a study on hrm practices and its impact on organizational

__________________________

© Copyright 2019 the authors.

67

Journal of Business Administration and Education

ISSN 2201-2958

Volume 11, Number 2, 2019, 67-96

A Study on HRM Practices and Its Impact on Organizational Performance in

Private Sector Banks in Kashmir District

Dr. Rafia Gulzar

Assistant Professor

Dar Al Uloom University

Al Falah Area- 3535

Saudi Arabia Riyadh-133140

Tel: +966 11-494-9000

Email: [email protected]

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JOURNAL OF BUSINESS ADMINISTRATION AND EDUCATION

68

A Study on HRM Practices and Its Impact on Organizational Performance in Private

Sector Banks in Kashmir District

ABSTRACT

This article enlightened to explore and compare human resource management

practices and their impact on organizational performance in Indian Private Sector

Banks( HDFC and JKB). From 1960s, the banking industry gave a boost to the Indian

economy. The results of many debates have ensured that banks can be the good source

of employment in India and the banking sector emerged as a large service sector to

enhance the economy of India. Considering the employees as an asset in service industry

especially in banks the role of human resource management is very important. Research

suggests that service quality has been increasingly recognized as an important factor that

is responsible for the good performance of any organization. Impact of human resource

management practices on organizational performance has been studied extensively in

Multinational companies, education sector and manufacturing sector. However only a

few research has been conducted in private banking industry. Even these researchers

have not compared human resource management practices Private Sector banks in

Jammu and Kashmir. The research was based on self-administered questionnaire survey

of total 384 employees. It consists of 24 managers, 266 subordinates from JKB, 8

managers, and 86 subordinates from HDFC bank. The main HRM practices studied

were General climate, OCTAPACE culture, Selection, job definition, career

planning, training, performance appraisal and compensation. The data were analyzed

statistically and finding revealed that HRM practices have huge impact on the

organizational performance in banking sector. At the end, research also depicted some

limitation as well as future research directions.

Keywords: Human Resource Management Practices, private sector banks, HDFC, JK


69

INTRODUCTION

The establishment of HRM practices in the banking industry could be made possible not

only with the sustained and continuous struggle of employees associations for decades,

but also the management introduced changes on pro-active basis over a long period of

time. During 1950's "staff departments with the enlarged function of manpower planning,

employee training, performance appraisal of employees, employees discipline, employee

administration, and the like. Still further, during 70's and 80's of the last century,

emphasis was laid on Human resource development(HRD), which provided a new

orientation to HRM in banking industry. Various HRM practices which were absent in

banks were acquired by banks, with the changes introduced by the bank managements

over a period of time. Since these HRM practices by the banks were acquired under

various circumstances and situations, inter – linkages and complementarities between

practices were missing. While evolving various HR practices like induction, training,

transfer policy, promotion, performance appraisal, placement, etc., the need for expected

future business development, expansion and diversification have never been considered.

So, these HR practices were evolved in a truncated form and haphazard manner.

To sum up the developments in respect of HRM in banking industry during the second

half of the last century. Mankidy (2000) observes:-

• The employees in the early stage were exploited by bank managements who held

traditional views about employees and employment relations. There was,

therefore, hardly any personnel management worth the name in banks then.

• Emergence of trade unions was partly in response to these exploitative conditions

which existed in banks.

• Most aspects of HRM in banks today, viz. promotion wages and salaries including

other monetary allowances, welfare measures such ad medical aid and leaves of


70

different types , superannuation facilities, etc., were taken out of the unwilling

hands of management through the organized efforts of employees. In other words,

a major part of banks HRM is dictated to the banks by the trade unions.

• Banks have also adopted certain aspects of HRM like training, performance

appraisal and related HRD activities. Some of these have had partial success in

operations.

• The pressure –oriented development of HRM, to some extent, continues in

banking even today.

Even in the non–bargain areas of HRM like training, performance appraisal system(PAS)

, traces of creativeness is clearly visible, for instance, training efforts are primarily carried

out as a statistical process to satisfy the requirements of the Reserve Bank of India .PAS

have been adopted because they are in vogue in other organizations and are now viewed

more as ritual then as effectives means and preconditions for employees development.

The banking industry nowadays is focusing on having a small number of large players

that can compete worldwide rather than having a large number of fragmented players".

The major Banks in India are depicted in Exhibit 1.1:

Exhibit 1.1: Depicting major Banks in India

1 ABN-AMRO Bank 17 Centurion Bank

2 Abu Dhabi Commercial Bank 18 China Trust Commercial Bank

3 American Express Bank 19 Citi Bank

4 Andhra Bank 20 City Union Bank

5 Allahabad Bank 21 Corporation Bank

6 Axis Bank (Earlier UTI Bank) 22 Dena Bank

7 Bank of Baroda 23 Deutsche Bank

8 Bank of India 24 Development Credit Bank

9 Bank of Maharashtra 25 Dhanalakshmi Bank

10 Bank of Punjab 26 Federal Bank


71

11 Bank of Rajasthan 27 HDFC Bank

12 Bank of Ceylon 28 HSBC

13 BNP Paribas Bank 29 ICIC1 Bank

14 Canara Bank 30 1DB1 Bank Indian Bank

15 Catholic Syrian Bank ° 31 Indian Overseas Bank

16 Central Bank of India 32 Induslnd Bank

33 NG Vvsva Bank 45 State Bank of India (SBI)

34 Jammu & Kashmir Bank 46 State Bank of Bikaner & Jaipur

35 JPMorgan Chase Bank 47 State Bank of Hyderabad

36 Karnataka Bank 48 State Bank of Indore

37 Karur Vysya Bank 49 State Bank of Mysore

38 Laxmi Vilas Bank 50 State Bank of Saurastra

39 Oriental Bank of Commerce 51 State Bank of Travancore

40 Punjab National Bank 52 Syndicate Bank

41 Punjab & Sind Bank 53 Taib Bank UCO Bank

42 Scotia Bank 54 Union Bank of India

43 South Indian Bank 55 United Bank of India

44 Standard Chartered Bank 56 United Western Bank Vijaya Bank

Main Objective of the Study

• To compare HRM practices in the private sector banks.

