IMPACT OF HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES ON ORGANIZATIONAL PERFORMANCE

ABSTRACT The objective of this study was to explore the impact of different Human Resource Management (HRM) practices (i.e. recruitment and selection, training and development, performance compensation appraisal, system) career on planning system, employee participation (POP) and and

Perceived

Organizational

Performance

Organizational Financial Performance. This research study is based on the universalistic perspective showing that a fixed set of best practices can create surplus value in various business frameworks. The Harvard model developed by Beer et al. (1984) guided initial process of domain identification. The most relevant HRM domain recruitment and selection, training and development, performance appraisal, career planning system, employee participation, and

compensation system followed by universalistic perspective has been selected for the study.

INTRODUCTION The corporate and professional communities interest and recognition of the significance of Human Resource Management (HRM) practices gained momentum after realization of the fact that it is the people who make organizations successful not the buildings. It would not be justified to assume that the concept of HRM is a newly emerged phenomenon. It is an advanced form of people management. At present the need for HRM is felt enormously, in order to ensure that the business units are able to accomplish organizational objectives through people. Organizations have always aimed for a sound HRM system for success. However, very few companies could establish separate autonomous HRM departments, owing to either affordability, fear or a lack of understanding of the worth and contribution of HRM activities. The key objective of HRM is to ensure organizational success through a competent and motivated workforce. This is possible if there are rigorous procedural HRM practices such as recruitment and selection, training and development, performance appraisal, career planning system, employee participation and compensation system. Ulrich (1997) said that to capitalize on new opportunities, HRM systems could be the main source. Sett (2004) argued that the globalization of the South Asian economy has been accompanied by an increasing use of HRM practices. The concept of HRM has attracted enormous attention and has stimulated significant debate between academicians and practitioners. Much of the discussion has been around the meaning of HRM, yet there is no single universally accepted definition of the concept. Literature suggests a range of definitions; some of these equate Human Resource Management (HRM) with Personnel Management (PEM), while others reflect

altogether different concepts. However, the philosophies and practices of the latter concept provide fundamentals for the philosophy and practices of HRM. Personnel Management characteristically focuses on a range of activities relating to the supply and development of labor to meet the immediate and short-term needs of the organization. Statement of the Problem While research has shown relationship and effect of HRM practices on organizational performance, yet the statistical work has not been done to study the relationship between HRM practices and different financial performance indicators, like Marris Ratio, Tobins Q, ROE, and ROA. Secondly, the literature does not divulge much information about the treatment of mediation of employee performance with organizational performance. Thirdly, the relationship of HRM practices and organizational performance across different industries needs to be studied. Finally countries in the growing phase like Pakistan, need to know the contribution of different factors and the intensity of their impact on organizational performance that leads towards economic development and prosperity. Pakistan is gradually shifting from agriculture to industrial economy and therefore it is important to determine empirically, the contribution of different factors like, HRM practices towards organizational performance. Research Purpose Identification of high performance generating factors is a difficult task, but many organizations in different geographical areas are claiming that their HR is the most valuable asset, and HR satisfaction is top priority for them. This research study addresses this assumption directly and therefore focuses on whether or not the Human

Resource Management practices actually make a difference in the performance of both, the individuals as well as organizations. If it is true, then which practices appears more performance oriented? In literature, HRM practices are linked with different performance measures and, it is justified that HRM practices are significant activities for an organization. Keeping in view the importance of these practices for the organizations, the following objectives were developed for the study: 1. To establish the link between different demographics with perceived organizational and financial performance. 2. To test the relationship of HRM practices with companies perceived and financial performance. 3. To see the effect of HRM practices on companies perceived and financial performance. 4. To test the mediating role of employee performance between HRM practices and perceived organizational performance. 5. To compare the effects of HRM practices on performance of sample industries 6. To suggest companies high weight HRM practices so that they can move towards strengthening the Organizational Performance Index (OPI).

Significance of the Problem Different studies have documented HRM dimensions and their relationship with organizational performance with the key focus on perceived magnitude. This study is contributing twofold dimensional aspects; first it is an addition to HRM literature and secondly to practitioners, by providing information about the active HRM practices in different industries of Pakistan, and their relationship with perceived and financial performance. This research will be helpful for HRM professionals to increase organizational performance by adopting significantly explored and tested HRM practices properly. Research Questions The following questions were proposed as part of this research study: organizational performance and organizational financial performance based on Marris, Tobins Q, ROE and ROA, and to what extent do demographic variables affect different types of organizational performances? gement practices and perceived organizational and financial performance? financial performance of the organizations? of different HRM practices and perceived organizational performance?

in different financial sector industries? Methodology This chapter will addresses research design, research model, tested variables (independent, dependent,), hypotheses, population, sample, instrumentation,

questionnaire reliability, data gathering procedures, response rate and statistical analysis methods. Schematic diagram of theoretical model Human Resource Practices Organizational Performance

Recruitment & Selection

Training & Development

Performance Appraisal System

Firms Financial Performance Measurement Tools

Employee Performance
Career planning system

i. Marris Ratio ii. Tobins Q iii. ROE iv. ROA

Compensation system

Employee participation