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Chapter 2- REVIEW OF LITERATURE

2.1 INTRODUCTION

This research project will remain incomplete if various research studies conducted in the

field of human resource management and human resource development are not taken into

account. The Researcher has reviewed several Research Papers, Books and Theses to

provide an insight into the academic endeavors related to HRD and their impact on

organizational performance. This chapter reviews the past researches on similar or related

topics and helps the researcher in providing a sound research foundation to understand the

issues on which the study is focused. In the following pages, an attempt has been made to

review some of the important studies conducted by various Researchers in India and even in

foreign countries. The chapter is presented in the following sub-heads:

2.2 Review of literature in the context of Indian Research on HR/ HRD/HRM

practices

Anupama Gupta (2010) described the challenges faced by Human resource manager in

context of new economic scenario. This paper emphasized that these challenges should

seriously taken care of. Main challenge is the shortage of skilled manpower. This paper

examined the role of human resource department to tackle the problem. It was the duty of

HR department to design a possible career path to retain talent. It was suggested that HR

manager should be ready to handle the challenges, but the role of other stakeholders should

also be included in order to ensure healthy survival of the organization.

Saini R.R. (2010) in his article ―Human resource development in UCO Bank-A case study

of Chandigarh Region.‖ evaluates the Human Resources Development policies and

practices. This study identified the process and problems in designing and implementing

Human Resources Development Systems. This study was analytical in nature and consist a

sample of 100 respondents to analyze their opinion about HRD Policies and Practices. The

Important findings of this study were, qualification was the most important factor of

recruitment at all level of managers and employees. It also concluded that problem solving

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strategy of the organization was very effective because all appropriate method have been

used to solve problems. Negotiation and Union involvement was the most prevalent used

method to solve the problem. This study also observed that the managers were not aware

sufficiently about the functioning of HRD Systems. Therefore a proper action plan to

improve awareness, Motivation, & serious concern among managers about HRD should be

implemented.

Kundu. Subhash C., Divya Malhan (2009) in their article on "HRM Practices in Insurance

Companies: A Study of Indian and Multinational Companies" opined that Competitive

advantage of a company can be generated from human resources (HR) and company

performance is influenced by a set of effective HRM practices. The results of this study

indicated that both multinational companies and Indian companies have to significantly

improve their practices regarding performance appraisal, training and financial benefits, and

hr planning and recruitment. Service sector is human resource intensive business. To gain

competitive advantage, service organizations should emphasize on human resource

management practices, as has been indicated in the results. A well-defined framework of

human resource management practices benefits not only the organization but also the

employee. HR policies of an organization benefit the employee by providing better

opportunities for growth in terms of better compensation, benefits, training and development

opportunities, and career management, in turn leading to job satisfaction and self-

fulfillment.

Tripathy (2008) observed that an organization can have competitive advantage by utilizing

its human resources. This can be achieved through sound HRD Practices. According to him

HRD include three C‘s- Competencies, commitment and culture. An optimum level of

progressive climate is essential for facilitating HRD in an organization. It was resulted that

good HRD Practices can influence financial and other performance indicators in the

organization.

Singh S.K (2008) in his research entitled ― HRD Climate: Interventions and challenges‖

examined that survival of the organizations in dynamic and complex environment require

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employee involvement, productivity and this can be achieved with the help of quality

targets, quality circles, training and development & suitable method of performance

appraisal etc. Above these HRD interventions/practices should be implemented in a suitable

way and HRD Climate should be conductive so that cooperation of employees can be

achieved and conflicts can be sorted out which in turn increase the effectiveness of the

organization.

Patil, Kallinath S. (2007) in his study opined that, the service sector plays a vital role in the

development of the country. LIC has grown into a living saga. This transformation has not

come about overnight. A breakthrough has been achieved on the strong foundation laid by

the people of this great institution, which provided confidence and inner strength to explore

new frontiers through the program of massive decentralization, development, expansion and

diversification undertaken in recent years. The organization is today on the threshold of new

vistas, striving and straining for reaching new heights and surging ahead in quest of

excellence.

Hemant Rao (2007) emphasized the changing role of HR. There was dramatic change in

HR during past five years. This study shows the significant role of human resource

managers in various areas like Empowerment of workers, Business process Reenergizing,

Total Quality management, Humanization of work, and Quality of work life. It was the

challenge of HRM to balance the impact of liberalization and globalization on productivity.

Earlier the role of Personnel department was to give advice or support when asked but the

changing professional employment scenario emphasized the role of HR professional while

dealing with employees of different regions, caste, language and social backgrounds.

Sharma and jyoti (2006) in an article on "job satisfaction" concluded that job satisfaction is

an effective reaction to an individual's work situation, and has been described as a positive

emotional response resulting from appraisal of one's job. One of the aspects that can lead to

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Dissatisfaction is one's attitude towards one's job. job attitude can be defined as an overall

feeling about one's job or career or in terms of specific facet of the job or career and can be

related to specific outcomes, such as productivity.

Subramanian, V. (2005) expressing his views regarding recruitment and selection of

employees stated that any organization which gives a fair share of attention to the

recruitment and selection of its people is bound to get good returns. Recruitment and

selection should be viewed in the wider context of the organizational future. What are the

strategic objects and hence what capabilities will the enterprise need in the future? Must be

the questions the organization should always address itself to. Therefore, an important

strategic issue to consider is how the recruitment and selection activity can contribute to

long term business goals.

G.V.Chalam and L. Srinivas (2005) in this paper made an attempt to explore the basic

gender disagreement with respect to HRD Climate in 20 branches of SBI at Andhra Pradesh.

Findings of the study showed that women employees have much more concern on HRD

climate than men. They come up with high level of satisfaction in respect of HRD Practices.

Female Employees had higher degree of pleasure toward HRD Climate. It was also revealed

that women respondents closely observed and followed the Human Resource development

climate of the Bank and were also very loyal toward bank regarding their commitment

toward work.

Maitin, T.P. (2003) In his article "Dynamic Human Resources" stated that, out of wide

variety of resources which participated in the process of organizational growth, human

resources are the most dynamic element of efficiency and productivity. In the context of

modern information age, manpower owns the responsibility of information mobilization and

their profitable utilization, which increases performance of organization. The role of human

resource as great intellectual assets in management is too valuable to accelerate the rate of

economic progress.

