcher. If this is the case then the causal nature of relationship depicted in the model will be reduced to simple correlational linkage. However, keeping in view the perceptual and attitudinal nature of data which were required, no other method to collect such data was available.

Fifth, all the data regarding employee behavior and organizational performance collected in this study were perceptual in nature. For example, employees' customer oriented behavior was the perception about the behavior of employees in his/her branch, similarly customer satisfaction data was collected as an indicator of organizational performance, which again is an attitudinal measure of organizational performance. It would be better if some additional objective data regarding both employee behaviors and organizational performance was used. For example in case of employees actual achievement of employee in the form of documented performance appraisal record may be used along with supervisor/manager evaluation of his/her customer oriented work behavior. Similarly in addition to customer satisfaction data with reference to employee, the number or amount of transactions made by the particular customer in last month may be added as objective measure of his/her satisfaction with the branch.

Sixth, while employee perceived organizational support was found related with their perceptions about organizational human resource practices, this might have inflated the relationship between the actual human resource practices of the firm and employee POS, as both the measures are perceptive in nature. Nevertheless, as Nishi and her colleagues noted that, ". . . it is not just the HR practices themselves but rather also employees' perceptions of those HR practices that are important for achieving desired organizational outcomes", what employees believe organization is doing to them is much more important than what organization thinks it is doing, because in the end it is employees' perception that determine his/her course of action regarding reciprocation to the organization.

Seventh, the study was conducted at individual level of analysis, i.e. data was collected and more importantly analyzed at employee level. A better insight into the mediating mechanism of the 'black box' may be gained by adding a second branch level analysis in the future studies.

Finally, stronger results in terms of explanatory power of the model would have been possible if more than one employee outcome variables were examined in the study. As affective commitment accounts for only 53.6% of the variation in the employee's customer oriented behavior, the inclusion of other forms of commitment, i.e. normative and continuance commitment as well as other employee outcome variables like job satisfaction are desirable in the research model to enhance its explanatory power.

7.3 Theoretical Contribution

This study will potentially contribute to the existing literature in the field of strategic human resource management and organizational behavior in several ways. First, by explicating the role of employees' perception as a strong predictor of perceptions of organizational support, it has enhanced our understanding of the underlying mechanism in organization-employee relationship. As noted by Schuler and Jackson and other behavioral perspective theorists one of the most important objectives of organizational people practices is to "elicit and control employee behaviors and attitudes" . A large number of studies in strategic HR while documenting a strong link between high performance work practices and organizational performance have advocated use of progressive, skill, knowledge and ability (SKA) enhancing human resource practices . Nevertheless, these practices do not directly lead to organizational performance. The link through which practices transform into organizational performance is an important area of concern. The role of employee perceptions and the resulting attitude and behavior remain to be fully understood in HR-Performance chain. The results of this study indicate that employees' perceptions about organizational human resource practices lead to their perceptions about organizational support (POS), which in turn translates into attitudes and behaviors desired for attainment of organizational objectives.

Further, POS literature to date has not fully examined the role of HR practices as antecedent to employees' perception of organizational support. Most of the work regarding the antecedents of POS so far is confined to the field of organizational behavior, by investigating the link between HR practices and POS this dissertation has taken a step forward in integrating the fields of human resource management and organizational behavior. As earlier noted, researchers like Uhl-Bein et al have called for more cross-disciplinary research in strategic human resource management and organizational behavior given the interrelated nature of the areas. They noted that lack of cross-disciplinary research is apparent as despite the fact that human resource practices are supposed to elicit and control employee attitude and behavior, most of the research in strategic HRM has rather focused on HR-Performance link ignoring the role of employee outcomes in such relationship.

By proposing and testing 'Perceived Organizational Support' (POS) as the mediating link between firm's HR practices and its performance, this study has enhanced our understanding of the HR-Performance link by integrating strategic human resource management and organizational behavior streams of literature.

