Impact of High Performance Work Practices System on Organizational Performance

Abstract

High performance work practices system is of key importance not only in strategic human resource literature but also for the organizations that are striving for excellence in today’s competitive markets. This research study highlights the contribution of high performance work practices to further the level of employee’s attitude and behavior and organizational performance through developing high performance work practices system in the banking sector. These systems provide a source of competitive advantage if they are unique because of their historic time boundedness, rareness, and inimitability. The overall purpose of the present research is to identify the high performance work practices that have the potential not only to positively enhance employee’s attitude and behavior but also positively affecting organizational performance and employee’s productivity; in most cases employee’s attitude and behavior mediate the relationship between high performance work practices and performance outcomes. The key objective and contribution of current study is to explore the impact of the moderating role of the resource base view on the relationship between high performance work practices and employee’s attitude and behavior. The study is based on middle and senior level managers of the banking sector. Convenient sampling technique is used to collect data from senior and middle level managers from all over the Pakistan. Questionnaires were used to collect responses; 3000 questionnaires were sent to the bank managers in all four provinces of Pakistan that are divided in to three banking regions i.e. south, central and north through Pakistan postal services and personal visits where regions were reachable. Out of 3000 questionnaires, 1704 responses were received making a response rate of more than 56.8%. For the purpose of data validity, cronbach’s alpha and factor analysis were used. Organizational performance is measured with: dimensions of subjective performance based on different item used by past researchers; financial performance consisting of book base measures i.e. return on equity (ROE), return on assets (ROA); and, market base measures i.e. market to book value of economic profit (MBVEP) and Tobin Q (TQ). Three years data from 2007 to 2009 were collected from State Bank of Pakistan. For testing hypotheses i.e. the impact of high performance work practices on organizational performance, on employee’s productivity and on HR outcomes, multiple regression techniques were used. The same multiple regression techniques were also used to study the mediation of HR outcomes i.e. employee’s behavior and attitude on the relationship between high performance work practices and organizational performance and employee’s productivity through the technique used by Baron and Kenny (1986). Moderated multiple regression were used to study the effect of the moderator on the relationship between high performance work practices system and employee’s attitude and behavior. Results indicate that high performance work practices have a positive and significant impact on organizational performance and employee’s productivity. Results also establish the mediating role of HR outcome i.e. employee’s attitude and behavior to further the level of organizational performance and employee’s productivity. It is also proved that the view of middle and senior level managers about time boundedness, rareness, and inimitability of high performance work practices plays a moderating role to further the impact of high performance work practices. Overall, the high performance work practices system were significantly related to the HR outcomes i.e. attitude and behavior, which, in turn, were significantly related to overall organizational performance and employee’s productivity. Moreover, as hypothesized, the HR outcome i.e. attitude and behavior acted as mediators of the relationship between high performance work practices systems and organizational performance and employee’s productivity. On the other hand, the mediating hypotheses for organizational book base financial measures as well as one of the organizational market base financial measures were not supported. The relationships between high performance work practices i.e. selectivity in recruitment (SIR), information sharing (IS), self-managed team (SMT), reduced status distinctions and barriers (RSDB) and measurement of HR practices and attitude are clearly moderated by RBV. On the other hand, RBV has also moderated the relationships between behavior and following high performance practices, such as employment security (ES), employment ownership (EO), information sharing (IS), self-managed teams (SMT) and reduced status distinctions and barriers (RSDB). The current study contributes to Strategic HRM research, as it is an attempt to explore the relationship between high performance work practices and organizational performance and employee’s productivity along with dimensions of employee attitude and behavior. For management, it provides guidance such as applying a combination of practices that not only directly affect productivity and performance but also develops positive attitude and behavior, which furthers the level of performance. Self-reported data cross and sectional analysis constitute limitations of the current study. Directions for future researches are also discussed i.e. in future researcher can include the objective data and should go for longitudinal study.