African Journal of Business Management Vol. 6(4), pp. 1306-1314, 1 February, 2012 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM11.

1025 ISSN 1993-8233 2012 Academic Journals

Full Length Research Paper

The impact of HR dimensions on organizational performance

Syed Saad Hussain Shah1, Robina Yasmin1, Sidra Waris1, Ahsan Raza Jaffari1, Jabran Aziz1, Wasiq Ejaz1 and Maira Fatima2
1

Iqra University, Islamabad Campus, Pakistan. 2 Independent Researcher

Accepted 8 November, 2011

This research paper focuses on the importance of most vital of HR dimensions and HR outcome leading to organizational performance. Study was conducted in telecom companies in Pakistan namely; Telenor and Zong with the sample of 300 respondents. Convenient sampling technique was used for the research survey; furthermore, the variables in the model were measured and tested with the help of equation modeling program (AMOS) in order to find relationships among variables. Major findings concluded that there is need of hour to take more steps for employee development as negative relation is observed between employee development and employee commitment, supporting this statement, it was also observed that positive relationship exists between performance of employee and employee commitment, so it means employees are working good in these organizations but further development of employees are lacking in these telecom cellular companies of Pakistan. In short, this research clearly explains that employees development is more important as compared to employees performance. So, steps should be taken to develop an employee by training, giving him job security and promotion rather than focusing directly on performance of employee. The research will contribute to mark employee performance and development as the main focus for HR department to work extensively on in order to increase employees commitment to tasks and achieve overall organizational performance. Furthermore, future research recommendations are presented at the end of research paper. Key words: commitment. INTRODUCTION HR dimensions have considerable impact on the performance of organization and this contributes an affirmative link sandwiched between the HR systems and the organizational performance (Osman et al., 2011). Training is a flexible way to develop an employee as it consists of both formal and informal ways to enhance the effectiveness and efficiency of employees (Kock and Ellstrom, 2011). Job security increases employee honesty, keep employees committed to organization and provides security to valuable information as well (Vadi and Jaakson, 2011). Promotion influences emotional state of employees and it affect the organizational justice which may leads to negative or significant outcomes on employee development (Tzafrir and Hareli, 2009). Employee development is reflected through retention of employees which is directly related to learning of employees but retention is affected by the age of employees. Both age and retention have a significant relation with learning that polishes employees skill and knowledge and in turn enhances performance of employee in an organization (Govaerts et al., 2011). Work design is affected by the environmental consequences related to employee commitment where the environmental consequences consist of collaboration and novelty, so this environment moderates interaction of individual employee collaboration and novelty insights. Moreover, if organization wants to enhance employee commitment, it should improve work design and environment and send talented employees to significantly work design arrangements that will in turn improve employee performance Employee development, employee performance, organization performance, employee

*Corresponding author. E-mail: saadihussain@live.com.

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(Vianen et al., 2011). Reward system is imposed in organizations to evaluate rewards and organizations think they reward employees on the basis to earn value and services by elaborating what they have spent and what they got as a result, whereas, there are organizations which do not evaluate the reward system properly but that is mainly due to lack of possessions. Employee performance can be evaluated by the evaluation of tasks and reward system (Armstrong et al., 2011) rewrite. Employee performance is the one that is affected by the knowledge transfer that helps employee to develop their understanding of networking as well as focusing on the organizational performance antecedents and this development in employee is due to knowledge transfer, where the employee performance is the one that enhances organizational efficiency as a result of employee learning output (Martinkenaite, 2011). Organizational performance is related to organizational justice which allows employees to get committed to tasks assigned to him/her and this justice of organization depends on employees trust in the organization that results in employee development as employee get indulges in high commitment performance management resulting increase in performance of employee (Farndale et al., 2010). In order to sustain the work performance, it must develop employees thorough learning and use their intellectual capabilities to work which in turn will results to increase in organizational performance (Kira et al., 2010). The quality dimensions management of performance as well as attitude of employees results in employee development and increases organizational performance (Kagaari et al., 2010). Human resource management (HRM) dimensions greatly influences the employee attitude which affects employee performance and development and if HRM systems work effectively, then increase in the organizational performance will be seen (Snape and Redman, 2010). Competitive advantage is must for any organization and employees are always viewed as a source of competitive advantage for any business (Barney, 1991; Pfeffer, 1994) so HR systems must be made in such a way that they utilize employees in best possible way to increase performance of organization. Huang (2001) investigated that training of employees leads towards better organizational performance. Employee development is basically a continuous learning process where employee developed to get and seek knowledge to act as a part for future enhancement of organizational superior performance (Jacobs and Washington, 2003). Promotion also acts as an important factor for employee development and according to a research the companies who promote employee internally, develop motivation in employees towards even harder goals to achieve and develops employees capabilities resulting increase in organizational performance (Lepak and Snell, 1999). Employee performance is important when far-reaching use of teamwork is required and when