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Malik and sur (2003) in their study on "Human Resource Accounting in India" observed

that the progress of any organization is absolutely dependent on the skillful utilization of its

human resources. Even in the modern world, an organization may own adequate financial

resources and acquire physical resources with latest technology as it needs, it would find

difficult to manage its affairs, if the human organization of the concern is not strong enough.

However, the strange irony is that in India most of the organizations do not recognize it

properly. They do not adopt human resource accounting (HRA) although it could contribute

significantly both to internal and external management decisions. HRA also helps the people

of the organization in improving their performance and bargaining capacity. It makes each

of them conscious about the ratio between his contribution towards the betterment of the

concern and the expenditure incurred by the concern on him.

Vidya A. Salokhe (2002) conducted a study on HRD, observes that "Human Resource

Development (HRD)" signifies an effort aimed at qualitative improvement of human beings

in their specific role as assets of an organization. HRD intrinsically recognizes that,

"People" are the organizations singularly important and valuable resources and that they

need to be developed in terms of their knowledge, skill and attitude for achieving their

personal as well as organizational goals. Because only dynamic people can built dynamic

organizations, only competent and motivated people enable an organization achieve its

goals.

Mishra and Bhardwaj (2002) in their research entitled ―HRD climate: An empirical study

among private sector managers‖ examined the nature and extent of HRD climate over the

hieratical levels in large private sector organizations located in eastern parts of India. A

sample of 107 managers at senior, middle, and lower levels is taken. The standardized

questionnaire on HRD climate developed by Rao and Abraham (1990) was used consisting

of a 5-point scale to measure the three categories i.e. general climate, OCTAPAC culture

and HRD mechanisms. For analyzing results mean scores and percentage scores of each

item was calculated, and t-test was applied to verify the results. The conclusion was that the

HRD climate prevailing in private sector organizations was good and satisfactory. Further

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the authors recommended that the top-level managers should be responsible enough to

introduce a well-integrated sound training policy for imparting training to the employees.

T.V. Rao (1999) in his book entitled ―HRD audit‖ describe the framework and

methodology of HRD audit. This is landmark work which makes corporations to conduct an

internal audit of their human resource functions. HRD score card has been developed and

tested by Dr. Rao. HRD dimensions are very essential for the contribution toward

organizational performance, HRD systems maturity, HRD competencies, HRD culture and

values, and HRD linkages to business goals. Many corporations have started investing in

HRD. They have started new human resource development, given top level positions to

human resource persons, created reasonable budgets and expect the HR function to give a

strategic advantage to their corporations..

Udai pareek &T.V. rao (1999) in ―designing & managing human resource system‖ depicts

the fluctuating trends in designing & managing human resource system. Recognize the

importance of HRD and the limitations of personnel department. Many organizations have

established new HRD department. This book treats human resource system. This work

includes some new additions namely career planning & development, induction training,

socialization, mentoring etc. This also gives information about professional bodies and

academic institutions active in the field of HRD.

Venkateswaran (1997) conducted a study entitled ―A note on HRD Climate‖ revealed that

early identification of human resource potential and development of their skill are the main

tasks of the HRD department. The study based on the response of 132 executives of large

public sector unit of engineering organization. The study proves the existence of favorable

HRD climate in the organization. The results of the study revealed that the HRD dimensions

increases the employee interest in the work place thereby eliciting a higher level of

performance.

Mathur et. al (1996) in a study on work culture try to differentiate the internal work culture

of public and private sector organizations in India. He examined the how the external socio-

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cultural environment and enterprise variables influence the internal work culture, which in

turn has an impact on human resource management practices. He resulted that as compared

to public sector organizations, the internal work culture of private enterprises put greater

stress on internal locus of control, future orientation of planning, and employee participation

in management and thereby result in better performance. It was further point out that HRM

Practices in private sector utilized more effective motivational techniques like feedback,

performance based reward, supervisory control, autonomy etc as compared to public sector.

Rajan gupta (1990) in his book entitled ―implementing human resource development‖ dealt

with the implementation part of HRD. The work gives an insight to improve the

implementation process and develop theoretical understanding about HRD implementation.

In this book attention is given to different aspects and issues involved in HRD like

manpower planning, education and training, impact of liberalization and globalization, total

quality management and human resource accounting and HR dimensions of the new

economic policy.

Rao and Abraham (1986) stated in their research paper entitled ―HRD Climate in Indian

Organizations‖ that human resource is essential for making an organization dynamic and

growth oriented. The top-level executives have ultimate responsibility in creating a healthy

climate and providing adequate training, which is essential for the overall development of

employees. They hold the view that holds the view that existence of development climate is

a pre-requisite for facilitating HRD system in the organization. Development climate

constitute three variables:- general climate, HRD mechanisms, the OCTAPAC culture.

In general climate, human resource development is given high importance by top & line

managers. In this supportive climate is facilitating the good personal policies and positive

attitude toward development. This climate include positive attitude of top management

&line managers towards practicing HRD in the organization.

HRD mechanism includes the practices followed & exercised in HRD including

performance appraisal & potential appraisal, training, feedback, counseling, career planning,

employee welfare, job rotation etc. these mechanism initiate the development employee

competencies.

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The OCTAPAC culture includes the value of openers, conformity, trust, authenticity, pro-

activity, autonomy and collaboration. This culture is essential for HRD implementation

openness makes people to feel free to discuss their feeling, ideas & activities with one

another. Conformity is solving the problems & issues rather than hiding them for fear of

hurting and getting hurt. Trust makes people to believe what they say to others & vice-

versa. Autonomy is about giving freedom to people to work independently with

responsibility. Pro-activity helps employee to take initiative & risk. Authenticity makes

people to do what they have promised earlier. Collaboration is tendency to help each other

and work as teams. So general supporting climate is essential for HRD implementation.

Successful HRD implementation involves use of maximum HRD mechanism. OCTAPAC

culture is needed for facilitating HRD.

The authors conducted a field survey to examine the prevailing climate in organizations and

for this a questionnaire was developed, grouped into 3 broad categories of general climate,

OCTAPAC culture and HRD mechanism consisting of 38 statements of above 3 categories.

Coefficient of correlation was computed. The overall interpretation of the study was that

there exists an average level of HRD climate in Organizations.

