Editorial Board

A Refereed Monthly International Journal of Management

Human Resource Development Mechanisms and Organizational Performance: Measuring a Causal Link

Author Name and Affiliations:

Umer Shareef Sheikh

(Research Scholar,

Department of Commerce,

Aligarh Muslim University)

Abstract:

A good research base asserts that effective performance is more often driven by organizational environment, size, design, strong organizational cultures, good management practices, effective communication networks, and also by rules and regulation, procedures and pay scales. However, a very sparse and scant research is available that has investigated the effects of a particular system or process or set of mechanisms on the performance of an organization. This particular research is therefore, intended to study HRD in relation to performance. It is aimed at creating a measurable link between HRD systems and performance of an organization. The underlying consideration is that since human resources in any organization occupies a pivotal place and are considered as the primary source of competitive advantage, it becomes inevitably important from managerial as well as research point of view to judge the viability of existing HRD systems within organizations and the impact such systems have on overall performance. Two hundred and eighty five (285) employees working in ten selected district hospitals of Kashmir actively took part in research. The analysis of responses revealed positive influences of various HRD mechanisms on the overall performance of the organizations under study. Accordingly, it is concluded that any significant change in the existing structure of HRD in hospitals would respond significantly by way of performance

Keywords: Human Resource Development, HRD mechanisms, Performance appraisal, training, employee welfare, organization development, feedback and counseling, organizational performance.

Introduction

The impact of human resource policies and practices on organizational effectiveness has always been an important topic of discussion in the fields of HRM, industrial and organization psychology (Kleiner, 1990; Jones & Wright, 1992). A growing contention among HR professionals and academics is that organizational human resource policies can, if properly configured, provide a direct and economically significant contribution to a firm’s performance. Moreover, the existing literature renders substantial evidence that individual human resource practices, as well as internally consistent systems or bundles of HR system, can indeed directly influence organizational performance (Russell et al., 1985; Terpstra & Rozell, 1993; Arthur, 1994; Kocharn & Osterman, 1994; Pfeffer, 1995; Osterman, 1994; MacDuffie, 1995).

Over the past few decades, a plenty of research has been conducted both within specific industries as well as across industries to demonstrate that enormous economic returns were obtained through the implementation of high involvement, high performance or high commitment management practices. Table 1.1 provides a brief recount of few such studies carried out by the researchers with a view to explore the HR-performance linkages. The relationships have clearly been established. From finding a positive relationship between HRD and performance to emphasizing that people are the strategy (Waterman, 1995) the vital role of human resource in any organization’s success has been well researched, established and acknowledged. (Insert Table 1.1 about here)

Human resources are now seen as a source of competitive advantage (Barney, 1991) and the success of any organizations therefore, depends to a large extent, on how well these resources are maintained. Grant (1996), Teece (1998), and, Teece et al., (1997) suggested that sustainability of advantage can reasonably be anticipated if a firm is able to continuously identify, upgrade, rejuvenate and reinvent valuable resources and has the ability to create an environment in which they can be self- reinforcing and enhancing in value and strength, thus causing the imitating firms sustain major cost disadvantages. While, Barney (1991) asserted that if the existing resources are not renewed in conjunction with changing environmental conditions, the strength of a firm’s original strategic assets may soon be nullified by the changing competitive profiles. Therefore, sustainability of competitive advantage does not only depend on the nature of resource bundles but at the same time, also on the firm’s ability to renew, reallocate, rejuvenate and redefine its resources to help them to cope with the changing business environment. Consequently, making it very essential on the part of organizations to ensure effective personnel policies and sound HRD mechanisms, which are self-reinforcing and self-enhancing in value and strength.

Purpose of the study

The purpose of this particular research is to study human resource development in relation to performance. It is assumed that there is statistically significant impact of various HRD mechanisms on the performance of an organization.