• To study how well HRM tasks are implemented in JKB and HDFC (Private Banks).

• To study about the effectiveness of HRM practices on organizational performance

in Private banks in Kashmir.

• Based on the results, to offer suggestions and recommendation for betterment in

the HR practice in private sector bank.

Hypothesis

H1: The overall human resource practices of private sector banks has positive impact on

organizational performance.


72

H2: The employees in private sector banks believe that there is a relation between HR

practices and organizational performance.

H3: HDFC bank employees are more satisfied than employees of JKB.

Sample Size

Employees from the leading Private sector bank –Jammu and Kashmir Bank and HDFC

Bank from the private sector were included as respondents in the research. A sample of

360 employees working in these banks at different levels were contacted for the purpose

of this research.

Review of Literature

Human Resource Management is very important for banks because banking is a service

industry. Research suggests that service quality is recognized as a crucial factor that

determines the level of success of any business (Parasuraman et al., 1988). Banking sector

in this case cannot be an exception. Level of quality service is widely used to evaluate the

performance of banking services (Cowling and Newman, 1995). The banks realize that

customers will be loyal if they receive higher values than competitors (Dawes and

Swailes, 1999) while on the other hand, banks in return can earn higher profits if they are

able to position themselves better than their competitors within the specific market

segments (Davies et al., 1995). People management and risk management are two key

challenges banks are facing. It has become big threat as well as opportunity for banks to

manage its workforce and at the same time risks that find out the success in the business

of banking. Skilled & efficient labor is responsible for efficient & effective risk

management. Banking is "People Business" means it start from people (employees) and

ends with people (customers). Below table is schematic view of definitions of variables

used in this research from literature perspective.

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Exh

ibit

1.2

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chem

ati

c v

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of

def

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s o

f v

aria

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fro

m l

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Def

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So

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HR

M a

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at a

ffec

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e

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etw

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M p

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d p

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nfl

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“Lin

kin

g c

om

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gie

s w

ith

hu

man

res

ou

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man

agem

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pra

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f M

anag

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xec

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07-1

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M i

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co

her

ent

& s

trat

egic

ap

pro

ach

to

war

ds

man

agem

ent

of

org

aniz

atio

n’s

mo

st v

alu

ed a

sset

s –

the

emp

loy

ees

wh

o i

nd

ivid

ual

ly &

coll

ecti

vel

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on

trib

ute

to

war

ds

the

ach

iev

emen

t o

f th

e o

bje

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f th

e

bu

sin

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A

han

db

oo

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of

per

son

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e. L

on

do

n: K

og

an P

age.

Arm

stro

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(19

95),

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95

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Org

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Per

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aniz

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nv

olv

es a

sses

sin

g o

f fo

ur

pro

cess

es l

ike

fin

anci

al,

cust

om

er,

emp

loy

ee

gro

wth

an

d

lear

nin

g

and

in

tern

al

bu

sin

ess

pro

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es.

“Pu

ttin

g t

he

Bal

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d S

core

card

to

Wo

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epte

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aniz

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form

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stu

die

d o

n t

he

bas

es o

f p

aram

eter

s

lik

e fi

nan

cial

, m

ark

et s

har

e, g

row

th,

cust

om

er s

ati

sfac

tio

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etc.

wit

h

ano

ther

co

ntr

ol

gro

up

.

HR

D A

ud

it, N

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i: R

esp

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oo

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Div

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age

Pu

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99

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Per

form

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is a

set

of

fin

anci

al a

nd

no

nfi

nan

cia

l in

dic

ato

rs, w

hic

h o

ffer

info

rmat

ion

on

th

e d

egre

e o

f ac

hie

vem

ent

of

ob

ject

ives

an

d r

esu

lts.

“A c

on

cep

tual

an

d o

per

atio

nal

del

inea

tio

n

of

per

form

ance

”,

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sin

ess

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form

ance

Mea

sure

men

t, C

amb

rid

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Un

iver

sity

Pre

ss.

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ske,

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06

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Hu

man

Res

ou

rce

Dev

elo

pm

ent

HR

D i

s a

syst

emat

ic e

xp

ansi

on

of

peo

ple

’s w

ork

-rel

ated

ab

ilit

ies,

focu

sed

on

th

e at

tain

men

t o

f b

oth

org

aniz

atio

nal

as

wel

l as

per

son

al

go

als.

Fig

ure

of

eig

ht

eval

uat

ion

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fu

nd

amen

tal

chan

ge

in

the

trai

ner

s ap

pro

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'',

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e

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inin

g O

ffic

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es

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D s

ho

uld

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con

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tual

ized

as

an a

pp

roac

h t

hat

su

pp

ort

s th

e

imp

act

that

peo

ple

can

hav

e o

n o

rgan

izin

g. T

he

focu

s o

f H

RD

is

on

acti

on

, dev

elo

pin

g t

he

cap

acit

y t

o a

ct, g

ener

atin

g c

red

ibil

ity

th

rou

gh

acti

on

, in

flu

enci

ng

, an

d w

ork

ing

wit

h o

ther

s in

sit

uat

ion

s lo

aded

wit

h

emo

tio

n a

nd

po

liti

cs.

Th

e fu

ture

P

ract

ice

of

HR

D,

Hu

man

Res

ou

rce

Dev

elo

pm

ent

inte

rnat

ion

al.

6(4)

559-

63.