employees are provided with the authority to take decisions on their own that result in superior performance of the HR systems (Arthur, 1994; MacDuffie, 1995). Performance information is termed as the organizational behavior in which employee commitment is affected significantly and negatively depending on the contextual factors this commitment of employees impacts the overall organizational performance influenced by the degree of employee altruistic behavior (Moynihan and Panday, 2010). Employee commitment is first time used in sort of relationship consisting of employee development and employee performance to meet organizational performance as employee are always considered vital asset for the organization. In the research model employee development has bee measured through three variables training, job security and promotion whereas employee performance is measured with three variables reward system, work design and participation. Furthermore, employee development and employee performance will leads to employee commitment. Finally, organizational performance is measured as a result with the aforementioned strategic human resource management (SHRM) model. So this type of strategic model will measure organizational performance strategically. In short a new HR model is established by elaborating main HR dimensions and HR outcomes that impact on organizational outcome by using literature in which future recommendations are given. Different variables from different research papers are considered in order to form a new HR model that measures organizational performance by focusing on employee performance and employee development as centre of the stage. This research paper will try to find the impact of employee performance and development on the organizational performance in view of employee commitment to tasks and towards different goals and objectives of organization. However, the major objective of the study is to find the importance of employees in scope of their performance and development leading to their commitment that impact on the overall company output. Furthermore the objectives of the research are as follows: i) Does development of employee leads to employee commitment? ii) How does employee performance effects employee commitment? iii) Is the commitment of employees results to increase organizational performance?

Problem statement The application of HR systems is critical for the performance of an organization and it contributes towards the growth of telecom sector. The HR systems, HR

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outcome and organizational performance in Pakistani telecom sector are areas of concern for the researchers. The extent to which Pakistani telecom sector is following these dimensions needs to be investigated, especially in the period, where there is a need of hour for the development of HR department.

Significance of study The study aids advancement in the literature by differentiating between the HR systems that impact the employee commitment and performance of organization, furthermore, the current research will help to identify how to manage the human resource issues taking place locally and what vital HR practices have been established or should be established in scope of organizational superior performance.

LITERATURE REVIEW Employee development is reflected through retention of employees which directly related to learning of employees. Work design is affected by the environmental consequences related to employee commitment where the environmental consequences consist of collaboration and novelty, this environment moderates the interaction of individual employee collaboration and novelty insights. Moreover, if organization wants to enhance employee commitment, it should improve work design and environment and send talented employees to work design arrangements that will in turn improve employee performance (Vianen et al., 2011). Employee training allows indirect relationship of classroom exercises and workplace attitude that can be made directly proportionate to each other. Employee development can be excelled when employee training in such activities like ideas, pre-education, post-education and lively guidance familiarity implemented on the performance of an organization (Ford, 2009). Employee training and development can be successful through different training schemes and be productive to the efficiency of industrial performance if employees professional interests are related to employee training and development (Jackson, 2008). An employee who possesses Intensive training approach attitude enables the company to speedily adjust the new distinctive organizational performance (Mitki, 2007). Chat and feedback mechanism allows great development in the training process such as surveys that aid to encourage many employees use as a training tool that is easy to use and will work for employee development and organizational efficiency (Noonan, 2008). There should be made some security standards as security issues are always marked as challenges for the organization and researchers are of the view that focus should be made on the security policies and standards