Human Resource Development Mechanisms

Researchers have suggested several ways as to how organizations can maintain high commitment and high performance among employees and ultimately organization effectiveness (Burack & Morgan, 1994). Such exhaustive suggestions included; promoting the organizations credibility with employees; encouraging the use of participative management and employee involvement programmes; focusing on high achievement mutual trust and commitment; and developing a combined group entrepreneurial approach to management, thereby creating an organizational culture in which individual employees are encouraged to be adaptive, competitive and successful. A firm that develops a sound selection system and has attractive HR programs such as higher than normal compensation packages and numerous development opportunities, can attract, select and maintain the highest quality resource pool (Wright et.al., 1994). Similarly, developing a good system of reward, communication, effective training programmes and socialization that encourage employees to act in the interest of the firm may add more to the value of the firm (Schuler & McMillan, 1984). Therefore, in essence, developing human resource assumes immense importance in the eyes of management of any organization that strives hard to achieve and sustain excellence through its work force.

The aim of HRD system is to develop the capabilities of each employee as an individual in relation to his or her present job and future roles, dyadic relationship, team spirit and collaboration among different units of the organization, and the overall health and self-renewing capabilities, which, in turn, increase the enabling capabilities of individuals, dyads, teams, and the entire organization. Subsequently, to achieve such objectives, HRD systems may include various process mechanisms or sub-systems which include performance appraisal, potential appraisal and development, feedback and performance counseling, career planning, training, organization development, rewards, employee welfare and quality work life. The current study is intended to study many of these systems as indicators of organizational performance.

Organizational Performance

The essence of the concept of organizational performance lies in exploring whether the organization has done well in carrying and discharging its administrative and operational functions pursuant to its mission and whether the agency actually produces the actions and outputs pursuant to its mission or the institutional mandate (Kim, 2005) and whether the internal management and operations have contributed substantially to the achievement of these goals (Rainey & Steinbauer, 1999). However, there has always been a lack of consensus as to what constitutes a valid set of organizational performance and organizational effectiveness criteria (Au, 1996; Forbes, 1998; Ostroff, 1992). Although many researchers relied on a single indicator, there seems to be a general agreement that multiple internal (preferred by internal participants) and external (preferred by clients and citizens) criteria are needed for a more comprehensive evaluation of organizations (Cameron, 1986; Connolly, Conlon & Deutsch, 1980). Brewer and Selden (2000) opined that previous researcher were concerned only about traditional financial efficiency-related measures of performance and neglected other values such as equity and fairness. Such traditional financial accounting measures of performance like return on investment and earnings per share can produce misleading conclusions about organizational effectiveness (Kaplan & Norton, 1992; Judge, 1994). The authors (Brewer & Selden) further argued that researchers establishing their own meanings of organizational effectiveness and set arbitrary indicators, should rather ask, ‘effectiveness from whose perspective’.

Brewer and Selden (2000) proposed a measure of organizational performance based on the perceptions of the organization’s members. They maintained the basic assumption of organizational psychology that organizations and individuals are interdependent (Pfeffer & Salancik, 1978). However, found less attention being paid to the bases upon which members of the organization assesses its effectiveness. They classified the dimensions of organizational performance in the public sector into internal and external performance, and each specifies the following performance-related values: efficiency, effectiveness, and fairness. The present study uses the same perceptual model to measure the performance of public health care sector of Kashmir. Organizational performance is assumed to be affected by HRD mechanisms. (Insert Fig 1 about here)

Participants and Procedure

The study is a very conscious and honest effort to explore the linkage between various HRD mechanisms and organizational performance. The focus of the study has been ten district-level government hospitals of Kashmir division of Jammu Kashmir. The data for the study has been collected through a well-designed structured questionnaire used in the works of Rao & Abraham (1986) and Brewer & Selden (2000). Thirty statements in the questionnaire measuring perception of employees about various HRD mechanisms were reduced to six explanatory factors using Principal Component Analysis ( See Table 1.3 in appendix for results ). Twelve questions were used to measure the dependent variable perceived organization performance ( See Table 1.4 in Appendix for results ). These items provide a broad assessment of performance by taping each dimension of the concept shown in figure 1. A separate section in the questionnaire was enacted to collect information about the demography of the respondents ( See Table 1.5 in Appendix for results ). All types of employees (except grade IV workers) were considered for the study. Using convenience sampling method, the questionnaire was distributed among 400 employees working on different designations in all ten selected hospitals. Respondents were asked to respond to questions on a five-point scale, representing strong disagreement (1) to strong agreement (5). Thus a ‘3’ represented indifference, that is, neither agreement nor disagreement. Notably, 308 employees responded to the questionnaire, however, only 285 of such responses could be found complete in every respect and used for further analysis. The responses though received were first put to reliability check using Cronbach’s alpha coefficient (measure of internal consistency). Further, multiple hierarchical regression technique has been employed to study the impact of various HRD mechanisms on the performance of organizations under study. The findings of this study are expected to be of immense importance to both academics and hospital administration in their way to creating and sustaining competitive advantage via development of human capital.

