core.ac.uk · 4 Department of Business Administration Dr Feza Tabassum Azmi Faculty of Management...

OLE OF INTERNAL AND. EXTERNAL AGENTS IN MANAGEMENT OF HUMAN RESOURCES: AN

EMPIRICAL STUDY OF SELECTED COMPANIES IN INDIA

THESIS SUBMITTED FOR THE AWARD OF THE 0EQ.RfE OF

~nttur of ftil000vbp IN

BUSINESS ADMINISTRATION

By

SHAHID MUSHTAQ

UNDER THE SUPERVISION OF # S

DR. FEZA TABASSUM AZMI D

DEPARTMFNÌ OF BUSINESS ADMINIS?RA?ION F~IGUUTY OF MANAGEMENT S1UDIES & RESEARGH

Ab1GARE MU.SbINt UNIVERSI°IY bIGARS -- 202002 [INDIA]

2012

9061

I DEDICATE THIS WORK TO MY REVERED SUPERVISOR Dr. FEZA TABASSUM AZM!

AND PARENTS THEIR INSPIRATION, LOVE AND SUPPORT HAS MADE

THIS WORK POSSIBLE

4 Department of Business Administration Faculty of Management Studies & Research

Dr Feza Tabassum Azmi '~ Aligarh Muslim University, Aligarh-202002 India Ph: +91 9411802120

Assistant Professor E-Mail: [email protected]

CERTIFICATE

Certified that Mr. SHAHID MUSHTAQ, PhD scholar in this Department, has

completed his thesis entitled "ROLE OF INTERNAL AND EXTERNAL

AGENTS IN MANAGEMENT OF HUMAN RESOURCES: AN

EMPIRICAL STUDY OF SELECTED COMPANIES IN INDIA" under my

supervision.

To the best of my knowledge and belief, the research work carried out by him is

based on the investigations made, data collected and analyzed by him, and has not

been submitted in any other university or institution for the award of any degree or

diploma.

(Dr. Feza Tabassum Azmi)

PhD Supervisor

ACKNOWEDGEMENTS

My first and foremost humble gratitude to "ALLAH" the ALMIGHTY for giving

me the strength to remain dedicated to complete this thesis.

I express my sincere gratitude to my supervisor Dr. Feza Tabassum Azmi for her

scholarly guidance, unflinching support and constant encouragement towards the

successful completion of this work. Her abiding commitment to scholarship and

academics has been an inspiring example and I am grateful to her for her

supervision and mentorship.

I owe my gratitude to Prof. Kaleem Mohd Khan for his invaluable suggestions

and help related to instrument/questionnaire development. I shall remain ever

grateful to Prof. M. Khalid Azam, Chairman, Department of Business

Administration and Dean, Faculty of Management Studies and Research, Aligarh

Muslim University, Aligarh, India, for his support and encouragement in the

completion of this thesis work.

I am also grateful to Prof. Javaid Akhtar, Prof. M. Israrul Haque, Prof. Valeed

Ahmad Ansari, Prof. Jamal Ahmad Farooqui, Prof. Parvaiz Talib, Dr. Salma

Abmad for their constant encouragement and support for the completion of this -

work. I am also thankful to all other teaching and non-teaching staff at the

Department of Business Administration, Aligarh Muslim University, Aligarh,

India, for always being very co-operative and supportive during this research.

I am sincerely grateful to Dr. Mohd Naved Khan, Department of Business

Administration, AIigarh Muslim University, Aligarh, India for reviewing the draft

questionnaire and promptly replying to all my queries as well as providing me

guidance from time to time.

I am grateful to Dr. Yasser Mahfooz for his co-operation during the course of this

study. I am also thankful to Late. Prof. Venkat Ratnam, IMI, New Delhi, India,

Dr. G. P Raman, Presidency College, Chennai, India, Prof. K. Prabhakar,

Velammal Engineering College, Velammal Nagar, Ambattur-Red Hills Road,

Chennai, India for reviewing the preliminary draft questionnaire/instrument and

providing their invaluable inputs and suggestions through their experience and

ii

knowledge of the subject. I am deeply thankful to Ratnakar Misra, Ex-HR Head

Hindustan Unilever Ltd. for his feedback on the earlier draft of

questionnaire/instrument.

I am grateful to Dr. M. Srimannarayana, XLRI, Jamshedpur, India; Dr. Rakesh

Agrawal, Assistant Professor IMT Ghaziabad, India, for providing necessary

reference material. I am thankful to Dr. Andrew F. Hayes, The Ohio State

University, USA, Prof. Dag Sorbom, Uppsala University, Sweden, Prof. Athar

All Khan, Prof. Qazi Mazhar Ali, from Aligarh Muslim University, Aligarh,

India and Dr. Pravasini Sahoo, IIT, Kharagpur, India for providing useful insights

regarding data analysis and structural equation modeling as well as providing the

reference material.

I am thankful to staff of Computer Centre and librarian of the Aligarh Muslim

University, Aligarh, India for their cooperation during the course of the study.

Special thanks are also due to Ratan Tata Library, Librarian, Delhi University,

Delhi, India, library staff of American Centre Library and NCERT Library,

New Delhi, India, for providing me access to all the research books, articles,

periodicals, reviews and other reference materials in these libraries.

I am grateful to Dr. Fareed Mehadi, Training and Placement Officer, Zakir

Hussain College of Engineering and Technology, Aligarh Muslim University,

Aligarh, India, Suresh Tripathi, President National HRD Network Delhi Chapter

and President (Human Resources) SRF Ltd, S. C. Bahuguna, Director, Indian Society For Training & Development (ISTD), New Delhi, India, S. Y. Siddiqui,

National President, NHRDN and Managing Executive Officer Admn (HR, Finance,

IT & COSL) Maruti Suzuki India Ltd, S. Ramesh, General Manager CPCL,

Chennai, India, Mohit Gandhi, Executive Director National HRD Network,

Della, Sham Sunder Singh, HR Consultant Chennai, India, Narender Kumar

Gupta, HR Consultant, Delhi, India, Satyanarayana Kunamneni, National HRD

Network for extending their support in data collection,

I am thankful to National HRD Network, New Delhi, Indian Society for

Training & Development, Confederation of Indian Industry, New Delhi, Associated Chambers of Commerce and Industry of India, New Delhi and

Federation of Indian Chamber of Commerce Industry, New Delhi, Delhi

iii

Management Association, New Delhi and CII, Chennai for providing me the

much needed opportunity to collect the data during the industry interaction

programs organized by different industry bodies as well as for providing the

databases of the member organizations to obtain the information from the selected

organizations. I will like to acknowledge the cooperation extended by the

responding organizations in providing their responses.

I owe my special thanks to my teachers and mentors Prof. Irshad Ahmed Hamal,

Dr. Sayeed Hasan Rizvi, Prof. S. H. Shah Jafri, Prof. J. A. Qazi, Prof. Ghulam

Abas, Prof. B. C Sharma, for their constant encouragement, support and good

wishes. I am thankful to alumni of our Department and University for their support

in data collection. I would like to thank Abdul Gafoor Danish, alumnus of the

department for his help in data collection. I am also thankful to my friends Zareen

Hussain and Javed Ghaffar for always being very helpful. My sincere thanks are

also due to fellow Research Scholars for their stimulation, support and good

wishes.

I am indebted to my family members who have been a constant source of

encouragement and moral support for rriy academic accomplishment. Last but not

the least, I would like to thank my father and mother for teaching me to work hard

and believe I could do anything.

(Shahid Mushtaq)

PREFACE

Business organizations are striving to maintain their competitive edge by

effectively managing their human capital. Managers at different levels have

realized that critical source of competitive advantage comes from having systems

and processes for managing human talent. Several researchers have highlighted the

dynamic nature of HR functions and its importance to the success of an

organization. Consequently, researchers and practitioners have recognised the

importance of strategic thinking vis-a-vis Human Resource Management (HRM).

These developments in HRM scenario have significantly changed the roles of the

HR professionals as well as the way people are managed in the organizations.

Several researchers have reported that besides HR departments, many other

people/entities are involved in management of HR. It is opined that there are

several agents-internal and external- who are involved in human resource

management activities owing to the increasing importance of people related issues

in business organizations.

Thus, it implies that agents other than the HR department may be involved in the

management of people in organizations. Primarily, research talks about three

important agents in HRM viz. top management, line managers and external service

providers. In the present study, the use of the term àgents' refers to the internal

and external entities/persons involved in HRM activities. It implies that these

entities/persons are not intrinsically part of an organization's HR department, but

are nevertheless, involved in different HR activities in varying capacities. Their

involvement has been mandated out of the growing need of business organizations

to involve non HR managers in HRM activities since human resource is seen as the

most vital organizational asset. Further, the need to share HRM - activities with

internal and external entities is necessary in order to enable HR managers to focus

their attention on strategic matters. The scope of studies on role of internal and

external agents in HRM has varied from being generic in nature to studies on

specific HR areas. The domain and focus of prior studies has been on the different

HRM functions of recruitment & selection, training and development, performance

v

appraisal, pay, reward management, human resource development and industrial

relations.

There are several reasons identified in the literature for the growing involvement

and participation of the.above agents in HRM. The involvement of these agents in

HRM helps business organizations to enhance their competence in managing

people, thereby, positively contributing to organizational change and enhancing

organizational effectiveness. Also, the involvement of agents is useful to close the

gap between organizational performance and individual performance and getting

long-lasting competitive advantage. The participation of these agents in HRM

helps in leveraging strategic competencies in order to survive the competition.

Keeping in mind the fact that the role of agents in HRM is increasing and their

involvement in HEM has significant consequences for the management of people

in organizations, a study on the role of these agents is expected to be both timely

and essential. Thus, a need was felt to develop an understanding on the prevailing

role of internal and external agents in HRM. The study attempts to develop a

reliable and valid instrument for measuring the role of internal and external agents

in management of human resources and to investigate the impact of the roles on the

status and effectiveness of HRM in selected companies in India.

This thesis is structured in the form of seven chapters. The first chapter begins with

an introduction of the importance of people management in organizations and

presents the definition of internal and external agents vis-a-vis HRM. It highlights

the role of internal agents viz, top management and line managers and external

agents viz, external service providers in HRM. Thereafter, the rationale behind the

present research and the objectives of the study are presented. This is followed by

the significance of the present research. In the end, the chapter provides an outline

of the research framework.

The second chapter provides a review of the existing literature on the role of

internal agents (line managers and top management) and external agents (external

service providers) in HRM. This chapter begins with a discussion of the role of the

agents in HRM. Thereafter, it gives an overview of different constructs used to

measure the above roles. Finally, it gives an insight into the status of empirical

researches undertaken on these roles in the Indian context.

vi

The chapter three seeks to identify the research gaps in the existing literature on the

role of internal and external agents in HRM. It focuses on indicating the problem

areas existing in the available literature. These problem areas and gaps relate to

both theoretical and empirical studies on role of agents and apply to both Indian

and global studies.

The fourth chapter provides a brief description of the need for research and study

objectives. It gives details of the research design and methodology. A discussion on

study constructs and items, instrument development and validity concerns,

sampling procedure and questionnaire administration is done which is followed by

specification of conceptual research models considered for the study along with

research hypotheses. The chapter ends with a brief outline of the methods of

analysis and the limitations of the study.

The fifth chapter begins with a discussion of the plan of analysis followed by a

flow chart depicting the same. Subsequently, it provides details of the profile of

responding firms and the respondents. The first part of the analysis deals with an

estimation of response rate, non-response bias, and common' method bias. After

that, measurement model and structural model fit are estimated and path analysis

carried out for testing of research hypotheses of three alternate research models.

This is followed by the assessment and comparison of alternate models on the basis

of fit measures. The chapter comes to an end with tests of comparison and

association with respect to company type and agents' involvement in HRM.

The sixth chapter provides a brief description of the findings based on the

analysis carried out. A discussion of the findings of the current research is carried

out in the light of prior research studies by other researchers. The last part deals

with the conclusions of the present study.

The seventh chapter highlights the managerial implications and contributions of the

study and puts forward directions for future research.

. I,cJ%, Shahid Mushtaq

vii

LIST OF PUBLICATIONS

Azmi, F. T. & Mushtaq, S. (2010). Charting the devolution landscape: Rhetoric and

reality Integral Review A Journal of Management, 3(1), 3-20

Azmi, F. T. & Mushtaq, S. (2011). Assessing the role of internal and external

agents in HRM: Scale development and validation. South Asian Journal of

Management, (Under review).

Azmi, F. T. & Mushtaq, S. (2012). Role of line managers in HRM: Empirical

evidences from India. International Journal of Human Resource Management,

(Under review).

Mushtaq, S. & Azmi, F. T. (6-7 June, 2011). Human resource outsourcing:

Emerging paradigm and research agenda. Paper accepted for Third Annual

American Business Research Conference Adelphi University, Long Island,

New York, USA.

viii

LIST OF ABBREVIATIONS

Abbreviations Expressions AIC Akaike Information Criterion AGFI Adjusted Goodness of Fit Index CAIC Consistent Akaike Information Criterion CFA Confirmatory Factor Analysis CFI Comparative Fit Index df Degrees of freedom

EBU External Service Providers Involvement in Budgeting vis-a-vis HRM

EDM External Service Providers involvement in Decision-making vis-a-Vis HRM

EFA Exploratory Factor Analysis EFF Effectiveness of HRM

EPA External Service Providers Involvement in Process/Activities vis-a-vis HRM

GFI Goodness of Fit Index HRM Human Resource Management HRO Human Resource Outsourcing IF! Incremental Fit Index IR Industrial Relation LBU Line Managers Involvement in Budgeting vis-a-vis HRM LDM Line Managers Involvement in Decision-making vis-a-vis •HRM LISREL Linear Structural Relationship LPA Line Managers Involvement in Process/Activities vis-a-vis HRM MI Model 1: Direct Effect Model M2 Model 2: Partially Mediated Model M3 Model 3: Fully Mediated Model MLE Maximum Likelihood Estimation NFI Normed fit Index NNFI Non-Normed fit Index PGFI Parsimony Goodness- of-fit Index PNFI Parsimony Normed- of-fit Index RFI Relative Fit Index RMSR Root Mean S uare Residual RMSEA Root Mean Square Error of Approximation SEM Structural equation Modeling SRMSR Standardized Root Mean Square Residual STA Status of HRM TBU Top Management Involvement in Budgeting vis-a-vis HRM TDM Top Management Involvement in Decision-making vis-a-vis HRM TPA Top Management Involvement in Process/Activities vis-a-vis HRM

ix

LIST OF EXHIBITS

CHAPTER 1: INTRODUCTION Page No

Exhibit 1.1: Research Framework 15

CHAPTER 2: REVIEW OF LITERATURE

Exhibit 2.1: Typology of Line Manager Roles 24 Exhibit 2.2: Mapping Perspectives on Line Managers as

Developers (LMaD) 26 Exhibit 2.3: A Framework for Line Manager HR Involvement 27 Exhibit 2.4: Typology of Middle Manager Influence 28 Exhibit 2.5: Proposed Influences on Strategic HRM Integration 39 Exhibit 2.6: Factors Influencing the Strategic Role of HR Department 41

Exhibit 2.7: A Model for Outsourcing 58 Exhibit 2.8: A Model for Successful HR Outsourcing 58

Exhibit 2.9: Moderation and Mediation 68

CHAPTER 4: RESEARCH METHODOLOGY

Exhibit 4.1: Classification of Research Design 87 Exhibit 4.2: Flowchart Illustrating the Questionnaire Development Process 94 Exhibit 4.3: Flow Chart Representing the Sampling Procedure 100 Exhibit 4.4a: Direct Effect Conceptual Model of Research (M1) 107 Exhibit 4.4b: Partially Mediated Conceptual Model of Research (M2) 107

Exhibit 4.4c: Fully Mediated Conceptual Model of Research (M3) 108

CHAPTER 5: ANALYSIS AND INTERPRETATION

Exhibit 5.1: Flow Chart Depicting the Sequence of Analysis 123

Exhibit 5.2: Nomological Validity: Measurement Model with Correlations 150

Exhibit 5.3: Classification of Fit Measures 152

Exhibit 5.4: Direct Effect Structural Model (M1) 157

Exhibit 5.5: Partially Mediated Structural Model (M2) 161

Exhibit 5.6: Fully Mediated Structural Model (M3) 167

x

LIST OF TABLES

CHAPTER 2: Page No

Table 2.1: Characteristics of Devolution of HRM to Line 20

Table 2.2: Key HR Domains vis-a-vis Line Manager Roles 31

Table 2.3: Key HR Domains vis-a-vis HRO 50

Table 2.4: Key Benefits vis-a-vis HRO 55

Table 2.5: Constructs Used to Measure Role of Internal and

External Agents 62

Table 2.6: Performance Measures from Literature on Role of Agents 70

Table 2.7: Moderating Variables Identified in Literature 71

CHAPTER 5: Analysis and Interpretation

Table 5.1: Responding Organizations — Sector 124

Table 5.2: Responding Organizations — Ownership 124

Table 5.3: Responding Organizations — Nationality 124

Table 5.4: Responding Organizations — Size 124

Table 5.5: Respondent Profile —Designation 125

Table 5.6: Respondent Profile — Experience in Present Position 125

Table 5.7: Respondent Profile -- Total Experience in the Organization 126

Table 5.8: Group Statistics for Non-response Error 128

Table 5.9: Independent Samples Test for Non-response Error 128

Table 5.10: Common Method Bias — Total Variance Explained 131

Table 5.11: Variables/Measures Considered for the Study 132

Table 5.12: KMO and Bartlett's Test of Sphericity 134

Table 5.13A: TDM Scale —Total Variance Explained 134

Table 5.13B: TDM Scale —Component Matrix 135

Table 5.14A: TPA Scale —Total Variance Explained 135

Table 5.14B: TPA Scale — Component Matrix 135

Table 5.15A: TBU Scale —Total Variance Explained 136

Table 5.15B: TBU Scale —Component Matrix 136

Table 5.16A: LDM Scale —Total Variance Explained I36

xi

Table 5.16B: LDM Scale —Component Matrix 137

Table 5.17A: LPA Scale —Total Variance Explained 137

Table 5.17B: LPA Scale —Component Matrix 137

Table 5.18A: LBU Scale —Total Variance Explained 138

Table 5.18B: LBU Scale — Component Matrix 138 Table 5.19A: EDM Scale—Total Variance Explained 138

Table 5.19B: EDM Scale —Component Matrix 139 Table 5.20A: EPA Scale —Total Variance Explained 139

Table 5.20B: EPA Scale —Component Matrix 139 Table 5.21A: EBU Scale —Total Variance Explained 140 Table 5.21B: EBU Scale —Component Matrix 140 Table 5.22A: STA Scale —Total Variance Explained 140 Table 5.22B: STA Scale —Component Matrix 141 Table 5.23A: EFF Scale —Total Variance Explained 141 Table 5.23B: EFF Scale —Component Matrix 141 Table 5.24: Indicator Reliability of the Scales 143 Table 5.25: Scale Reliability Estimates 144 Table 5.26: 1-values of Scale Items 146 Table 5.27: Bentler-Bonett Coefficient and GFI Values 147 Table 5.28: Discriminant Validity-Total Variance Explained 148 Table 5.29: Discriminant Validity of Scales 149 Table 5.30: Nomological Validity of Scales: Correlation Values 149 Table 5.31: Fit Indices, Recommended Values and Descriptions 153 Table 5.32: Moderating Variables - Correlation Values Matrix 154 Table 5.33: Ml-Fit Indices from LISREL 8.50 155 Table 5.34:M1-Hypotheses Testing through SEM .159 Table 5.35: M2-Fit Indices from LISREL 8.50 159 Table 5.36: M2-Hypotheses Testing through SEM 164 Table 5.37: M3-Fit Indices from LISREL 8.50 165 Table 5.38: M3-Hypotheses Testing through SEM 169 Table 5.39: Comparision of Fit Indices of Alternate Models 171 Table 5.40A: Group Statistics 174 Table 5.40B: Independent Samples T- Test 175 Table 5.41A: ANOVA Descriptives 178

xii

Table 5.41B: ANOVA Results 179 Table 5.42: Tests of Differences 179 Table 5.43: Chi-Square Tests 180 Table 5.44: Chi-Square Tests 180 Table 5.45: Chi-Square Tests 181 Table 5.46: Chi-Square Tests 181

Table 5.47: Chi-Square Tests 182


Table 5.49: Chi-Square Tests 183 Table 5.50: Chi-Square Tests 183 Table 5.51: Chi-Square Tests 183 Table 5.52: Chi-Square Tests 184









Table 5.61: Tests of Association 187

CHAPTER 6: Findings, Discussion and Conclusion

Table 6.1: Results of Hypotheses Testing: Direct Effect Model (M1) 195

Table 6.2: Results of Hypotheses Testing: Partially Mediated Model (M2) 196

Table 6.3: Results of Hypotheses Testing: Fully Mediated Model (M3) 197

Table 6.4: Results of Tests of Difference and Association 200

TABLE OF CONTENTS

PAGE NO.

