Saeed-ur-Rehman,
MS, Sarhad University of Science & IT, Peshawar. Email: saeedurrehman621@gmail.com
Wali Rahman, Associate Professor, Sarhad
University of Science & IT, Peshawar. Email:
wali.ba@suit.edu.pk
Nazim
Ali, Assistant Professor, University of Malakand Chakdara.
Email: nazimali100@yahoo.com
Abstract. Today
organizations are competing not on the basis of their sizes but by the quality
of their inputs and the processes that they employ to convert inputs into the
outputs. Keeping in view this in mind this study looks into the impact of some
HR Practices on perceived financial performance in the Bank of Khyber. The
study employs a sample of 142 managers collected from 116 bank branches from
all over Pakistan. The hypothesized relationships are tested using Amos 18
through path analysis. Out of the three hypotheses the empirical data supported
two while one has not been supported. Overall, the study validates the theory
of good HR practices have positive relationship with perceived financial
performance of the banks. The Future research should examine the impact of this
perception on the actual performance. The current study is purely quantitative.
Therefore there is a need of carrying out a qualitative study with the same
variables to get more subtle findings. This research could also be replicated
in other banks and comparison could be drawn for more holistic results and
increasing the generalizablility of the results.
Key words:
Training, Pakistan, competitiveness, textile industry
Introduction
The critical
nature of human resources in an organization has got eminent importance in the
recent years. If people are effectually managed they can significantly
contribute to the organization. Today, current global challenges are not
unconnected to human behavior(Oludiyi,
2015). In the current fluid and competitive market, it has
become an issue of survival for organizations to react accordingly. In all this
reaction good HR practices are central that can move employee’s competencies
and motivational level whereas organizational structure facilitates employees
to perform the chores proficiently (Bailey,
1993). Better execution of these HR practices have
significant influence on the firm’s performance, therefore for the effective
implementation of firm’s business plan its human capital plays vibrant role.
It’s an emerging unanimity among HR experts and researchers that if firm’s HR
policies are properly communicated then these surely contribute to the firm’s
output. In other words, a firm can get competitive edge through its matchless
and cooperative employees which will be difficult for opponents to copy (Huselid,
1995).
Organizations
always try to grab more and more market share, for this they not only need
latest technology but the positive behavior of their employees which is the
real capital for any firm. It is this capital that ultimately makes all the
available resources effective to achieve overall organizational objectives.
Therefore firm first should take care of its employees to ensure the achievement
of common goal (Cania,
2014). For the attainment of desired performance firm
should have to develop such conducive working environment where individuals or
groups warmly accept their respective assigned tasks for the constant improvement
of firm’s business (Armstrong,
2006). This conducive work environment can only be achieved
if an organization ensures application of some good HR practices.
Among these
good HR practices recruitment & selection and training & development
are the two most common practices that a firm critically needs to take care of.
An effective hiring could produce favorable long term results for the
organization, while poor selection might be disastrous for the organization. It
is argued in literature that proper employment is critical in order to get a
justifiable competitive edge (Nartey,
2012). A capable HR system with good practices keeps
constant eye on the level of performance in order to keep it in right direction
(Khilji,
2001). Cascio (1991) found relationship among financial outcomes and level
of investment in advanced HR practices. Despite of the advent of information
technology and other technological changes organizations still requires
uplifting the performance of their employees in order to achieve their overall
goal. They still need to improve their services which could only be made
possible by adapting best HR practices. It means that it is essential for firm
to focus on HRM as it is resource contribution to its profitability (Delery
& Doty, 1996; Huselid,
1995; Lado
& Wilson, 1994).The current study has an objective to inspect the above two commonly
known HR practices in the target organization i.e. Bank of Khyber. The study
will be based on the perception of employees about link between these two
practices and bank’s financial performance.
Research Questions
1. What is the quality of
recruitment as HR practices being practiced in the Bank of Khyber?
2. What is the quality of Training
and Development being practiced in the Bank of Khyber?
3. Do these HR practices affect
bank’s perceived financial performance?
The current
study will be testing the following hypotheses.
H1 Good
recruitment and selection practices have positive impact on bank’s perceived
financial performance.
H2 Good
training & development practices have positive impact on perceived
financial performance.
H3 Both HR
practices have positive impact on perceived financial performance.
Numerous
studies have discovered an extensive perception of human resource management
for creating link among HR practices and organizational performance. According
to widespread perception selection of best HR practices can further increase
worth of business environment without following any specific strategy by the
management. Those HR practices which could enhance the organizational
performance can be considered the best HR practices (Huselid,
1995; Jeffrey
Pfeffer, 1994). Unfortunately in Pakistan service sector is far
behind in terms of sustainable strategic planning, that’s why the practices
which our firms are following are mostly individual’s experiences which mostly
discontinues when that person leaves the organization.