Choice of Variables

The study used different HRD sub-systems or mechanisms as independent variables. The various HRD mechanisms identified as variables include Performance appraisal and reward system, Feedback and Counselling, Potential appraisal and Career development, Employee welfare and QWL, Organization development, and, Training and Development. The researcher used all these variables to predict organizational performance of hospitals in Kashmir. The literature supports the use of various HRD mechanisms as independent variables (see for reference, Tarab, 2013; Purang, 2009). Performance in some studies appear as independent variable, however, the current study takes it as a dependent variable as suggested by March and Sutton (1997).

Analysis and Interpretations

HRD mechanisms in Hospitals: The item-wise mean scores and standard deviation of the opinion of various employees about HRD mechanism in use at various district hospitals of Kashmir are presented in Table 1.3 (See Appendix). Among various mechanisms studied, only two have been found over a fairly good degree of 4 while, all other measured dimensions felt in between 3 and 4 on a five point scale, indicating a satisfactory but not an excellent level of prevalence. Potential appraisal and Career development mechanism reported the highest average score ( m = 3.5004 ) followed by Feedback and Counselling ( m = 3.46 ). Besides, the lowest average score ( m = 3.06 ) of all is reported for Performance Appraisal and Reward mechanism indicating a desirable system of appraisal and mechanisms for rewarding any good work by employees. Similarly the average scores for Employee welfare and QWL ( m = 3.12 ), Organization development ( m = 3.21 ), and, Training and development ( m = 3.19 ) were also found above minimum desirable extent. Thus, indicating the existence of a satisfactory system of employee welfare and QWL, good organization development culture and occupancy of above average training and development climate. The results thus support our preposition that HRD mechanisms across various hospitals in Kashmir are satisfactory.

Organizational Performance of Hospitals: The performance constraint of the study has been measured using twelve statements in the questionnaire asking the respondents for their opinion about internal as well as external efficiency, effectiveness, and, equity and fairness. As can be seen in Table 1.4, the mean scores for internal factors of efficiency and fairness are lower than all other factors. However, internal effectiveness reports the highest average score among all. The average values of the two questions in each category are 3.330 in internal efficiency, 3.871 in internal effectiveness, and 3.340 in internal fairness and 3.460 in external efficiency, 3.486 in external effectiveness, and 3.745 in external fairness. The lowest mean scores of all are for the two internal efficiency items. The report shows that the responses about two internal measures (efficiency and fairness) are lower or less favourable than the responses about external measures suggesting that public health-care employees, like the American federal employees and Korean public employees in Brewer and Selden (2000) and Kim (2005) studies, perceive that the external stakeholders, such as ‘customers’ receive better attention and treatment than internal stakeholders, such as ‘employees’. This in turn suggests the importance of improving public personnel management practices related to internal fairness and efficiency. The overall organizational performance is perceived above par as the overall mean score has arrived at m =3.5390 which is satisfactory. However, maintaining scope for further improvement.

Relationship between HRD mechanisms and Organizational Performance

To know the magnitude of influence that various HRD variables have on the perceptual organizational performance of hospitals in Kashmir, Multiple Hierarchical Regression technique has been employed. This procedure demonstrates a unique partitioning of the total variance accounting for in a dependent variable by a set of predictors (Cohen and Cohen, 1983). As can be seen from Table 1.2, the researcher has entered five control variables in Model 1 and added all six components of HRD as independent variables in Model 2 . Therefore, any significant change in R² resulting from the final step is due to unique contribution of predicting variables because confounding or spurious influences have already been removed. It is important to note here that data were properly screened and cleaned; all issues relating to multi- co-linearity were duly resolved (Co-linearity is removed since the study employed PCA method of factor extraction) and all other necessary assumptions of regression were fulfilled.