for the betterment of organization which in turns work for the development of employees as employees know and need their information (Werlinger et al., 2009). Promotion of employees directly influences their emotional state which in turn is affected by organizational justice that leads to negative to or significant outcomes on employee development (Tzafrir and Hareli, 2009). Promotion is directly related to employees motivation to work for the betterment of the organization that would result in employee development and in turn increases organizational performance (Takahashi, 2006). The leaders behavior considered as vital for the employee development. Therefore, the relationship between leader and employees or sub-ordinate should be improved as employee development is derived from the performance appraisal as well as motivation and promotion of employees and leaders (Schyns, 2006). Support for the employee development let the employees committed to their work where variables like learning and performance works as to moderate the relationship between employee development and organizational performance but the development of employees whether significant or negative is related to the situations and environment where they work too (Maurer and Lippstreu, 2008). In order to sustain work performance, it is must develop employees thorough learning and use their intellectual capabilities to work which in turns results as increase in organizational performance (Kira et al., 2010). The designing or redesigning of work and authority given to employees directly influences the commitment of employees to work (Kuo et al., 2010) that have impact on organizational performance. The designing of compensation must be designed according to work design and employees must be compensated accordingly to the set pattern of managerial work they are responsible to deliver (Jing et al.2010). Ethics in management should evolve for the betterment of organizations and design of work must align with ethical dilemmas where institutional ethical, managers are easy for the company to control as they follow company rules by showing interest in them (Reis, 2010). In order to enhance work engagement and employees commitment, work design should be placed in line with the HR systems; moreover, compensation plans must be made stronger such as rewarding employee to reduce turnover ratio of experienced employees (Burke and Kot, 2010) to increase organizational performance. Reward system allows employees to work for the betterment of organization and employees feel they are being rewarded to improve the performance of the organization (Emery, 2009). To bring organization to a standardized level factors like rewards, communication etc. are vital for the organizational improvement and rewarding employees increases employees performance (Wahid and Corner, 2009). Giving rewards to employees support for the organizational development and employee innovative performance could be seen as rewarding and gives significant results to performance (Alpkan et al.,

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2010). Supportive management and rewarding employees has significant relationship with the quality performance as employees are emotionally attached with the rewards and managerial support (Slatten, 2009). Employee development is basically a continuous learning regardless of present requirements of organization as employee is developed to get and seek knowledge for future of the organizational superior performance (Jacobs and Washington, 2003). It may be looked as one of the most critical dimension of HR to determine the company performance. For employee development training has been considered as one of the part of HR policy and marked as superior performance HR systems (Delaney and Huselid, 1996). Moreover a significant relation is observed between the training of employee and organizational superior performance (Koch and Mc Grath, 1996), as training allows employees to have multidimensional skills. In respect to employees development security, employees are marked as part of superior performance HR systems (Pfeffer, 1995). Employee performance is important when far-reaching use of teamwork is required and when employee is given the authority to take decision on its own which results in superior performance HR dimensions (Arthur, 1994; MacDuffie, 1995), so it shows that the design of working is important for task specially if you provide authority to employees then this sort of design of work allows the employees to have high performance work system as participation of employees is enhances in this regard. So employee participation has a significant impact on the satisfaction and performance in working environment (Wagner, 1994) as low level employees sometimes contribute to bulk of information necessary for organization, and in team work environment, every employee participates to increase overall performance of the task assigned to them. HRM dimensions greatly influences the employee attitude which affects employee performance and development and if HRM dimensions works significantly then increase in the organizational performance will be seen (Snape and Redman, 2010). Employee behavior improves the performance of organization as it shows a significant effect as employees behavior always considered vital asset for the organization (Dalal et al., 2009). Performance information is termed as the organizational behavior in which employee commitment is affected positively and negatively depending on the contextual factors. This commitment of employees impacts the overall organizational performance influenced by the degree of employee altruistic behavior (Moynihan and Panday, 2010). On the other hand, it is recommended for employee development that performance based compensation such as rewards are marked as superior performance of HR dimensions (Huselid, 1995). Employee commitment is define as ones acceptance of the objectives of the company, secondly, develops skills to achieve the goals, and develops less turnover intension (Porter et al., 1974). Employee engagement consists of