Third, this study contributes to the area of organizational commitment by testing Allen and Meyer's three component commitment model in non-North American context, albeit to the extent of affective commitment only. Most of the studies so far conducted to test the said model in the American and European contexts; given the unique socio-cultural makeup of South Asian communities the test of three-component model adds to our understanding of this important concept. The results of this study supported the consistent with earlier studies carried out in American or European contexts in terms of its relationship with POS and employee outcomes, thus it extended the generalizability of three commitment model to this part of the world.

Fourth, despite theoretical propositions forwarded by the researches regarding positive and significant relationship between affective commitment and customer relevant employee behavior , the empirical investigation of relationship between the two constructs is very limited to date. This dissertation is one of the very few studies which have empirically investigated the link between employee's affective commitment and his/her customer oriented behavior. The results of the study revealed that employee's affective commitment is a significant predictor of employee's customer oriented behavior which means that employees strongly committed to the organizations will exhibit better customer behavior and vice-versa. The study also established the role of affective commitment as a mediator between POS and customer oriented employee behavior. Therefore, the study contributes to the existing organizational commitment literature by enhancing our understanding about antecedent and consequences of affective commitment as well the mediating role played by it between employee perceptions and behavior.

Finally, the study contributes to the existing body of knowledge about the employee behavior - customer satisfaction relationship. Allen and Grisaffe proposed that, "customers who receive high quality service from the employees in an organization will have more positive "attitudinal" reactions (e.g., customer satisfaction perceived service quality) to the organization than those who receive poor quality service". However, this proposition regarding the relationship between customer-oriented behavior, i.e. service quality from the employee, and attitudinal reaction of customers, i.e. customer satisfaction has rarely been tested in the previous studies. The results of this study reveal that there is a strong positive relationship between employee's customer-oriented behavior and satisfaction of customers with his/her service. Further, the role of customer-oriented behavior has also been proposed, tested and found significant as a mediator between employee's affective commitment and satisfaction of customers interacting with him/her. These findings results in a better understanding of the mediating mechanism between human resource practices and organizational performance linkage research.

7.4 Managerial Implications

The findings of this dissertation will be of importance to business managers, especially HR managers, for a variety of reasons. As higher level of perceived organizational support was found significantly related to both affective commitment and customer oriented behavior, managers shall devise ways to enhance the perceptions of organizational support among their employees. Findings of this dissertation may help in achieving this objective. As higher level of POS was found to be consequent of perceptions regarding organizational practices, by deploying supportive people practices like availability of internal career opportunities, training facilities, participation in decision making, the organizations can foster higher level of POS among its employees.

First of all the study demonstrated the existence of a very strong link between perceptions of supervisor support and perceptions of organizational support. In most of the cases the organization is known to a non-manager employee through his/her interaction with immediate supervisor. As already noted, supervisors are viewed as agents of the organization as such their behavior and attitude is interpreted as organization's orientation towards employees. Further, the study also revealed high correlation between supervisor support and result oriented appraisal, and supervisor support and participation in decision making, which in turn found to be significantly related to the perceptions of organizational support. This means that these human resource practices not only affect POS directly but also exerts influence on POS through their impact on supervisor support. All these findings highlight the important role of immediate supervisors in achievement of desired employee behavior and ultimately organizational performance. Therefore, one of the most important managerial implications of the study is that the individuals shall be properly trained in the art and science of HR before appointment as branch manager as it is a prerequisite for the attainment of organizational objectives. Untrained supervisor who do not possess sufficient skills, knowledge and abilities to appraise their subordinates' performance or who how to involve branch employees in decision making are bound to communicate negative image of the organization resulting in negative perceptions about organizational practices and support which ultimately may lead to deteriorated service behavior.