Initially the dependent variable organizational performance is regressed on five demographic (control) variables (i.e., Gender, Age, Job, Experience and Salary). These demographic characteristics resulted in a highly significant p-value ( p < .05 ) and demonstrated 23.7 percent change in R² for organizational performance. In Model 2, the addition of the six HRD variables resulted in a highly significant ( p < .05 ) change of 53.0 percent in R² for organizational performance meaning thereby that HRD sub-systems or mechanisms carry significant relationships with organizational performance. (Insert Table 1.2 about here)

The researcher examined the standardized coefficients in order to estimate the relative importance of each HRD variable that affects organizational performance. The results show variables having statistically significant effects on organizational performance. The independent variable performance appraisal and reward ( β =0.103 ) reports significant P- value ( P < .05 ), meaning thereby that performance appraisal and reward does contribute towards organizational performance. The most influential variable is Feedback and Counselling ( β = 0.403, p < .05 ), and the next is Organizational Development ( β = 0.360, p < .05 ). Potential appraisal and career development reported a beta coefficient of ( β = 0.267, p < .05 ). The findings also indicate that Employee welfare and QWL ( β =0.237, p < .05 ) and Training and Development ( β =0.193, p < .05 ) contribute to organizational performance. Thus Feedback and Counselling is found to be the powerful predictor of organizational performance in government hospitals of Kashmir.

Discussion

This study clarifies the effects of HRD mechanisms on the performance of an organization, as all dimensions of HRD i.e., Performance appraisal and reward, Feedback and Counselling, Potential appraisal and Career development, Employee welfare and QWL, Organization Development, and, Training and development have been found influencing organizational performance of hospitals in Kashmir. The results can be partially compared with previous research findings. The study confirms that organizational performance will be improved if HRD climate is bettered or improved. Thus, it supports Pareek and Rao (1986) that HRD system can contribute significantly to positive cultural changes, increased productivity, and excellence in organizations. The results of this study also maintain consistency with the findings of Ostroff (1992), Yousef (1998), Judge et al., (2001), Kim (2005). The results show that employee welfare and QWL is positively correlated with organizational performance. The literature suggests that positive work related behaviour and attitudes largely depend on employee perceptions as to the extent to which their employer values their contribution and cares about their well-being (Allen & Helms, 2002). This view is also consistent with social exchange theory (Blau, 1964), which proposes that the psychological contract between employer and the employee is an important determinant of organizational behaviour.

The study reveal positive relations between various HRD interventions (feedback and counselling, potential appraisal and career development, and, organization development) and organizational performance. Several empirical studies have confirmed that certain human resource practices are related to high performance in organizations (Delaney & Huselid, 1996; Martell & Carroll, 1995; Kalleberg & Moody, 1994; Terpstra & Rozell, 1993; Haltiwanger, Lane & Spletzer, 1999). For instance, Delaney and Huselid (1996) studied 590 for-profit and non-profit firms from the National Organizations Study (NOS) and found positive relations between HR practices such as training and staffing selectivity and perceptual measures of organizational performance. Kalleberg and Moody (1994) studied a similar sample of organizations and confirmed that certain HR policies and practices improve organizational performance. Terpstra and Rozell (1993) studied business firms and found a relationship between five staffing practices and organizational performance. Simon (1998) found that federal bureaus that had received a President's Quality Award had better human resource management and development system. While Martell and Carroll (1995) observed eighteen executive-level HRM practices and found several of them associated with higher firm performance. The key components of HRM and HRD are building human capital through recruitment and employment processes, retaining high performing human capital, maintaining sufficient human capacity to do the agency’s work, and providing employees with sufficient training. Enough evidences exist in the literature to believe that each of these components is positively related to organizational performance.