trust, communication and employee focus has significant direct and moderate indirect contact with the organizational performance (Kaplan and Stromberg, 2002). Participative leadership style consists of employee engagement and employee commitment to corporate social responsibility that impacts on organizational performance where employee feels that corporate strategies are better for them without harming their ethical value (Rok, 2009). Employee commitment with the organization helps to build organizational commitment which shows significant result related to job satisfaction and increases organizational performance. Moreover, culture allows supporting relation between commitment and satisfaction (Ying and Ahmad, 2009). Self trust and team work improves employees motivation to work in collectivism which is backed by learning culture of the organization which has a significant impact on the employees commitment towards the organization (Song and Kim, 2009). Employee commitment results in increasing participation of employee in view of higher skills in business environment which increases the organizational performance (Drake et al., 2009). Work locus of control has been identified mainly in two categories namely as internal work locus of control and external work locus of control which directly impacts on employees commitment which increases or decreases organizational performance (Jain et al., 2009). Employee commitment is always affected by the organizational environment where he/she is working and this physical environment increases or decreases employees commitment to work which impacts on employee development and organizational performance (McGuire and McLaren, 2009). The redesigning of work and the empowerment to employees directly impacts the commitment of employees that works for the development of employees (Kuo et al., 2010). Action plans are designed to improve the employee commitment and if properly designed will help managers to achieve effective leadership and this will improves the employee performance and develops employees skills too and as a result helps to increase organizational performance (Tinline and Crowe, 2010). High level of employee well being will help to get employee fully engaged with his performance and organizational performance as employee commitment and performance is greatly influenced by employee well being which means an employee has full engagement with organizational goals (Robertson, 2010). With the utilization of technology such as survey, enables the employee to remain committed to his tasks assigned and will get feedback on his performance (Winston, 2010). Performance based compensation plans allow the employees to work harder that surely will increase performance of employees to work (Ho et al., 2009). The setting of long term objective effects the engagement of employees which shows significant approach towards being optimistic, thus results in increased organizational performance (Medlin and Green, 2009). The quality dimensions management of performance as well as

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Table 1. Summarizing some of the researches in the past on the relationship in the model.

Relationship ED-EC EP-EC EC-OP

Researcher and Year Kira et al. (2010), Laura (2009), Werlinger et al. (2009) and Tzafrir and Hareli (2009) Alpkan et al. (2010), Jing et al. (2010), Kagaari et al. (2010) and Boleslaw Rok (2009) Kuo et al. (2010), Ying and Ahmed (2009), Song and Kim (2009), Drake et al. (2009) and Jain et al. (2009)

Training Security Promotion Reward system Employee performance Employee commitment Organizational performance Employee Development

Design of work Participation

Figure 1. Theoretical model.

attitude of employees results in employee development and increases organizational performance (Kagaari et al., 2010). Trust between employee relationships is marked as vital for employee development that impacts on organizational performance (Sharkie, 2009). In Table 1, few research papers are highlighted that are showing the relationship among different variables based on the previous researches that are being utilized in this research work. In the Figure 1, the theoretical model is presented on which the whole research is based. Relations between latent variables and independent variables are presented, furthermore final relations among independent, mediating and dependent variables are elaborated. The following hypotheses are derived from the Figure 1: H1: There is a significant effect of employee development on employee commitment H2: There is a significant effect of employee performance on employee commitment H3: There is a significant effect of employee commitment on organizational performance
METHODOLOGY The methodology chapter explains the steps that are to be followed to analyze the relationship among variable of concern. It consists of

following steps: sampling, instrument and measures and procedure.

Sampling Sampling attempts to achieve representativeness of the target population. Probability and non-probability sampling are two approaches for sampling. Where issues regarding generalization and/or to draw statistical conclusions, probability sampling is commonly used (Hair et al., 2003). In this study non-probability random sampling was used. Five companies relating to telecom sector of Pakistan were the population of this study. The companies were the main telecom companies selected providing cellular services namely as Zong and Telenor. The potential respondent of this study are employees of the companies. A total of 550 questionnaires were distributed to these companies and out of these questionnaires 300 questionnaires were retrieved back and were processed in this study. Thus, a response rate of 54.5% was achieved in this study.

Instrument and measures The questionnaire comprised of two sections, the first section contains general information about the employers contact number and email address. Second section related to questions that covered organizational performance (seven items), employee performance (five items), employee development (three items), employee commitment (three items) and employee commitment (five items). These questions were made after the facto analysis. Moreover, the questions in section one consists of nominal scale. The scale to measure organizational performance, employee

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Table 2. Reliability of measurements instrument.