2.3 Review of literature in context of Global research on HR/ HRD/ HRM

practices

Benjamin Akinyemi(2011) in their research paper entitled ―An Assessment of Human

Resource Development Climate in Rwanda Private Sector Organizations‖ assesses the

impact Human resource development climate in two leading Rwanda based

telecommunication and insurance companies. This research studied the differences between

the Telecommunication industry and the Insurance industry with respect to their prevailing

Developmental Climate along with three dimensions of HRDC. Primary data is collected

from 87 respondents in both the companies through a structured, self administered 38-item

Human Resource Development Climate (HRDC) questionnaire developed by Rao and

Abraham (1986). The questionnaire measured the General Climate, HRD Mechanisms and

OCTAPAC (Openness, Confrontation, Trust, Autonomy, Pro-action, Authenticity and

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Collaboration) Culture within the two private organizations. According to the findings, the

prevailing HRDC within both organizations is congenial. However, results show that the

developmental climate in the telecommunications company is more favorable than that of

the insurance company.

Kalyani tanvir(2008) in the research ―Challenges of Human Resource Development to

pace with Globalization‖ The study was aimed at identifying the variables related to human

resource development in teacher educators‘. Researcher studied the effect of human

resource development climate, performance appraisal, induction in-service education and

training needs of teacher educator with impact of gender, experience, age, organizational

difference, working in unisex or co-education, service stature difference. Population of the

study was teacher educators working in the eleven institutes of teacher education in the two

cities Islamabad and Rawalpindi. Two hundred twenty three, male and female teacher

educators responded to the researcher‘s questionnaire. Instrument used for data collection

was HRDC, PERAP, INS and training needs assessment, questionnaire adapted through

Noorjahen N, Ganihar. Major findings of the study revealed, that gender wise, experience

wise, age-wise difference, organizational difference, working in unisex or co-education,

service stature difference have a significant impact on the variables HRDC, PERAP, INS

and training needs. Furthermore a significant relationship among the variables HRDC,

PERAP, INS and training was determined.

M.A. Sahaf and M.A. Siddiqui (2007) examined the effectiveness of training in the

Educational organizations. The focus of the paper is various components of training and

development like induction training, training needs, training inputs, management attitude

towards training. Findings of the study revealed that teachers were not satisfied with the

prevalent training and development programs. In the study a number of recommendations

were made like induction training of the fresher should be given, Feedback may be obtained

from the students about their teachers, separate training programs may be organized to train

faculty in handling teaching aid equipment like computer, lab equipment, overhead

projector, internet etc.

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Hassan (2007) reviewed HRD practices with organizational values and measured the

employees‘ perspective. It was observed in research that HRD practices namely potential

appraisal and promotion, learning/ training, performance guidance and development were

positively correlated with organizational values like collaboration, creativity, quality,

delegation and human treatment but the performance appraisal, career planning and

contextual analysis variables were negatively associated with Trust and creativity. Hassan

et al (2006) investigated whether ISO certification contribute toward improvement in HRD

system and also examined the role of HRD Practices on employees development and quality

orientation in the organization. Results indicated that ISO certified companies, as compared

to others, obtained higher means on some HRD Variables. It was identified that

organizations with better learning, training and development, reward and recognition, and

HRIS (Human resource information system) promote HRD climate in the organization.

Quality orientation was estimated by career planning, performance guidance and

development, role efficacy, and reward and recognition system.

S. Husain Ashraf (2007) brought out the fact that Human development is the core of all

development efforts. It was explained that Human resource is very dynamic and essential

resource for producing goods and services and welfare of the society. Human development

at micro (Institutional) level involved selection, manpower planning, training, performance

appraisal, potential appraisal, development, compensation etc. At macro (National) level it

involved illiteracy, poor health, eradication of poverty. Human development included

sustainable development, human rights, security, productivity and development,

empowerment, equity and opportunity. In fact to achieve higher standards of human

development positive approach was necessary which include higher growth rate, larger

expenditure on social sector, an efficient utilization of funds etc.

Wan et al. (2002) describe the pattern of relationship between HRM practices and firm

performance. HRM practices were creating a positive impact on organizational targets.

Results achieved through regression analysis suggested that facilitating and implementing

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important HRM practices increased organizational performance. The performance appraisal

is the most important practices of HRD to increase financial performance. The companies of

Singapore interested in enhancing HR performance emphasized the need for empowerment

and training.

2.4 Review of research contribution on HRD and Organizational performance

in Indian context

Sangeeta Trehan and Karan Setia(2014), in their research entitled ―Human Resource

Management Practices and Organizational Performance: An Indian Perspective‖ give a

better understanding of the role of human resource practices in creating and sustaining

organizational performance, specifically in the Indian context. They discuss a framework

that indicates how external and internal factors affect HRM practices which in turn generate

core benefits for the organization and ultimately lead to overall corporate performance.

After a comprehensive literature review they highlight three sets of HR practices that would

support a healthy and innovation-oriented HR system. They are: (1) training-focused; (2)

performance based reward (3) team development. HR Practices in their model refer to these

three bundles of practices. OP outcomes are the ultimate dependent variables in the model.

These are organizational outcomes/ their indicators such as shareholder return, profits,

productivity, organizational survival and product (and services) innovation. They found

highly positive relationship between human resource practices and organizational

performance.

Ansari A & W. Fola (2014) in their research article entitled ―Financial soundness and

performance of life insurance companies in India‖ examine those factors which determine

the profitability of life insurers operating in India taking return on asset as dependent

variable. They consider all the 23 Indian life insurers (including 1 public and 22 private) as

the sample for this study and the data for 3 financial years, viz., 2008-09, 2009-10 and

2010-11 are taken into consideration. For this purpose, firm specific characteristics such as

leverage, size, premium growth, liquidity, underwriting risk and equity capital are taken and

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regression is applied to estimate the Return on Assets. The findings of the study revealed

that the profitability of life insurers is positively and significantly influenced by the size and

liquidity. The leverage, premium growth and equity capital employed have negatively and

significantly influence the profitability of Indian life insurers. This study does not find any

evidence for the relationship between underwriting risk and profitability.

Sumnider kaur Bawa and Samiya chattha (2013) in their research entitled ―Financial

performance of life insurers in Indian life insurance industry‖ made an attempt to examine

the financial performance of Indian life insurers on the basis of various parameters like

various financial ratios related to liquidity, solvency, profitability and leverage. Generally,

performance can be estimated by measuring the profitability of firm. They includes 18

Indian life insurers (including 1 public and 17 private) in the sample and ratios are

calculated for the period of 5 years from 2007- 2012 and then analyzed by using multiple

linear regression model to measure the impact of different factors on profitability of life

insurers . The results of the study reveal that profitability of life insurers is positively

influenced by liquidity and size and negatively related with the capital. Profitability does not

show any relationship with solvency and insurance leverage.