The study posits that training and development is related to organizational performance and thus falls in line with Ng and Siu (2004), Schuler and MacMillan (1984), Bartel (2002) that there is positive link between investment in training and performance. Existing literature suggests that training and development provisions are taken as sign by employees that their organization desires to enter into a special exchange with them, thus, creating a strong psychological bond between them and their employer (Garrow, 2004).

The results suggest that people are an essential organizational resources and a cause of good organizational performance. It is the individuals working in an organization who become the basis for utilization of other resources. Hospitals in Kashmir can be more successful with the delivery of their services when they value their employees and view them not as cost but as asset. The administration and the government officials at the helm of affairs are urged to have a better understanding of the significance of employees in public hospitals. In this way, the results of this study also support the perspective of people-cantered management (Pfeffer, 1996; Becker & Gerhart, 1996; Rainey, Brewer & Seldom, 2000; Kim, 2005). Pfeffer and Veiga (1999) opined that people-oriented practices increase employee satisfaction and commitment, and therefore, people work harder and improve business performance results. The public sector health-care institutions in Kashmir also need to provide people-cantered practices for promoting public employees job satisfaction, organizational commitment, public service motivation, and organizational citizenship behaviours so that the overall performance of the hospitals in Kashmir is improved.

Demographic characteristics of the respondents were expected to influence organizational performance. And therefore, to reduce any possibility of such spurious statistical influence, researcher also measured demographic control variables (gender, age, job, experience, and, salary). The results revealed statistically significant impact of various control variables on the organizational performance.

Conclusion and Suggestions

Besides exploring the existing status of HRD structure and performance of hospitals in Kashmir, the primary concern of this research has been to study and establish a measurable link between HRD and performance. The study found the existence of satisfactory system of HRD and equally satisfying performance of health-care sector of Kashmir. The employees in general demonstrated a favourable attitude towards developmental policies being in practice in sample studied hospitals and looked contentious towards their work and the organization as a whole. However the results indicate substantial scope for improvement in the existing HRD structure of hospitals as well as in various factors affecting performance. It is recommended that in order to further strengthen the job related behaviours of employees for better and efficient performance, hospital authorities should patch out and focus on the areas that dissatisfy employees in health-care. The present study observed the following few weak areas requiring concern;

1. Most of the employees have shown disagreement with the reward system in hospitals and it is concluded that good performances are not fairly acknowledged and rewarded (See Q22 under F1 in Table 1.3).
2. The top management in health-care is found doing usual things and is less concerned about how to make employees stay at work more joyous and comfortable (See Q01 and Q03under F4 in Table 1.3).
3. The overall training and development culture is found above par however, employees are seen dissatisfied with the efforts been made to identify, upgrade and utilize the potential of employees in hospitals (See Q23 under F6 in Table 1.3).

Health-care is a service based industry which employs people to sell its services. However, to keep these people intact with the changing requirements of the complex business environment, they must continuously be developed. And to ensure continuous development of human resource it is necessary for the firms to create a system within the system which is self- reinforcing, self-enhancing to update, upgrade, rejuvenate, and re-invent new skills, learning and knowledge within people to help them maintain pace with the dynamic business environment. Hospitals in Kashmir must focus on ensuring a congenial developmental climate which is conducive to work and supportive for employees. The top managements are required to invest considerable amount of time and efforts to make sure that employees enjoy their work. They should also put in lot of efforts to identify and utilize the potential of employees. Training is an important tool to help people update their skills and also attain new skills. Management should go out of the way to identify training needs of the employees and ensure skill development via sponsored development programmes.

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Appendix: Tables and Figures

Table 1.1: Summary of major studies in HRD-Organizational Performance relationship

Source: Adapted from Kandula, S. R. (2001)

Fig. 1

Table 1.2: Predicting organizational performance

Source; SPSS_20 Output (Results Based on Survey)

Table 1.3: Factor loadings of scale measuring HRD climate in Hospitals of Kashmir

Source; SPSS_20 Output (Results Based on Survey)

Extracted Factor loadings after Varimax Rotation

Table: 1.4: Organizational performance of Hospitals (α = 0.872)

Source; SPSS_20 Output (Results Based on Survey)

Table 1.5: Distribution of Respondents by Demographic Characteristics

Source; SPSS_20 Output (Results Based on Survey)