Certificate Acknowledgements Preface v List of Publications viii List of Abbreviations ix List of Exhibits x List of Tables xi

Table of Contents xis

Chapter 1: INTRODUCTION 1-15 1.1 Background of the Study I 1.2 Agents in HRM: Meaning and Definitions 4 1.3 Indian Scenario: A Snapshot 8 1.4 Rationale of the Study 9 1:5 Research Objectives 12 1.6 Significance of the Study 14 1.7 Research Framework 15

Chapter 2: REVIEW OF LITERATURE 16-77 2.1 Role of Internal and External Agents in HRM: Brief Overview 16 2.2 Role of Internal Agents in HRM 18

2.2.1 Role of Line Managers in HRM 19 2.2.1.1 Dimensions of Line Manager Roles 21 2.2.1.2 Line Manager Roles: Key HRM Domains 28 2.2.1.3 Rationale for Role of Line Managers in HRM 31 2.2.1.4 Role of Line Managers in HRM: Barriers and

Constraints 34 2.2.2 Role of Top Management in HRM 37

2.2.2.1 Dimensions of Top Management Roles 38

xiv

2.2.2.2 Top Management Roles: Key HRM Domains 42

2.2,2.3 Rationale for Role of Top Management in HRM 43

2.3 Role of External Agents in HRM 44

2.3.1 External Service Providers : HR Outsourcing 44

2.3.2 Dimensions of Human Resource Outsourcing 45

2.3.3 Human Resource Outsourcing: Key HRM Domains 48

2.3.4 Rationale for Human Resource Outsourcing 51

2.3.5 Human Resource Outsourcing: Barriers and

Constraints 56

2.4 Constructs to Measure Role of Agents in HRM 59

2.5 Alternate Variables to Measure Role of Agents in HRM 67

2.5.1 Performance Measures as Outcome Variables 68

2.5.2 Moderating Variables 71

2.5.3 Mediating Variables 73

2.6 Internal and External Agents in HRM: An Indian Perspective 74

Chapter 3: PROBLEM AREAS AND RESEARCH GAP 78-82

3.1 Focus on the Role of Individual Agents 78

3.2 Focus an Prescriptive Studies. 79

3.3 Lack of Studies on Outcomes of Role of Agents in HRM 79

3.4 Focus on Qualitative Methodology 80

3.5 Paucity of Empirical Studies 80

3.6 Small Sample Size-Based Studies 81

3.7 Low Response Rate in Existing Studies 81

3.8 Focus on Manufacturing Sector 81

3.9 Lack of Reliability and Validity of Research Instruments 82

3.10 Paucity of Studies in the Indian Context 82

Chapter 4: RESEARCH METHDOLOGY 83-119

4.1 Need for Research 83

4.2 Research Objectives 84

4.3 Research Design 87

4.4 Research Constructs and Measures 88

4.4.1 Independent Variables: Measures of Role 88

4.4.2 Dependent Variable: Effectiveness of HRM 91

xv

4.4.3 Mediating Variable: Status of HRM 92

4.4.4 Moderating Variable: Organizational Profile 93

4.5 Questionnaire Development Process 93

4.5.1 Stages of Questionnaire Development 94

4.5.2 Translation Validity: Face and Content Validity 97

4.6 Research Instrument/Questionnaire 98

4.7 Sampling Procedure 100

4.7.1 Target Population 100

4.7.1.1 Sampling Unit 101

4.7.1.2 Sampling Element 101

4.7.2 Sampling Frame 102

4.7.3 Sampling Approach and Sample Size 103

4.8 Questionnaire Administration and Data Collection 103

4.9 Conceptual Models of Research 106

4.10 Research Hypotheses 109.

4.11 Methods of Analysis 118

4.12 Limitations of the Study 119

Chapter 5: ANALYSIS AND INTERPRETATION 120-187

5.1 Plan of Analysis 120

5.2 Profile of Responding Firms and Respondents 123

5.3 Estimation of Response Rate 126

5.4 Estimation of Non-response Bias 127

5.5 Estimation of Common Method Bias 129

5.6 Measurement Model 131

5.6.1 Factor Analysis 132

5.6.2 Assessment of Reliability 142

5.6.3 Assessment of Validity 145

5.7 Structural Model 151

5.7.1 Structural Model Fit 151

5.7.2 Fit Indices, Path Coefficients and

Hypotheses Testing 155

5.8 Criterion Validity 169

5.9 Comparison of Alternate Models 170

xvz

I

5.10 Tests of Differences

172

5.11 Tests of Association

179

CHAPTER 6: FINDINGS, DISCUSSIONS AND CONCLUSIONS 188-204

6.1 Findings and Discussions 188

6.2 Conclusions 201

Chapter 7: MANAGERIAL IMPLICATIONS AND FUTURE 205-208 RESEARCH DIRECTIONS

7.1 Managerial Implications and Contributions of the study 205 7.2 Future Research Directions 207

REFERENCES

209-237 Appendix : Questionnaire

xvii

CHAPTER 1: INTRODUCTION

1.1 Background of the Study

1.2 Agents in HRM: Meaning and Definitions

1.3 Indian Scenario: A Snapshot

1.4 Rationale of the Study

1.5 Research Objectives

1.6 Significance of the Study

1.7 Research Framework

CHAPTER 1: INTRODUCTION

Chapter Overview

This chapter begins with an introduction of the importance of people management

in organizations and presents the definition of internal and external agents vis-a-vis

Human Resource Management (HRM). It highlights the role of internal agents viz.

top management and line managers and external agents viz, external service

providers in HRM. Thereafter, the rationale behind the present research and the

objectives of the study are presented. This is followed by the significance of the

present research. In the end, the chapter provides an outline of the research

framework.

1.1 Background of the Study

Business organizations are striving to maintain their competitive edge by

effectively managing their human capital. Mello (2011) argued that managers at

different levels have realized that critical source of competitive advantage comes

from having systems and processes for managing human talent. Several researchers

have highlighted the dynamic nature of HR functions and its importance to the

success of an organization (Lengnick-Hall & Lengnick-Hall, 1988; Schuler, 1992).

For instance, Boxall (1994) reported that HR functions have moved from being

administrative and reactive to being executive and proactive. The competitive

business environment has led to massive restructuring in business organizations.

Consequently, human resource researchers and practitioners have recognised the

importance of strategic thinking vis-a-vis HRM (Brewster & Larsen, 1992;

Brewster & Soderstrom, 1994; Budhwar, 2000a, 2000b; Budhwar & Sparrow,

1997; Lengnick-Hall & Lengnick-Hall, 1988; Schuler, 1992; Schuler et al., 1993;

Storey, 1992; Storey & Sisson, 1994).

These developments in HRM scenario have significantly changed the roles of the

HR professionals as well as the way people are managed in the organizations.

Several researchers have reported that besides HR departments, many other

people/entities are involved in management of HR (Khatri & Budhwar, 2002;

1

PapaIexandris & Panayotopoulou, 2005; Whittaker, 1990). In this context,

Valverde et al. (2006) argued in favour of the role of agents in management of HR

and highlighted the contribution that the different HR agents make to the HR

function. It is opined that there are several agents-internal and external- who are

involved in human resource management activities owing to the increasing

importance of people related issues in business organizations.


management of people in organizations. Primarily research talks about three

important agents viz.

■ Top management, who make strategic decisions (including HRM strategic

decisions), establish the organization's values and philosophy (Guest, 1997;

Lepak & Snell, 1999a; Schuler & Jackson, 1999) and influence its whole

approach to managing people (Sisson & Storey, 2000; Stanton et al., 2010).

■ Line managers, who traditionally have been given responsibility for some

operational aspects of managing people, but whose role in this function has

continued to increase since the advent of HRM (Hutchinson & Wood 1995;

Keen & Vickerstaff, 1997; Lowe, 1992; Schuler 1992; Storey, 1992).

■ External HR service providers or HR outsourcing agencies usually

contracted by organizations to provide administrative HRM services or

professional, specialised HRM solutions (Cook, 1999; Young, 2000). The

outsourcing of these activities has also been found to be on the increase..

(Hall & Torrington, 1998).

Various research studies have -highlighted the role of internal agents viz, top

management (Schuler & Jackson, 1999; Valverde et al., 2006), line managers

(Brewster & Larsen, 2000; Brewster et al., 2004; Harris et al., 2002; Hoogendoorn

& Brewster, 1992; Larsen & Brewster, 2003; Legge, 1995; Thornhill & Saunders,

1998) and external agents viz. external HR service providers (Cook, I999;

Cunningham & Hyman, 1999; Delmotte & Sels, 2008; Klass et al., 2001; Valverde

et al., 2006) in people management activities. The scope of studies on role of

internal and external agents in HRM has varied from .being generic in nature to

studies on specific HR areas (Casco"n-Pereira et al., 2006). The studies which are

general in nature provide insights about the sharing of HRM function with agents

N

(e.g. Armstrong, 1998; Hall & Torrington, 1998; Sparrow et al., 1994; Valverde,

2001), while the studies on specific areas focus on precise HR activities being

carried out by other agents (e.g. Bond & Wise, 2003; Currie & Procter, 2001;

Heraty & Morley, 1995; Hope-Hailey et al., 1997). Both types of studies focus on

the fact that HR activities are shared with other agents.

The domain and focus of prior studies has been on the different HRM functions of

recruitment & selection, training and development, performance appraisal, pay,

reward management, human resource development and industrial relations

(Andersen et al., 2007; Ardichvili & GasparishviIi, 2001; Brown & Purcell, 2007;

Budhwar, 2000a; Casco'n-Pereira et al., 2006; Cook, 1999; Cunningham &

Hyman, 1995; Currie & Procter, 2001; Gautam & Davis, 2007; Hall & Torrington,

1998; Heraty & Morley, 1995; Hope-Hailey et al., 1997; Mahoney & Brewster,

2002; Murty, 2007; Papalexandris et al., 2001; Redman, 2001; Smith et al., 2006;

Srimannarayana, 2010; Watson & Maxwell, 2007; Watson et al., 2007; Woodall et

al., 2002). Theses HRM functions have been considered by previous researchers to

study the involvement of internal and external agents in light of individual as well

as groups of HR activities.

There are several reasons identified in the literature for the growing involvement

and participation of the above agents in HRM. The involvement of these agents in

HRM helps them to enhance their competence in managing people, thereby,

positively contributing to organizational change and enhancing organizational

effectiveness (Buyens & De Vos, 2001; Gibb, 2003; Macneil, 2001; McCracken &

Wallace, 2000; Siug2diniene, 2008). Also, the involvement of agents is useful to

close the gap between organizational performance and individual performance and

getting long-lasting competitive advantage (Gibb, 2003; Macneil, 2001;

5iugzdiniene, 2008). The participation of these agents in HRM helps in leveraging

strategic competencies in order to survive the competition (Keen & Vickerstaff,

1997; Stanton etal., 2010).

Keeping in mind the fact that the role of agents in HRM is increasing and their

involvement in HRM has significant consequences for the management of people

in organizations, a study on the role of these agents is expected to be both timely

and essential. Thus, a need was felt to develop an understanding on the prevailing

role of internal and external agents in HRM.

3

1.2 Agents in HRM: Meaning and Definitions

The Cambridge Advanced Learner's Dictionary & Thesaurus defines the word

àgent' as a person who acts for or represents another. According to the Oxford

Dictionary, the term àgent' is derived from Latin word agere- 'doing', meaning a

person who acts on behalf of another to produce an effect. Further, it goes on to

define an àgent' as a person who helps in managing business, financial, or

contractual matters for another. These definitions of the term àgent' signify the

involvement of other entities/persons in a particular activity.

In the present study, the use of the term àgents' refers to the internal and external

entities/persons involved in HRM activities. It implies that these entities/persons

are not intrinsically part of an organization's HR department, but are nevertheless,

involved in different HR activities in varying capacities. Their involvement has

been mandated out of the growing need of business organizations to involve non

HR managers in HRM activities since human resource is seen as the most vital

organizational asset (Keen & Vickerstaff, 1997; Kulik & Bainbridge, 2006; Lawler

& Mohrman, 2000; Ulrich 1997). Further, the need to share HRM activities with

internal and external entities is necessary in order to enable HR managers to focus

their attention on strategic matters (Kulik & Bainbridge, 2006; Valverde et al.,

2006; Valverde, 2001).

According to Valverde et al. (2006), agents other than the HR department may be

involved in the management of people in organizations. These are both external and internal agents. Internal agents include top management and line managers

whereas external agents include external service providers or HR outsourcing

agencies. The HR function is not understood simply as a set of activities performed

by the HR department but all managerial actions regarding the organization of

work and the entry, development and exit of people in the organization (Valverde,

2001). The idea of HRM as a partnership of multiple agents or stakeholders is

beginning to be more widely employed (Valverde et al., 2006). Researches in the

area have recognized the role of these agents in HRM with varying levels of

contribution (e.g. Kulik & Bainbridge, 2006; Valverde et al., 2006).

4

Internal Agents in HRM

Top Management

Top management has been considered as an important internal agent in HRM

(Valverde et al., 2006), as they make crucial strategic decisions and influence the

whole approach to managing people (Guest, 1997; Lepak & Snell, 1999a; Sisson &

Storey, 2000; Stanton et al., 2010). A number of research studies have explored the

significance and contribution of top management teams in the organization. In this

context, the role of chief executive officers, top management teams and board of

directors as strategic assets has been identified (Fisher & Dowling, 1999;

Hambrick & Mason,1984).

Several researchers have acknowledged the influence of top management on HRM

policies and practices (e.g. Heneman et al. 2000; Khilji, 2002; Tsui & Milkovich,

1987). Researchers (e.g. Green et al., 2006; Valverde et al., 2006) have opined that

some form of involvement of top managers in HR is vital for attaining business

objectives. When top executives are sensitized to human resource issues, it tends to

support greater HR-strategy integration, leading to favourable outcomes for the

organization (Bae & Lawler, 2000; Bennett et al., 1998). Top managers should

offer transformational leadership by sharing their vision with employees. An HR

function that is perceived by key actors in the corporation to have a high degree of

reputational effectiveness is more likely to succeed in enacting strategic roles. Top

management is recognized as the most powerful force facilitating HRM (Boxall &

Purcell, 2003; Macky & Boxall, 2007; Stanton et al., 2010; Wright et al., 1994).

Line Managers

The role of line managers vis-a-vis HRM has received ample research attention

(Agrawal, 2010; Budhwar, 2000a, 200b; Budhwar & Sparrow, 1997; Gibb, 2003;

Keen & Vickerstaff, 1997; Kulik & Bainbridge, 2006; Macneil, 2001; McCracken

& Wallace, 2000; Siug2diniene, 2008; Srimannarayana; 2010; Valverde et al.,

2006). Line managers or middle managers are placed below the top managers and

are responsible for supervising other managers. The scope of these managers has

traditionally been limited to establishing and meeting the goals in their respective

departments.

5

In this context, researchers have used the term devolution to define the role of line

managers. Devolution means reallocation of personnel tasks to line managers

(Brewster & Larsen, 2000; Hall & Torrington, 1998; Renwick, 2000; Storey,

1992). Devolution as a subject of inquiry has received considerable research

attention (e.g. Azmi & Mushtaq, 2010; Currie & Procter, 2001; Poole & Jenkins,

1997; Tsui & Milkovich, 1987 among others). Devolution to the line implies that

line managers should become more involved in HRM so that HR staff can take on

a greater strategic and change management roles (Finegold & Frenkel 2006; Sisson

& Storey 2000; Teo & Rodwell, 2007). A number of scholars have carried out

studies dealing with specific areas of HR devolution, for instance, Fenton-

O'Creevy's (2001) and Marchington's (2001) studies of middle managers attitudes

towards employee involvement, Redman's (2001) study about devolvement of

performance appraisal function, Currie and Procter's (2001) work on the area of

pay and Dunn and Wilkinson's (2002) study in the area of absence management.

Of late, the line managers' role have been reorganised in the organizations and

they are now responsible for core HRM functions. Line managers play an

important role in producing the synergy between physical and human resources for

the development of their subordinates (Brewster & Larsen, 1992). Line managers

are responsible for achieving the HRM goals and making sure that their

subordinates show commitment, quality and flexibility (Lowe, 1992). Legge

(1989) reported that HRM is "vested in line management as business managers

responsible for co-ordinating and directing all resources in the business unit in

pursuit of bottom line profits".

In addition to this, several HR responsibilities viz, pay and benefits, recruitment

and selection, training and development, industrial relations, health and safety, and

workforce expansion and reduction are shared between HR managers and Iine

managers (Brewster & Larsen, 2000; Larsen & Brewster, 2003). Line managers are

responsible for the implementation of these HR practices at the operational level

(Grafton & Truss, 2003; Marchington, 2001). Participation between HR and line

helps in enhancing organizational performance,(Gennard & Kelly, 1997). Further,

the effective implementation of these HR practices is dependent on line managers"

capability and commitment regarding their HR role (Guest, 1987; Purcell &

Hutchinson, 2007; Storey, 1992). Line management has been identified as the

0

perfect location to position HR responsibilities as it would make HR more

effective (Hope Hailey et al., 2005; McGovern et al., 1997). As a result of line

managers involvement in HRM, the status and effectiveness of HRM is enhanced

(Larsen & Brewster, 2003; Schuler, 1990).

External Agents in HRM

External HR Service Providers

The third important agent in HRM is external HR service providers or HR

outsourcing agencies (Cook, 1999; Hall & Torrington, 1998; Kulik & Bainbridge,

2006; Valverde et al., 2006; Young, 2000). It involves hiring a third-party service

provider or vendor for the administration of an HRM activity that would normally

be performed in-house. Many organizations find the use of external service

providers as more efficient and less costly than hiring staff to handle HRM

functions in-house. Given that HRM service vendors specialize in the services they

provide to their clients, they benefit from economy of scale effects and these

benefits are transferred to their clients. In addition to this, some organizations turn

to outsourcing either because they do not have the necessary knowledge, or their

knowhow is so outdated that they need to make significant investments. Many

vendors make investments in HRM tools and techniques and later spread their

costs over many clients. In this sense, outsourcing provides competencies that do

not exist in-house (Galanaki & Papalexandris, 2005).

Although, various researchers have put forward their view points on role of top

management, line managers and external service providers, yet there is no clear

consensus on the definition of these agents. However, certain common

terminologies and descriptions can be identified from the extant literature.

Researchers (e.g. Dale & Cooper, 1992; Fisher & Dowling, 1999; Hall &

Torrington, 1998; Hambrick & Mason, 1984; Storey, 1992,; Valverde et al., 2006;

Whittaker & Marchington, 2003) have frequently used the term top management,

upper echelons, senior managers, board level line managers, chief executive

officers, general managers, board of directors as well as senior line manager for

referring to top management. Similarly, terms such as supervisors, first line

managers, lower-level line managers, front-line manager, operational managers,

7

junior line managers, middle managers are used synonymously for line managers

(Bond & Wise, 2003; Budhwar, 2000a, 2000b; Budhwar & Sparrow, 1997;

Conway & Monks, 2010; Hales, 2005; Hall & Torrington, 1998; Heraty & Morley,

1995; KuIik & Bainbridge, 2006; Larsen & Brewster, 2003; Lowe, 1992;

Siug2diniene, 2008; Storey, 1992; Valverde et al., 2006; Whittaker &

Marchington; 2003). Likewise, for external agents the commonly used terms are

external service providers, outsourced consultants, HR outsourcing agencies,

external HR specialist agencies and external consultants (e.g. Hall & Torrington,

1998; Kulik & Bainbridge, 2006; Redman & Allen, 1993; Valverde et al., 2006).

1.3 Indian Scenario: A Snapshot

During the last twenty years, the Indian economy has undergone radical changes

from a predominantly government-controlled to a market-based economy and is

growing at a rapid pace (Grossman, 2008). Consequently, international firms are

investing in India to tap the business opportunities offered by its expanding

market. In order to extend the scope of their business operations in India, these

organizations have located their offices in India and are relying on more localized

management to develop an understanding of local management practices (Dowling

et al., 1994; Haire et al., 1996; Tayeb, 1994).

This shift has also changed the nature of competition for Indian organizations.

Globalization and internationalization of domestic businesses, concerns for total

quality management, shifts in the employee profile and de-skilling, re-skilling and

multi-skilling as well as issues related to work-force reduction have opened many

opportunities as well as challenges for the business organizations (Rao et al., 1994;

Sodhi, 1994; Venkata Ratnam, 1995). The paradigm shift in the economy has

direct implications for HRM in India (Krishna & Monappa, 1994).

Of late, Indian industry has realised the importance of effectively managing human

resources for long-lasting competitive advantage. Subsequently, studies in the

Indian context have highlighted the changing nature of HR policies, practices and

roles in Indian organizations (e.g. Bhatnagar & Sharma, 2004; Jain, 1991; Lawler

et al., 1995; Stening, 1994; Sharma & Khandekar, 2006). As the roles of HR

managers are becoming strategic in nature and they are now increasingly taking

part in board rooms, many HR tasks and responsibilities are getting reallocated to

other stakeholders such as line managers and external service providers. For

instance, Bhatnagar and Sharma's (2005) study have explored changing strategic

HR roles. Gopalakrishnan (2008) makes a case for placing HR on line managers'

schedule. However, there is dearth of empirical research on role of internal and

external agents in HRM in the Indian context.

In addition to this, focus in the Indian context has remained on the reallocation of

HR responsibilities to line managers (Budhwar & Sparrow, 1997), while in some

studies the impact of supervisor-subordinate relationships on organizational and

individual performance was investigated by researchers such as Varma et al. (2005), Varma et al. (2007). Azmi (2011) investigated the role of top management

as well as devolution vis-a-vis HRM in the Indian context. In case of external

agents, generally the focus of research has been on different forms of HR

outsourcing and cost benefit analysis of HR outsourcing (Seth & Sethi, 2011).

Keeping in view the significance of human resources in the success of an

organization, it is important to explore the role of key agents in people

management. Most researches have been undertaken in the western world and that

too primarily on devolution of HRM to line managers (e.g. Brewster & Larsen,

1992; Hall & Torrington, 1998; Schuler, 1992; Sparrow & Hiltrop, 1994; Storey,

1992). As a result of this, there are limited number of studies in this area. There is

no consolidated literature incorporating the study of all agents. Although some

studies have explored the role of agents in HRM but the focus remained on just

one of the agents. Thus, in the Indian context, this area remains Iargely unexplored,

barring a few exceptions (Agrawal, 2010; Budhwar, 2000a, 2000b; Budhwar &

Sparrow, 1997; Budhwar et al., 2006; Seth & Sethi, 2011; Srimannarayana, 2010).