Beulah Viji Christiana. M; V. Mahalakshmi (2012) in their research paper entitled

―Influence Of Employee Perception Towards Human Resource Practices And

Organizational Support On Their Citizenship Behavior In Private sector banks - An Indian

Perspective‖ studied whether the HR practices like performance appraisal, training and

career development in the private sector banks are positively associated to organizational

commitment of employees which help them to become responsible organizational citizens

.They also attempted to find out whether perceived organizational support would serve as a

mediator in the relationship between HRM practices and commitment. The statistical results

on data gathered from a sample of 214 employees in the private banks demonstrated that

career development and performance appraisal have direct, positive and significant

relationships with organizational commitment. In addition, perceived organizational support

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was found to partially mediate the relationships between two of the three HRM practices

(career development and performance appraisal) and commitment.

Santosh singh Bais (2011), conducted research entitled ―Human Resource Development

(HRD) in Insurance sector- A study with special reference to life Insurance corporation Of

India‖. As per the findings of the study it can be interpreted that the real strength of a

country lies in the development of the human mind and body. The growth and development

of any country depends on its people. Empirical studies have indicated that labor and capital

were largely responsible for the development of advanced countries. This was done by way

of investment in education and training of the labor forces. Thus human beings are

considered as the most valuable resource.

Solkhe and Chaudhary (2010) in their research on HRD gathered the responses from 71

junior and middle level executives from various departments of a public sector undertaking

finds the existence of good HRD. According to the results, the managers showed a favorable

attitude towards HRD Policies and practices of the organization. They were satisfied with

the developmental policies of the top management. Solkhe and Chaudhary (2011)

conducted another empirical investigation examining the three components of HRDC. In

this study they analyze and determine the relationship, further the impact of HRD Climate,

OCTAPACE Culture on Job Satisfaction as an Organizational Performance measure in the

selected public sector enterprise. The study is based on the responses sought from

executives from various departments and different hierarchical levels of a public sector

undertaking located in North India. The findings indicate that HRD Climate has a definite

impact on Job Satisfaction which in turn leads to the increased organizational performance.

The analysis showed that there exists a positive relationship between different components

of HRD Climate and Job satisfaction. The correlation coefficient was .734 (General

Climate), .693 (JHRD Mechanisms) and 0.695 (OCTAPAC Culture) respectively. This

proves that HRDC is a contributing factor to increase the level of job satisfaction of the

employees. The result from their study shows a reasonable level of development orientation,

trust and freedom of expression, healthy interpersonal relationship and openness. However,

employees are not satisfied with promotions decisions within the company.

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Jain Ravindra and R. premkumar (2010) in his article on ―Management styles,

Productivity and adaptability of human resource: An Empirical study‖ explained the

relationship between management styles and productivity of Human resources. This study

explained the extent to which management style are practiced in Indian organizations across

public sector and private sector enterprises. The author had measured the impact of

management style on HR productivity and HR Adaptability. This study is exploratory in

nature. He had collected primary data through administering the relevant questionnaires to

three hundred executives belonging to both public sector and private sector. This study

comes to the conclusion that both productivity and adaptability of the human resources were

found to have positive correlation with the selected four management styles.

Subramony (2009) in his study on "A Meta-Analytical Investigation of the Relationship

between HRM Bundles and Firm Performance", resulted after studying the meta-analysis of

239 effect sizes derived from 65 studies that HRM bundles have larger effects than their

constituent individual practices. HRM Bundle is positively related to business outcomes.

These findings reaffirm the case of firm level investments in synergetic HRM combinations

and highlight the importance of investing innovative practices.

Som (2008) studied the role of innovative HRM practices and their impact on enhanced

corporate performance during the change process. The results found that innovative

recruitment and compensation practices have positive significant relationship with firm

performance. It was also observed that HR department seems to be the most important

factor for enhancing corporate performance in the context of economic liberalization. This

study holds importance because liberalization created competition and adoption of

innovative HRM practices are important for increase in corporate performance.

Singh. et al.(2008) conducted a study to examine the impact of Human resource policies

and practices on organizational performance. The data used in this study was collected from

49 organizations consisting of 18 public sector and 31 private sector enterprises representing

the diverse set of industries. For the study they used multi item instruments. For example

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they suggested that the employees should motivated through higher than industry average

wages, performance linked wages and stock option schemes and if human resource policies

are updated on regular basis there is a high likelihood that the organization will achieve high

employee morale, adaptability, quality of product and service, learning and growth and

impact on industry. This study reveals that empowering people through extensive

information sharing, job rotation, and multi-tasking and decentralizing decision making

powers is more likely to help improve the various dimensions of performance, and thus

organization can take initiative to introduce best human resource practices for enhancing

organizational performance. Empowerment and Meritocracy also emerged as significant

predictors of overall performance.

Purang (2008) attempted to measure the relationship between different dimensions of HRD

climate (Participation, succession planning, training, performance appraisal and job

enrichment) and organizational commitment. This study resulted that positive perception of

climate shall enhance the commitment, which further increase the performance of the

employees.

Bjorkman and Budhwar (2007) in his research entitled ―Human resource management and

the performance of foreign firms operating in India‖ reviewed the relationship of HRM and

the performance of foreign firm operating I India by taking 76 subsidiaries of overseas firms

operating in India. The results highlighted that introduction of HRM practices form foreign

patent organizations is negatively associated with performance and local adoption results in

positive association with the performance of foreign firms operating in India. The findings

asserts that HRM practices do improve the organizational performance in Indian

subsidiaries of foreign firms if localization of HRM implemented as people belong to local

areas are more sensitive toward their culture and environment.

S. Biswas, Kailash, B.L. Srivastava and Vijai N. Giri (2007) in their study of Indian

organizations described the linkages between a firm‘s human resource management

practices, their effect on individual organizational member‘s behavior and enhancement of

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organizational efficiency. Extra role behavior of the employees was shaped by the

management policies and practices. The findings of the study confirmed that the extra role

activities of an individual increased his attachment to the job, organizational citizenship

behavior had a significant influence on employees‘ level of job involvement and there

existed favorable association between job involvement and organizational effectiveness.