Dimension Employee development Employee performance Employee commitment Organizational performance Total

No of items 4 3 5 7 19

Cronbachs alpha 0.820 0.781 0.866 0.730 0.899

performance, employee development and employee commitment was Likert scale ranking (5- Point) where 1 is highest degree of disagreement and 5 is the least degree of agreement. The statistical package for social sciences program (SPSS) was used for analysis and AMOS used to test the model. It is an adapted questionnaire based on the SHRM dimensions and organizational performance. Scale was generated from different research papers of the researchers. The Table 2 demonstrates the reliability of each dimension of the questionnaire. The employee development four items with reliability of 0.820 and the employee performance (three items) with reliability of 0.781, whereas, the employee commitment (five items) has reliability of 0.866, finally, organizational performance (seven items) has minimum reliability of 0.730. The reliability index for the instrument (19 items) is 0.899. Procedure The questionnaire was personally distributed among five telecom companies situated in different areas of Rawalpindi and different sectors of Islamabad. Before giving the questionnaire, all the questions were explained to the respondents so that they can fill questionnaire easily and complete understands them. The sample was limited to five companies of telecom sector with two companies dropped from the survey namely as Sco and Ptcl as the survey was focused on the SHRM dimensions of cellular mobile service companies only in telecom sector of Pakistan. Hence, convenient sampling method was followed. After the data was collected from the entire companies selected for the study, it was coded and entered into SPSS sheet for analysis. Dependent variable organizational performance, mediating variable (employee commitment) and independent variables (employee development and employee performance) were computed using SPSS and Structural equation modeling program (AMOS) was used to test the model. In order to test the hypothesis AMOS was applied. This study applies reliability and validity analysis, factor analysis and Structural Equation modeling. Reliability is the degree of consistency that is between the multiple measurements of a variable (Hair et al., 1998). Reliability shows the consistency of the findings of the research. Internal consistency of the whole scale is the most widely and accepted measure of reliability. It is obtained by coefficient alpha which is also regarded as Cronbachs alpha. Validity refers to the degree to which a scale measures which is really supposed to measure. For ensuring the content validity, most of the items of the constructs where adapted from the previous literature. Three types of validity are: 1) content validity, 2) convergent validity and 3) discriminant validity. Construct validity measure the accuracy to what extent the theory based variable actually reflects the variable. Convergent validity indicates the extent to which two different indicators of a variable confirm one-another. Squared correlation is the measure between two constructs with extracted variance between two constructs in order to measure the discriminant validity. The correlation square between two constructs should be smaller than the one being correspond.

First of all, reliability test was applied to check consistency of responses. Reliability test and factor analysis were used to test the reliability and validity of the instrument and descriptive analysis was used to identify and check the level of application of SHRM systems. The confidence interval for the present study is 95 and 5% level of significance. The level of significance of the variable was checked at 5%. Moreover, AMOS was also used to test the model fitness and to find significant and insignificant relationship of variables among each other.

RESULTS AND DISCUSSION Structural equation modeling In order to find the model fitness structural equation modeling (SEM) was done. SEM is used to test and estimate the causal relationships by using a combination of statistical data and qualitative causal assumptions (Wright, 1921; Haavelmo, 1943; Simon, 1953; Pearl, 2000). The hypothesis H1 is used to find the model that employee development has significant effect on the employee commitment, second hypothesis H2 checks the significant effect of employee performance on employee commitment and last hypothesis H3 is checked that is there is significant effect exists between employee commitment and organizational performance. Figure 2 explains that the SHRM dimensions employee development and employee performance impacts on organizational performance through mediation of employee commitment. Table 3 provides results for the fitness of model indexes. Different outputs of AMOS is illustrated in the table namely as Chi, Df, Sig, Chi/Df, GFI, AGFI, CFI, NFI, RMR and RMSEA. The value of Chi square>0.05 which shows that the model is not a fit one and according to one researcher Joreskog and Sorbom (1993) who suggests that value of Chi-square must be less than 0.05 to accept the model. However, many researchers argued that the Chi-square can be misleading in case of large size samples. If one output shows insignificant results we have to move to other outputs in order to have model fitness. Other outputs such as GFI, AGFI, CFI and NFI should be equal to or greater than 0.90 in order to have model acceptance (Schumacker and Lomax, 2004). In this scope results in Table 3 shows that the values of GFI, AGFI, CFI and NFI are greater than 0.90 (0.995, 0. 974,

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0.75 .75

ED
-.27 .49 0.49

0.37 .37 -0.27

e1
1

0.46 .46

EP

0.71 .71

EC

0.68 .68

OP
1

0.03 .03

e2
Figure 2. SHRM dimensions, employee commitment and organizational outcome. Key: ED, Employee development; EP, employee performance; EC, employee commitment; OP, organizational performance.