Moreover, the focus of studies conducted in India remained mostly on single agent.

Thus, an investigation into the role of internal and external agents in HRM in the

Indian context is an issue that merits research attention.

1.4 Rationale of the Study

HRM is gaining increasing importance because employees are considered to be a

primary component for attaining competitive advantage (Barney & Wright, 1998).

6

With the changing economic scenario and rising challenges in the business

environment, the corporate world is fast realizing the worth of human resource as

an inimitable strength for attaining long-lasting competitive advantage. Human

resources constitute an important source of competitive advantage for the

organization (Wright & McMahan, 1992) and are the potential contributor to the

creation and realization of the organization's goals (Jackson & Schuler, 2000).

Consequently, the performance of human resource function has turned out to be

more important than ever.

Schuler (1990) pointed out that the status of HR managers has grown and as a

result of the growing importance of HRM, business organizations are realizing the

role of various other entities in HR related issues. According to Valverde et al. (2006), agents other than the HR department may be involved in the management

of people in organizations. These are both internal and external agents. Internal

agents includes top management and line management where as external agents

includes external service providers. Some researchers have argued that all

managers are people managers (Papalexandris & Panayotopoulou, .2005;

Whittaker, 1990) and the involvement of both internal and external agents in

carrying out the HR function is recognized in various studies (e.g. Budhwar,

2000a, 2000b; Budhwar & Sparrow, 1997; Finegold & Frenkel 2006; Gratton et al., 1999; Khatri & Budhwar, 2002; Mahoney & Brewster, 2002).

The shifting of traditional HRM responsibilities to line management have been

reported by different researchers (e.g. Larsen & Brewster, 2003; Renwick &

McNeil, 2002). Top managers are also increasingly getting involved in HRM as

they evolve strategies to attract, motivate, and retain the best talent in the

organization ((hung et al., 1987; Harper, 1993; Jonas et al., 1990). At the same time, HR outsourcing has also gained prominence of late, engendering a new genre

of research on the role of external service providers in HR (e.g. Banham, 2003;

Cook, 1999; Mahoney & Brewster, 2002). Of late, both internal and external

agents are seen to be participating in management of HR, albeit with differing

degrees of involvement. However, the focus of previous studies on HR has been on

traditional HRM activities and the role of different agents in HRM in particular has

been relatively under researched.

10

Studies on agents role in HRM usually focus on just one or at most two agents.

There are no studies incorporating the role of all agents (Valverde et al., 2006).

Additionally, the limited scope of previous studies has made it difficult to clearly

define the different agents in HRM and necessitates incorporating the scattered

viewpoints of researchers regarding the role of internal and external agents in HR.

Therefore, it is important to clearly define the role of key actors in HRM.

Although prior studies have recognized the key role of both internal and external

agents in HRM, yet there is limited empirical research on the role of these actors in

HRM and their relationship in operationalising an effective HR strategy

(Mayrhofer et al., 2004; Stanton et al., 2010; Teo & Rodwell, 2007). There are few

empirical evidences on the outcomes of roles of agents in HRM. Thus, there is no

clarity on impact of involvement of internal and external agents.

While the opening of Indian economy to world markets has attracted a large

number of foreign players to expand the scope of their businesses, global

institutions like the Word Bank have predicted that India will become the fourth

largest economy by 2020 (Budhwar & Varma, 2010). Consequently, it has

prompted top managers of business organizations to find out the nature of HR

practices existing in India, thus, driving the need to explore the role of internal and

external agents in HRM.

Although a number of studies have explored the involvement of internal and

external agents in HRM in India (e.g. Agrawal, 2010; Budhwar & Sparrow, 1997;

Seth & Sethi, 2011; Srimannarayana, 2010), the focus of these studies has

remained limited in nature. Furthermore, in the Indian context, the focus of the

research studies has remained on a single agent. There is no comprehensive study

incorporating the role of both internal and external agents. Besides, the impact of

the involvement of internal and external agents in HRM in India has remained

largely unexplored: Hence, research attention is required to uncover the prevailing

scenario. This gap in the extant researches in the Indian context has prompted the

need to explore the role of both internal and external agents simultaneously.

Thus, it can be safely asserted that there is dearth of empirical research that can

help the researchers and practitioners to understand the role of internal and external

agents in HRM in the Indian context. Therefore, the focus of the present study was

11

to explore the role of both internal (top management and line managers) and

external agents (HR outsourcing agencies or external service providers) in HRM in

the Indian context as well as to study the outcomes of these roles.


The study endeavors to address the following broad objective:

To develop a reliable and valid instrument for measuring the role of top

management, line managers (i.e. internal agents) and external service providers

(i.e. external agents) in management of HR and to investigate the impact of their

role on the effectiveness of HRM and status of HRM. The study also seeks to

establish differences as well as association between organizational profile and

various dimensions of the above roles.,

The broad objective can be divided into four categories of sub-objectives:

Category I: Developing an instrument for measuring the role of internal and

external agents in HRM

•:• TQ develop a reliable and valid instrument for measuring various

dimensions of role of top management, line managers and external service

providers in management of HR.

Category II: Investigating the impact of role of internal and external agents in

HRM

(a) Investigating the impact of role of top management in HRM

•:• To investigate the impact of role of top management in HRM on the

effectiveness of HRM.

❖ To investigate the impact of role of top management in HRM on the status

of HRM

b) Investigating the impact of role of line managers in HRM

❖ To investigate the impact of role of line managers in HRM on the

effectiveness of HRM

12

❖ To investigate the impact of role of line managers in HRM on the status of

HRM

(c) Investigating the impact of role of external agents in HRM

❖ To investigate the impact of role of external service providers in HRM on

the effectiveness of HRM

•3 To investigate the impact of role of external service providers in HRM on

the status of HRM

(d) Investigating the impact of status of HRM on the effectiveness of HRM

•2+ To investigate the impact of the status of HRM on the effectiveness of

Category III: Assessing the differences between company type i.e. sector

(manufacturing and service) and company size (small, medium and large

organizations) on the role of internal and external agents in HRM

•S To assess differences in role of top management in HRM on the basis of

company sector (i.e. manufacturing and service).

❖ To assess differences in role of line managers in HRM on the basis of


❖ To assess differences in role of external service providers in HRM on the

basis of company sector (i.e. manufacturing and service).

❖ To assess differences in role of top management in HRM on the basis of

company size (small, medium and large organizations).

❖ To assess differences in role of line managers in HRM on the basis of

company size (small, medium and large organizations).

❖ To assess differences in role of external service providers in HRM on the

basis of company size (small, medium and large organizations).

Category IV: Establishing, association between company type i.e. sector


organizations) with the role of internal and external agents in HRM

13

•3 To establish association between the role of top management in HRM and


❖ To establish association between the role of line managers in HRM and


❖ To establish association between the role of external service providers in

HRM and company sector (i.e. manufacturing and service).

❖ To establish association between the role of top management in HRM and

company size (i.e. small, medium and large organizations).

+ To establish association between the role of line managers in HRM and

company size (i.e. smalI, medium and large organizations).

•3 To establish association between the role of external service providers in

HRM and company size (i.e. small, medium and large organizations).

1.6 Significance of the Study

The study has both theoretical as well as practical significance. As far as

theoretical significance is concerned, the study has several contributions to make to

the existing literature. The present research tries to consolidate the existing

scattered viewpoints in the area. Further, a reliable and valid research instrument is

developed to simultaneously measure the role of internal and external agents in

HRM. This instrument can serve as a useful tool for future researchers in the area.

In the current study, the role of internal and external agents vis-a-vis HRM is

explored in the Indian context. The impact of involvement of these agents on status

and effectiveness of HRM is also explored. The findings of the study will guide

practitioners in understanding the present scenario of role of internal and external

agents in HRIVI in India. The findings may further aid them in understanding how

these roles impact the overall functioning of human resource management

departments. In addition to this, the study also addresses the specific differences

and association between company type viz, sector to which the company belongs

(manufacturing/service) as well as size of the company determined by number of

employees (small/medium/large) and the role of internal and external agents in

14

I

a

I

HRM. The findings are useful to determine specific HR process based on sector

and size of the organization.

1.7 Research Framework

The research outline followed in the current research is presented in Exhibit 1.1.

Exhibit 1.1: Research Framework

Preliminary Conceptualization

Literature Review

Research Gap

Identification of Research Constructs/Items

Instrument Development

Pilot Study

Primary Data Collection

Data Cleaning &Tabulation

Analysis

Reporting of Findings

Conclusions

Managerial Implications

Directions for Future Research

15


2.1 Role of internal and External Agents in HRM: Brief

Overview

2.2 Role of Internal Agents in HRM

2.2.1 Role of Line Managers in HRM

2.2.1.1 Dimensions of Line Manager Roles

2.2.1.2 Line Manager Roles: Key HRM Domains

2.2.1.3 Rationale for Role of Line Managers in HRM

2.2.1.4 Role of Line Managers in HRM: Barriers

and Constraints

2.2.2 Role of Top Management in HRM

2.2.2.1 Dimensions of Top Management Roles

2.2.2.2 Top. Management Roles: Key HRM Domains

2.2.2.3 Rationale for Role of Top Management in HRM

2.3 Role of External Agents in HRM

2.3.1 External Service. Providers : HR Outsourcing

2.3.2 Dimensions of Human Resource Outsourcing

2.3.3 Human Resource Outsourcing: Key HRM Domains

2.3.4 Rationale for Human Resource Outsourcing

2.3.5 Human Resource Outsourcing: Barriers and

Constraints

2.4 Constructs to Measure Role of Agents in HRM

2.5 Alternate Variables to Measure Role of Agents in HRM

2.5.1 Performance Measures as Outcome Variables

2.5.2 Moderating Variables

2.5.3 Mediating Variables

2.6 Internal and External Agents in HRM: An Indian

Perspective


Chapter Overview

This chapter provides a review of the existing literature on the role of internal

agents (line managers and top management) and external agents (external service

providers) in HRM. This chapter begins with a discussion of role of internal agents

in HRM. Thereafter, it elaborates on the role of external agents in HRM followed

by an overview of different constructs used to measure the above roles. Finally, it

gives an insight into the status of empirical researches undertaken on these roles in

the Indian context.

2.1 Role of Internal and External Agents in HRM: Brief Overview -

The rapid changes in the business environment have substantially transformed the

roles of the HR professionals as well as the way people are managed in business

organizations. In this context, Valverde et al. (2006) have recognized the

contribution of internal agents viz, line managers and top management and

external agents viz, external service providers in HRM.


management of people in organizations. Primarily research talks about two

important categories of agents viz, internal and external agents.

Internal Agents: In today's organizations, role of internal agents have changed

and it continues to evolve with the changing needs of the organizations. Both line

managers and top management are seen to be participating in management of HR,

albeit with differing degrees of involvement (Valverde et al., 2006). Internal

agents include:

■ Line managers, who traditionally have been given responsibility for some

operational aspects of managing people, but whose role in HRM has

continued to increase (Hutchinson & Wood 1995; Keen & Vickerstaff,

1997; Perry & Kulik, 2008; Schuler, 1992; Storey, 1992).

16

■ Top management, who make strategic decisions (including HRM strategic

decisions), establish the organization's values and philosophy (Guest, 1997;

Lepak & Snell, 1999a; Schuler & Jackson, 1999) and influence its whole

approach to managing people (Stanton et al., 2010; Sisson & Storey, 2000).

External Agents: External agents include external HR service providers or HR

outsourcing agencies usually contracted by organizations to provide administrative

HRM services or professional, specialised HRM solutions (Cook, 1999; Young,

2000). The outsourcing of these activities has also been found to be on the increase

(Hall & Torrington, 1998).

Valverde et al. (2006: 618-9) opine strongly in favour of distributing FIRM

responsibilities across agents:

"The HR function is not understood simply as the set of activities performed by the HR department, but as all managerial actions carried out at any level regarding the organization of work and the entry, development and exit of people in the organisation so that their competencies are used at their best in order to achieve corporate. objectives............ In this sense, agents other than the HR department may be involved in the management of people in organizations".

Morley et al. (2006) noted that in recent times, more and more HR role is carried

out in the organizations through internal and external devolution. Internal

devolution involves transfer of HR responsibilities to line managers while external

devolution deals with outsourcing of HR activities to external contractors. The

concept of internal devolution is discussed in detail in sub-section 2.2 while

description of external devolution is provided in section 2.3. '

Several researchers have reported the role of internal agents viz. line managers and

top management (Brewster et al., 2004; Harris et al., 2002; Larsen & Brewster,

2003; Legge, 1995; Morley et al., 2006; Schuler & Jackson, 1999; Thornhill &

Saunders, 1998; Valverde et al., 2006) and external agents viz, external service providers (Delmotte & Sels, 2008; Klass et al., 2001; Morley et al., 2006;

Valverde et al., 2006) in HRM.

The focus of scholars on role of internal and external agents in HRM is mixed.

Generally, two types of studies are reported from literature viz, general studies on

sharing of HR responsibilities and secondly, studies on specific HR areas

(Casco'n-Pereira et al., 2006). The general studies talk about the role of agents in

1'1

• ___ _____________it of numan resources (Hall & Torrington, 1998; Sparrow et al.,

1994), while in case of specific studies role of agents in specific HR areas has been

explored (e.g. Currie & Procter, 2001; Dick & Hyde, 2006; McCarthy et al., 2010).

Various reasons are cited for the increasing involvement and participation of the

above agents in HRM such as emergence of flatter, organization structures,

changing division of labour, strategic integration, transaction costs, high quality,

flexibility and high commitment (Guest, 1989; Morley et al., 2006).

2.2 Role of Internal Agents in HRM

The involvement of internal agents in HRM is becoming a global trend. The role of

both types of internal agents viz., line managers and top management is growing.

Maxwell et al. (2004) identified the potential enablers of line managers'

involvement in HR activities such as top management support for HR, integration

of HR activities with organizational goals and benchmarking of HR.

Researchers in the area have reported that internal agents can be given more

control of HRM strategy by allowing their involvement in decision making at the policy formation level as well as developing strategic partnerships between HRM,

senior and line managers (Hall & Torrington, 1998; McCracken & Wallace, 2000),

The involvement of top management ensures that HRM is given due consideration

at top level and there is integration of HR policies and practices with the

organizational strategy. As HR polices cascade down, line managers become

important stakeholders in influencing how HR polices are interpreted and enacted.

revious research studies in the area suggest that the involvement of these two

roups of managers in HRM is critical to the effectiveness of HR (Currie &

'octer, 2001; Mayrhofer et al., 2004; Purcell & Hutchinson, 2007).

for literature also suggests that the role of internal agents in HRM is analysed on

lividual and separate basis (McCarthy et al., 2010). Moreover, research also

[icates that internal agents understand the important role of HR in helping their

anizations to gain competitive advantage (Papalexandris & Panayotopoulou,

'3). Research evidences reveal the positive implications of involvement of

:mal agents in HRM (Bond & Wise, 2003; Perry & Kulik, 2008). In addition to

, several potential benefits are linked with internal agents involvement such as

faster decision making (Budhwar, 2000a; Whittakker & Marchington, 2003), and

facilitating individual and organizational performance (Watson & Maxwell, 2007).

2.2.1 Role of Line Managers in HRM

During the last three decades, considerable changes have influenced the roles of

line managers when it comes to managing people. Line managers play an

important role in HRM, since they are expected to create a synergy between

human, financial and physical resources by allocating time, money and energy to

the development of their subordinates (Brewster & Larsen, 1992). A number of

research studies have indicated the significance of involvement of line and middle

managers in HRM (e.g. Qadeer et al., 2011; Nonaka, 1988; Smith, 1997). Transfer

of HR responsibilities to the line denotes that Iine managers should become more

involved in HRM so that HR staff can take on a greater strategic role (Finegold &

Frenkel, 2006; Legge, 1995; Sisson & Storey, 2000). Teo and Rodwell (2007)

reported the importance of line managers in operationalization of HRM goals and

further add that line or middle managers' involvement in HR processes and

activities release the HR managers from day-to-day functional roles.

Various descriptions have been used to explain the relationship between line and

HR managers such as "the filling-in-the sandwich" (McConville & Holden, 1999),

"partnership" (Hutchinson & Wood, 1995; Hall & Torrington, 1998), "piggy-in-

the-middle" (McConville, 2006), "linking pins" (Likert, 1961). In this context,

several researchers have used the term devolution and devolvement to define the

role of line manager in HRM (Brewster & Soderstrom, 1994; Conway & Monks,

2010; McGovren et al., 1997; Morley et al., 2006). The word devolution means

reallocation of personnel tasks to line managers (Armstrong & Cooke, 1992;

Brewster & Larsen, 2000; Cunningham et al., 1996; Storey, 1992, Thornhill &

Saunders, 1998). Morley et al. (2006) have used. the term internal devolution' to

describe role of line managers and argued that in case of internal devolution, line

managers should play larger role in policy development besides carrying out the

operational HR processes and activities.

The decentralization of HR responsibilities to the line is an important aspect of

strategic HRM. Line management has been viewed as increasingly taking HR

19

responsibility (Clark, 1998). In many organizations today, line managers carry out

activities which were traditionally performed by HR specialists. Line management

traditionally have been given responsibility for some operational aspects of

managing people, but their role in the HRM function has continued to increase in

the present times (Storey, 1992). According to Green et al. (2006), partnership

between FIRM and line is getting acceptance in business organizations.

As suggested by Casco'n-Pereira et al. (2006), two types of studies on devolution

can be identified: (1) general studies on HR areas being devolved (e.g. Budhwar,

2000a; Gautam & Davis, 2007; Hall & Torrington, 1998; Torrington & Hall, 1996)

and (2) specific studies focusing on one single area (e.g. Bond & McCracken,

2005; Cunningham & Hyman, 1995; Currie & Procter, 2001; Dunn & Wilkinson,

2002; Marchington, 2001; Redman, 2001). The general studies on devolution focus

on the HR functions that are devolved and provide an insight on how devolution

can be undertaken in terms of what middle managers do. The studies impinge on

the range of activities performed by middle managers in Iine function while the

specific studies focus on precise HR activities. Some of the specific HR activities

that have been explored by researchers include training and development,

recruitment and selection, industrial relations, pay and reward and performance

appraisal (Currie and Procter, 2001; Heraty & Morley, 1995; Hope-Hailey et al.,

1997; Redman, 2001; Wood, 1995). On the basis of existing perspectives, a

summary of characteristics of devolution is presented in Table 2.1.

Table 2.1: Characteristics of Devolution of HRM to Line Researchers Characteristic

Khatri (2000) Free information flow between HR and line Casco'n-Pereira et al. (2006) Devolvement of decision-making power

, Green et al. (2006) Partnership between HRM and line Green et al. (2006) Identification of HR problems done jtly Nixon and Carroll (1994) Developing soft skills among line managers

Mayne and Brewster (1995) Devolvement is driven by both organizational and effectiveness criteria

Budhwar and Sparrow (1997), Harris et al. (2002) Line managers given training in HRM

Budhwar and Boyne (2004), Budhwar and Sparrow (1997), Brewster and Larsen (2000), Wood (1995)

Transfer of responsibility for HRM to line

Source: Prepared by the Researcher

20

One of the major changes in HRM that affect the line managers is the advancement

of technology. The growth in the field of information technology can simplify HR

processes and deliver HR advice and services to the line managers (Papalexandris

& Panayotopoulou, 2003). Renwick & McNeil (2002) noted that the use of

information technology tools have made it possible for line managers to deal with

some HR tasks without the assistance of the HR department, while in software

industry line managers perform all the HR tasks on their own (Brewster & Larsen,

2000). Qadeer et al. (2011) have presented a detailed review of the relevant

literature in the area and identified the supports and barriers for the tine managers

to take on HR responbilities.

2.2.1.1 Dimensions of Line Manager Roles

Hall and Torrington (1998) studied the distribution of HR tasks between personnel

specialists and middle managers. They found evidence of devolution of day-to-day

personnel matters to line managers in UK. Valverde (2001) compared the

contribution that the different HR agents make to the HR function. Findings of the

study show middle managers' involvement in operational level HR decisions and

daily people management activities such as identifying training needs, carrying out

performance appraisal and service delivery functions such as acting as trainers or

interviewing candidates in a selection process.

Watson and Maxwell (2007) on the basis of case study evidence, argued that line

managers' knowledge on the basis of their involvement in HR tasks may improve

their performance in HR activities. Cascon-Pereira et al. (2006) identified the tasks

that are devolved and degree of devolution along a number of dimensions.

Cunningham and Hyman (1995) studied the changes in employee relation practices

in UK and found that the organizations are adopting both hard and soft approaches

for managing people as a result of which line manager are experiencing significant

changes in their role.

Storey (1995) proposes that line managers should be closely involved as both the

deliverers and drivers of HR policies. Gennard and Kelly (1997) concluded that

with the emergence of SHRM, the line-personnel relationship has changed. The

third Workplace Industrial Relations Survey (WIRS 3) puts forward that line

21

managers were spending more of their time on HR activities during 1980s

(Millward et al., 1992).

Cunningham and Hyman (1999) reported that many organizations are increasingly

devolving personnel responsibility to line managers. This has been attributed to

growing competition. The study finds that devolved responsibilities of personnel

are formally geared to securing commitment from employees by promoting an

integrative culture of employee management through line managers. Renwick

(2000) pointed out that both costs as well as benefits are associated with the

involvement of line managers in HRM. The benefit includes willingness and

flexibility of line managers to take on increased responsibility in HRM and feel it

as a career-enhancing work, while organizational costs involve the line feeling

under pressure to complete HR tasks owing to their involvement in HRM.