Vin

ce ,R

. 20

03

.8

HR

D c

ov

ers

fun

ctio

ns

rela

ted

pri

mar

ily

to

tra

inin

g, c

aree

r

dev

elo

pm

ent,

org

aniz

atio

nal

dev

elo

pm

ent

and

res

earc

h a

nd

dev

elo

pm

ent

in a

dd

itio

n t

o o

ther

org

aniz

atio

nal

HR

fu

nct

ion

s w

her

e

thes

e ar

e in

ten

ded

to

fo

ster

lea

rnin

g c

apac

ity

at

all

lev

els

of

the

org

aniz

atio

n, t

o i

nte

gra

te l

earn

ing

cu

ltu

re i

nto

its

ov

eral

l b

usi

nes

s

stra

teg

y a

nd

to

pro

mo

te t

he

org

aniz

atio

n’s

eff

ort

s to

ach

iev

e h

igh

qu

alit

y p

erfo

rman

ce.

Ho

w

do

H

RD

p

ract

itio

ner

s d

escr

ibe

lear

nin

g

at

wo

rk?

Hu

ma

n

Res

ou

rce

Dev

elo

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Inte

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ion

al,

Vo

l.7,

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RD

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th

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om

pet

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yn

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an

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a s

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Rew

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Su

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Per

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Ind

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key

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Ach

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om

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Ad

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ho

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om

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Peo

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mu

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Dav

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an

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pad

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cGra

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Def

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Job

des

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can

be

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eter

min

e th

e g

rou

pin

g o

f in

div

idu

als

into

sm

alle

r w

ork

un

its

and

as

a v

alid

ati

on

fo

r th

e o

ver

all

stru

ctu

re o

f

the

org

aniz

atio

n

Fro

m

job

-bas

ed

to

com

pet

ency

-bas

ed

org

aniz

atio

ns.

Jo

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of

Org

aniz

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Beh

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5(1)

,

Law

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Job

def

init

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is

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wri

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fo

rmat

of

du

ties

an

d t

ask

s a

sin

gle

wo

rker

is

exp

ecte

d t

o p

erfo

rm.

Th

e h

um

an

reso

urc

es

glo

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Car

eer

pla

nn

ing

Car

eer

pla

nn

ing

sta

nd

s fo

r th

e fo

rwar

d-l

oo

kin

g e

mp

loy

men

t p

oli

cies

of

an

org

aniz

atio

n,

wh

ich

ta

kes

in

to

acco

un

t th

e ca

reer

o

f in

div

idu

al

exec

uti

ves

, in

vo

lved

in

var

iou

s ta

sks,

par

ticu

larl

y c

riti

cal

task

s.

Per

spec

tiv

e M

anag

emen

t,

Him

alay

a

Pu

bli

shin

g H

ou

se B

om

bay

, 682

.

Mic

hae

l 19

93

13

Car

eer

op

po

rtu

nit

ies

and

rew

ard

s ar

e im

po

rtan

t fa

cto

rs i

n p

rov

idin

g a

dev

elo

pm

enta

l cl

imat

e in

an

y o

rgan

izat

ion

.

HR

D A

ud

it, N

ew D

elh

i: R

esp

on

se B

oo

ks

(A

Div

isio

n o

f S

age

Pu

bli

cati

on

s) N

ew D

elh

i.

Rao

, T V

19

99

14

Car

eer

pla

nn

ing

is a

co

nti

nu

ou

s p

roce

ss f

or

an in

div

idu

al t

o d

evel

op

his

ow

n

occ

up

atio

nal

co

nce

pt

bec

ause

o

f sk

ills

o

r ab

ilit

ies,

n

eed

s,

mo

tiv

atio

ns

and

asp

irat

ion

.

Hu

man

Res

ou

rce

Ma

nag

emen

t, 4

th

Ed

itio

n, T

he

Eco

no

mic

Pu

bli

shin

g H

ou

se,

Bu

care

st, p

.332

Man

ole

scu

, A.

2003

15

Car

eer

pla

nn

ing

mu

st a

lig

n i

nd

ivid

ual

nee

ds

wit

h o

rgan

izat

ion

al n

eed

s

and

op

po

rtu

nit

ies,

ev

alu

atin

g, a

dv

isin

g a

nd

info

rmin

g i

ts e

mp

loy

ees

on

care

er

pla

nn

ing

, in

div

idu

al

dev

elo

pm

ent

effo

rts

wit

h

trai

nin

g

and

dev

elo

pm

ent

pro

gra

ms.

Pla

nn

ing

an

d

care

er

man

agem

ent

in

org

aniz

atio

ns,

Jo

urn

al

of

Org

aniz

atio

nal

Psy

cho

log

y, 3

(4)

Po

pes

cu N

evea

n ,A

. 20

03

16

Em

plo

yee

s P

arti

cip

atio

n

He

con

ten

ded

th

at w

ork

ers

par

tici

pat

ion

in

vo

lves

cre

atin

g o

pp

ort

un

ity

un

der

su

itab

le c

on

dit

ion

fo

r p

eop

le t

o i

nfl

uen

ce t

he

dec

isio

ns

that

aff

ect

them

.

Th

e H

um

an s

ide

of

En

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ss i

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Em

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lass

ifie

d in

to s

ix d

iffe

ren

t

com

bin

atio

ns-

p

arti

cip

atio

n

in

wo

rk

dec

isio

ns,

co

nsu

ltat

ive

par

tici

pat

ion

, sh

ort

-ter

m p

arti

cip

atio

n, i

nfo

rmal

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tici

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ion

, em

plo

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ow

ner

ship

, an

d r

epre

sen

tati

ve

par

tici

pat

ion

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Em

plo

yee

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tici

pat

ion

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erse

fo

rms

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dif

fere

nt

ou

tco

mes

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y o

f

Man

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Per

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Ap

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A f

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al m

anag

emen

t sy

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vid

es f

or

the

eval

uat

ion

of

the

qu

alit

y

of

an i

nd

ivid

ual

’s p

erfo

rman

ce i

n a

n o

rgan

izat

ion

.