Table 3. Structural equation modeling.

Chi.Sqr. 3.113

Df 2

Sig 0.211

Chi/Df 10.556

GFI 0.995

AGFI 0.974

CFI 0.999

NFI 0.997

RMR 0.002

RMSEA 0.043

GFI, Goodness of fit index; RMR, root mean square residual; CFI, comparative fit index; NFI, norms fit index; RMSEA, root mean square of approximation.

Table 4. Hypotheses testing based on Regression weights.

Variables EC ED EC EP OP EC

Estimates -0.272 0.713 0.683

S.E. 0.072 0.092 0.015

Critical ratio -3.788 7.748 46.478

P-value 0.000 0.000 0.000

Results Supported Supported Supported

ED, Employee development; EP, employee performance; EC, employee commitment; OP, organizational performance.

0.999 and 0.997) respectively so its mean that the model is accepted. However still there are some remaining outputs so they should also be considered for further acceptance of model. The output root mean square error of approximation (RMSEA) tells about optimally chosen parameters would fit the population co-variance. Value below 0.08 shows good fit of the model matrix (Byrne, 1998). This model fulfills this criteria because (RMSEA<0.080) the value in Table 3 is 0.043. Similarly, the RMR value shown in Table 3 represents the root mean square residuals, and for a well fitted model, RMR

value should be equal to 0.050 or less. In the Table 3, RMR is 0.002 which shows the model is perfect as it is very close to 0 and is less than 0.050 so the model is again accepted and it shows that the model is a fit one. Moreover, there is a wide disagreement among researchers which fit indexes to report. Jaccard and Wan (1996) recommend the use of at least three fit tests for the model acceptance, accordingly, theses model values GFI, AGFI, CFI, NFI, RMR and RMSEA (0.995, 0.974, 0.999, 0.997, 0.002 and 0.043) respectively shows that the model is fit one and is acceptable. The results shown in Table 4 hypotheses testing based

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on regression weights on the relationship between constructs; employee development (ED), employee performance (EP), employee commitment (EC), organizational performance (OP) as discussed in figure 2. Table 4 shows beta value to be -0.272 between employee development (ED) and employee commitment (EP). Hypotheses is supported because relationship is significant (p<0.05). This result is significant with past researchers (Kira et al., 2010; Laura, 2009; Werlinger et al., 2009; Tzafrir and Hareli, 2009). On the other hand, beta value between EP and EC is 0.713 and p<0.05. The results support the hypothesis that employee performance has significant impact on the employee commitment. This result is significant with past researches (Alpkan et al., 2010; Jing et al., 2010; Kagaari et al., 2010; Boleslaw, 2009). Moreover relationship between EC and OP is also accepted because (p<0.05) and beta value is 0.683. The proposed hypothesis that employee commitment has significant impact on organizational performance is supported. This result is also significant with past researches (Kuo et al., 2010; Ying and Ahmed, 2009; Song and Kim, 2009; Drake et al., 2009; Jain et al., 2009).

Conclusion Based on the above research, this study find out that employees development significantly increases employee commitment to work; similarly, performance of employees has significant effect on employees commitment to different tasks assigned. As a result employees commitment leads to significantly increase overall organizational performance. LIMITATIONS AND FUTURE RESEARCH There are certain limitations to the study which needs to be mentioned here; i) The sample size of study is low, so it cannot be generalized therefore study could be generalized by increasing the sample size to have a wider focus. ii) The results can be tested by adding new variables to the model for example feedback, mentoring, on the job training etc. This study has been conducted purely with the employees of Telenor and Zong, Islamabad and Rawalpindi; however, it can be extended to the other organizations as well, for example, banking sector, insurance companies and construction companies etc.
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