Bond and McCracken (2005) drawing on case studies research in four financial

sector companies in Scotland proposed a model for line manager decision-making

for dealing with requests for time off at short notice. The model outlined the

important factors such as extent of devolution, company polices, type of

emergency, operational constraints and employee commitment that effect the line

managers decisions and leads to good and poor decision-making. However, these

factors are mediated by line managers' common sense or tacit knowledge in

dealing with these areas.

Kulik and Bainbridge (2006) found evidence of a trend within Australian

organizations to devolve people management activities to the line. Results revealed

that human resource managers and line managers have different views of the trend,

with HR managers being more optimistic that the trend has had positive

organizational outcomes and anticipating more devolution to occur in the future.

Hutchinson and Purcell (2010) analyzed the human resource management

responsibilities of ward managers and paramedic supervisors in NHS trust. The

results of the study reveal that the roles of these front-line managers have been

enlarged without support from senior managers and the HR function due to which

issues of role conflict and ambiguity, heavy workloads and stress increased.

Whittaker and Marchington (2003) explored the relationship between line

managers and their HR counterparts. Findings of the study reveals that line

22

managers are satisfied with the support they receive in performing the devolved

HR responsibilities and are keen to take on the responsibilities that are explicitly

related to the development of their team. Most line managers report working

closely with their HR counterparts. Cantrell and Miele (2007) report that line

managers are now involved in various people management activities like staff

planning, recruitment, performance management, staff development, pay, career

development and communications.

Harris et al. (2002) studied the transfer of HR responsibilities in regulated

environment in UK public sector organizations and revealed that line managers and

HR specialists shared the responsibility of effectiveness and long-term

sustainability with respect to increased regulatory environment. Larsen and

Brewster (2003) reported that the HR tasks are increasingly transferred to line

managers but the degree of involvement in such tasks differs across European

nations.

Hsu & Leat's (2000) study indicated the role of line managers in HRM decision-

making. They revealed that line managers are influential in decision-making

regarding training and development, recruitment and selection and workforce

expansion and reduction. Conway and Monks (2010) analyzed the impact of

organizational restructuring on the devolution of HRM to middle managers in the

Irish health service. Results of the study pointed out that increased layers of

bureaucracy brought about by the centralisation process create problems of

decision-making by HR and middle managers.

Storey (1992) proposed a typology of senior and middle line managers which

provides insights about the role that line managers can adopt in organizations. Two

key dimensions of line managers' role is identified which is integrated in a matrix.

The first dimension reveals the extent to which a manager is commercially or

technically oriented. The second dimension measures the degree to which a

manager takes proactive or reactive decision. The integrated matrix presents four

types of line managers i.e. Production manager, Manufacturing manager, Business

manager and Sales manager.

The typology presents the responsibility for HR will vary according to the role that

line managers will perform. Production manager is the traditional interpretation of

23

the role. Thus it is. likely that training and development responsibilities would

largely be the remit of the specialists in this situation. The manufacturing managers

actively seek to find innovative ways. This type of line managers are more

generalists, they have greater responsibility and they undertake a wide range of

tasks.Under this typology, HR responsibility could be expected to be shared

responsibility between the specialist and the manufacturing manager. The business

manager has an awareness of the total organization and how it fits within its wider

environment. Here, HR might again be a shared responsibility, but in this the line

assumes the greater ownership. The fourth type of line manager is the sales

manager. This type of manager continues to operate in a reactive environment but

shifts in orientation from technical aspects of production to commercial aspects.

While conceptually possible, Storey (1992) found little evidence of this type of line

manager. The above typology of Storey (1992) is depicted in Exhibit 2.1

Exhibit 2.1: Typology of Line Manager Roles

Proactive

Business Manufacturing Manager Manager

Commercially oriented

Sales Administrative

Manager Manager

Technically oriented

Reactive

Source: Adapted from Storey, J. (1992). Developments in the management of human resources. Oxford: Blackwell.

24

Tulgan (2001) remarks that line manager roles in learning and development at

work matters in the milieu of boundery-less careers. There are five non-monetary

factors that are relevant to the boundry-less careers, where the career paths

followed by people are no longer restricted to old pathways in one organization or

one area of work:

■ When they work — offer relief from gruelling schedules.

■ Where they work —the options of elements of home working.

• What they do — downshifting as well as career advancement.

• Who they work with — the quality of networks and teams.

• What they are learning — not just for performance, but also for employability.

Gibb (2003) carried out a study on line manager involvement in learning and

development at work. The benefits of increasing line involvement in learning and

development at work is negated by the disadvantages in involving line manager.

The study presented two explanations in the form of a continuum to justify the

trend of line manager involvement in learning and development at work. The first

continuum plots significance of line managers' involvement from minimal to

profound significance. The second continuum addresses the question of whether

devolution is aligned with control or commitment systems.

According to minimal significance perspective greater line management

involvement in learning and development is simply an extension of conventional

management control. On the other hand, profound significance supports the shift to

commitment systems with the re-invention of management that involve the growth

of new HRM practices. The study concluded that although there are apprehensions

about greater line involvement in Iearning and development at work which is

negated by the greater anxiety to reaffirm work organization and management in

an era of knowledge management.

Exhibit 2.2 presents the typology of different perspectives that can be used to map

the role of line manager as developers. As evident from Exhibit 2.2, there are

levels of correlation between line manager and the employer as descriptions of

roles and careers for management change with changing organizational contexts.

0461

Exhibit 2.2: Mapping Perspectives on Line Managers as Developers (LMaD)

Sceptical Perspective

Greater LMaD is Greater LMaD is inappropriate due to inappropriate as need is

organizational change for L&D specialists

Escalating Analysis

Greater LMaD is needed Greater LMaD is needed to achieve organizational to deal with L&D more

change effectively

Championing Perspective

Source: Adapted from Gibb, S. (2003). Line manager involvement in learning and development Small beer or big deal? Employee Relations, 25(3), 289

Casco'n-Pereira et al. (2006) identified the following dimensions of devolution:

a) tasks/responsibilities b) decision-making power c) financial power and d) expertise power

The authors assessed the transfer of each of these dimensions in each personnel

area. It is presumed that these four dimensions are likely to play a role in HR

function's devolvement to line managers. As some studies suggest, the reality of

devolution is not simple and the transfer of HR functions to middle managers

appear in a great variety of forms, not only in terms of different HR areas or

activities but also in terms of different degrees — tasks, knowledge and expertise,

financial power and decision-making power. The devolution of each of these

dimensions may have a distinctive impact on middle managers perceptions.

McGuire et al. (2008) concluded that commercialization of the public sector has

led to the enhanced staff performance and in this context the role of line managers

become imperative. Exhibit 2.3 presents a framework for Iine managers' HR

involvement, the success of which depends on striking a balance between factors

favoring devolvement and those inhibiting HR involvement.

Exhibit 2.3: A Framework for Line Manager-HR Involvement

Enablers of line manager HR involvement • Greater degrees of responsibility & task variation • HR information systems • Close relationships with employees • Formation of strategic partnerships

Public sector change driven by: • Commercialisation Line manager Degree of change • High quality service involvement in experienced in HR

delivery HR process processes & quality • Greater financial and of service delivery

public accountability • Cost rationalisation

Inhibitors of line manager HR involvement • Lack of training & support • Excess Workload • Short-term priorities surpassing long-term

development initiatives • PoIitical pressures

Source: Adapted from Mcguire, D. Stoner, L. and Mylona, S. (2008). The role of line managers as human resource agents in fostering organizational change in public services. Journal of Change Management, 8(1), 73-84

In order to illustrate the divergent view points of the researchers regarding the role

of middle managers in strategic change, Floyd and Wooldridge. (1992), (1994),

(1997) and Wooldridge and Floyd (1990) have developed a typology that helps us

to recognize the role of middle managers to the realization of strategy and the

conditions necessary for this to take place. The framework is outlined in Exhibit

2.4 and it reveals the upward and downward influence of middle managers in the

strategic change process allowing for a consideration of an enhanced role of

middle or line managers in acting as change agents for employees.

27

In upward influence, middle managers are engaged in `championing alternatives'

and `synthesising information' roles. In championing alternatives role, middle

managers conceive business opportunities that fall outside an organization's

current concept of strategy. In their synthesising information role, middle

managers also supply executive management with information about emerging

issues, e.g. internal or external developments, and events and trends viewed as

consequential to the organization. In doing this, middle managers serve an

important role in identifying strategic issues. In downward influence, middle

managers carry out the roles of `facilitating adaptability' and ìmplementing

deliberate strategy'. Middle managers may stimulate emergent strategic change

from employees which may not be anticipated in the deliberate strategy set out by

executive management.

Exhibit 2.4 Typology of Middle Manager Influence

Behavioural Activity

Upward Influence Downward Influence Divergent

Championing Facilitating Strategy Adaptability

Cognitive Activity

Integrative Synthesising Information

Implementing Deliberate Strategy

Source: Adopted from Floyd, S. W. and Wooldridge, B. (1992). Middle management involvement in. strategy and its association with strategic type: A research note. Strategic Management Journal, 13, 153-167.

2.2.1.2 Line Manager Roles: Key HRM Domains

A number of scholars have carried out studies dealing with specific areas of HR

devolution. For instance, Marchington's (2001) and Fenton-O'Creevy's (2001)

studies of middle managers attitudes towards employee involvement, Redman's

(2001) study about devolvement of performance appraisal function, Currie and

28

Procter's (2001) work on the area of pay and Dunn and Wilkinson's (2002) study

in the area of absence management.

Bond and Wise (2003) carried out a study to know the familiarity of line managers

in executing the legal and company family leave policies as well as the training

support provided to them. The result obtained from the case studies of four

financial sector organizations found that line mangers' training on the above stated

area is limited, as a consequence of which, HR specialists' role is to provide

information and training to line managers for effectiveness. Heraty and Morley

(1995) carried out a study to find out the issues involved in devolving training and

development to line and the resultant consequences. The result of the study

concluded that there is evidence of devolvement of operational issues and concerns

but it found little evidence of devolvement of strategic issues like policy

development. Factors such as importance of the activity from a strategic

perspective, the issue of ownership, differing perspectives between line managers

and specialists and the organizational support for Iine managers to conduct training

and development activities in a competent manner were responsible for complete

devolvement to the line.

Rockart (1988) found that the growth in information technology has increased the

business opportunities so is the role of line managers in system formation and

execution. Siugzdiniene (2008) points out that as organizations are striving to

make HRD function leaner and more strategic; line managers are increasingly

becoming responsible for performing HRD activities in order to facilitate

employee learning and development. The increased expectation about line

managers' role in HRD has necessitated substantial investments in capacity

development of line managers. Study by Industrial Relations Services (1994) found

different perceptions depending on the different HR areas devolved. In this study it

was found that line managers would be most likely to have responsibility for issues

related to departmental performance and least responsible for issues that required a

singular stance and homogeneity of policy.

Andolsek and Stebe (2005) studied the influence of organizational characteristics

(size, age, numerical flexibility, HRM strategies, HRM policies) and situational

factors (sector, state) on devolution of HRM in five European countries. The focus

of the study was on the following HR areas: recruitment, pay, training, industrial

29

relations and workforce reduction. The results of the study revealed that devolution

is dependent on external institutional factors and institutional environment is the

main factor that encourages or limits the devolution.

Renwick and MacNeil (2002) studied the role of line managers in developing

employee careers, the change that is expected from them and the impact of such

changes on their careers. It was concluded that in the competitive business

environment, line mangers are Iooking for the ways and means to enhance the

performance of their employees as well as their own performance in both problem

solving and goal achievement.

Watson and Maxwell's (2007) study focused on the areas where line managers are

involved in HRD activities, their knowledge of HRD roles and responsibilities and

the underlying difficulties they face in discharging such activities. Findings reveal

that line manager through assistance from HRD professionals have started

adopting HRD roles.

Wood (1995) measured line management responsibility focusing specifically on

selection. Respondents were asked if in their plant line management takes

responsibility for initiating and carrying out their own selection, with personnel as

a support. Selection was chosen as the focus because of its centrality to personnel

management. Moreover, it is likely to be the first element in any delegation of

personnel matters to line managers.

Gautam and Davis (2007) studied the devolvement of pay and reward, recruitment

and selection, training and development, industrial relations and workforce an

increasing line management responsibility for the above stated HR areas. MacNeil

(2003) explored the role of line managers in facilitating creation and transfer of

tacit knowledge in teams as well as the barriers concerning the transfer of tacit

knowledge between individuals and teams and finally emphasized the importance

of developing line managers as facilitators. MacNeil (2003) highlighted that as

competitive business pressures results in centralized structures, flatter management

layers, adoption of team-working processes and employee empowerment, line

managers offers key role in contributing to strategic HRM outcomes by

encouraging knowledge sharing in teams. Table 2.2 presents a summary of key HR

domains explored by researchers in this area.

30

Table 2.2: Key HR Domains vis-a-vis Line Manaaer Roles HR Domain Researchers

Employee engagement Marchington (2001), Fenton-O'Creevy's (2001) Identification of training needs Green et al. (2006), Watson et al. (2007) Performance appraisal Redman (2001), Andersen et al. (2007) Counseling Nixon and Carroll (1994) Compensation Currie and Procter (200I), Hoe-Haile etal. (1997) Absence management Dunn and Wilkinson's (2002) Legal and family leave policies Bond and Wise (2003) Training and development Heraty and Morley (1995) System formation and execution Rockart (1988) Employee learning Siu zdiniene (2008) Knowledge management MacNeil (2003) Career management Renwick and MacNeil (2002) HRD Watson and Maxwell (2007) Industrial relations; health & safety Hope-Hailey etal. (1997) Recruitment & selection Hope-Halley et al. (1997), Wood (1995) Workforce expansion & reduction Kramar and Lake (1998) Managing change Cunningham and Hyman 1995) Reward management Brown and Purcell (2007) HR planning, recruitment, selection Srimannarayana (2010) Recruitment, pay, training, industrial relations and workforce reduction

Andolsèk and Stebe (2005), Gautam and Davis (2007)

Quality circles, appraisal, discipline, staffing levels, empowerment, team briefing, recruitment and dismissal

Cunningham and Hyman (1995), Hall and Torrington (1998)


Hope-Hailey et al. (1997) have found that Line-HR responsibilities differ according

to the specific HRM area. The HR function, for example, may still retain certain

areas such as IR, pay and benefits, organizational health and safety, recruitment

and selection whereas line managers take more responsibility for work force

expansion and reduction (Hope-Halley et al., 1997; Kramar & Lake, 1998).

2.2.1.3 Rationale for Role of Line Managers in HRM

The concept of shared responsibility for HRM by both line management and HR

specialists is being recognized within the literature and there is constant debate

about the same. A number of reasons are cited about the same ranging from the

requirement for speed, adaptability and flexibility of HRM offerings in dynamic

and changing environments (Renwick, 2000), the plan of cost reduction, increased

31

utilization of HR capital (Budhwar, 2000a, Renwick, 2003) and the adherence of

SHRM philosophy of integrating HRM policy and practice with the needs of

business (Ulrich & Brockbank, 2005).

Positioning the HRM responsibility at a local level through line management

provides managers the opportunity to be directly involved in the HRM issues

affecting their own staff and department. The logic behind this rationale is that an

employee's line managers may be more properly placed to interact, translate and

disseminate HR policy and practice to bring out commitment and performance

(Larsen & Brewster, 2003; Renwick, 2000). The reallocation of HR responsibilities

results in motivating employees through nurturing effective control as line

managers are in regular contact with the employees. In addition to this the

reallocation of HR function to line managers has a positive effect on organizational

performance (Harrison, 2005). Gibb (2003) has associated devolvement with

increase in quality at work, development of a wide range of people related

capabilities, alignment of HRD with broader organization's strategic goals and

transformation of managers as better people managers.

With the line managers assuming an increased role in the transactional delivery of

people processes, HR managers may be released from this task thus, enabling them

to focus on strategic value adding activities (Cunningham & Hayman, 1999). The

decision to devolve HRM to line management may increase the speed of decision-

making on HRM issues as evidenced in the findings of Larsen and Brewster (2003)

and Renwick (2000). Their studies established that devolution may limit the

repetition of effort within HRM delivery and reduce financial costs through

reducing headcounts of HR and by enabling them to focus on strategic value

adding activities as opposed to those of a transactional nature.

Research findings on the extent of devolution to the line have been mixed

(Brewster & Larsen, 2000; Budhwar, 2000b; Harris et al., 2002). However, a

number of studies support the positive impact of devolution on different measures

of organizational performance. Participation between HR and line helps , in

enhancing organizational performance (Gennard & Kelly, 1997; Guest, 1987;

Thornhill & Saunders, 1998). Budhwar (2000b) revealed the positive implications

of the devolvement of HRM to line managers on a firm's performance.

32

0-

Renwick (2003), based on interviews with line managers on their experiences in

handling HR work that has been devolved to them in three different work

organizations located in UK, found that significant organizational benefits exist

from involving the line in HR work like. -line willingness and flexibility to take on

increased responsibility and accountability in HR work. Adams' (1991) research

indicated that innovations in HR occurred where personnel is decentralized to line

managers.

Andersen et al. (2007) revealed that strategic integration and devolvement of HRM

is accomplished to a fair level in the organizations and the amount of configuration

of HRM with business objectives and strategies is associated with firm

performance. In this context, line management training in HR practices had an

optimistic association with firm performance. The condition of HRM in Australian

organizations can be improved by enhancing training and support of line managers

in the devolvement of HR practices.

Hutchinson and Purcell (2003) indicated that line manager involvement in

coaching, guidance and communication positively influences organizational

performance. Mcguire et al (2008) found that devolvement of HR responsibilities

to line managers has enhanced the public services as well as improved employee

performance as a result of swiftly dealing with the workplace problems and faster

decision-making.

Dopson and Stewart's (1990) and Kanter's (1982) studies revealed that an

organization's competitive advantage will increasingly depend on the degree to

which middle managers have a greater input into the strategy and policy arena.

Middle managers make vital contribution to organizational performance (Currie &

Proctor, 2005; Floyd & Wooldridge, 1994, 1997; Huy, 2001). Hutchinson and

Purcell (2010) on the basis of case study research in NHS trust reported that front-

line managers are important to the delivery of effective HRM and thus strongly

influence organizational performance and service delivery.

Research studies have stressed the importance of organization of HRM within the

company in order to improve the organizational performance (Brewster et al.,

1997; Budhwar & Sparrow, 1997). In this context, the main features of HRM

organization as highlighted in different studies includes integration of HRM and

33

business strategy (Boswell, 2006; Truss & Gratton, 1994) and distribution of roles

and influence of HRM specialists and line managers (Andolsek & Stebe, 2005;

Hall & Torrington, 1999). Results of the Dany et al. (2008) study pointed out the

moderating impact of distribution of roles and influence between HRM specialists

and line managers on the link between HRM integration and organizational

performance. Further, the results reveal that level of integration and distribution of

roles and influence between HRM specialists and line managers has positive

performance implications only in particular situations.

Brown and Purcell (2007) study reported the positive impact of line manager

involvement in reward management on organizational performance. Many

researchers have indicated that line participation and decision-making in HR

activities helps in enhancing organizational performance (Azmi, 2010; Gennard &

Kelly, 1997; Guest, 1987; Thornhill & Saunders, 1998). Line manager

involvement in communication, guidance and coaching, positively influences

organizational performance (Hutchinson & Purcell, 2003). Purcell and Hutchinson

(2007) reported that front-line managers act as agents in the HRM performance

chain and the quality of leadership behaviour and satisfaction with HR practises

have a strong effect on employee attitudes. Mitsuhashi et al. (2000) analysed the

line and HR executives' perceived effectiveness and importance of HR

departments. The results of the study revealed the differences between the

perceived effectiveness of the entire HR function as rated by HR and line

" - executives.

2.2.1.4 Role of Line Managers in HRM: Barriers and Constraints

There is a clear difference between the rhetoric of devolution and what actually

happens in practice (Casco'n-Pereira et al., 2006). Although there is evidence of

increased line involvement in the management of human resources, there is still

some resistance to the uptake of HR responsibilities at the line level (Cunningham

& Hyman, 1995, 1999; Currie & Procter, 2001; Poole & Jenkins, 1997; Renwick,

2000). Cunningham and Hyman (1995) pointed out that organizations are finding it

difficult to transfer the HR vision of senior management down to the line since line

managers lacked the necessary skills as well as resources. Further, Cunningham

M

and Hyman (1999) reported that many organizations have devolved personnel

responsibility to line managers as a result of restructuring of personnel activity but

line managers are not satisfied with the training provided to them by personnel

department to deal with HR matters. Tensions exist between line managers and

personnel and the function appears to be vulnerable to further contraction.

There is still some concern that several barriers remain to the adoption of general

joint arrangements. Within the process of devolution, the configuration of

responsibilities is still to be resolved (Renwick, 2000). Marchington (1999) has

explained that leaving too much to the line may result in inattention and

inconsistencies in approach and retaining too much control with HR runs the risk

that problems will not be dealt with using an appropriate business focus.

McGovern et al. (1997) reported in their study that line managers are disinclined in

taking HR tasks viewing it as illogical. As a consequence of this, HR departments

are hesitant to transfer responsibilities to line owing to their knowledge, skill and

capability to bear these tasks. Renwick (2003) pointed out that devolution involves

significant organizational costs like the line feeling under pressure to complete HR

tasks amongst other duties and not seeing themselves as experts in HR work.