Lastly, it was found that satisfied employees will contribute towards, the effectiveness of an

organization.

S.Ramaya, (2007) explained about the responsibility of the organization to utilize human

resource in the best manner for the achievement of business results. The concept of balanced

score card make organization to achieve objectives through HRD. The findings of the study

shows cause and effect linkage between investment in training and development and an

organizations business goal. Balanced score card provided a number of benefits to human

resource and increase their efficiency. Individual employees‘ performance was evaluated in

a structured manner. Balanced score card was an effective tool to measure the performance

of the human resource which was responsible for the firm‘s performance.

Chand & Katou (2007) have conducted a study on Indian hotel industry covering 439

hotels and resulted that Hotel performance is positively associated with HRM system of

recruitment and selection, manpower planning, job design, training and development,

quality circles and pay system and also related with hotel category (chain or individual

hotel). They affirmed that Hotels who belong to chain category and focus on best HRM

practices achieve higher performance as compared to other category.

D.K.Pandey (2007) described that in the changing scenario the role of HR in the

organization must be align with organizational goals. This can be achieved through best HR

practices. This paper provided diverse HRM reforms and suggesting best HRM practices.

Quality of life for workers and positive organizational climate would be the greatest

contributor for the retention of workers and for their high morale. It was suggested that

performance appraisal technique should be tailored according to the job. It was further

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suggested that trade union should work for wage increase and other concessions that can

increase the productivity and performance of Human Resource. These new HRM Practices

and Reforms are imperative.

Sami A. Khan (2007), outlined the fact that Human resource management function had to

play important role in adding value to the business activities in the organization. This paper

explains that HR function should be strategic and should align with the business strategy

that would result into superior efficiency, quality, innovation and customer responsiveness.

The challenges before the human resource managers were related to new issues like

managing new learning, knowledge and skill of human factor, sustainable competitive

advantages. It is the responsibility of the HR managers to work for the shaping of

organizations in new business scenario.

Shahnawaz, M.G. and Rakesh C. Juyal (2006) in their research paper" Human Resource

Management Practices and Organizational Commitment in Different Organizations"

concluded that HRM refers to the overall philosophy about the organization and how people

should be managed and is not merely limited to certain specific functions. HRM focuses on

congruence and commitment instead of compliance and control. This study suggested that

there is a need to develop industry specific HRM policy and practices to remain competitive

and to develop committed workforce.

Singh kuldeep (2004) in his research paper entitled ―Impact of HR practices on perceived

firm performance in India‖ studied impact of HR practices on perceived firm performance in

India identifying 82 firms out of a sample of 359 firms selected from BT- 500 index with

response rate of 22.84 %. The study used various HR Practices as independent variables

whereas the perceived organizational performance and market performance as dependent

variables. The results indicated that there is highly significant relationship between two

human resource practices Training (r = 0.37, 0.39) and Compensation system (r = 0.41,

0.43) and positive impacts on perceived general and market performance of the firms,

indicating that an increase of (1) unit in compensation will increase (0.41) in the firm‘s

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performance and (0.43) in the firm‘s market performance. An addition of (1) unit in training

will enhance (0.37) the firm‘s performance and (0.39) in the firm‘s market performance,

secondly,. On the other hand two practices, namely job definition (r = -0.21) and career

planning system (r = -0.15) had a negative and an insignificant impact on perceived firm

performance. The result highlighted the positive relation among several HR practices like

Training, employee participation, compensation, selection, performance appraisal, and firm

performance with correlation point r= 0.32. This study holds importance because it has been

conducted outside US context where most of the previous studies of this type have been

conducted earlier.

Goyal (2004) concluded in his study that human resource plays an important role in

development and growth of any organization and for that matter of any economy. Among all

the factors of production only human resource are living being and have unlimited capacity

and potentials. Such capacity and potentials of human being can be developed for the

benefit of organization by applying proper strategies. Human beings are not only active

factor of production in itself but it also activates other inactive and inert factor of production

like money, materials, machines and methods. In this present age of globalization survival

and growth of any organization depends on the proper development of its human resources.

Paul and Anantharaman (2003) explored the causal model linking HRM with

organizational performance in Indian software companies and found that not even a single

HRM practice has direct causal connection with Organizational performance. Further it was

mentioned that HRM practices such as job design, compensation and incentives, training

directly affect the operational performance parameters viz. employee retention, employee

productivity, product quality, speed of delivery and operating cost. They suggested that

integrated approach to link HRM practices with organizational performance should be

adopted. It calls forth a wider vision to see the big picture and the interdependence and

interrelationship among HRM practices, intervening variables, operational performance

parameters and financial performance.

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Sivasubramaniam & Venkataratnam (1998) studied the relationship between HRM and

firm performance in 52 companies in India. This research gives evidence of relationship of

HRM with company performance. The findings stated that an adoption of HR strategy

translates into 4% edge in return on investment and nearly 5% advantage in return on assets.

It was also observed that match between HR strategy and business strategy results in

reduction of 8% in turnover rates. They recommended that when market conditions get

tougher and competitors attempt to imitate our products and services, which is sustainable

and un-imitable is the Human resource based advantage.

A.S Bhatia and G.K. Bhatia (1997) in their joint paper ―Human resource Development:

India in Global Context‖ Presented a comparative analysis of the development of Human

Resource of the countries in the world, based upon the Human Development Index. Further,

India is one of the bottom line countries having the lower development of human resource.

Their study concluded that the bureaucratic controls, centralized planning and

administration, poor allocations and inadequate outlays for infrastructure in schools,

colleges, universities, libraries and laboratories and training of teachers have resulted into

inefficiency of the present educational system. Further education and health services should

be given the priority deserved to meet the objective of development of people.

Jain (1996) in his publication ―HRD Practices in Indian Industries‖ examines the impact of

HRD policies and practices on increasing Organizational Effectiveness and through light on

the development of a cohesive HRD climate. He studied the conceptual framework of HRD

by undertaking the past and present patterns of HRD in two public sector undertakings

which is BHEL and NFI. He studied the relationship between HRD variables, personal

factors and effectiveness variables. The author emphasized that the importance of the HRD

practices are yet to be acknowledged in their contribution toward organizational

effectiveness. In this context the author also presented a general model of HRD, which

explains the factors contributing significantly for the development of public sector

undertakings in India.