Em

plo

yee

s’

per

cep

tio

n

of

per

form

ance

app

rais

al

syst

em

and

th

eir

rela

tio

nsh

ips

wit

h

som

e p

erso

nal

an

d

org

aniz

atio

nal

fact

ors

: A

n

emp

iric

al

stu

dy

in

th

e

org

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atio

ns

in t

he

un

ited

ara

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dm

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20

It

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niq

ue

for

com

mu

nic

atin

g

per

form

ance

exp

ecta

tio

n a

sses

smen

ts o

f th

e p

ote

nti

al

of

emp

loy

ees

and

id

enti

fies

th

e

nee

d f

or

imp

rov

emen

t.

Man

agin

g

emp

loy

ee

atti

tud

es

and

beh

avio

rs

in

the

tou

rism

an

d

ho

spit

alit

y

ind

ust

ry.

New

Y

ork

: N

ov

a S

cien

ce

Pu

bli

sher

s, I

nc.

Ku

slu

van

, S.

2003

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Ap

pra

isal

mec

han

ism

can

be

use

d t

o e

val

uat

e th

e d

evel

op

men

t o

f th

e

emp

loy

ee’s

att

itu

de

and

beh

avio

r.

Imp

act

of

HR

pra

ctic

es o

n p

erce

ived

fir

m

per

form

ance

in

In

dia

. A

sia

Pac

ific

Jo

urn

al

of

Hu

man

Res

ou

rces

, 42(

3), 3

01–3

17.

Sin

gh

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2004

22

JOU

RN

AL

OF

BU

SIN

ES

S A

DM

INIS

TR

AT

ION

AN

D E

DU

CA

TIO

N

77

Tra

inin

g a

nd

Dev

elo

pm

ent

Tra

inin

g i

s an

ex

pen

siv

e w

ay o

f at

tem

pti

ng

to

en

han

ce h

um

an

pro

du

ctiv

ity

.

Th

e sh

ape

of

thin

gs

to

com

e.

In

F.

Hes

selb

ein

&

P

.Co

hen

(E

ds)

.Lea

der

to

lead

er: E

nd

uri

ng

insi

gh

t o

n le

ader

ship

fro

m

the

Dru

cker

fo

un

dat

ion

's a

war

d w

inn

ing

jou

rnal

(p

p.

109

-120

).

San

F

ran

cisc

o,

CA

;

Joss

ey -

Bas

s.

Dru

cker

,P.F

. 19

99

23

Tra

inin

g i

nd

icat

es t

he

pro

cess

in

vo

lved

in

im

pro

vin

g t

he

apti

tud

es,

skil

ls a

nd

ab

ilit

ies

of

the

emp

loy

ees

to p

erfo

rm s

pec

ific

job

s.

“Hu

man

re

sou

rce

and

P

erso

nn

el

Man

agem

ent”

, T

ata

McG

raw

-Hil

l

Pu

bli

shin

g C

om

pan

y L

imit

ed, N

ew D

elh

i.

Asw

ath

app

a, K

. 20

00

24

Tra

inin

g r

efer

s to

act

ivit

ies

wh

ich

eq

uip

em

plo

yee

s o

r u

pg

rad

es

wo

rker

s w

ith

nee

ded

sk

ills

to

per

form

/ ca

rry

ou

t b

ette

r in

th

eir

pre

sen

t

job

s.

Hu

man

re

sou

rce

man

agem

ent

and

th

e

glo

bal

nes

s o

f fi

rms:

An

em

pir

ical

stu

dy

in

Ch

ina.

Th

e In

tern

atio

nal

Jo

urn

al o

f H

um

an

Res

ou

rce

Ma

nag

emen

t, 1

9(5)

: 828

-839

.

Li

J.,

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n,

G.,

Lia

o,

S.

&

Ch

u, C

.W.L

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2008

25

Co

mp

ensa

tio

n

Per

form

ance

-bas

ed c

om

pen

sati

on

is

the

do

min

ant

HR

pra

ctic

e th

at

org

aniz

atio

ns

com

mo

nly

use

to

ev

alu

ate

and

rew

ard

em

plo

yee

s.

Str

ateg

ic

hu

man

re

sou

rce

pra

ctic

es,

top

man

agem

ent

com

mit

men

t,

team

so

cial

net

wo

rks

and

fir

m p

erfo

rman

ce:

the

role

of

hu

man

re

sou

rce

pra

ctic

es

in

crea

tin

g

org

aniz

atio

nal

co

mp

etit

ive

adv

anta

ge,

Aca

dem

y

of

Man

agem

ent

Jou

rnal

, 46

(6):

740-

751.

Co

llin

s C

. J.,

and

Cla

rk K

.

D.

2003

26

Co

mp

ensa

tio

n m

anag

emen

t is

an

in

teg

ral

par

t o

f H

RM

ap

pro

ach

fo

r

man

agin

g p

eop

le a

nd

as

such

it

sup

po

rts

the

ach

iev

emen

t o

f b

usi

nes

s

ob

ject

ives

Rel

atin

g

Co

mp

eten

ces

to

pay

: T

he

UK

Ex

per

ien

ce,

Co

mp

ensa

tio

n

and

B

enef

it

Rev

iew

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905

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stro

ng

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. an

d

Bro

wn

, D.