Harris et al (2002) too concur with this view and point out that lack of specialist

knowledge among the line managers was a hurdle in performing HR tasks

effectively in the UK. Francis and Keegan (2006), Purcell and Hutchinson (2007)

and Renwick (2000) pointed out that line manager involvement in HRM needs

substantial improvement.

Thornhill and Saunders (1998) have argued that the absence of a designated human

resource specialist role actually results in quite negative consequences where the

scope for strategic integration is significantly impaired. Line managers may resist

empowerment initiatives and fail to see the benefits of the changes. McConville

(2006) reported that apprehensions do exist regarding the new role of line

managers. The study suggests that middle managers intention to be proactive in

HRM enhances their role but adds substantial workload as a result of which

problems inflate. As a result, counseling line managers may be important since

driven by budgetary pressures, line managers generally choose to concentrate more

on production matters (Armstrong, 1998; Cunningham & Hyman, 1999). On the

35

other hand, HR specialists consider that line managers may not have the skills to

take on personnel responsibilities effectively (Torrington & Hall, 1996).

Several scholars found that authority to make final decisions on HR by line was

missing (e.g. Armstrong, 1998; Cunningham & Hyman, 1995; McConviIle &

Holden, 1999; Patton, 2003). Schuler and Huselid (1997) consider HR-line

partnership is not happening in all companies. Hope-Hailey et al. (1997) concluded

that devolution to line remains problematic. .

It has been noted that little has changed in the inimical attitudes of Iine

management towards personnel (Legge, 1978). Many researchers have reported

low degrees of devolution (Cunningham & Hyman, 1995, 1999). There has been

Iittle training of line managers dealing with HR issues (Renwick, 2003).The ability

and willingness of line managers to carry out HR tasks remains a challenge (Bond

& Wise, 2003; Currie & Procter, 2001). Hall and Torrington (1998) point to

making sustained efforts to vest HRM responsibility with line. Watson et al.

(2007) observed that reducing the workloads of line managers and good relations

with HR are means to develop greater devolution. Line managers should be given

more decision-making power (McCracken & Wallace, 2000).

In this context, McGovern et al. (1997: 26) concluded:

"the prospects for full-blown devolvement to the line are not promising given the current priorities of these businesses. Attempts to devolve HRM to the line may be possible but only if accompanied by increased monitoring on the part of the HR specialists".

Rather than devolution of responsibilities, what is in fact needed is a partnership

between HR and line managers as suggested by Currie and Proctor (2001). Kinnie

(1990) studied - the multi-dimensional aspect of devolution and argued that

devolving authority necessarily involves devolving decision-making capacity in

financial terms. McConville and Holden (1999) opine that if associated budgets are

not devolved along with the responsibilities and tasks then what is being devolved

is actually a liability.

Armstrong (1998) adds that if authority involves personal influence arising from

knowledge or position then the devolution of expertise must be another dimension

of devolution. The devolution of expertise extends devolving not only the tasks but

the skills and knowledge to perform these tasks. Given the critical role of

36

counseling, (Nixon & Carroll, 1994) managers need to develop their counseling

skills to turn out to be completely successful in their management roles. Gennard

and Kelly (1997) have suggested that extensive participation between HR and line

managers can create mutual benefit for both as they jointly contribute to solve

business problems. Hence, organizations need to undertake a thorough examination

of factors that enable successful adoption of devolution.

2.2.2 Role of Top Management in HRM

Globalization has ushered a new era in business world where national boundaries

become irrelevant and organizations are competing with each other across border

(Ansoff, 1991). In a knowledge driven global economy, it is intellectual and social

capital rather than natural resources, financial or physical capital that is the key

source of competitive advantage (Fine gold & Frenkel, 2006).

In the face of this increasing international competition, Beer et al. (1984) stressed

the need to focus on the value of investments in human resources as it provides a

major source of competitive advantage. It is important for the top.. managers to

evolve strategies to attract, motivate, and retain the best talent in the organization.

Researchers in the area of HRM have contributed a significant amount of literature

on the role and the job of top managers in an organization vis-a-vis people related

issues (Chung et al., 1987; Harper, 1993; Jonas et al., 1990). Valverde et al. (2006)

reported the contribution of top management in HRM. They indicate that top

management make strategic decisions (including HRM strategic decisions),

establish the organization's values, goals and philosophy and influence its

approach and ideology to managing people. As a result of this, top management

have been identified as an important agent in HRM.

On the basis of empirical analysis Valverde et al. (2006) found evidence that top

management is involved in variety of HR activities at different levels of HRM

decision-making ranging from operational decision making, daily people

management to a smaller degree even in administrative and technical activities.

Researchers in the area have recognized the contribution of senior management in

developing and implementing the strategic direction of the HR function (Guest

1997; Lepak & Snell 1999; Macky & Boxall, 2007; Stanton et al., 2010).

37

2.2.2.1 Dimensions of Top Management Roles

Studies in the field of HRM have reported the role of top management in the

management of people in organizations (Finegold & Frenkel, 2006; Storey, 1992;

Valverde et al., 2006). Recent research has examined the importance of the chief

executive officer, top management team and board of directors as strategic assets

(Fisher & Dowling, 1999). Hambrick and Mason (1984) term it as the upper-

echelon. The upper echelons contribute to the firm's awareness of the competitive

environment. The top management team comprises of key functional heads where

top executives play a key role in selecting, training, evaluating, and rewarding their

immediate subordinates. -

The influence of top management on HRM policies and practices is acknowledged

by several writers (Heneman et al. 2000; Khilji, 2002; Tsui & Milkovich, 1987).

Upper echelons notion also make out that certain traits of top managers may be

related to firm performance (Hambrick & Mason, 1984). Khilji (2002) recognized

the pivotal role of top managers in modifying the HR image of their organizations.

Top managers should offer transformational leadership by sharing their vision with

employees. An HR function that is perceived by key actors in the corporation to

have a high degree of reputational effectiveness is more likely to succeed in

enacting strategic roles. Top management is recognized as the most powerful force

facilitating HRM and serve as a key to attain and sustain competitive advantage

(Porter, 1991; Tracey, 2002).

Finegold and Frenkel (2006) conducted a study in eight biotech firms of USA and

Australia and cited a number of factors that are responsible for top management

involvement in people management. Generally four approaches viz, no in-house

HR, tactical HR, strategic HR and hybrid: evolving from tactical to strategic HR,

are followed across these eight firms depending on the size of the firm and

financial resources available with the firm. It was found that in knowledge driven

industries, top management plays a key role in people management and are directly

or indirectly involved in a number of HR related tasks in their organizations.

Kirkpatrick & Locke (1991) reported the executive human resource management

responsibilities of CEOs are vital because having the right managers in place has a

real impact on organizational performance. Senior managers who are ineffective

38

can keep a company from reaching its goals (Finkelstein, 1992). Novicevic and

Harvey (2001) speak out that the top management has to look for suitable ways to

generate a sustainable competitive advantage through HR efforts. Thornhill and

Saunders (1998) reported the role of top manager in establishing the organizational

structures that support adaptability and policies to promote optimistic employee

relations.

Sheehan (2005) reported that the role of the CEO is crucial in the realization of

expected HRM outcomes. Examples of such roles include decision to make HR a

part of the senior committee and direct HR reporting relationship to the CEO.

Moreover, CEOs involvement ensures that all these activities receive due

consideration and present an integrative approach to HRM. Various researchers

(e.g. Golden & Ramanujam, 1985; Lawler et al., 1995) have also argued the

importance of direct access to the CEO through a formal reporting relationship.

Sparrow and Marchington (1998) pointed out the importance of informal

interaction of HR managers with senior management executives and the

association that is developed between them. Exhibit 2.5 presents the proposed

influences on strategic HRM integration.

HKm integration Extlibit Z.5: F'roposed influences on u-

Organizational Recognition Responses of the need to apply • HR representation at the strategic HR senior committee level principles • Direct HR reporting

relationship to CEO 4 Increase in line managers

HR responsibilities

Expected Outcomes

• FuIl integration of HRM with business strategy

• Integrated HR policy design • Integration of HR

responsibilities within line management activities

Moderating Influences

• HR manager's commitment to strategic HR initiatives

• HR manager's commitment to business values

• Business acumen

• Top management commitment to HR initiatives

• Corporate culture commitment to HR initiatives

Source: Adapted fror Sheehan, C (2005). A model for HRM strategic integration. Personnel Review, 34(2),192-209.

Researchers in the area of HRM (Budhwar, 2000a; Kane et al., 1999) have

recognized the role of top management direction and support as an important

determinant of HRM success. In this context, analysts have mentioned the

importance of direct access to the CEO through formal reporting relationship

(Golden & Ramanujam, 1985; Nininger, 1980). Welbourne and Cyr (1999)

revealed the role of CEO in developing the competence of employees. Buyens and

De Vos (2001) recognized the importance of HR function in translating the

business strategies and top managers' perceptions of HRM. Further, reported that

integration of HRM with business strategies was comparatively higher in the

organizations where top management considered employees as strategic assets.

Brown and Purcell (2007) opined that senior management is involved in

development of reward strategy and final approval of rewards to employees.

Martell and Carroll (1995) conducted a study in specific firms affiliated with

Fortune 500 companies on the role of the top management team in executive

human resource management vis-a-vis organizational performance. Organizational

performance was considered as dependent variable where as executive human

resource management practices (i.e. staffing, compensation, performance appraisal

and training) were considered as independent variable and strategic business unit

competitive strategy (using Michael Porter's generic strategies) was a control

variable. The results revealed in the light of the role of top management several

executive human resource management practices associated with firm

performance.

Truss et al (2002) presented the results of a longitudinal study conducted between

1992 and 2000 within two organizations viz. Chelsea and Westminster NHS trust

and Citibank, an investment bank. In both organizations, the study reveals the key

role of senior managers in influencing the HR department's role. In case of Trust,

the chief executive owed a place for HR director as well as was made a member of

the Trust's strategic executive group to discuss strategic HR issues where as in

case of bank similar type of role is played senior managers.

Based on the findings of the study, a model is presented in Exhibit 2.6 to extricate

the different factors that control the HR department's role. In the model various

organizational environment factors are presented which have an impact on HR

department's main role set members viz. senior managers and line managers. The

40

signals sent to the HR department regarding the role to be played which in turn

affects the resources allocated to the function. Further, within the HR department

certain attributes and behaviour are differentiated and finally the output is in the

form of HR reputational effectiveness.

Exhibit 2.6: Factors Influencing the Strategic Role of HR Department

External Context

Organizational Context • Size • Centralisation • Sector/industry • Diversity • Culture • Shocks • Workforce characteristics • Shared meaning of SHRM

.._.._L...,.... . .,_+.................... Senior Managers Line Managers

• HR role expectations i • HR role expectations

Human Resource Allocation ] I HR Department's Role

Attributes Behaviour • Perceived role • Role behavior • HR leadership • Strength of will to act strategically • HR managers type A /B • Resource deployment • HR expertise • Structure of HR dept • Business Knowledge • Focus of activities • Power • Communication and visibility

External Context

Source: Adapted from Truss, C., Gratton, L., Hope-Harley, v, Stiles, P. & Zaleska, J. (2002). Paying the piper: Choice and constraint in changing HR functional roles. Human Resource Management Journal, 12('2.), 39-63.

Hutchinson and Purcell (2010) conducted study on HRM responsibilities of front-

line managers such as ward managers and paramedic supervisors in NHS trust and

concluded that support of senior managers is important for these managers to carry

out HR function.

41

Ohtaki (2005) reported the changing role of CEO in HRM in line with the changes

in HRM. The study further talks of integration of HRM into the organization's

business planning process. This new role puts forward the new challenges for

CEOs to build sustainable businesses

2.2.2.2 Top Management Roles: Key HRM Domains

Armstrong and Brown (2008) noted that top management has a central role to play

in implementation of performance management. They have to communicate that

performance management is an essential part of the managerial practices of the

business organizations and the effectiveness with which line managers executes

their performance management responsibilities is one of the measure used when

appraising their performance. Top management should ensure that line managers

do not feel pressurized in this exercise and view this as an innovative and

developmental approach. Moreover, line managers should be involved in the

design, development and evaluating the effectiveness of performance management

processes.

In Buyens and De Vos's (2001) study revealed that top management viewed HR

function as important way through which change management programmes can be

developed and carried out effectively. Further, research indicates that other HRM

functions such as employment relationship, motivation of employees are

considered equally important by top managers. Martell and Carroll (1995)

conducted a study on top management team from HRM perspective and concluded

that top executives are involved in selection, training, performance evaluation and

compensation of their subordinates. Moreover, Carroll and Gillen's (1987) study

also found evidence of CEO's involvement in selection and appraisal of managers.

Cunningham and Hyman's (1995) study reveals that the control of senior

management on HR planning decisions is more in comparision with line managers.

Whittaker and Marchington (2003) on the basis of case study research found

evidence of involvement of senior managers in different HRM areas such training

and development, recruitment, selection, performance appraisal. Moreover, senior

managers involvement ensures that people management issues are given due

consideration at board level. Valverde et al. (2006) reported the involvement of top

42

management across a wide range of HR processes and activities such as training

and development, staff reduction, health and safety, collective bargaining and

performance appraisal. Ohtaki (2005) carried out a study on the role of CEO in

HRM and found that involvement of CEO is important for compensation,

performance appraisal, career development and talent management.

2.2.2.3 Rationale for Role of Top Management in HRM

Papalexandris and Panayotopoulou (2005) reported that CEO's participation and

decision-making in HR activities have helped the organizations to gain competitive

advantage. Collins and Clark's (2003) study reveals that top managers' social

networks intervenes the relationship between HR practices and firm performance.

Senior managers' involvement in HRM activities enhances the HR effectiveness

and firm performance (Andersen et al., 2007).

Drawing on case study research, Stanton et al. (2010) pointed out the important

role of CEO in providing leadership and resources to create distinctive HR

systems. in addition to this, senior managers also play a crucial role in translating

the HR messages across the management hierarchy. In this perspective, researchers

(e.g. Bowen & Ostroff, 2004; Macky & Boxall, 2007) have argued that the

involvement of senior management contributes in achieving business goals and

enhance organizational effectiveness.

Klein et al. (2001) and Lado and Wilson (1994) reported that CEO's involvement

in HRM ensures close interaction between different groups of managers which

encourages the sharing of information which is important for the formulation and

implementation of HRM infrastructure for achieving the goals of the organization.

Papalexandris and Panayotopoulou (2003) reported that CEOs acknowledge the

crucial role of HR to gain competitive advantage over domestic and foreign

players.

Pfeffer and Davis-Blake (1987) noted that senior managers play a key role in

managing the crucial resources such as financial support and people to HR

departments therefore, increasing the HR department's capacity to carry out HR

processes.. Ohtaki (2005) reported that the contribution of CEO in HRM is

important since it articulates the vision of the company and its HR policies.

43

2.3 Role of External Agents in HRM

External agents are often involved in the management of people in organizations

(Valverde- et al., 2006). External agents include external HR service providers or

HR outsourcing agencies which are hired by the business organizations to provide

professional HRM solutions (Cook, 1999). Human Resource Outsourcing (HRO)

has emerged as global phenomenon indicating the wide spread use of external

agents in HRM.

In this context, Morley et al. (2006) have used the term "external devolution"

which implies outsourcing HR activities to external contractors. External

devolution is based on transaction cost model. The transaction cost model places

substantial importance on make or buy decisions (Gunnigle, 1998). It is pointed

out that if organization is not able provide a particular HR service at cheaper rate

when compared with external HR service providers, then organizations should buy

such services from HR outsourcing agencies. In addition to this, some other factors

such as demand and supply contribute to HR outsourcing.

Moreover, the dynamic business environment of the new age economy has

completely changed the nature of competition faced by business organizations. In

order to compete in the market place, business organizations need access to latest

technology which requires huge investments as well as time for establishing the

same in-house. That is why most companies decide to outsource some of their

HRM functions. Also, it provides opportunity to invest in the core areas and

enhance the competitiveness of the firm.

2.3.1 External Service Providers: HR Outsourcing

Human resources are the most valuable assets of any organization as the

organization's success lies in their hands and constitute an important source of

competitive advantage (Khatri, 2000; Wright & McMahan, 1992). Jackson and

Schuler (2000) identify HR as the potential contributor to the creation and

realization of the organization's goals. Consequently, HR practices have the

potential to be key drivers of overall firm success. In order to ensure that its

employees remain satisfied, the company has to have a specialized human

resources department that most of times proves to be a costly affair. Business

44

organizations are realizing the role of various other entities such as external service

providers in HRM providing services so as to save cost and time.

Valverde et al. (2006) argued in favour of the role of external service providers or outsourcing agencies in HRM. There are many entities involved in management of

HR function (Khatri & Budhwar, 2002). Human resource outsourcing has

completely transformed the landscape of HRM practices in organizations.

As a result of this transformation, organizations are fast realizing the importance of

focusing on core HR activities and outsourcing their non-core, administrative

activities. The role of external HR service providers is becoming increasingly

popular and the number of companies outsourcing their HR activities continues to

rise (Kosnik et al., 2006). Various researchers have explored the role of external

consultants in HRM (e.g. Kitay & Wrght, 1999; Redman & Allen, 1993;

Torrington & Mack, 1986). Analyzing the role of external service providers such

as consultants is critical for passing on new management practices between

industries (Littler, 1982). Moreover, the role of external service providers in HRM

has emerged as a popular subject of inquiry in the academic literature in the past

few years.

2.3.2 Dimensions of Human Resource Outsourcing

Bryce and Useem (1998) described outsourcing as the contracting out of a

company's major functions and activities to an external service or goods provider.

In other words, outsourcing consists in conducting one or more organizational

activities, using external agents (Lacity & Hirschheim, 1993). Adler (2003) defined

it as a process in which a company contracts with a vendor and rents its skills,

knowledge, technology, service and manpower for an agreed-upon price and

period to perform functions for a client. Lever (1997) defined it as a long-term

contract relationship that the enterprise received business services from the

outsourcing vendor.

Outsourcing is a historical and well recognized practice and HRM outsourcing

itself is a quite traditional practice (Kakabadse & Kakabadse, 2002). Different

studies have revealed that HRM outsourcing continued to rise in the areas of HRM

consulting and the design of HRM tools (Banham, 2003; Cook, 1999). Gay and

45

Essinger (2000) and Mehrotra (2005) have identified HRO as the fastest growing

area of outsourcing. Turnbull (2002) defined HR outsourcing as placing

responsibility for various elements of the HR function with a third-party provider.

History of HRO can be traced back to more than five decades, when Automatic

Data Processing set up its payroll processing services in the US. Now, the

company has more than $7 billion annual revenues and 40,000 associates

(www.citehr.com). External service providers such as Hewitt and Exult are

offering solutions to meet HRO needs of the organizations in a big way thus,

enabling them to focus on their core business activities. The services offered by

these companies in the HR area, includes training, legal advice, consulting,

headhunting, audit of HR policies and procedures, labour relations, maintenance of

personnel records, employee development program, HR information systems,

benefits, job description process, exit interviews, performance management

process and compensation (Alewell et al., 2009; Tremblay et al., 2008).

Although different researchers have defined the concept in their own words but the

underplaying assumption remains the same. It can be concluded that HRO is a

process in which a company utilizes the services of a third party (HR outsourcing

agency or external HR service provider or consultants) to take care of its HR

functions. External HR service providers or HR outsourcing agencies are part of

outsourcing industry which are usually contracted by organizations to provide

administrative HRM services or professional, specialized 14RM solutions (Cook,

1999; En-shun, 2007).

A company may outsource a few or all of its HR related activities to a single or

combination of service providers located anywhere in the world. According to Seth

and Sethi (2011), HR outsourcing service providing firms can be divided into five

categories depending on the services they offer as:

> Professional Employer Organization (PEOs), > Business Process Organization (BPOs), > Application Service Providers (ASPs),

E-services and > Hybrid Outsourcing Firms

In the above mentioned categories, the PEOs are the ones that assume full

responsibility of a company's HR functions where as others such a BPOs, ASPs

and e-services provide web based HR solutions like database maintenance, HR

46

data warehousing, maintaining records, developing and maintaining HR software's

etc. In case of hybrid outsourcing firms, if organizations are having apprehensions

of outsourcing all their HR tasks to a PEO then it considers outsourcing of labor-

intensive HR functions. For instance, several business organizations use

recruitment agencies to find suitable candidates while prefer to retain control of

other HR activities such as salary negotiation, hiring and firing employees.

Traditionally, HR activities have been performed in-house; however, gradually HR

activities are being outsourced to external service providers (Jamrog et al., 1997; Stewart, 1996). The concept of HRO has grown in popularity since the early

1990s, particularly in the USA, where up to 90 per cent of the companies outsource

some HRM activity (Cook, 1999; Mahoney & Brewster, 2002). For instance, one

of major development in HRO is the 1999's deal involving BP and Exult in which

Exult was contracted to take up ownership and management of all global

transactional and administrative HR services for BP (Adler, 2003). Since then

HRO has grown with external HR service providers focusing on more complex HR

solutions than simply processing of routine HR services. The results of the 2004

survey conducted by the Society for Human Resource Management revealed that

60% of the business organizations participating in the survey had outsourced at

least one HR service (Esen, 2004).

It is generally observed that transition from internally managed HR functions to

externally managed HR functions, is a sensitive issue as the culture of the service

provider and that of the organization may be different. Organizations create teams

to facilitate this transition and monitor the agency over a period and evaluate their

performance. As a result of outsourcing of HR process and activities, HR managers

get more involved in strategic decision-making (Khatri & Budhwar, 2002)

Nowadays, most organizations prefer to focus on their core competencies and

choose to outsource their non-core activities to external service providers. Trends

point towards increased outsourcing in the new and emerging technology area,

with focus on the application service provider model where enterprises outsource

their entire HR-related processes, including recruitment, retention and related areas

(Klass et al., 1999; Klass et al., 2001).