77

Dandekar, Karnik and Sathye (1994) ―Improving HRD in the Power Sector: The Case of

Performance Appraisal in MSEB‖, assessed the importance of human resource in state

electricity board Maharashtra. Improvement in the performance of Public Sector

Undertakings is by and large depends upon the development of Human Resources available

in the organizations. The role of HRD becomes essential with improvement in service sector

where technology up gradation demands efficient and productive workforce to achieve

organizational targets. Service sector where people interface are of great importance, the

role of HRD in utilizing human capital to enhance the knowledge and skills and efficiency

in order to motivate people.

Bharwaj, Rupali and Khandelwal, (1993) in their research work entitled HRD: A key to

organizational Effectiveness. linked HRD managers, line managers and top management

for successful implementation of HRD practices, after review of several case studies and

experiences in India, noted ‗Western and third World studies of organizational excellence

indicate five major keys to organizational excellence: mission, vision of excellence, core

values, style of management; goals, policies and choice of domain; management systems

and structure; and organizational renewal processes‘

Abraham (1989) surveyed the HRD practices of 68 Indian organizations. He measured

various elements of the HRD profile of these organizations including Training performance

appraisal, career planning, Employee counseling, promotions, rewards etc. and the HRD

climate (openness, collaboration, trust, authenticity, pro-action, autonomy, confrontation).

Abraham also constructed an index of growth of the company profitability as a measure of

organizational performance. He was able to use this index only in 14 of the 68 companies.

He found that while the HRD profile did not correlate with the company performance, the

HRD climate did. He found that the perception of the HRD climate of the company was

more important than the HRD practice itself. This study also indicates that HRD culture is a

powerful intervening variable in translating HRD practices into profit. The HRD manager

matters a lot in this regard alone with line managers and top management.

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Porter (1985) has described a wider outlook and suggested that firms should analyze their

competitive environment, choose their strategies and then acquire the resources needed to

implement those strategies. Almost all the firms use same resources to implement these

strategies or to have the same access to these resources. He has discussed organizational

internal qualities that may affect competitive advantage. He argues that human resources

management policies can present a important source of competitive advantage because they

make employee more effective and productive. Superior employees create superiority in

their activities. Porter thus comes to the conclusion that there exists strong interaction

between the quality of a firm‘s human resources management practices and its sources of

competitive advantage in the markets.

Pareek and Rao (1977) Larsen & Toubro a prominent Engineering Company in India had

appointed two consultants from the Indian Institute of Management, Ahmadabad to study

the effect of performance appraisal system and make recommendations for improving it.

The two consultants (Pareek and Rao, 1975) studied the system through interviews etc, and

suggested a new system. They recommended that "… Performance Appraisal, Potential

Appraisal, Feedback and Counseling, Career Development, Career Planning and Training

and Development get attention as unique parts of an integrated system which we call the

Human Resources Development System" This system was proposed as a separate system

with strong linkages with Personnel (Human Resources) system. In their second report of

the Human Resources system in L&T suggested that the personnel function be viewed as

Human Resources Function (HRF). Personnel Administration, HRD, Worker Affairs and

Organization development should be added to the HRD Function, the consultants

recommended that…" Since OD is being added now, it is necessary to strengthen that part

of HRD.

2.5 Review of global research contribution on HRM/HRD- op linkage

In recent years, the focus of research on HRM has shifted from study of individual HRM

Practices on business performance to entire HRM system and its effect on organizational

79

performance. The researchers have divergent views about this new phenomenon. Some

researcher thought this system view of HRM is appropriate but simultaneously other argue

that Multiple HRM subsystem into one measures create unnecessary reliability and

multicollinearity issues (Becker and Huselid 1988). In addition comprehensive examination

of individual HRM practices highlights the significant predictor of business performance

(Bjorkman and Budhwar 2007).

In case of Organizational performance divergent views exists regarding use of financial and

non financial measures. Dyers and Reeves 1995 are of the opinion that profit, sales and

market share are financial measures and Productivity, quality, efficiency and the attitudinal

and behavioral measures such as commitment, intention to quit, and satisfaction are non

financial measures of organizational performance. Hoskinsson et al 2000; Bae & lawler

2000 have found problems in measurement of financial performance in emerging

economies. They argued that lack of market based financial reporting, inadequate regulatory

mechanisms, lack of transparency in financial reporting, issues of fictitious financial assets,

and window dressing are the main problem in financial dimension of organizational

performance.

Rather subjective measures are easy to measures but they have their own limitations because

of inclusion of personal biases. Researcher argues that though perceptual measures may

introduce limitations, but even then their benefits are far greater than limitations (Delaney &

Huselid 1996; youndt et al 1996). Many variables and events, both internal and external

affect organizations directly rather than perceptions (Boselie et al, 2005). The researcher

argued that more proximal measures which exert direct influence on organizational

performance should be used. These are productivity (Chang & chen 2002, Huselid 1995),

quality of product and services (Macduffie 1995;), Job satisfaction(Guest 1999; Hoque

1999), employee turnover intentions(Shaw et al 1998, Batt 2002), Trust in management and

commitment(Tsai et al, 2006). The following studies are conducted in global context to

show the linkage of HR/HRD/HRM with organizational performance indicators. The

following are the research contribution of various researchers in different parts of the world.

80

Eric Ng Chee Hong, et.al. (2012) in their study entitled ―An Effectiveness of Human

Resource Management Practices on Employee Retention in Institute of Higher learning: - A

Regression Analysis‖ studied the effective human resource management practices namely

employee empowerment, training and development, appraisal system compensation etc and

their impact on employee retention. In this research primary data was collected using the

non probability self administered questionnaire that consist of questions with 5-points Likert

scales from a samples of 278 individuals. By using a multiple regression analysis, it is found

that, training and development, appraisal system and compensation are significant to

employee retention except employee empowerment. Based on the results, training,

compensation and appraisal is a fundamental consideration for University of Y lecturers‘

retention decision; while empowerment is less fundamental to lecturers‘ consideration as

this can be attributed to the Asian culture characteristic of higher authority conformity.

Mir Mohammed Nurul Absar, et. al. (2010), in their research entitled ―Impact of HR

Practices on Organizational Performance in Bangladesh‖ studied the overall impact of

different HR practices on organizational performance and they collected Data from fifty

manufacturing firms in Bangladesh and come to the conclusion that HR practices have

significant association with organizational performance. Out of many HR practices,

performance appraisal is found to have more significant impact on organizational

performance.