2005

27


78

Approaches in Studying Relationship between HRM Practices and Organizational

Performance

In contrast to empirical works on individual HRM practices and organization

performance relationship, the relationship between HRM practices & organizational

performance has been the subject of significant examination. Jackson, Schuler and Rivero

(1989) studied effects of HRM systems on organizational financial performance through

behavioral approach. They realized that it is essential for organizational viability that

HRM systems provide the capabilities to acquire, develop, motivate and retain

employees who will enhance organizational effectiveness. In explaining the significance

of human resources to organization performance, the majority of work in HRM has

adopted the resource-based view of the organization (Barney, 1991; Delery, 1998).

According to this view, an organization can gain a competitive advantage from the

human resources it possesses. However, the organization does not obtain a competitive

advantage from the HRM policies, but from human resources that the organization

attracts and retains (Delery, 1998). These arguments point to the performance potential

of a universal approach to HR focus on capital enhancement. However, apart from the

theoretical arguments, there were also evidences supporting a positive relationship

between universal approach to HRM practices and organizational performance.

Arthur (1994) adopted an approach to intra-industry examination of the HRM practices

of thirty American steel minimills. In addition to the impact of HRM practices on

organization’s performance, the contingency approach is concerned with the similarity

or fit between various policies and practices adopted by organizations. Arthur employed

an experimental classification identifying two types of HRM systems (control and

commitment) to test the extent to which the combination of practices utilized by

organizations could forecast differences in organizational performance. His findings

show that minimills using the commitment systems of HRM had higher productivity,

lower scrap rates and lower turnover than those minimills using control systems.


79

Huselid (1995) studied the impacts of thirteen HRM practices on organization’s

performance. Two measures of HRM practices were identified. First were designated

“employee skills & organizational structures” with practices enhancing skills, abilities,

role performance, while the second was labeled “employee motivation”, with practices

aimed at evaluating & reinforcing desired employee behaviors. His findings showed

when these two measures were regressed on productivity individually both measures

produced positive & significant results. However when these were entered

simultaneously, motivation remained significant. Most of the previous studies verify the

relationship between HRM practices and organizational performance. However, various

approaches to these examinations have emerged. The following section gives a critical

review of the various approaches taken in the area of HRM, and the assumptions made

under each approach.

Previous research in HRM has used one of the following ways to examine the

effectiveness of HRM practices on organizational performance viz, universalistic,

contingency or configurationally approach (Delery & Doty, 1996).

Universalistic perspective

Universalistic perspective is the simplest form of theoretical model in the HRM literature.

Universal perspective seeks for “best practices”. Researches in the universalistic

perspective are micro analytical in nature that some HRM practices are always better than

others and that all organizations should adopt these practices.

The extensive work of Huselid’s (1995), work reflected the “universalistic” approach to

HRM. This perspective is based on the assumption that there are certain “best” HRM

practices which contribute to increased financial performance regardless of the strategic

goals of organizations. Further, a universalistic approach to HRM research is based on

the assumption that HRM practices contribute to worker motivation which leads to

increased productivity. Also it results in increased efficiency (Ichniowski, Kochan,

Levine, Olson & Strauss, 1996). While many authors agreed with these assumptions


80

(Osterman; 1994, Pfeffer, 1994), various studies have utilized different mix of HRM

practices and there has been very limited work that provides a definitive description as

to which HRM practices should be included in a “best practice” system. Huselid (1995),

for instance, utilized thirteen HRM practices. Pfeffer (1994) however, utilized sixteen

management practices to achieve higher productivity & profits. Delery & Doty (1996),

listed seven practices that are considered strategic in nature. Practices listed were internal

career opportunities, formal training system, appraisal measures, profit sharing,

employment security, voice mechanism & job description.

Contingency perspective

Contingency thinkers hypothesize that an organization needs to adapt certain HRM

practices for various organizational strategies. However a number of researchers have

argued that contingency perspective is more appropriate approach to HRM (Butler, Ferris

& Napier, 1991; Jackson & Schuler, 1995; Dyer, 1985; Lengnick-Hall & Lengnick-Hall,

1988; Schuler & Jackson, 1987; Schuler, 1989). The contingency thinkers argue that, for

organization to be effective its HRM practices must be consistent with other aspects of

the organization.

The major difference between contingency approach & universalistic perspective is that

these studies have tried to link variations of HRM practices to specific organizational

strategies (Hoque, 1999;Youndt, Snell, Dean & Lepak, 1996; Khatri, 2000). Schuler &

Jackson (1987) and Schuler (1989), pointed out that HRM practices which are not

synergistic & consistent with organizational strategy and which conflict with other HRM

practices are confusing in effect. These end up creating an ambiguity which can slow

down individual & organizational performance. Porter (1985), has provided a framework

that specifies three strategies for competition: cost leadership as the low cost product or

service provider; differentiation, such as by superior quality or service and focus or niche

strategies that concentrate on narrow area of differentiation. Thus the contingency view

would maintain that if an organization has adopted a cost leadership strategy, then it


81

should have human resources practices consistent with this strategy. With cost

leadership, an organization would probably not have a compensation system for

executives nor would it pursue a practice of wage leadership. Furthermore, the

compensation system also should fit the organization culture and additional matching

will be required when the organization has several cultures.

The study conducted by Delery and Doty (1996), on HRM practices in the banking

industry examined the impact of the universalistic and contingency approaches. The

researchers tested the universalistic approach by examining the direct organization

performance effects of several individual human resource practices on the position of

loan officers. These practices included (1) internal career opportunities (2) extensive

training (3) result- oriented performance appraisals (4) employment security (5)

participative decision making (6) clear job descriptions and (7) profit sharing.

Organizations performance was measured with two accounting ratios: return on assets

(ROA) and return on equity (ROE). For tests of contingency approach, the researchers

used a product/market innovation instruments to categorize the banking organizations

into the Miles and Snow strategic types: prospectors (emphasis on innovation), analyzers

(imitators of innovators and focused operations), and defenders (low-cost producers).