47

2.3.3 Human Resource Outsourcing: Key HRM Domains

The prior literature on HRO can be clubbed into the two types of studies viz.

general studies on HRM being outsourced and studies focusing on specific HR

areas. The general studies on HRO talk about the reasons and rationale for the

growth of HRO while in case of specific studies, the focus of the researchers

remained on specific HR areas outsourced. Given that HRM service vendors

specialise in the services they provide to their clients, they benefit from economy

of scale results and these benefits are transferred to their clients (Galanaki &

Papalexandris, 2005; Galanaki & Papalexandris, 2007). Another reason why some

companies may turn to outsourcing is the requirement for know-how. Many

vendors have already made major investments, in HRM tools and techniques and

can spread their costs over many clients. Outsourcing offers knowledge and

competencies that may not exist in-house (Galanaki & Papalexandris, 2005).

Different types of activities may be outsourced by an organization e.g.

administrative and regulatory, transactional activities (like pay-roll administration,

healthcare, pension, administration of training, retirement, relocation

administration and other benefits), developmental, advisory and change

management (Alewell et al., 2009; Gilley et al., 2004;Tremblay et al., 2008). Kitay

and Wrght (1999) conducted a study to explore the relationship between

management consulting industry and .management of human resource in Australia.

The findings of the study reveal that the use of management consultants in

management of human resource has increased significantly.

Kodwani (2007) studied the underlying reasons that are encouraging business

organizations to outsource HR tasks. In order to cut costs and fully focus on the

core business activities, business organizations are reducing manpower from their

payrolls. As a consequence of which HRO is becoming the buzzword for the

corporate world. Outsourcing of HR tasks is adopted by different organizations

irrespective of size. Embleton and Wright (1998) identified the issues relevant to

successful outsourcing. They concluded that organizations where outsourcing is

part of an overall corporate strategy and employees are aware of the overall

situation are successful. Coggburn (2007) investigated HRO in public sector. The

study provides a conceptual framework that helps to analyze the appropriateness of

HR outsourcing.

48

Galanaki and Papalexandris (2005) opined that the continuous development of

HRM services market goes hand-in-hand with the development of the HRM

practice in general. Lawler et al. (2004) and O'Brien (2005) reported the popular

HRO contract of British Petroleum in 1999 with Exult. Since then HRO activity

has amplified to the point of being persistent and decisively ingrained facet of

private sector HR strategy. Several researchers have stated that HRO has increased

considerably over the years (e.g. Andersen, 1996; Harkins et al. 1995; Woodall et al., 2002). Both qualitative and quantitative reports from various sources provide

proof of this growth (Maurer & Mobley, 1998; Mobley, 2000; Pricewaterhouse

Coopers, 2002).

Various research studies have reported that training is one of the commonly

outsourced HR function (e.g. Cook, 1999; Cooke et al., 2005; Galanaki &

Papalexandris 2005; Vernon et al., 2000). Galanaki et al. (2008) studied

outsourcing of training function and proposed two types of training models viz.

generic and specific. Generic models deals with the generic training for

development of competencies while in case of specific models, job-or-company

specific training such as induction training, job specialization is provided to

employees.

Mahoney and Brewster (2002), Papalexandris et al. (2001) have recognized that

HR that are outsourced can fall ' into one of the following categories viz.

recruitment and selection, training and development, pay and benefits etc. In

addition to the above mentioned functions, following categories have also been

constantly mentioned in the literature viz. HR planning, performance appraisal

systems, and organizational climate and culture (Cook, 1999). Shaw and Fairhurst

(1997) study found that training and development along with facilities

management were the most likely areas to be outsourced, while industrial relations

expertise was the least likely area.

Hall and Torrington (1998) in their study established the probable HR activities to

be outsourced i.e. recruitment and selection, training and management

development, outplacement, health and safety, quality initiatives, job evaluation

and reward strategies. These activities are considered for outsourcing ' either

because they were considered non-core or because the organization may not have

the expertise to handle them internally. Vernon et al. (2000) conducted a study on

J

four different areas of HR outsourcing such as training and development,

recruitment and selection, pay and benefits, and workplace

outplacement/reduction.

Galanaki and Papalexandris (2005) studied the practice of outsourcing human

resource management functions such as training, staffing, rewards and

restructuring in Greece. Primarily outsourcing activities include small portion of

HRM such as payroll functions (Adler, 2003), however, it has steadily developed

to cover several human resource functions (Lever, 1997). Table 2.3 presents a

summary of key HR area being outsourced.

Table 2.3: Key HR Domains vis-a-vis HRO Researchers HR Domain

Training and development, legal advice, temporary agency work, HR consulting, headhunting, payroll

AIeweIl et al. (2009) accounting, placement services, selection of personnel, outplacement services, interim management, complete outsourcing of HR HR planning, recruitment and selection, employee

Chiang et al. (2010), Kulik and relations, HRIS, payroll, compensation and reward, Bainbridge (2006), Woodall et al. performance appraisal, benefits administration, (2009) training and development, health and safety,

employee services

Cook, (1999) Performance appraisal systems, HR planning, organizational climate and culture,

Delmotte and Sels (2008), Tremblay Training, payroll, recruitment and selection, career

et al. (2008), Vernon et al. (2000) guidance, appraisal, outplacement, labour relations, benefits

Mahoney and Brewster (2002), Recruitment and selection, pay and benefits, training Papalexandris et al. 2001) and development, merger- outplacement-downsizing

Payroll administration, training/development,

Smith et al. (2006) executive coaching, HRMIS, healthcare benefits administration, recruitment (executive & non- executive), strategic business planning Recruitment and selection, training and

Galanaki and Papalexandris (2007), development, pay and benefits, merger-outplacement-downsizing Galanaki and Papalexandris (2005) performance appraisal systems, HR planning, or anizational climate and culture Training and management development, recruitment

Shaw and Fairhurst (1997) and selection, outplacement, health and safety, quality initiatives, job evaluation, reward strategies and systems HR planning, EEO/diversity, recruitment and

Klaas etal. (1999) selection, organizational development, safety & health, performance appraisal


50

Gainey et al. (2002) study reported that companies outsource approximately 30

percent of their HRM training functions directly allied to core capabilities but

mainly this has led to enhanced performance with improved training design. Greer

et al. (1999) study emphasized not to outsource the employee relations and

performance management that are sometimes outsourced along with some related

functions such as payroll administration and benefits concurrently as a bundle.

2.3.4 Rationale for Human Resource Outsourcing

Studies on HRO have provided substantial support to companies for pursuing the

same (e.g. Dell, 2004; Greer et. al, 1999).There are a number of financial issues

that induce business organizations to adopt HRO. HRO is considered by

organizations to accomplish operational costs savings through economies of scale

provided by external HR service providers, avoid investment for HR technology

upgrades or permanent HR staff on company pay rolls into variable costs

(Fernandez et al., 2006; Koch et al., 2004; Lawther, 2003).

Several studies highlighted the outsourcing benefits such as . decreased costs, a

better focus on HRM issues which are immediately associated with the company's

success and higher quality customer service (Csoko, 1995; Greer et al., 1999;

Simmonds and Gibson, 2008 Woodall et.al., 2002). Outsourcing can be a key

value-added activity when pooled with effective restructuring. Marinaccio (1994),

asserts that outsourcing along with improved engineering processes may increase

the efficiency of business processes while retain product quality. Lever (1997)

argued that the value-added activity that outsourcing brings should finally

augment strategic capabilities and benefit the firm's performance with regard to

gaining a competitive edge, managing market risks, maximizing returns and

strengthening internal capabilities. Lever (1997) claimed that benefits that

outsourcing brings should ultimately increase strategic capabilities and firm

performance.

HRO provides the organizations flexibility to purchase the best available talent or

technology, thus, offering employees more ease through self-service applications

(Fernandez et al., 2006; Koch et al., 2004; Wilson, 2003). Marinaccio (1994) adds

that outsourcing enhances organizational efficiency. Greer et al. (1999) and Rainey

51

(2005) have identified the underlying principle for HRO. The important instances

include building stronger internal focus on core HRM functions and delivering

more strategic value for the organization.

Hirschman's (2000) study reported that reducing cost while at the same time

maintaining at-least equal levels of quality and strategic focus will enhance the

competitive advantage of an organization. This has led to expansion in the use

of external service providers for HRM functions. In the perspective of this

fact, there is significant growth in academic research which provides a strong list

of factors that support the decision to outsource human resource activities (e.g.

Greer et al., 1999; Hendry, 1995; Klaas, 2003; Klaas et al., I999; Klaas et al., 2000; Klaas et al., 2001; Lepak et al., 2005; Lepak & Snell, 1999b; Lever, 1997).

According to the transaction cost theory, activities that are not firm-specific are

more likely to be outsourced, whereas the resource-based viewpoint advocates that

activities not critical to core competencies should be outsourced (Williamson,

1975). Lepak and Snell's (1998) model of virtual HR based on transaction cost

economics (Williamson, 1975, 1985; Coase, 1937) and resource-based perspective

offers a useful framework to select the HR activities that should be outsourced.

Researchers in the area of HR outsourcing have mostly based their studies on

transaction cost economics theory to delineate the conditions under which HR

outsourcing is useful for the organizations (Hart, 1988) and apparent benefits

associated with such outsourcing (Klaas et al., 1999). Ulrich (1996) reported that

outsourcing of HR practices can be helpful to the development of the core

competence of organizations and integrating HR practices with corporate strategy.

Greer et al.'s (1999) study pointed out that occasionally HR outsourcing is driven

by the evolution of the HR function within the organizations. Baron and Kreps'

(1999) analytical model emphasized that activities of low strategic importance and

low task should be outsourced. Besides the conceptual logic offered by transaction

cost economics and the strategic HR perspective, other underlying principles for

HRO are cost savings, decrease in risk, specific expertise and brief expansion of

HR capabilities to meet extraordinary circumstances (Greer et al., 1999).

Adler (2003), Oshima et al. (2005) concluded that HRO provided the time to HR

professionals to support business activities. Gilley et at. (2004) conducted an

52

empirical study to establish the relationship between the outsourcing of activities

such as training and payroll, and firm performance as well as the outsourcing-

performance relationship and firm's size. Results of the study revealed that

outsourcing of training and payroll have positive influence on firm performance

where as the outsourcing-performance relationship and firm's size were

unconvincing.

Gilley and Rasheed (2000) studied the extent of outsourcing across a wide range of

business activities as well as depth of outsourcing within each activity and found

no direct effect of outsourcing on performance. However, outsourcing had positive

influence on firm's performance following cost leadership and innovative

differentiation strategies, as well as for firms operating in stable environments.

Klaas et al. (1999) based their study on transaction cost economics to examine the

relationship between organizational characteristics and the degree of reliance on

HR outsourcing. Results of the study revealed that perceived benefits from HR

outsourcing will vary with a number of organizational characteristics. Klaas (2003)

studied the relationship between small and medium-sized enterprises and the

professional employer organizations and outlined a structure to examine the HRO

factors in small and medium-sized enterprises.

According to the U.S. General Accounting Office (U.S. G.A.O, 2004), whether the

drivers are mundane or elegant, it likely depends upon the specific HR activity

being outsourced. Lower-tiered activities such as payroll are mostly allied with

cost savings whereas higher-tiered activities like performance management

systems, workforce planning are related to gain expertise or to respond quickly.

Some studies on HRO indicated that most of HRO tends to be for the lower-tiered,

transactional activities, thus, reflecting the large number of mundane as different to

elegant drivers (Rainey, 2005, McClendon et al, 2002).

Outsourcing HR functions has positive bearing on employee satisfaction,

motivation and efficiency. These facets of HRO make it essential for considering

the effects of HRO on firm performance. In this context, Gainey and Klass (2002)

reported that outsourcing of FIRM training function has led to better training

design with enhanced performance. HRO is highlighted as a cost-saving strategy

by external consultants and HR service providers. Usually, the external HR service

53

providers which specialize in HR services, offers lower costs than client because of

economies of scale, greater efficiency and higher levels of expertise.

Greer et al. (1999) identified five factors that facilitate HR outsourcing viz.

downsizing, rapid growth or decline, globalization, increased competition, and

restructuring, based on the extant literature and interviews with senior HR

executives. HRO is carried out for both operational and strategic reasons. Based on

the results of the study, procedure for selecting vendors, managing the outsourcing

transition, managing vendor relations and monitoring vendor performance is

proposed. HRO can enhance the HR worth as well as reinforce the growth of HR

as a business partner and strategic contributor to the organization's goals.

According to Csoko (1995), outsourcing carries benefits such as cost reduction,

increased service quality and increased access to experts in specialized areas. The

key considerations following HR outsourcing is the need for increased focus on

core business and cost reductions (Van Hoek, 1999), greater business flexibility

and need for specialized expertise (Bettis et al. 1992; Jennings 1996; Quinn et al.

1990). Outsourcing, decisions usually target a minimum of 15 per cent cost saving

and sometimes in the range of 20-25 per cent (Bounfour, 1999; Jennings, 2002).

Several researchers have highlighted HRO as advantageous in terms of both

service delivery and the enhancement of the strategic position of HR

(Brenner, 1996; Laabs, 1993; Switser, 1997). Both the resource-based view of the

firm (Barney, 1991) and the transaction-cost economics model (Williamson, 1985)

seem to influence firms' HR outsourcing decisions.

A number of studies have evaluated the make-or-buy decisions in favour of

outsourcing of HR functions (Autor 2003; Belcourt, 2006; Cooke et al., 2005;

Gainey & Klaas 2003; Greer et al., 1999; Klaas et al., 2001). The extent of

outsourcing HR tasks varies between firms and sectors (Cooke et al., 2005). Cost

and quality are the focal points of outsourcing research and make-or-buy decisions

of the firms are based on transaction cost theory (Williamson et al., 1975).

Klein (2004) reviewed the empirical researches on make-or-buy decisions which

have been conducted on the basis of transaction cost theory. The results of the

study revealed that many important determinants which describe firm structure

and environment as well as underlying relation between outsourcing effects and

54

make-or-buy decisions have been overlooked. Structural and contingency factors

such as firm size may have a strong impact on outsourcing decisions (Jack et al., 2006; Marlow, 2006; Mayson & Barrett 2006). Becker and Gerhart (1996)

discussed about cost vis-a-vis value aspect of HR outsourcing. This viewpoint

points out that organizations should assess both cost centres (e.g., benefits

administration) and value aspect (e.g. recruitment and hiring) of HR outsourcing.

Klass (2003) concluded that cost has major influence on the decision to outsource

HR activities as it is difficult for many companies to maintain professional HR

staff for internally developing required HR services. Moreover, outsourcing of HR

activities offers an organization unique edge over competitors and save the

resources for other operations. . Saha (2005) reported that organizations are

looking for HR service offerings to integrate process management with strategic

human capital. Klaas et al. (2001) and Lepak etal. (2005) based their viewpoint on

resource based view and concluded that organizations should deliver those services

in-house that are core to their competitiveness and outsource those services that

are considered peripheral. Table 2.4 presents the summary of key benefits of HRO.

Table 2,4. Key Benefits vis-a-vis HRO Researchers Benefits of HRO

Babcock (2004), Fernandez et al. Costs savings through economies of scale (2006), Koch et al. (2004) Lawther (2003), Marinaccio (1994) , Increases organizational efficiency and flexibility Wilson (2003) Quinn and Hilmer (1994) Helps focus on core competencies Becker and Gerhart (1996) Cost vis-a -vis value aspect of HR outsourcing Ulrich (1996) Hel s in integrating HRM with corporate strategy Greer et al. 1999) Operational and strategic benefits Baturina (2003) Benefits through expertise and reliabilityof vendors Csoko (1995), Simmonds and Cost reduction, increased service quality and access Gibson(2008, Woodall et al. (2002), to ex erts competency in specialized areas Bettis et.al. (1992), Jennings (1996), Cost reductions, greater business flexibility and Quinn et. al. (1990) need for specialized expertise En-shun (2007) Access to latest technology and critical expertise

Belcourt (2006), Benson and Littler Cost reduction, improvement in quality, focus on

(2002), Galanaki et al. (2008) core and excluding non-core training tasks, reduces head count, improves labour flexibility

Saba (2005) Helps in linking process management with strategic human capital

Gainey and Klass (2002), Cost saving and better administration Gilley et al. (2004) Source: Prepared by the Researcher

55

Cooke (2004) viewed the rising intricacy of the technology, legal environment and

organizational changes as the key features encouraging the decision to outsource.

Adler (2003) appends to the list the factors such as intense competition,

globalization, downsizing, industry changes and restructuring as the major reason

for outsourcing. Moreover, outsourcing is also guided by the need for specific

expertise, a new developmental stage of organizational HRM that has exceeded

the firm's existing capacity, advances in HR information systems, increased

risk exposure (Greer et al., 1999; Klaas, 2003) and cost savings (Babcock, 2004).

2.3.5 Human Resource Outsourcing: Barriers and Constraints

HR outsourcing has received ample research attention, however, very few studies

have addressed issues like the conditions that promote or hinder the outsourcing

decision processes. Although HRO offers significant organizational benefits, it

suffers from low quality of service, high transaction costs and loss of control over

outsourced HRM function. Quinn's (1999) study revealed that outsourcing can fail

owing to the wrong assessment of need for outsourcing. The study fizrther adds that

lack of interest of managers to analyze outsourcing need can also lead to its failure.

Although HRO helps organizations to focus on their core business but outsourcing

frequently fails short of anticipation (Barthelemy & Adsit, 2003).

Khatri and Budhwar (2002) found that competency level of external HR service

providers and poor quality of service inhibit organizations in outsourcing human

resource activities. Moreover, HR strategy and organizational culture are other

important factors that influence the organizational tendency to outsource HR

activities (e.g. Khatri & Budhwar, 2002; Ulrich, 1996). Since organizational

culture is developed over period of time, it is difficult for external consultants to

comprehend the same immediately and perform the HR tasks in light of

organizational culture.

Barthelemy and Adsit (2003: 87) analyzed the outsourcing deals in Europe and US

and delineated the "seven deadly sins" responsible for unsuccessful outsourcing. It

includes outsourcing core activities, selecting the wrong vendor, writing a poor

contract, overlooking personnel issues, losing control over the outsourced activity,

overlooking the hidden costs of outsourcing and failing to plan an exit strategy.

56

P.

Ulrich (1996) highlighted that outsourcing restricts the organizations to develop

unique expertise within the employees and therefore gives rise to incompetence.

Klass et al.'s (2001) revealed that external HR service providers need considerable

investment to identify the requirement of the organization which increases the cost,

therefore, making outsourcing less attractive. Barney (1991) pointed out that it is

difficult to communicate the tacit knowledge and experience of employees to

external service providers, thus, making the case for providing training in-house.

Enshun (2007) identified different types of risks faced by organizations while

outsourcing HRM functions (i.e. strategic; contractual and operational risks). In

strategic risk, outsourcing of core HRM functions results in short-term benefits

while in the long run, organizations may face problems due to loss of in-house

expertise (Greer, et al., 1999; Stroh & Treehuboff, 2003; Laabs; 1998). Contractual

risk is the result of fixed agreement between service provider and the organization

without any flexibility. The third type of risk is operational risk which includes

operational performance such as lower levels of service quality, unexpected

business interruptions, poor understanding with service providers and inadequate

monitoring of performance of vendors. Kodwani (2007) highlighted different types

of challenges for HRO. It includes political risk, resistance from employees in

accepting the change and vendor selection.

Lawler and Mohrman (2003) reported the general problems of HRO such as poor

service, loss of internal expertise, contractor not performing as expected and

unexpected resources required to manage outsourcing relationship. The problems

or risks associated with outsourcing are explained by Roberts (2001:239-49) as:

"Organizations are afraid of losing some control over the delivery of outsourced services and finding themselves overly dependent on the vendor or liable, for the vendor's actions. Outsourcing sensitive information, particularly confidential information, has inherent liability if information security is breached by the vendor".

A study by Simmonds and Gibson (2008) highlighted the roadblocks linked with

outsourcing HR functions. Exhibit 2.7 presents a two part model for managing the

outsourcing of HRD function. Part one of the model is based on four elements (i.e.

prioritize, select, trust and monitor) while part two of the model is important for

managers to chart the decisions of different aspects of outsourcing HRD against

specificity/complexity of training needs and risk/value of assets.

57

Exhibit 2.7: A Model for Outsourcing

Tailor-made In-house outsourcing training

Off-the-shelf Blended training In-and-out-sourcing

High

Specificity/ Complexity of training

needs

Low Risk/ Value of assets

High

Source: Simmonds, D. and Gibson, R. (2008). A model for outsourcing HRD. Journal of European Industrial Training, 32(1), p.10.

Stroh and Treehuboff (2003) presented a model that retaining some in-house

expertise for the function being outsourced and outsourcing only non-core

activities. Exhibit 2.8 presents the above model.

Exhibit 2.8: A Model for Successful HR Outsourcing

Audit the vendor annually

internally I, Communicate

the process .

Keep training internal

Keep the company culture

Successful outsourcing Offer a consistent

menu of service

Do not outsource a problem

Interview outsourcing agencies employees

Keep some expertise in-house

Never outsource core activities

Source: Stroh, L. K and Treehuboff, D. (2003). Outsourcing HR functions: When and when not to go outside. Journal of Leadership & Organizational Studies, )0(1), p.22

58

The following factors can be critical to making and implementing a successful

outsourcing decision (Laabs, 1993).