Tahir Masood(2010); in his research work entitled ―Impact of Human resource

management practices on organizational performance: A mediating role of employee

performance‖, studied the impact of different Human Resource Management (HRM)

practices (i.e. recruitment and selection, training and development, performance appraisal,

career planning system, employee participation and compensation system) on Perceived

Organizational Performance (POP) and Organizational Financial Performance. Another

purpose was exploring mediating role of Employee Performance (EP) between HRM

practices and Perceived Organizational Performance. Researcher collected data from

Human Resource Professionals working in different companies of five industries Banking,

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Insurance, Leasing, Modaraba and Investment. Primary data from 274 HRM professionals

of 129 companies were collected using questionnaire. Secondary data was collected from

the published financial reports of the companies listed with Karachi Stock Exchange (KSE)

for the period of five years starting from 2004 to 2008. Results identified that all human

resource management practices were positively correlated with perceived organizational

performance and perceived employee performance, while none of the HRM practice showed

substantial contribution towards organizational financial performance. Correlation and beta

values of HRM practices were significant with POP in the banking industry. Recruitment

and selection (β = .662, p < .001) followed by employee participation (β = .516, p < .01)

showed significance in the insurance, (β = .343, p < .001) performance appraisal in the

modaraba, and recruitment and selection in the investment industry. Recruitment and

selection, training and development and the compensation system significantly contributed

towards the Marris Ratio in the modaraba industry. The compensation system in the

insurance industry, performance appraisal and compensation system in the leasing industry

contribute significantly.

Muhammad Asif Khan(2010) conducted a study entitled ―Effects of Human Resource

Management Practices on Organizational Performance – An Empirical Study of Oil and Gas

Industry in Pakistan‖ to measure the impact of human resource management practices on

organizational performance in Oil and Gas Industry in Pakistan. The response of 150

managers of 20 selected firms from Oil and Gas Industry have been gathered with the help

of self-reported questionnaire that include Five HRM Practices namely Recruitment and

selection, training and development, performance appraisal, compensation and reward and

employee relation with one another and subjective measures of organizational performance.

Factor analysis was used to define human resource management practices. Regression

analysis provided a positive and significant association of above practices with

organizational performance. The study provides results for management to use these for

superior performance.

82

Messersmith and Guthrie (2010) studied the high performance work systems

Organizations and their implications on the firm‘s performance in New Zealand. One of the

most important challenges faced by the human resources managers is finding and retaining

the right people. They are of the opinion that the most important part of an organization are

people and human resources systems designed to acquire, develop, and motivate skilled

individuals have impact on the firm performance. They studied the data of more than two

thousand establishments and provided a number of theoretical and practical implications

which described that using high performance work systems is resulted in many positive

outputs like sales growth, product innovation, and organizational innovation. Their findings

are in line with much of research in strategic human resources management. They found a

positive relationship between human resources systems such as high performance work

systems and firm performance metrics.

Abang Azlan mohamad (2009) in his research article namely ―Human resource practices

and Organizational performance, incentives as Moderator‖ examines different human

resource practices and the impact of incentives on manufacturing companies in Malaysia.

He has studied three types of human resource practices namely, performance appraisal,

training, and information technology and the focus of this research with the presence of

incentives as moderator on organizational performance. In this research sample of eighty-

five firms from Sarawak, Malaysia, has taken. The results have indicated that the two

components of human resource (HR) practices namely, training and information technology

have direct impact on organizational performance. It was found that incentive is positively

related to organizational performance but did not moderate the relationship between both

HR practices and organizational performance. Implications of the findings, potential

limitations of the study, and directions for future research are suggested.

A study by Katou A.A., (2008) has the purpose to bring out the impact of HRM practices on

organizational performance in the context of Greece. Data were collected from 178

organizations using a structured questionnaire in manufacturing sector, and analyzed using

the ‗structural equation modeling‘ (SEM). The results indicated that the relationship

83

between HRM practices (resourcing and development, compensation and incentives,

involvement and job design) and organizational performance is partially mediated through

HRM outcomes (skills, attitudes, behavior), and this relationship is influenced by business

strategies (cost, quality, innovation). Thus, the contribution of this study for academics and

practitioners is that HRM policies related with business strategies will affect organizational

performance through HRM outcomes.

Rizov and Croucher (2008) in his research examined the association of HRM practices and

organizational performance in European firms. They found that collaborative form of HRM

practices reflected positive and statistically significant relationship with firms‘ performance.

They are of the opinion that employees should be treated as an assets and core partners in

the organization and they should communicate organizational mission, values, goals and

strategy so that they can prepare themselves for the achievements of those targets.

Boselie et al., (2005) In meta-analysis of 104 articles, concluded that the top four HRM

practices are efficient recruitment and selection, training and development, contingency and

reward system, and performance management that have been extensively used by different

researchers.

Tzafrir (2005) studied the relationship between trust, human resources management

practices and firm performance. The study deals with practices, attitudes and performance at

the organizational level. The sample was selected from 275 organizations in Israel ; Out of

the total sample 104 questionnaires were completed. The study reveals the role of trust in

the middle of organizational and employment relationships. The study puts emphasis on

trust and integrates it with many human resources management practices and organizational

performance. This study was unique and one of its kind which explore the broader effects of

trust in the workplace. The study looks at the relationships between trust and several

mechanisms for improving organizational performance, influencing employee attitudes and

behaviors, and retaining employees in the organization. He stated that manager‘s trust in

their employees has a considerable impact on shaping the human resources management

84

system. In order to improve the performance, senior managers need to hold a clear

understanding of HR system.

Madan Mohan Jana (2005) in this study focuses on the Optimum use of Human Resources

and Input performance with the help of synergy concept and kaizen Principles. This study

examined the relationship between input performance and resource use pattern. Synergy is

that whole is greater than sum of its parts.

Sang (2005) in his research work focused on of managers from Taiwan and Cambodia and

concluded that human resource planning; staffing; compensation and reward; teamwork;

training and development, and employee security had influence positively on financial and

non-financial organizational performance. The study measured the positive effects on

operational performance, namely, production flexibility, product cost, product quality, and

product delivery.