Another important inference which may be drawn from the results of study is the role of proper employee behavior in eliciting customer satisfaction. Keeping in view the strong relationship between employee behavior and customer satisfaction, it is advisable that management should devise trainings with exclusive focus on behavioral or HR dimensions of service quality. This finding and the resultant implication is important because it has usually been observed that organizational trainings in banks normally focus on technical side of the service quality, e.g. one may come across trainings which are designed to enhance skills, knowledge and abilities (SKAs) in the domain of information technology or auditing and accounting, however very few, if any, trainings are currently devised to improve the SKAs exclusively in the domain of customer-oriented employee behavior. Given the strong relationship between employee behavior and customer satisfaction, it would not be advisable to be taken for granted that all employees will exhibit proper behavior required for customer satisfaction. In fact, of all the organizational tasks, proper behavior is most difficult to sustain under the conditions of organizational stress, anxiety, and related problems. Thus the implication of the finding is that if the organizations want to fully attain the desired objectives and goals they must devise and implement proper behavioral management trainings for their employees.

7.5 Future Research Directions

The findings of this research when taken together with its limitations point to the future research direction that would further our understanding of the black-box phenomenon by overcoming the limitations of this research. For example, though the study has demonstrated the existence of strong relationship between perceptions of HR practices and organizational performance, albeit the data was collected from single industry, i.e. banks. The fact that banking industry in Pakistan is one with the most developed HR systems, put limits on the generalizability of the study. It is quite possible that in organizations with underdeveloped HR system the employees' affective commitment and/or customer oriented behavior is more influenced by personality traits and/or co-worker behavior rather than perceptions of organizational HR practices or organizational support. After all individuals with low or no organizational support, for example child labors, are also witnessed to exhibit customer oriented behavior. Thus in order to better understand the link between HR practices and customer oriented behavior it is advisable that future studies shall collect data from multiple industries.

Second, as already noted in the limitations section, the data for this study is collected and analyzed at individual level of analysis. This limits our understanding of unit-level attitudes and behaviors of employees on the satisfaction of customers. Considering the role of branch as a highly interrelated group of individuals where a specific customer transaction usually completes after passing through a number of employee-desks, it will be highly desirable that future research shall undertake multi-level analysis, thus integrating individual level and unit level constructs. A study collecting data about employees' perception, commitment and behavior and customer satisfaction at individual level and then aggregating it unit level to study the relationship among these variables at both individual as well as unit level will be of high value to the field. Such a multi-level research will enhance our understanding about the variance attributable to the difference in implementation of same HR practice across different organizational units (recall the discussion of supervisory role in implementation of performance appraisal and participation in decision making) and variance accounted for difference in employees' perception of the same HR practice. Variables like personality trait, social background, etc. may be added to explain why uniformly implemented human resource practice elicit different perceptions among employees. For instance Yoon and Thye has reported the tendency of positively affective employees to perceive greater supervisor support. Similarly social institutions of early childhood play important role in perception formation mechanism of individuals. All these factors may lead to difference in perceptions at employees' end causing variance in level of POS experienced by different employees which in turn may lead to difference in employees' attitudinal and behavioral responses.

Another limitation posed on the interpretation of results of this lead from its cross-sectional design. A promising area for future research will be to employ longitudinal design whereby effects of organizational human resource practices on employee POS, attitude and behavior may be studied over a longer period of time. This type of research will also shed light on changes occurring in level of POS and/or employee level outcome as a result of change in supervisor or other specific organizational practices, for example increase in rewards and salaries or additional training facilities etc. The results of such a research will allow more causal inferences and will definitely enhance our knowledge about the mediating mechanism between HR-Performance linkages by providing causal explanations of the link. Further, longitudinal data will also provide the opportunity to examine the possibility of reverse causality, i.e. whether low level of employee attitude and the resulting behavior influences the organizational decision to engage in more POS enhancing practices or not. Such questions and alike can only be answered through the use of behavior based longitudinal data in HR-Performance linkage.

7.6 Conclusion

Conclusively, the findings of this study significantly contribute to our understanding regarding the 'black-box' phenomenon in strategic human resource management. Further, by utilizing the behavioral perspective of strategic HRM to analyze the relationship between employees' perceptions of human resource practices and their perceptions of organizational support, this research has bridged the gap between human resource management and organizational behavior. The results of the study guides the managers to be careful about how employees are feeling about organizational practices rather than solely relying on the notion that certain practices have been implemented across the board. At the end of the study some suggestions have also been provided to guide the future research.