> Describing outsourcing objectives clearly before making an outsourcing

decision

> Organizations should consider who will manage outsourcing decision and why

> Looking into the short as well as long term objectives

> Determining the company's culture support for an outsourcing decision

Choosing the nature of operation viz, centralized or decentralized before

outsourcing

Paul (2003) opines that cost should not be considered as the only deciding factor to

outsource non-core HR activities but others factors such as cultural fit and a

commitment to quality shall be taken into consideration, Organizations must look

into the range of services which a vendor has to offer as well as its expertise and

experience in offering such services. Based on the type of function an organization

has to outsource, it can select an appropriate outsourcing firm. Baturina (2003)

focused on the reliability of service provider and its expertise in providing the HR

solutions as important facilitating factors for HR outsourcing,

2.4 Constructs to Measure Role of Agents in HRM

Constructs are latent or unobservable variables that cannot be measured directly

but can be measured by one or more indicators or items (Ahire et al., 1996; Hair et

al., 2008; Malhotra & Dash, 2011; Schumacker & Lomax, 2004). Researchers in

the area have identified several constructs to measure the role of internal and

external agents in HRM. Review of prior studies throws light on these constructs

and items used to measure them. At the same time, several researchers have related

the measures of role with measures of organizational performance and

effectiveness (Budhwar, 2000a; Budhwar & Sparrow, 1997; Hutchinson & Purcell,

2003; Mcguire et al., 2008; Valverde et al., 2006).

Since most studies in the area have focused on only one or at best two agents,

different measures exist to evaluate the roles of both internal and external agents in

HRM. For instance, Budhwar (2000a) studied the role of line managers through

devolvement of HRM responsibilities using items like primary responsibility with

59

line managers for HRM decision-making, change in the responsibility of line

managers for HRM vis-a-vis pay and benefits, recruitment and selection, work-

force expansion and reduction, training and development, health and safety and

industrial relations.

In other similar research studies, researchers have used different constructs to

measure the involvement of line managers in decision-making (e.g. Budhwar &

Boyne, 2004; Gautam & Davis, 2007). Andolsek and Stebe (2005) identified

devolution as a construct to study line managers' responsibility for HRM decisions

in European organizations. The extent of devolution was mapped in light of

different HRM functions like recruitment, training, industrial relations and

workforce reduction.

A number of researches carried out in the area have used items from Cranet survey

(e.g. Andolsek & Stebe, 2005; Brewester et al., 1997; Dany et al., 2008; Papalexandris & Panayotopoulou, 2003; Papalexandris & Panayotopoulou, 2005).

Cranet survey or Cranfield Network on European HRM is a comprehensive survey

of comparative HR practices across several countries. Broadly, the survey covered

two dimensions viz, integration and devolvement.

Valverde et al. (2006) studied the participation of internal and external agents in

HRM activities at various levels of HRM decision-making viz, strategic, policy,

operational and administrative. They investigated the distribution of HR

responsibilities among agents across wide range of HR areas such as training and

development, resourcing, change management etc. Dany et al. (2008) explored the

role of FIR specialists and line managers in five HRM areas such as pay and

benefits, recruitment and selection, training and development, industrial relations

and workforce expansion/reduction using the items developed in Cranet survey.

Casco'n-Pereira et al. (2006) identified various dimensions of devolution such as

decision-making power, task/responsibilities, financial power and expertise power.

These four dimensions were explored vis-a-vis different HRM functions viz.

recruitment and selection, training and development, compensation, leadership,

health and safety, communication, dismissals, motivation and team management.

Hope-Hailey et al. (1997) investigated the role of line managers in people

management practices in light of dimensions such as access to strategic decision-

making and HR functions.

Research studies on role top management in HRM have identified several issues to

measure the level of involvement of top level people in HR related issues. For

instance, Sheehan (2005) reported that CEOs play a key role in the involvement of

HR at the strategic decision-making level. In addition to this, CEO's involvement

in HRM decision-making ensures that HR strategy is integrated with the corporate

strategy. Drawing on the prior research studies, Azmi (2011) argued that training

and sensitization of top managers in HRM practices is important for determining

relationship with HR practices and strategy. The study further explored a number

of issues such as role of top management in HRM, consistency of HR activities

'T_ with organizational vision etc.

Role of external agents in HRM too has been explored from different perspective.

Gilley et al. (2004) studied the degree of outsourcing of HR activities viz, payroll

and training. Galanaki (2008) investigated different aspects of outsourcing training

to external service providers. Klass et al. (1999) explored HR outsourcing focusing

on four types of HR activities viz, transactional, generalist, human capital and

recruitment and selection as measures. Klass et al. (2001) investigated outsourcing

of HR practices by six measures such as idiosyncratic processes, HR strategic

involvement, positive HR outcomes, promotional opportunities, demand

uncertainty and outsourcing by competitors.

Tremblay et al, (2008) explored HR outsourcing in Canadian organizations using

organizational and strategic variables viz, management support, benchmarking,

outsourcing experience, HR strategic role, union, pay policy transaction attributes

such as specific complexity, HR variability, measurement problems , risks of

outsourcing (HR risks, provider risks and business risks).

Since most studies in the area focus on a single agent, therefore, a comprehensive

construct definition is not available in the extant literature. Assimilating the

scattered viewpoints, a list of constructs identified from the literature on role of

internal and external agents in HRM is presented in Table 2.5.

61

Table 2.5: Constructs Used to Measure Role of Internal and External Agents searchers Construct Items

Internal A ents viz. Line Managers and Top Management

> Line manager confidence in HR H&away k2010) Line HR relationship > Line-HR partnership

> Collaborative problem solving

Andersen eta!, (2007) Line management > Involvement of Gne managers in execution of HR practices devolvement ➢ Line managers training in the firm to execute I'JR practices

> Responsibility for FIRM decision to line Andolsek and Stebe (2005) Devolution > Changes in the process of devolution

➢ Levels of devolution

D Formulation of vision and strategy

Perceived importance of > Instructing and training, planning, staff development

Brandt eta!, (2009) managenallliR activities

➢ Communication of values and attitudes, handling conflicts, delegation handling information, supervision/coaching, negotiations

➢ Follow u /monitorin , roblem solver/expert, reporting ,staff well-bein

Brewster & Hegewisch (1994), > Primary responsibility with line managers for HRM decision-making

Budhwar (2000x; 2000b), Devolvement ➢ Change in the responsibility of line managers for HN

Budhwar & Sparrow (1997) > Percentage of line managers trained in HRM functions such as performance appraisal, training and development

Brewster & Larsen (1992) Devolvement ➢ Scope of }JR activities devolved to line managers > De ree to which HRM function is involved in co orate strategy

Brewster at al. (2004), Line manager y Level of participation in HR functions Nehles et al. 2006 involvement

Transfer of responsibility for FIRM to line

Line manager and top > HR department is represented at board level

Budhwar & Boyne (2004) managers' role

➢ Participation of HR department in managing change > HR participation in formation of corporate strategy4rom the outset

HRM considerations built into or anization strate

Researchers Construct Items

➢ Task/responsibilities

Casco'n-Pereira et al. (2006) Devolution ➢ Decision-making power > Financial power ➢ Expertise ower

Conway & Monks (2010) Middle manager ➢ Primary responsibility for HR activities (workforce practices, appraisal, perspective of HR training, development recruitment and selection, grievances

Distribution of influence between Hk specialis ts

> Responsibility for HRM decisions vis-a-vis recruitment and selection, Dany el al. (2008)

and line managers fn training and development, pay and benefits , industrial relations and

1 workforce expansion/reduction

Gautam & Davis (200 Devolvement ➢ Primary responsibility for implementing HR policy decisions > Direction of line management responsibility for HRM

Heraty & Morley (1995) Line managers' role > Responsibility for major policy decisions on training and development ➢ Res onsibili for aing trainingand development activities

Change in line managers role and responsibilities responsibilities,

➢ Transfer of people management responsibilities to the line Hope-Bailey et al (1997)

access to strategic ➢ Shift in responsibility for decision-making in HR issues to line managers

decision-making ➢ Integration with strategic direction

Responsibility for HRM

> Line management responsibility for pay and benefits, recruitment and Hsu & Leat (2000)

functions selection, training and development, industrial relations, health and safety, and work-force expansion/reduction

Kulik & Bainbridge (2006) Distribution of people management activities

➢ Primary responsibility for people management activities like HR planning,

among agents performance management, training, recruitment, industrial relation etc.

Line management > Responsibility for HR policy decisions (pay, training, industrial relations)

Larsen & Brewster (2003) responsibility for HRM

➢ Direction of change in HR responsibility of line management for pay, training , industrial relations etc,


➢ Line managers understanding of HR strategy Line managers i' Ownership of the HR strategy

Maxwell & Watson (2006) perspective on > Line managers involvement in HR activities involvement in HRM ➢ HR specialists' support of line managers in HR activities

➢ Com etence of line managers in HR activities

Papalexandris & Role of line managers

Major decisions on pay and benefits, recruitment and selection, training and Panayoto ulou (2003) development, labour relations, downsizin

Papalexandris & Line managers' HRM ➢ Involvement of line managers in decisions on pay and benefits, recruitment Panayotopoulou (2005) responsibility and selection, trainin and development, industrial relations

Devolution > Line management involvement in people management activities Perry & Kulik (2008)

Line Support

> Line managers were given support for their HR responsibilities > Line managers receive training for people management skills

Srimannarayana (2010) Line management > Extent of responsibility of line managers in HRM activities involvement in HRM > Variation in line mans ers' involvement in FIRM activities

Line managers' role in > Line managers' views on their role HR activities and line managers'. Watson & Maxwell (2007) H ranking of most important HR activities (like team briefings, identification

of training needs, perfonnance appraisal, evaluating training

> Line management responsibility for HR practices in the organization (like Zhu et al. (2008) Devolvement recruitment and selection, compensation, training, performance assessment

• > Percents a of line managers formally trained to perfonu HR activities

Valverde et al, (2006) Distribution of HR

s onsibiliti s > Participation in HRM activities

Rote of top management > HR managers viewed as partners in the management of the business Becker & Huselid (1998)

in HR strategy > Effort to align business and HR strategies p HR de artment's involvement in coruorate strate is lannin

Bowen et al (2002) Top managers role > Top manager consider HR department as important HR de artment works with senior management on key strategic issues


➢ Top management incorporates HR information (plans, activities etc.) when

Green eta!, (2006) Top management role in establishing the organization's direction HRM > Top-level managers are trained to integrate all functions into the decision-

makin rocess

➢ HR representation on the senior committee level Poole & Jenkins (1997) Top management role ➢ HR managers part of strategic planning process

➢ HR mans ers have appropriate in ut into strategic decisions,

➢ Direct reporting relationship with the CEO Schuler (1992) Linking HR•strategy ➢ Good informal relationship

> HR representation on the senior committee

> HR representation at the senior committee level Sheehan (2005) Top management role > HR part of the senior decision•mnaking processes

Direct reporting or informal relation between HR. manager and CEO

Top managers role in ➢ HR specialists participation at board level to strategy Wood (1995)

HR strategy ➢ Line manager initiates and carries out selection. > Personnel issues incorporated with business

External A eats viz. External Service Providers

Triggers of explicit HR Changes in manpower requirement

Alewell et a!, (2009) procurement decisions for different I

> Changes in manpower endowment

functions > Manpower balance in HR department

➢ Causes Decline in demand, increase in labour and non-labour costs

Benson & Littler (2002) Outsourcing and ➢ Objectives workforce reductions • Improve labour productivity, improve decision-making

' > Effects on employees

Employee job satisfaction, changes in employee duties


➢ Potential areas of HR outsourcing FIR planning, recruitment and selection, training and development, employee relations, performance appraisal, health and safety, payroll, compensation and reward, benefit administration, employee services

Idiosyncratic HR Practices

Chiang et al. (2010) HR outsourcing • Organization way of managing HR is unique • Organization manage HR like most other firms do Overall outsourcing emphasis

Organization outsource many staff functions ➢ HR Strategic Involvement

• Involvement of HR in ma or strategic decisions

HR outsourcing > Strategic involvement of HR

Delmotte & Sels (2008) 1 Focusing view Contribution of HRM to the strategic objectives of the organization

Efficiency view • Effi ➢ Devolution of'HR activities ➢ Evolution of the HR head count

Transactional, human ➢ Design and delivery of HR planning, employee relations, EEOldiversity,

capital, HR generalist, organizational development, safety & health, performance appraisal, 1 R10,

Klass eta! (1999) recruitment

payroll, training exempt employees, training non-exempt employees, employee assistance programs, recruiting exempt employees, recruiting non-

activities exempt eal 10 ees, selectin em to ees

• Idiosyncratic processes, HR strategic involvement, positive HR outcomes, Klass et al. (2001) HR outsourcing promotional opportunities, demand uncertainty and outsourcing by

competitors

Organizational and > Management support, benchmarking, outsourcing experience, HR strategic

Tremblay et al. (2008) strategic variables, role, outsourcing experience, union, pay policy transaction attributes, ➢ Specific complexity, HR variability, measurement problems risks of outsourcing ➢ HR risks, provider risks and business risks

Source: Compiled by the Researcher

2.5 Alternate Variables to Measure Role of Agents in HRM

Prior studies on role of internal and external agents have suggested the positive

implications of redistribution of HR activities among agents on certain outcome or

endogenous/dependent variables like overall performance and effectiveness (e.g.

Azmi, 2010; Bond & Wise, 2003; Dany et al., 2008; Gilley et al., 2004; Renwick;

2003; Valverde et al., 2006). Researchers Iike Perry and Kulik (2008) have linked

the role of internal agents with effectiveness of people management in

organizations

However, various studies on role of internal and external agents have indicated that

performance is not the direct outcome of this redistribution of roles but that

alternate variables affect this causal chain too. Alternate variable includes

moderating or interacting variables and mediating or intervening variables.

A moderating variable changes the relationship or strength of relationship between

two related variables viz, exogenous and endogenous variables (Frazier et al.,

2004; Hair et al., 2008). Hence, moderation effect is an interaction whereby the

effect of one variable depends on the level of another. Absence of significant

moderating effects makes the interpretation between the predictor and outcome

construct easy. Moreover, lack of relationship between moderator, predictor and

outcome variables helps to differentiate moderators from mediators.

Mediating variable is a third variable/construct that intervenes between two other

related constructs. In model testing, hypothesized mediating effect can produce

both direct and indirect effects (Hair et al., 2008). Direct effect relationships Iink

the two constructs with a single arrow while indirect effects involve series of

relationships with at least one intervening construct. Hence, indirect effect is a

sequence of two or more direct effects and is characterized by multiple arrows.

Exhibit 2.9 illustrates moderation and mediation effect.

67

Exhibit 2.9: Moderation and Mediation

Direct Effect

Exogenous variable Endogenous variable Di

e.g. role measures e.g. performance

Moderation Effect

Exogenous variable Endogenous variable

e.g. role measures e.g. effectiveness of HRM

Exogenous variable e.g. role measures

Moderating variable e.g. organizational profile

Mediation Effect

Mediating variable e.g. status of HRM

Endogenous variable e.g. effectiveness of HRM

Source: Adopted from Frazier, P. A., Tixi , A. P. & Barron, K. E. (2004). Testing moderator and mediator effects in counseling psychology. Journal of Counseling Psychology, 51 (1), 115-134

2.5.1 Performance. Measures as Outcome Variables

Several research studies have indicated the positive impact of internal and external

agents' involvement in HRM (Guest, 1987; Valverde et al., 2006). Internal

devolution entails the involvement of internal agents in HRM viz, line managers

and top management while in external devolution involvement of external agents'

viz. external HR service providers is assessed. In this context, researchers found

positive support of internal devolution on different measures of organizational

performance. Some studies have specifically established that participation between

HR and line helps in improving organizational performance (e.g. Azmi, 2010;

Gennard & Kelly, 1997; Thornhill & Saunders, 1998).

Budhwar (2000a) reported the positive implications of devolvement of HRM to

line managers on a firm's performance. Renwick (2003) argued in favour of

devolving HR tasks to line managers since significant organizational benefits exist

68

from involving the line in HR work. Moreover, devolvement of HR responsibilities

helps in configuration of HRM with business objectives and strategies associated

with the firm performance (Andersen et al., 2007). Various researchers have

reported the positive implications of line managers' involvement in HRM decision-

making on organizational performance (Hutchinson & Purcell, 2003; Mcguire et

al., 2008).

Hutchinson and Purcell's (2010) study revealed that front-line managers'

involvement is important for the delivery of effective HRM. The most important

features as highlighted in different studies is the roles and influence of HRM

specialists and line managers as defined and distributed within the firm (Andolsek

& Stebe, 2005; Hall & Torrington, 1998). Additionally, Dany et al. (2008) argued

in favour of the moderating impact of distribution of roles and influence between

HRM specialists and line managers on the link between HRM integration and

organizational performance. Hall and Torrington (1998) pointed out the need for

exploring the role of line managers in HRM and its impact on the effectiveness of

people management.

Azmi (2011) explored the role of top management in HRM and its relationship

with HRM effectiveness and organizational performance. The results revealed the

positive implications on the performance of the organization. Gilley et al. (2004) conducted a study to find out the link between HR outsourcing and firm

performance by investigating the influence of HRO processes on different types of

performance measures viz, innovation, financial and stakeholder performance. The

finding of the study revealed that outsourcing of some HR activities have positive

implications on firm performance.

Benson & Littler (2002) studied the outsourcing and workforce reductions to

establish the relationship between outsourcing and performance outcomes through

a number of indicators like reduction in labour costs, improvement in labour

flexibility, productivity, decision-making, customer service and job enrichment and

communications.

Table 2.6 presents the performance measures identified from internal and external

agents' literature.

Table 2.6: Performance Measures from Literature on Role of Aaents Researchers Construct Items

> Objective Performance • Sales

Azmi (2010, 2011) Organizational • Shareholder returns

performance • Return on capital employed > Subjective Performance

• Overall performance of the company > Return on equity

Andersen et al. Firm ➢ Return on assets (2007) performance ➢ Market growth

> Profitabily ➢ Profitability

Organizational

)> Product/service quality

Dany et al. (2008) performance > Level of productivity ➢ Rate of innovation 9 stock market erformance ➢ Financial Performance

• Return on assets • Return on sales • Overall financial performance

➢ Innovation Performance

Gilley et al.(2004) Firm • R&D outlays performance • Process innovations

• Product innovations ➢ Stakeholder Performance

• Employment growth/stability • Employee morale • Customer & supplier relations

> Reduce Iabour costs,

Benson & Littler Performance > Improve labour flexibility

(2002) outcomes > Improve labour productivity ➢ Improve decision-making > Improve customer service

People > Effectiveness of people management issues Perry and Kulik management in the organization (2008) effectiveness > Overall effectiveness of people management

activities in the or anization > Market Performance

• Profitability • Return on equity • Return on assets

➢ Organizational Effectiveness Zhu et al. (2008) Firm

performance performance • Timely adaptation of company products • and services • Timely adaptation of company strategy • Achievement of quality • Achievement of employee satisfaction • Achievement of customer satisfaction

Source: Compiled by the Researcher

70

2.5.2 Moderating Variables

Several researchers have explored the role of a number of interacting variables viz.

age of the organization, organizational size, sector, nature of the organization, life

cycle stage of the organization etc. in the relationship between role of agents and

performance (Andersen el al., 2007; Andolsek & Stebe, 2005; Budhwar, 2000b; Lawler et al., 1995; Perry & Kulik, 2008).

A number of scholars have identified organizational characteristics and contingent

variables such as size of the organization, technology adopted, age of organization,

ownership, life-cycle stage of organization as moderators in the studies on role of

agents (Budhwar, 2000a; Budhwar & Sparrow, 1997). Miller and Tolouse (1986)

have reported the impact of size of the firm on CEO role.

Gilley et al. (2004) studied the moderating effect of firm size on training and

payroll outsourcing vis-a-vis performance. Tremblay et al. (2008) studied the

relationship of HRO with size, industry and ownership structure (public versus

private). The results of the study revealed that smaller and larger organizations are

expected to outsource HR activities then medium-sized organizations. Galanaki et

al. (2008) studied the moderating effect of perceived benefits such as cost,

flexibility and quality benefits from outsourcing of training services on extent of

outsourcing in training services. The results revealed that availability of training

services in the external market moderates the perceived benefits from outsourcing

of training services. Chiang et al. (2010) reported the influence of organizational

characteristics such as ownership on degree and type of HR outsourcing. Table

2.7 provides a list of moderating variables identified by different researchers in the

studies linking role of internal and external agents in HRM with performance and

effectiveness.