Results of the universalistic approach revealed that result- oriented appraisal, profit

sharing and employment security all had a positive impact on ROA while profit sharing

also has a positive impact on ROE. In order to test the contingency approach, the

researchers examined the incremental impact on the performance of the strategy

interactions with each of the human resource practices. Results of the contingency

approach indicated that for banks in the prospector's strategic category, the use of results

– oriented appraisals produced higher ROA and ROE. Interestingly defender banks that

allowed loan officers to participate in decision-making had better ROA and ROE.

Conversely, prospector banks performed better with less participative decision making.


82

In addition, more internal career opportunities produced positive impacts on ROA and

ROE in prospector banks while the reverse held for defender banks.

Configurational perspective

The configurationally perspective is focused on how patterns of multiple, planned

human resource deployment and activities achieve the organization’s goals. A closely

related body of work calls for a configurational approach to HRM and argues that it is

the pattern of HRM practices that contribute to the attainment of organizational goals

(Wright & McMahan, 1992). According to the configurational perspective, in order to be

effective, an organization must develop its HRM system in such a way that it achieves

both horizontal and vertical fit. Horizontal fit means internal consistency of the

organization’s HRM practices and compatibility of the HRM system with other

organizational characteristics and features comes under vertical fit.

According to configurational perspective, the impact of HRM practices on organizational

performance is dependent on the implementation and usage of an effective combination

of HRM practices called HRM bundles (Arthur, 1994; MacDuffie, 1995). Such bundles of

complementary practices are used to produce high performance effects than individual

HRM practices (Ichniowski et al., 1997). Ichniowski et al. (1997) explained that interaction

effects among HRM policies are important determinants of productivity so organizations

realise the largest improvements in productivity by adopting bundles or clusters of

complementary practices rather than making changes to single practices. Kalleberg and

Moody (1994), found a tendency for performance enhancing HRM policies and practices

to occur together, thereby creating high performance work systems. Likewise both

Arthur (1994) and Becker and Huselid (1998), also found potential impact of systems or

bundles of HRM practices on organisational performance.

Alcázar et al., (2005), argue that configurational bundles must not be confused with

universalistic bundles or systems because while the former consists of holistic patterns of

interrelated, synergistic practices, the latter comprises single practices combined in an


83

additive manner. In other words, the configurational approach involves more complex

typologies of ideal types of HRM systems than found in universalistic approaches.

All the above-mentioned approaches has shown that there is a positive relation between

HRM practices and performance of an organization.

Data Analysis and interpretation

Most of the organization does possess certain unique characteristics, the results are

bound to differ from each other .Exhibit 1.3 and exhibit 1.4 depicts the overall perception

of managers and subordinates towards the Human resource management practices in

private sector banks. The private sector banks include HDFC and JKB. It is clear from the

exhibit 1.3 ,that the highest percentage 53.6% of managers from HDFC agree that general

climate of an organization is good that plays important role to improve the performance

of an organization and 53.2% of JKB managers also agree and is statistically significant

(p-value ≤0.0001). JKB with a score of 46.7% of agree with the perception the OCTAPACE

culture has direct impact on the organizational performance followed by HDFC (39.3%)

and is statistically significant with p-value ≤0.0001. The result from the table shows that

31.2% of managers of HDFC perceives that bank has good selection process and

techniques that leads to effective performance of an organization followed JKB (16.3%)

and is statistically significant (p- value ≤0.0001). The table shows that 52.6% of JKB

managers agree with the statements of Job definitions followed by HDFC with 46.9%. It

is clear from the result that if job description and job specifications will be clear to the

employees that will directly improve performance of an employees and leads to the

increase in the performance of an organization. The majority of the managers (51.8% of

HDFC and 42% of JKB) agree that career planning is clear to all the employees and is

statistically significant. The table also depicts that 50.0% of HDFC managers are neutral

towards the employee's participation while 41.1% managers of JKB agree with the

statements of employee's participation and statistically significant with p-value ≤0.0001.

Both managers private sector banks agree with the performance appraisal variable of


84

HRM practice with the highest percentage of 51.8% in HDFC then JKB (44.7%) which

implies that performance appraisal and organizational performance are closely linked

with each other. Training plays an important role in enhancing the skills of employees

and 50% of HDFC managers agree with the training variable of HRM practice followed

by the managers of JKB with 46.9%. The results shows that 32.5% of HDFC managers

strongly agree that company takes care of employees while setting the compensation

followed by JKB (26.0%) with p-value ≤0.0001 and is statistically significant. After

analyzing the above table, we can accept both alternate hypotheses that HRM practices

have significant association with organizational performance and HRM have significant

impact on organizational performance and reject null hypothesis.

It is also clear from Exhibit 1.4 that overall perception of subordinates varies in the private

sector banks as well. For general climate, the highest percentage of agree is shown by the

subordinates of JKB (39.6%) and for OCTAPACE culture the greatest percentage of Agree

is shown by the subordinates of HDFC ( 33.1% and are statistically significant with p-

value ≤0.0001. While in Selection the highest percentage of agree is shown by the

subordinates of HDFC (43.1%) followed by JKB (39.8%) and in job definition the highest

percentage of agree is shown by the subordinates of JKB (42.6%) followed by HDFC

(37.5%). The respondents from sample study strongly agree in the following order HDFC

(32.7%) and JKB (32.4%) towards the career planning of HRM variable .It was observed

that 27.8% of subordinates of HDFC agree with the statement of employees participation

while 28.1% JKB agree that employees participation plays major role in enhancement of

organizational performance. The table reveals that 34.5% of HDFC subordinates agree

with the statement of performance appraisal followed by JKB (32.5%) and is statistically

significant with p-value ≤0.0001. The highest percentage of agree for training variable is

shown by the subordinates of HDFC (52.8%) followed by JKB (35.0%). The table depicts

that 32.5% of HDFC subordinates agree with compensation variable of HRM practices

followed by 21.4% of JKB subordinates and is statistically significant with p-value


85

≤0.0001. From the exhibit 1.3 it is clear that perception of employees towards HRM

practices is positive. This indicates that HRM practices are positively related with

organizational performance and HRM practices has direct impact on organizational

performance.

