Relationship Between Hr Practices And Percieved Employees

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Abstract

The basic objective of this study is to measure the impact of three HR practices which are compensation practices, promotion practices and performance evaluation practices on perceived employee performance. Data was collected through time tested questionnaire from public and private sector bankers of NWFP, Pakistan. Pearson Correlation and Multiple Regression were used for measuring the impact of HR practices on perceived employee performance. Data was operated by using SPSS 15 version. The results of correlation indicated a significant relationship between compensation practices and perceived employee performance, promotion practice and perceived employee performance and performance evaluation practices and perceived employee performance. Multiple Regression showed that 57% percent of the variance in perceived employees' performance can be accounted for by compensation practices, employee evaluation practices and promotion practices. Private and public sector banks should pay special attention to these three HR practices in order to ensure bankers' performance.

Key words: HR Practices; perceived employee performance; private and public sector banks; NWFP; Pakistan.

Introduction

Many researches have been conducted which reveal a positive link between HR practices and employees' performance (Wright et al., 2003 and Tessema and Soeters, 2006 and Park et al., 2003). As Pakistan is an 'under researched' country (Aycan et al. 2000) and no research has been conducted to investigate the relationship between HR practices and employee performance in banking sector of NWFP, Pakistan, this study is conducted to test the impact of HR practices on perceived employee performance.

Literature review

A plethora of research is available on the impact of HR practices on perceived employee performance. For example, Huselid (1995) in his famous article "The impact of human resource management practices on turnover, productivity, and corporate financial performance" took eleven human resource management practices which are personnel selection, labor management participation, incentive compensation, performance appraisal, grievance procedures, information sharing, job design, attitude assessment, recruitment efforts, promotion criteria and employee training. He found a significant relationship between high work practices such as compensation and employees outcomes.

Teseema & Soeters (2006) in their famous article "Challenges and prospects of HRM in developing countries: testing the HRM-performance link in Eritrean civil service" took eight HRM practices which are recruitment and selection practices, placement practices, training practices, compensation practices, employee performance evaluation practices, promotion practices, grievance procedure and pension or social security. They found a significant relationship between HRM practices and perceived employee performance.

In present study, three HRM practices which are compensation practices, promotion practices and performance evaluation practices are taken and their relationship is tested with perceived employees' performance in banking sector of NWFP, Pakistan. Keeping in view the above discussion the following hypotheses are developed:

Hypotheses:

H1: There is a statistically significant correlation between compensation practices and perceived employee performance in banking sector of NWFP, Pakistan.

H2: There is a statistically significant correlation between promotion practices and perceived employee performance in banking sector of NWFP, Pakistan.

H3: There is a statistically significant correlation between performance evaluation practices and perceived employee performance in banking sector of NWFP, Pakistan.

Theoretical Model

Dependent variable

Independent variables

Compensation practices

Perceived employee performance

Performance evaluation practices

Promotion practices

Methodology

Sample and Data Collection

Sample of the present study consists of three private sector banks namely Muslim Commercial Bank, Allied Bank Limited and Habib Bank Limited and three public sector banks namely The Bank of Punjab, National Bank of Pakistan and The Bank of Khyber. 100 questionnaires along with a covering letter that explained the purpose of the study were personally administered to bankers of private sector and 130 questionnaires were personally distributed to bankers of public sector in NWFP. Eighty one (81) questionnaires showing a response rate of 81% were returned from private sector bankers and eighty three (83) questionnaires showing a response rate of 63.84% were returned from public sector bankers. Only two questionnaires returned from private sector bankers and which contained incomplete information were disposed off.

Measures

Questionnaire adapted from Teseema & Soeters (2006) was used in order to identify the relationship between HR Practices and Perceived Employees' Performance. Compensation practices contained 6 items, promotion practices 3 items, performance evaluation practices 6 items and perceived employee performance 4 items. Responses were measured on 5 point likert scale, 1 strongly disagree to 5 strongly agree. All scales showed a good reliability as shown in table 1.

Table 1 Reliability

Cronbach's Alfa

Compensation practices

.81

Promotion practices

.76

Performance evaluation practices

.89

Perceived employee performance

.84

Statistical Analysis

Pearson Correlation and Multiple Regression were used for measuring the impact of HR practices on Perceived Employees' Performance. Data was operated by using SPSS 15 version.

Findings

Table 1: Demographics

Frequency

Percentage (approx)

Age

20-25

38

23

26-30

51

32

31-35

27

17

35-40

36

22

41-45

10

6

Marital status

Married

131

81

Single

31

19

Gender

Male

146

90

Female

16

10

Qualification

Graduate

29

18

Master

129

80

MS/M.Phil

4

2

Tenure

1-5

47

29

6-10

51

32

11-15

29

18

14-20

20

12

Above 20

15

9

Demographics did not show any relationship with performance. So in the present study they were not used for measuring their impact on perceived employees' performance. Majority (81%, n=131) of the respondents are married and only 19% of the respondents are unmarried. Majority (90%, n=146) of the respondents are male and only 10 percent are female. Majority (80%, n=129) of the respondents have mater degrees.

Table 2 Correlation between HR Practices and Employees' performance

Mean

Std Deviation

Number

1

2

3

4

1

3.9444

1.06468

162

1

2

3.8519

1.09330

162

.377**

1

3

3.8642

1.14483

162

.274**

.351**

1

4

4.2407

.77062

162

.622**

.544**

.509**

1

** Correlation is significant at the 0.01 level (2-tailed).

1= Compensation Practice; 2= Performance Evaluation Practice; 3= Promotion Practice; 4= Performance Practices

The results of correlation as shown in table 2 indicate that there is a statistically significant relationship between compensation practices and perceived performance (r=0.62, p<.01) of bankers of NWFP, Pakistan. This finding is similar with the findings of Shahzad et al. (2008) and Teseema and Soeters (2006) who found value (r=0.44, p<.01) and (r=0.38, p<.01) respectively. As the per capita income of a Pakistani is very low, they prefer compensation to anything else. Promotion practices were also found to have a significant positive impact on perceived employees' performance (r=0.54, p<.01) which is supported by Shahzad et al. (2008) and Teseema and Soeters (2006) who found values (r=0.56, p<.01) and (r=0.48, p<.01) respectively. Performance Evaluation Practices also showed a significant correlation with perceived employees' performance (r=0.509, p<.01) which is not supported by the findings of Shahzad et al. (2008) and Teseema and Soeters (2006). In banking sector a practice of evaluation is present and the employees' performance is always based on such an evaluation system.

Table 3 Multiple Regression

R

.756

R Square

.571

Adjusted R Square

.563

Standard Error of the Estimate

.509

F

70.170

Sig.

.000

Beta

t

Sig.

Compensation Practices

.438

7.680

.000

Performance Evaluation Practice

.276

4.719

.000

Promotion Practice

.292

5.178

.000

The value of R Square as shown in table 4 indicates that 57 percent of the variance in perceived employees' performance can be accounted for by compensation practices, employee evaluation practices and promotion practices. F is significant at .000 level which verifies that fifty seven percent of the variance in perceived employees' performance can be accounted for by compensation practices, employee evaluation practices and promotion practices.

Model

Dependent variable

Independent variables

Compensation practices

.44

.28

Perceived employee performance

Performance evaluation practices

.29

Promotion practices

Conclusion

All the three HRM practices which are promotion practices, compensation practices and performance evaluation practices showed a significant positive correlation with perceived employee performance. The management of private and public sector banks are enjoined to pay special attention towards compensation practices, promotion practices and evaluation practices in order to increase employees' performance.

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