People with
their expertise, competencies and abilities with the dimensions to install with
best interest of the firm are now considered the prominent source of firm’s
success and competitive advantage (Armstrong,
2006). As per Barney (1991) resource based view supports that non-stop
competitive advantage can be obtained if firms have advantageous group or pool
of HR practices which cannot be copied by its rivals. In order to make the
employee an asset for the organization it is very necessary to modernize the
recruitment and selection procedure which should be merit based. However some
specific or general training can be helpful for further modernization of the
human asset in the organization.
Keeping the
same dimensions in view, the present study will be looking into the
relationship of recruitment and selection, training & development with
perceived financial performance of BoK. Figure 1 shows the proposed theoretical
link between the variables of the study.
Recruitment &
Selection Perceived Financial
Performance Training & Development
Figure1: Theoretical Framework of the study
Literature Review
Competitive
business environment is characterized by hard work which ensures the existence
of an organization in the market (Jothilakshmi, 2015). When an organization
believes that its employees should have favorable working behavior, it is
necessary for it to have applicable HR plans (Aswathappa,
2008). It has been noticed that proper recruitment and selection
can produce best fit between individual performance and organizational needs.
If employees are not properly motivated their performance might not be
according to their capabilities. There is a big list of HR practices which
could affect human behavior. However, some are very common and have got
currency among the researchers and the practitioners. These practices are
generally believed to have positive effects on the motivational level of
employees and can work as a bridge between the mutual interest of the employee
and the employer.
The
relationship between HR practices and firm’s performance has widely been
accepted among research community in the field of industrial relations,
organizational psychology and human resource management (Boudreau,
1991; Jones
& Wright, 1992). Researcher’s advocates that by using high
performance work practices including selection procedure, compensation and
training etc. can boost the employee’s capabilities and knowledge and will also
dismiss the non-performers from the organization. Individual employee’s
performance has got importance recently but researchers believe that collective
performance of employees can create a unique source which could be difficult
for rivals to copy. Good HR practices not only positively affect employees’
productivity, performance, personal development and overall organizational
financial performance, they also affect non-financial sectors as well (Afzal,
Mehmood, Sherazi, Sajid, & Hassan, 2013). These practices uplift an employee’s productivity
and her/his regularity (Al-Shuaibi,
Shamsudin, & Subramaniam, 2013; Sang, 2005).
Recruitment
is the process through which an organization addresses its hiring needs and
then makes selection out of the pool of potential candidates. Through this
process firm can create pool of right candidates at the right time with
suitable skills and capabilities (Pfeffer,
1998). This process can be handled internally or externally
which depends upon the nature of requirement. The level of effectiveness of
these two practices consequently reflects the quality of human resource management
of a firm (Gamage,
2014). Organization bears heavy cost in the process of
recruitment and selection that’s why it cannot afford the selection of an
incapable candidate. Therefore organizations tries to focus on selecting the
right applicant with the right kills at minimum cost that supports firm’s
strategic objectives (Ofori
& Aryeetey, 2011).
Recruitment
and selection works as safeguard for providing honest and trustworthy people
and in the long run it has large share for the prosperity of the firm. In
reality the core objective of recruitment is to catch more and more candidates
for the vacant positions and enable the authorities for selecting the best fit
pool candidates (Gamage,
2014). The present literature indicates that there is a
positive relationship in recruitment and selection and organizational
performance (Gamage,
2014; Syed
& Jamal., 2012).
After
selection of the right person for the right job in the right time, updating the
knowledge, skills and abilities, training and developing is highly critical.
Training and development create group or individual performance which will
consequently enhance the financial performance of the firm. Organizations
should consider the importance of training and development and have to invest
in it for enabling their workforce to face any uncertain situation and for
timely decision making to be the part of the market (Tai,
2006). Training is beneficial in many ways; on one hand it
keeps and uplift the competencies of employees and on the other hand it
contributes in organizational change process (Valle,
Martın, Romero, & Dolan, 2000). It improves the retaining of skillful employees and minimizes the
unintentional job rotation of employees (Jones
& Wright, 1992; Shaw,
Delery, Jenkins, & Gupta, 1998). Further, it shows long term commitment of the firm to its employees
and increases the motivational level of workforce (Pfeffer,
1994).
If a firm
has the objective to enrich the performance of its employees it is imperative
for it to arrange training and development programs. Organizations can use many
alternatives of training like coaching and mentoring, employee’s participation
and cooperation. All such exertions enable employees to participate in all
relevant working activities which help in boosting the overall organizational
performance.
Training and
development might be exorbitant in terms of money and time but in return it
helps to retain the highly skill full staff (Husin,
Chelladurai, & Musa, 2012). Bailey (1993) has discussed that employees usually underutilized
and perform lower than their competencies. It has been further discussed that
HR practices inspires employee’s motivation and provide guidelines through
organizational structure about how to perform their roles. In order to keep the
interest of employees parallel to shareholder’s interest, organization should
have to promote such culture which best supports to better performance i.e.
merit system, performance appraisal, internal promotion, financial rewards and
training and development etc.