Exhibit 1.3: Index of perception of managers towards variables of HRM practices in Private

Sector

Variables

Banks

Sample

size (n)

Agreement (%)

p-value Strongly

disagree Disagree Neutral Agree

Strongly

agree

General Climate (GC) HDFC 8 12.5 8.9 14.3 53.6 10.7

≤0.0001*

JKB 86 2.7 8.8 21.1 53.2 14.3

OCTAPACE Culture (OC) HDFC 8 17.9 28.6 39.3 14.3

JKB 86 3.3 13.1 19.1 46.7 17.8

Selection(S) HDFC 8 2.1 14.6 52.1 31.2

JKB 86 2.1 11.0 20.0 50.6 16.3

Job Definition (JD) HDFC 8 6.2 12.5 12.5 46.9 21.9

JKB 86 0.3 12.8 22.1 52.6 12.2

Career planning (CP) HDFC 8 5.4 5.4 23.2 51.8 14.3

JKB 86 2.0 14.8 26.6 42.0 14.6

Employees participation

(EP)

HDFC 8 4.2 16.7 50.0 29.2 ≤0.0001*

JKB 86 5.8 21.7 24.4 41.1 7.0

Performance Appraisal (PA) HDFC 8 1.8 12.5 17.9 51.8 16.1

≤0.0001* JKB 86 4.3 12.3 28.7 44.7 10.0

Training(T) HDFC 8 2.1 10.4 14.6 50.0 22.9

≤0.0001* JKB 86 2.9 17.1 21.3 46.9 11.8

Compensation (C) HDFC 8 7.5 10.0 32.5 32.5 32.5

≤0.0001* JKB 86 6.3 29.5 31.4 26.0 26.0


86

Exhibit 1.4: Index of perception of subordinates towards various variables of HRM practices

in Private Sector

Variables Banks Sample

size (n)

Agreement (%)

p-value Strongly

disagree Disagree Neutral Agree

Strongly

agree

General Climate(GC) HDFC 24 10.7 22.6 26.8 32.1 7.7

≤0.0001*

JKB 266 5.5 21.2 24.6 39.6 9.0

OCTAPACE Culture(OC) HDFC 24 11.3 13.7 26.2 33.3 15.5

JKB 266 7.5 21.8 28.2 31.8 10.7

Selection(S) HDFC 24 14.6 6.9 22.2 43.1 13.2

JKB 266 4.6 17.0 26.7 39.8 11.8

Job Definition(JD) HDFC 24 6.2 17.7 16.7 37.5 21.9

JKB 266 5.1 17.3 21.4 42.6 13.7

Career planning(CP)

HDFC 24 12.5 13.7 31.0 32.7 10.1

≤0.0001* JKB 266 5.8 27.1 27.3 32.4 7.3

PNB 33 3.5 14.3 22.9 38.1 20.3

Employees participation(EP) HDFC 24 15.3 19.4 29.2 27.8 8.3

≤0.0001* JKB 266 12.5 30.1 24.7 28.1 4.6

Performance Appraisal(PA) HDFC 24 11.3 15.5 28.6 34.5 10.1

≤0.0001* JKB 266 8.2 22.4 28.1 32.5 8.8

Training(T) HDFC 8 0.7 11.8 19.4 52.8 15.3

≤0.0001* JKB 86 7.7 24.2 22.9 35.0 10.2

Compensation (C) HDFC 8 10.0 18.3 33.3 32.5 5.8

≤0.0001* JKB 86 13.5 30.5 26.3 21.4 8.3

Perceptions of managers and subordinates towards the overall HRM practices in the private

sector

The overall research results presented in Exhibit 1.5 regarding the perception of managers and

subordinates towards the overall HRM practices in the private sector banks (HDFC & JKB) . The


87

table shows that perception of managers lies in the range of scale that is satisfactory. The overall

values of mean in case of managerial group of HDFC are > 60% except for employee participation.

The table shows that perception of subordinates lies in the range of scale that is dissatisfactory

and recorded overall percentage of mean score >45 in HDFC. The overall mean score of managers

of HDFC against General Climate is 3.41(60.25) which are marginally higher than subordinates

which is recorded as 3.04(51.00). The table also exhibits that managers recorded highest values

for mean and scored >70 % against selection process and training and development with the mean

score 4.13 and 3.81. On the other hand subordinates of HDFC shows the highest mean score of

3.70(67.50) against training which is slightly less than the managerial staff. The table also reflects

the lowest mean score 3.04(51.00) of managerial staff recorded against the employee participation

variable.The rest of the variables scored by manager's of HDFC shows reasonably good response.

When we look at the exhibit 1.5, the interesting observation comes into light that subordinates

express positive view against Job Definition and Training and Development which scored >60%.

However the rest of HRM variables scored by subordinates of HDFC show average response.

This is indication of the fact that there is a tremendous scope of improvement of various HRM

practices in case of subordinates of bank.

The perception of managers of JKB also falls in satisfactory range of scale as compared to

subordinates. The table amply that the overall mean values of managers recorded >60% for HRM

variables except for compensation and employees participation. The table also shows clearly that

in case of managerial staff possess highest mean and scored >60% against Selection Process with

the mean score 3.68. On the other hand subordinates of JKB shows the highest mean score of

3.43(60.75) against Job definition. The table also reflects the lowest mean score 2.97(49.25) of

managerial staff recorded against the compensation variable. The rest of the variables scored by

manager's shows reasonably good response. When we look at the table 1.4, the interesting

observation comes into light that subordinates express positive view against Job Definition >60%.