Dessler (2003) discussed various aspects of human behavior in his views," inter country

differences affect a company's Human Resource Management process". Cultural factors

such as individualism versus collectivism suggest difference in values, attitudes and

therefore behavior and reactions of people from country to country. Economic and labor

costs factors help determine whether Human resource emphasis should be on efficiency,

commitment building, or some other approach. Industrial relations and specifically the

relationship between the worker, the union and the employer influence the nature of a

company's specific HR policies from country to country. Further he opines that strategic

human resource management is the linking of HRM with strategic goal and objectives in

order to improve business performance and develop organization cultures that faster

innovation and flexibility.

Chang and chen (2002) linked the HRM practices like workforce planning, training and

development, benefits, teamwork and performance appraisal with productivity. They studied

62 firms in Taiwan and found that there exist positive relationship between HRM practices

85

and productivity and business performance. This study also resulted in negative relationship

between workforce planning and employee turnover. They argued that HRM practices

increase the employee productivity and competencies and thereby increase the

organizational performance.

Bjorkman and Xiucheng (2002) investigated the effect of HRM practices on firm

performance in china and found a positive and significant association between HRM

Practices and performance.

Gelade & Ivery (2003) studied the relationship between HRM, work climate and

organizational performance in the branch network of retail banking. The results indicated

the significant correlation between work climate, human resource practices and business

performance. They explored that the correlations between work climate and performance

cannot be explained by their common dependence on HRM Factors and the results equate

with the mediation model in which the effect of HRM on business performance are partially

mediated by work climate.

Ichniowski and shaw (1999) in their comparative study of United States and Japan ,found

that Japanese firms were more productive and profitable than firms in United states, just

because of use of more sophisticated HRM/HRD practices.

Yeung and Berman (1997) have made an attempt to find out impact of human resources on

business performance. They have address following questions

Do Human Resources practices make a difference in business results?

In what ways can Human resources practices add value to business performance?

What are the most appropriate human resources measures that drive business performance?

They observed that in general human resources practices play three major roles:

In Building critical organizational capabilities; enhancing employee satisfaction; and

improving customer and shareholder satisfaction.

86

They also observed that by ‗reviewing some recent research studies regarding the human

resources – business performance relationship and by building upon the use of the balanced

scorecard framework in some companies such as Sears and Eastman Kodak, the results

were: Human resources do make a difference in business results, Human resources practices

can contribute to business performance through a multidimensional approach-building

organizational capabilities, improving employee satisfaction, and increasing customer and

shareholder satisfaction and commitment; They also resulted that A New cluster of human

resources measures, in addition to the traditional human resources measures, should be

developed to capture and drive the impact of human resources on business performance.

Delery and Doty (1996) in their research studied approximately 200 banks and found that

difference in HR practices reported rather large differences in financial performance and

devised strategic models for theorizing in strategic human resources management i.e.

Universalistic, contingency and configurational etc. They are of the opinion that the

strategic human resource management draws on three dominant modes of theorizing,

universalistic, contingency and configurational perspective in context of performance

predictions. They identified seven key strategic human resources practices developed

theoretical arguments consistent with each perspective.

Koch and McGrath (1996), studied 319 business units and link improved labor

productivity with human resources policies. They have given a research question that ―what

shall we do to improve performance? They have suggested that management of an

organization‘s human resources have significant relationship with the productivity of its

employees. They argued that firm should invest in the planning for, recruitment, selection

and development of firm specific human capital assets. The results of their study show that

attention needs to be given to the hiring and developing of employees in comparison with

capital formation of the firm. The major findings of the study reveal that the Human

resource strategy may be leveraged in capital intensive environment which is dynamic in

nature.

87

Ostroff (1995) developed an overall HR quality index based on aggregate ratings of all HR

activities of a firm. On the basis of this index, firms were classified into four categories. The

firms that scored higher on the HR Quality Index consistently outperformed than those with

a lower index on four financial measures: market/book value ratio, productivity ratio (i.e.

sales/employees), market value and sales. Recent researches worldwide have shown that

good HR practices and policies do influence business growth and development. The

researches indicate that the companies gain competitive advantage through best and efficient

human resource.

Huselid (1995), who examined the relationship between HR practices and performance

indicators like corporate turnover, profitability and market value. He collected responses

from senior HR executives in a sample of 968 publicly traded corporations in the US

regarding HR practices a high-performance work system (HPWS). After controlling for a

number of variables, he found that his HR index was significantly related to the gross rate of

return on assets (a measure of profitability) and Tobin‘s Q (the ratio of the market value of a

firm to its book value). This study is one of its own kinds and provides foundation for

succeeding research. He also stressed on importance of training and organizational culture

as these two variables put positive impact on employee behavior and help to achieve

positive results.

Pfefer (1994) Stressed that Human resource has been vital for firm sustained performance.

In knowledge economy, the human resource has been recognized as a strategic tool,

essential for organizational profitability and sustainability. This indicates that importance

given to human resource is the key indicator of organizational success. This realization has

led to the new role of human resource managers as strategic partner in formulation and

implementation of organizational strategy for high performance.

Barney (1991) is of the opinion that Human resource management has emerged as an

essential factor for sustained competitive advantage. Their research highlights that

organizations develop sustained competitive advantage through management of scare and

88

valuable resources like Human being. Empowered employees are the core assets of the

organizations and they work for increase organizational performance.

2.6 Conclusion

Strong evidence exists in literature about different HRM practices and their impact on

organizational performance. Researcher found positive relationship between HRM practices

namely effective recruitment and selection, training and development, compensation and

reward, performance appraisal, employee relation with firm performance.(Harel & Tzafrir,

1996; Delaney &Huselid 1996; Bartel 2004; Chie et al 2002; Batt 2002; Boselie et al 2001;

Bjorkman & Xiucheng 2002; Kto 2004; Hoque 1999; Ngo et al 1998; katou & Budhwar

2007, Huselid et al 1997; Young et al 1996).

Review of literature indicated that essential HR practices heavily researched as workforce

planning (Matthis & Jackson, 2004); job analysis(Cascio 2006, Dessler 2003); Training and

development(Katou and Budhwar 2006), Recruitment and selection (kulik 2004);

compensation and reward system (Milkovich & newman, 1999); Performance appraisal

(bernardin & Russell 1993), Career management ( Schein 1996), human resource

information system(Wolfe, 1998), Quality of work life, personal diversity, employee

attitude surveys ( Armstrong 2005, Bracken 2000, Hayes 1999).

89

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