Research Methodology
The
researchers have applied survey method for the current research. Population of
the present study is all managerial staff of BoK which is almost 300 as per
information provided by AVP rank officer. In all, 300 questionnaires were distributed
from which 158 were received. Sixteen questionnaires were found faulty are
removed from analysis. Response rate is 53% and total 142 questionnaires have
been analyzed in the final analysis. Recruitment & selection and training
& development have been measured through 5 items Likert scale. For analysis
SPSS and AMOS have been employed.
Analysis
Three
different scales for the three variables of the study have been employed. To
check the validity of the measurement and structural and models a number of
goodness of fit indices have been employed. They include chi-square, CMIN/df,
root mean square residual (RMR), root mean square error of approximation
(RMSEA), goodness-of-fit index (GFI), comparative fit index (CFI). The basic
motive behind using four fit statistics has to have a holistic approach to the
model. All the values in the both case have been found within the acceptable
level as per Hair et al. (2006).
+ + +
Figure 1 The Proposed Theoretical Model
Hypotheses Testing
There are three hypotheses in the study.
They have tested by employing structural equation modeling (SEM) through Amos
and Multiple Regression through SPSS. To find out the impact of independent
variables (recruitment 7 selection, and training & development) on the dependent
variable (perceived financial performance), path analysis through SEM and
Multiple Regression through SPSS were conducted. Relationships among these
variables were hypothesized. These hypothesized relationships were analyzed in
two ways; a test of the overall path model and individual tests. Model estimation procedures for simultaneous
equations were used to test the hypothesized model (Figure 1).
Hypothesis 1: Good
recruitment practices have positive effects on perceived financial performance.
Hypothesis 1 was aimed at testing the
impact of recruitment and selection on perceived financial performance in the
sample. Since the standardized path coefficient of 0.08 and the t-value of 1.19
happened to be insignificant (p-0.227), the hypothesis has not been supported
by the data. In other words it can be said that in the sample data the chance
is greater than 5% which means that here the data has failed to reject the null
hypothesis.
Hypothesis 2: Good
training & development practices have positive impact on perceived
financial performance.
Hypothesis 2 was aimed at testing the
impact of training and development on perceived financial performance in the
sample. Since the standardized path coefficient of 0.57 and the t-value of 4.61
happened to be significant (p-0.000), the hypothesis has been supported
by the data. In other words it can be said that the null hypothesis has been
rejected.
Hypothesis 3: Both
HR practices have positive impact on perceived financial performance.
The summary results of the hypotheses
testing are presented in Table 1.
Table
1 Summary of Hypotheses Testing
|
Hypotheses |
Results |
|
|
H1 |
Good recruitment and selection practices have
positive impact on bank’s perceived financial performance. |
Not |
|
H2 |
Good training & development practices have
positive impact on perceived financial performance. |
Supported |
|
H3 |
Both HR practices have positive impact on perceived
financial performance. |
Supported |
The proposed model in figure 1 and summary of
hypotheses in table 1 provide the results of the data analysis with
respect to understand the antecedents and consequences of the employee
development. The study hypothesized that HR practices
like recruitment & selection, and training & development in the subject
banks have positive impact on the perceived financial performance. The analysis
of the data supported this prediction. If paraphrased in simple words this
would mean that if the banks practice these practices there is a significant likelihood
that they will affect the dependent variable to the level of 50%. These results
support previous researches on the impact of such HR practices on the
performance on the organization (Afzal et al., 2013; Al-Shuaibi et al., 2013; Delery & H. Doty, 1996; Huselid, 1995; Lado & Wilson,
1994; Sang, 2005). However, there is a need of realizing the fact the
results here are not that much encouraging. There could be a number of reasons
for this trend in the subject banks. The subject HR practices have yet to get
central role in the overall organizational culture in the country. For individual employees the system appears
to carry contaminations and deficiencies (Noe, Hollenbeck, Gerhart, &
Wright, 2005) and has almost no validity.
The results of the current did not support common perception regarding the
positive role of recruitment in the performance of organization. Though there
is a widespread support (Gamage,
2014; Montana
& Charnov, 2000;
Rauf,
2007; Syed
& Jamal, 2012) for the critical role of recruitment in organizational performance,
other factors like absence of trust in the system, manipulation in recruitment,
favoritism, etc. could jeopardize the real worth of this HR practice.
The empirical
results of the study regarding the role of training and development in
perceived financial performance are in line with the previous studies (Bartel,
1994; Delery
& Doty, 1996; Huselid,
1995; Knoke
& Kalleberg, 1994). These results reflect that training and development play an important
role in building the perception of the employees. There is a need of making
this activity an integral part of the bank culture and its frequency and
quality be taken care of.
On the whole the empirical evidence
supports the third hypothesis. The results indicate that there is an overall
impact of the subject HR practices on managers’ perception. In other words, the
quality of these HR practices can promote and strengthen their perceptions of
financial performance. Therefore, it is presumed that this study would provide
guidelines to help policy makers better understand to look into these HR
practices for positively affecting managers’ perception. It is also presumed
that this study would be helpful for those at the helm of affairs in making
better decisions about the overall management.
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