However the rest of HRM variables scored by subordinates show average response. Which is


88

indication of the fact that there is a tremendous scope of improvement of various HRM practices

in case of subordinates is concerned.

It is clear from the table that satisfaction levels of the employees both managers and subordinates

in JKB are less as compared to the employees of HDFC. Thus it is clear from the table 1.5 that

contradictory statements among the managers and subordinates in both the organization are

observed. Managers claim that top management of banks goes out of their way to assure that

employee adore their work. Managerial personnel also claim that their main focus is to develop

their subordinates in banks. On the other hand interesting observation come to light that

subordinates blame that employee's participation is rare in making any decision and

compensation is not based on competency or ability of an employee. However as compared to

managers, subordinates are highly dissatisfied with existing HRM practices in both banks. The

HDFC employees are comparatively better than JKB which is clearly reflected from aggregate

values of mean and their respective percentage ranging between 3.04(51.00) to 4.13(78.25) in

managers and 2.94(48.50) to 3.70(67.50) in subordinates. While in JKB overall values of mean and

their respective percentage ranging between 2.97(49.25) to 3.68(67.00) in managers and 2.81(45.25)

to 3.43(60.75) in case of subordinates. From the above analysis, we can conclude that managers as

a whole are more satisfied than subordinates towards the HRM practices in the sample study

organizations. We can also conclude that satisfaction of HDFC employees towards the HRM

practices is higher than JKB employees. Higher the level of satisfaction higher is the

organizational performance thus we can say the HRM practices are closely related with

organizational performance.


89

Exhibit 1.5: Perceptions of Managers and Subordinates towards the overall HRM practices in private

sector

Variables

HDFC

Managers

N=8

HDFC

Subordinates

N=24

JKB Managers

N=86

JKB Subordinate

N=266

Mean

score

%

Mean

score

Mean

score

% Mean

score

Mean

score

%

Mean

score

Mean

score % Mean score

General

Climate 3.41

60.25 3.04

51.00 3.61

65.25 3.25

56.25

OCTAPACE

culture 3.50

62.25 3.28

57.00 3.62

65.50 3.16

54.00

Selection

Process 4.13

78.25 3.33

58.25 3.68

67.00 3.37

59.25

Job

Definition 3.66

66.5 3.51

62.75 3.64

66.00 3.43

60.75

Career

Planning 3.64

66.00 3.14

53.50 3.52

63.00 3.08

52.00

Employee

Participation 3.04

51.00 2.94

48.50 3.22

55.50 2.82

45.50

Performance

Appraisal 3.68

67.00 3.17

54.25 3.44

61.00 3.11

52.75

Training and

Development 3.81

70.25 3.70

67.50 3.48

62.00 3.16

54.00

compensation 3.43 60.75 3.06 51.50 2.97 49.25 2.81 45.25

Conclusion

The respondents mostly managers of sample study organizations perceived satisfactory

attitude towards existing HRM practices in the sample study organizations. The

managers showed high level of satisfaction with the developmental policies of the top

management and were happy with the prevailing HRM climate in the sample study


90

organizations. It is evident from the overall results that the employees of HDFC are more

satisfied than the JKB at both managerial level as well as subordinate level.

Suggestions and Policy Implications

The research study attempts to analyze the impact of HRM practices of HDFC and JKB

by focusing on relationship between HRM practices variables on organizational

performance in the within the Jammu and Kashmir state of India. In order to achieve and

meet with the world wide standards and to sustain in a competitive market banks need

to create such an organizational climate that has great impact on the quality of

organizational performance. For keeping the climate favorable certain important issues

to be considered seriously, like good quality of leadership, treating employees humanly,

mutual confidence, two way communications and opportunity for development. .There

is an intense need for restructuring of OCTAPACE Culture so that it can bring about

changes required for better performance. Recruitment and selection should be based on

internationally accepted personality traits to be globally competitive. The sample study

organization has to create such strategies that will help them to attract the best candidate

from the market in order to achieve competitive edge. It is suggested that employees

should be allowed to shape their duties in an unpredictable situations. The management

should be flexible so that continuous support, collaboration, trust and confidence among

employees can be imparted and developed. Employees in the sample banks should have

clear career path that motivates employees to work effectively and efficiently in order to

achieve organizational goal. Further horizontal promotion can be introduced apart from

vertical promotion so that frustration of the employees can be minimized. Because of

these factors the employees will definitely feel job security rather than looking for another

jobs in other organization. There is an urgent need for redesigning the PAS and self-

appraisal and peer appraisal should be introduced so that PAS serves as important input

for promotion, transfer, career planning, training, salary administration and reward

system in these sample banks. . It is also suggested that besides imparting job specific


91

training the banks under study should focus on varied training programs that can impart

new knowledge and skill linked with the career progression. It is clear that employees

are not satisfied with the compensation policy in the sample study organization that

should be taken care because of its volatile and critical nature. The performance based

salary will hopefully save the sample study organization from the already unfavorable

composition of workforce, cross cultural environment and other demographic factors.

Limitation and direction for future research

The research study made number of limitations. The main limitation of this research

study is about sampling issue as the sample size of HDFC was small as compared to JKB.

In addition to that, the study focused on perceptions of organizational performance and

HRM practices as reported by the employees. Hence, it is subject to common source and

common method bias as perception varies from person to person. The study did not cover

all the HRM practice variables that have an impact and relationship with organizational

performance.

In order to validate the findings of the study, case study, focus groups and longitudinal

studies are another interesting approach that can be undertaken for future research.

Additionally, the research model of this study can be tested in other service sector like

education, hospitals and tourism with the large sample size so that the research model

can be generalized.


92

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