Table 2.7: Moderating Variables Identified in Literature Researchers Moderating Variables

➢ Organizational characteristics • Size • Age • Numerical flexibility

Andolsek and Stebe (2005) • HRM strategies • HRM policies

> Situational factors • Sector • State

71

Researchers Moderating Variables

Andersen et al, (2007) > >

Firm size Industry sector

➢ Contingent variables • Age of the organization • Size of the organization • Life cycle stage of the

Budhwar (2000) organization (growth or turnaround)'

• Nature of the organization (Private or Public sector)

• Presence of unions • Presence of HR strategies

➢ Contingent variables • HR strategy • Flexible form of employment

and ownership • Life cycle stage of organization • Size

Budhwar & Sparrow (1997) • Age • Union membership

➢ Non-contingent factors • Institutional factors • National culture • Dynamic business environment • Business sector

➢ Size ➢ Age

Dany et ad., (2008) > Characteristics of the markets (growing, stable or declining )

➢ Industry Sector (Primary, Secondary, Tertiary)

> Perceived benefits from outsourcing training services

Galanaki et al. (2008) • Cost benefits • FlexibiIity benefits • Quality benefits

Organizational size > Organizational age ➢ Manufacturing ➢ Public sector

Perry and Kulik (2008) > Organization strategy > Dynamic growth > Extract profit ➢ Public sector ➢ Manufacturing > Organizational performance

Miller and Tolouse (1986) > Size

72

Researchers Moderating Variables ➢ Contextual variables

• Sector • Organizational size • Structure

Valverde et al. (2006) • Culture • History or age of organization • Environment • Technological system • Employee characteristics • HR function characteristics

➢ Size of the organization Benson & Littler (2002) > Organization age

> Industry > Organizational characteristics

Chiang et al. (2010) • Size • Ownership • Industry type

Klass et al. (2001) ➢ Size of the organization ➢ industry

Gilley et al. (2004) ➢ ➢

Firm size Firm age

Gilley & Rasheed (2000) ➢ Organization age ➢ Size

Tremblay et al. (2008) ➢ Industry and 9 Ownership structure (public versus

private). Source: Compiled by the Researcher

a.5.3 Mediating Variables

Previous studies on role of internal and external agents have indicated the indirect

•elationship between the role of internal and external agents in HRM and

ffectiveness of HRM (Guest & ' Conway, 2011; Hope Hailey et al., 2005). For

nstance, Larsen and Brewster (2003) reported the possible outcome of line

nanagers' involvement in HR practices such as effects on the size and shape of

{R department; effects on the shape of the organization and effects on the shape

End role of HR department, besides enhancing organizational effectiveness

'Schuler, 1990).

ieveral indicators of status of HRM have been identified in different research

studies viz, position of HR departments, representation of HR department at board

.evel, position and responsibility of HR executives, HR executives' role in

73

strategic decisions, general managerial training to HR executives , relationship of

HR executives with CEO (e.g. Budhwar, 2000b; Budhwar & Boyne; 2004; Green

et al. 2006; Hope-Halley et al. 1997; Mayrhofer & Brewster, 2005; Sheehan, 2005;

Teo & Crawford, 2005; Truss, 2003; Wood, 1995).

2.6 Internal and External Agents in HRM: An Indian Perspective

While most of the studies on role of internal and external agents vis-a-vis HRM

have been conducted in the Western world (e.g. Finegold & Frenkel 2006; Gratton

et al., 1999; Larsen & Brewster, 2003; Mahoney & Brewster, 2002; Papalexandris

& Panayotopoulou, 2005; Renwick & McNeil, 2002; Shen, 2005; Valverde et al.,

2006; Whittaker, 1990), the role of these agents remains largely unexplored in Asia

and more specifically in India except for a few studies (e.g. Azmi, 2011; Budhwar

& Sparrow, 1997; Khatri & Budhwar, 2002; Saha, 2005; Singh, 2009; Zhu et al.,

2008).

Emerging markets across the globe are the drivers of economic growth, with lower

operating costs and rapidly growing markets that are hard to match in more

developed economies. The focus of multinational corporations- has been to move

business operations to Asian countries, particularly India. With a growing

consumer base and a rapidly advancing economy, India is regarded as one of the

most valuable emerging markets (Budhwar, 2001).

In India, economic reforms have attracted a Iarge number of multinationals as a

result of which there is paradigm shift in the HRM scenario. Moreover, India is

witnessing unparalleled growth and its economy is progressing at a rapid pace

(Budhwar & Varrna, 2010; Grossman, 2008). These developments in the Indian

economy have prompted global institutions like World Bank to depict that India

will turn out to be the world's fourth Iargest economy by 2020. This growth has

fuelled numerous HR challenges for business organizations in India (Sodhi, 1994;

Venkata Ratnam, 1995).

Owing to the changes in the business landscape in India, companies are shifting

their attention towards more and more HR-centric approaches. Consequently, the

role of agents in HRM is also becoming increasingly evident. A few empirical

evidences have emerged from time to time supporting this contention. Budhwar }

74

and Sparrow (1997) analyzed the degree of devolvement of responsibility for HRM

to line managers in India. A number of contingent measures and organizational

practices were found to determine the level of devolvement in Indian organizations

which showed similarities with UK, Italy and Germany.

Bhatnagar and Sharma (2004) investigated line managers' perception of strategic

HR roles. Findings of the study show that there was no difference in the perception

of the strategic partner role among line managers of public sector and multinational

firms. However significant difference existed in the perception of HR mangers and

line managers.

Srimannarayana (2010) conducted an empirical study to evaluate the level of

responsibility of line managers in HR activities. The results reveal that line

managers have moderate responsibility for all HR functions. The level of

responsibility of line management seems to be more in performance management

and training and development related activities and less in compensation related

activities. On the basis of ownership of the organizations, nature of business,

length of service and functional area of line managers significant differences exists

for certain HR activities.

Gopalakrishnan (2008) has argued for placing HR on line managers' agendas. He

contends that the line must understand that their main job is to manage people. HR

should help managers to rediscover how to manage. Managers would need

guidance to reconnect with the people and HR can help them fulfil this role.

Aggarwal (2010) analyzed the working relationship between line and human

resource in different organizations across variety of sectors in India. HR-line

relations are average to low in most organizations, however, there are areas where

both value the roles played by each other. Azmi (2010) explored the relationship

between devolution of HRM and organizational performance in India. The findings

of the study revealed that devolution of HRM had a significant, direct and positive

impact on organizational performance.

Azmi (2011) talked about importance of top managers' training in HRM practices

for exploring its relationship with HR practices and strategy. Additionally, Azmi's

study delves into a number of issues such as role of top management in HRM and

uniformity of HR activities with organizational vision etc.

f41

Budhwar and Sparrow (1997) reported the importance of personnel representation

at board level in the integration of personnel function with corporate strategy.

Moreover, they also stressed on greater interaction between top management and

HR department so as to ensure that people related matters are given priority.

Role of external agents in HRM has recently received ample research attention in

India. Across the globe the use and importance of HR outsourcing varies.

Variations may be because of the size of the businesses, the degree of

sophistication of the HR function, the extent of development of the HR

outsourcing market, cultural norms, employment regulations and labour market

characteristics in specific countries and regions. The general trends towards HRO

reveal that the use is much less in Asian countries than in Europe and USA. A

major reason for low uptake of HRO and shared service activities among Asian

countries is the perceived poor quality of service and competency level of

consultants in the market and the associated lack of options. Concerns about data

security and loss of management control are also important reasons for not

outsourcing. The majority of outsourcing user firms in the Asia region appears to

be MNCs.. HR outsourcing services providers' clients in India include GE Capital,

Ford Motors, Hyundai Motors, HSBC and other companies.

Result. of HR outsourcing in Asia-Pacific online survey by Hewitt way back in

June 2002 with respect to the Indian market reveals three models of outsourcing

viz.

a) Outsourcing of the complete HR function - more prevalent among foreign

companies that have established operations in India.

b) Outsourced expertise — where staff expertise is provided as an outsourced

service rather than processing services, observed particularly among small and

medium sized companies that find difficulty retaining skilled, senior HR staff.

c) The outsourcing of HR processes, including payroll (inclusive of timesheets

processing, salary, pay slips, issuance of checks, deduction, computation etc)

and benefits processing.

In the Indian context, the role of external agents in HRM is explored in several

studies. For instance, Saha (2005) conducted a study on HR outsourcing and

concluded that in order to gain competitive advantage, multinational corporations

76

are realizing the importance of outsourcing their entire HR function. In addition to

this, several operational and strategic rationales are identified for HR outsourcing

like need for specialised expertise, HR information technology, cost savings,

vendor efficiencies and service, firm's HR capacity, reduction of risk, to improve

the overall business performance to achieve competitive advantage.

Singh (2009) reviewed the scope and development of HRO in India. The study

further explored various types of HR outsourcing and rationale for outsourcing

human resource functions. In India, business organizations are outsourcing a range

of HR activities such as recruitment, compensation etc. Chiamsiri et al.'s (2005)

study focused on the concept of offshore outsourcing by giving an overview of key

information technology enabled services outsourced in India. In addition to this,

the study looks at the potential changes in nature of the services outsourced in

India and issues related to HRM approach.

Seth and Sethi (2011) studied various types of HR outsourcing and the factors that

should be considered before outsourcing of different HR activities. The results of

the study revealed that the decision of HR outsourcing is dependent on factors like

affordability, flexibility, availability of adequate resources and acceptability. In

addition to this, the study also suggests pre-requisites for successfully carrying out

HR outsourcing.

77

CHAPTER 3: PROBLEM AREAS AND RESEARCH GAP

3.1 Focus on the Role of Individual Agents 3.2 Focus on Prescriptive Studies 3.3 Lack of Studies on Outcomes of Role of Agents in HRWI 3.4 Focus on Qualitative Methodology 3.5 Paucity of Empirical Studies 3.6 Small Sample Size-Based Studies 3.7 Low Response Rate in Existing Studies 3.8 Focus on Manufacturing Sector 3.9 Lack of Reliability and Validity of Research Instruments 3.10 Paucity of Studies in the Indian Context

3

CHAPTER 3: PROBLEM AREAS AND RESEARCH GAP 1'

Chapter Overview

This chapter seeks to identify the research gaps in the existing literature on the role

of internal and external agents viz. Iine managers, top management and external

service providers in HRM. It tries to indicate the problem areas existing in the

available literature. These problem areas and gaps relate to both theoretical and

empirical perspectives on role of agents.

3.1 Focus on the Role of Individual Agents

Valverde et al. (2006) reported that HRIVI is not the sole responsibility of HR

departments but also of other agents. Thus, all managers are people managers and

there are many people involved in the HR function (Khatri & Budhwar, 2002;

Papalexandris & Panayotopoulou, 2005; Whittaker, 1990). These are both internal

and external agents. HRM is viewed as a partnership involving two or at most

three HRM agents (Mohrman & Lawler, 1999). Several research studies have

reported the role of line managers (Budhwar & Sparrow, 1997; Budhwar, 2000a,

2000b; Conway & Monks, 2010; Hutchison & Purcell, 2010; Srimannarayana,

2010; Valverde et al., 2006; Wood, 1995), top management (Finegold & Frenkel,

2006; Schuler & Jackson, 1999; Valverde et al., 2006) and external service providers (Cook, 1999; Cunningham & Hyman, 1999; Delmotte & Sels, 2008;

Klass et al., 2001; Redman & Allen, 1993; Valverde et al., 2006) in people

management activities.

Valverde et al. (2006) explored the role of both internal as well as external agents

in HRM. Barring this, the researcher did not come across any study in which the

role of all the three agents has been explored comprehensively. Most studies

usually focus on just one of the agents or, at most, on two agents. There is no

developed literature incorporating the study of all agents (Valverde et al., 2006).

Most researchers in the area have independently explored the role of a single agent

vis-a-vis HRM (e.g. Budhwar & Sparrow, 1997; Budhwar, 2000b; Cook, 1999;

78

Conway & Monks, 2010; Delmotte & Sels, 2008; Redman & Allen, 1993; Schuler

& Jackson, 1999; Srimannarayana, 2010). Despite this, even on individual basis,

there is a dearth of studies. Concurrently, the role of line managers, top

management and external service providers in FIRM has not been explored in an

in-depth manner in prior studies. For instance, different studies have reported the

scarcity of academic-oriented research on issues related to HR outsourcing in

comparison to the growing literature on outsourcing as well as exploratory

evidence of key drivers that influence organizations to resort to external providers

(Cooke et al., 2005; Shen, 2005). Thus, an investigation into the role of internal

and external agents in HRM is a research issue that needs to be addressed.

3.2 Focus on Prescriptive Studies

The literature is more prescriptive or normative than descriptive (Valverde et al.,

2006). Thus, there is greater emphasis on what various agents should do to manage

people, as opposed to establishing what they actually do (Grafton et al., 1999). There is a paucity of studies that can give a descriptive picture of the current

scenario of role of agents in HRM. Often this literature lacks any strong evidence

(Jackson & Schuler, 1999). Also, there is a tendency to concentrate on the wider

concept of "role" (including activities, responsibilities, power relationships,

influence and position etc.) with little focus on specifying which particular

responsibilities are allocated to each agent (Legge, 1995).

3.3 Lack of Studies on Outcomes of Role of Agents in HRM

Although some studies have linked the role of agents with performance outcomes,

there is still a dearth of empirical findings on outcomes of role of agents. Hall and

Torrington (1998) and Perry and Kulik (2008) opined that the need to study the

involvement of agents and effectiveness of people management as the focus of the

prior studies are on their role in HRM. Conway and Monks' (2010) study indicated

the role of line managers in HR activities and contribution to organizational

performance. However, these studies are few and far between. The focus of most

studies has remained on the role of agents and the impact of role of all the agents

has not been explored.

79

3.4 Focus on Qualitative Methodology

There is a paucity of empirical studies in the area since most of the previous

studies are based on qualitative methodology, primarily case-based studies (e.g.

Bond & McCracken, 2005; Bond & Wise, 2003; Cascon-Pereira et al., 2006;

Currie & Proctor, 2001; Finegold & FrenkeI, 2006; Gennard & Kelly, 1997; Harris

et al., 2002; Hutchison & Purcell, 2010; McConville, 2006; Renwick, 2000;

Renwick, 2003; Thornhill & Saunders, 1998; Whittaker & Marchington, 2003;

Watson et al., 2007). Consequently, there are no comprehensively developed

measures to study the role of line managers, top management and external service

providers in management of HR. The scarcity of studies in the area has led to

methodological problems in measuring the role of agents in FIRM. Dany et al.

(2008) pointed out the need for more empirical studies in the area.

3.5 Paucity of Empirical Studies

The role of internal and external agents in management of HR has been relatively

under researched both in developing theory and analyzing empirical data as most

of the studies are based on qualitative methodology (e.g. Bond & McCracken,

2005; Conway & Monks, 2010; Dick & Hyde, 2006; Finegold & Frenkel, 2006;

Harris et al., 2002). Empirical evidences are limited. (e.g. Budhwar, 2000b;

Budhwar & Sparrow, I997; Dany et al., 2008; Hsu & Leat, 2000; Srimannarayana,

2010), Busi and McIvor (2008) pointed out that there is dearth' of empirical

measures to analyze the business transformation activities with reference to

external service providers.

Since most of the studies are theoretical in nature, as a result of which, there are no

testable theoretical models that deal with examination of the roles of internal and

external agents in management of HR giving rise to various methodological issues.

The absence of models give rise to problems in developing strong measures since

models provides support to structure the scattered viewpoint. As Wright and

McMahan (1992) reported, a well-developed model allows for testing and revision

to increase its accuracy. Additionally, this would have implications for the

methodological design of the study. Thus, there is a need for more empirical

:1

evidences to unearth the actual roles being played by the three agents viz, line

managers, top management and external service providers in HRM,

3.6 Small Sample Size-Based Studies

Research in the area suffers from small sample size related problems that make the

study less generalizable. For example, the sample size in different studies has been

as low as nine (Gratton et al., 1999), thirteen (Whittaker & Marchington, 2003),

twenty-eight (Gennard & KeIly, 1997), thirty-eight (Cunningham et al., 1996),

forty-eight (Conway & Monks, 2010), ninety-three (Budhwar, 2000a), ninety-four

(Gilley et al., 2004), one hundred thirty five (Wood, 1995).

Small sample size provides a limited view of population and has an adverse effect

on the statistical results. It can lead to erroneous conclusions, thus, making the

study results less generalizable. Small sample size represents a Iimited number of

companies and therefore, provides a narrow view of cross-section of industries.

3.7 Low Response Rate in Existing Studies

One of the important issues in research in this area is related to response rate.

Research on role of agents usually suffers from low response rate. Review of

different researches in the area reveals response rate e.g. 18.6% (Budhwar, 2000a,

2000b), 25% (Fenton-O'Creevy, 2001), 17% (Gilley et al., 2004), 8,56% (Hall &

Torrington, 1998), 24% (Khatri, 2000), 22.7% (Klass et al., 1999, 2001), 17%

(Larsen & Brewster, 2003), 5% (Perry & Kulik, 2008), 19% (Tremblay et al., 2008),10.5% (Valverde et al., 2006), 16% (Wood,1995). Low response rate usually

leads to non response bias related problems.

3.8 Focus on Manufacturing Sector

Majority of the researchers in the area have focused on the manufacturing sector

(Chand & Katou, 2007; Hsu & Leat, 2000; Perry & Kulik, 2008). For instance,

Budhwar (2000a, 2000b) and Budhwar and Sparrow (1997) focused on six

industries viz, food processing, plastics, steel, textiles, pharmaceuticals and

footwear. Gilley et al. (2004) investigated HR outsourcing and its relation with

81

organizational performance in manufacturing units. Although some studies have

focused on the role of agents in the service sector, but these studies are only few

and far between (Sisson, 1993).

3.9 Lack of Reliability and Validity of Research Instruments

Rigorous research methodology is necessary for the development of a reliable and

valid instrument in order to enhance the process of theory building (Yin, 1994). As

most of the studies are based on qualitative methodology (Bond & McCracken,

2005; Conway & Monks, 2010; Dick & Hyde, 2006; Finegold & Frenkel, 2006;

Harris et al., 2002), the issue of reliability and validity are not addressed. Even in

the case of empirical studies (e.g. Budhwar, 2000a; Budhwar & Sparrow, 1997;

Dany et al., 2008; Hsu & Leat, 2000; Srimannarayana, 2010), the issue of

reliability and validity are not addressed appropriately.

3.10 Paucity of Studies in the Indian Context

There is a dearth of studies on the theme in the Indian context. Most of the studies

are based in Europe and the UK (e.g. Bond & Wise, 2003; Cunningham & Hyman,

1999; Harris et al., 2002; Hoogendoorn & Brewster, 1992; McGovern et al., 1997;

Renwick, 2003; Whittaker & Marchington, 2003). Very few studies have been

reported so far on role of agents in HRM in the Indian context. Except for certain

studies (Agrawal, 2010; Bhatnagar & Sharma, 2004; Budhwar & Sparrow, 1997;

Srimannarayana, 2010), most studies focus on the western context (Cantrell &

Miele, 2007; Cunningham & Hyman, 1995; Gibb, 2003; Larsen & Brewster, 2003;

MacNeil, 2003; Morley et al., 2006; Renwick, 2003; Thornhill & Saunders, 1908;

Whittaker & Marchington, 2003). Thus, there is a real need to explore the issue in Indian settings, keeping in mind the fact that India is a fast-growing economy with

an emerging HR landscape.

82


4.1 Need for Research 4.2 Research Objectives 4.3 Research Design 4.4 Research Constructs and Measures

4.4.1 Independent Variables: Measures of Role 4.4.2 Dependent Variable: Effectiveness of HRM 4.4.3 Mediating Variable: Status of HRM 4.4.4 Moderating Variable: Organizational Profile

4.5 Questionnaire Development Process 4.5.1 Stages of Questionnaire Development 4.5.2 Translation Validity: Face and Content Validity

4.6 Research Instrument/Questionnaire 4.7 Sampling Procedure

4.7.1 Target Population 4.7.1.1 Sampling Unit 4.7.1.2 Sampling Element

4.7.2 Sampling Frame 4.7.3 Sampling Approach and Sample Size

4.8 Questionnaire Administration and Data Collection 4.9 Conceptual Models of Research 4.10 Research Hypotheses 4.11 Methods of Analysis 4.12 Limitations of the Study


Chapter Overview

This chapter provides a brief description of the need for research and study

objectives. It gives details of the research design and methodology. A discussion on

study constructs and items, instrument development and validity concerns, sampling

procedure and questionnaire administration is done which is followed by

specification of conceptual research models considered for the study along with

research hypotheses. The chapter ends with a brief outline of the methods of analysis

and the limitations of the study.

4.1 Need for Research

There were several reasons that prompted this research:

❖ HR is seen as potential contributors to the creation and realization of the

organization's goals (Jackson & Schuler, 2000) and constitutes an

important source of competitive advantage for the organization (Wright &

McMahan, 1992). However, there are limited empirical studies on the role

of internal agents viz, top management (e.g. Fisher & Dowling, .1999;

Heneman et al., 2000; Khilji, 2002) and line managers (e.g. Brewster et al.,

1997; Budhwar, 2000a; Budhwar & Sparrow, 1997) as well as external

agents viz, external service providers (e.g. Galanaki & Papalexandris,

2005) in management of HR. As a result of this, no established measures

are available. Hence, a need was felt to empirically test a model that

incorporates the scattered viewpoints regarding the role of internal and

external agents in management of HR.

❖ The researcher was motivated by the fact that an empirical study on role of

different actors (i.e. internal and external agents) in management of HR will

be useful to organizations to gain an insight into restructuring the HR

processes and speeding up decision-making (Brewster & Larsen, 2000;

Cunningham & Hyman, 1995; Cunningham & Hyman, 1999; Gibb, 2003;

Renwick, 2000).

83

❖ An analysis of the literature in the field reveals only a few studies in the

Indian context e.g. Agrawal (2010), Bhatnagar and Sharma (2004), Budhwar

and Sparrow (1997), Srimannarayana (2010) and that too on single agents.

:• The researcher did not come across any study in the global context as well as

in the Indian context in which the role of all agents has been studied together

(Valverde et al., 2006) Thus, an investigation into the role of internal and

external agents in HRM is a research issue that is both timely and relevant.

•+• The researcher did not come across any study that explores both the

involvement of internal and external agents in HR and its relationship with

effectiveness and performance. Consequently, a need was felt to take up both

the issues for study.

•S Although some instruments have been developed to study the role of internal

and external agents in HRM independently, a need was felt to develop a

reliable and valid instrument to collectively study the internal and external

agents' level of involvement in different HR activities.


The broad objective and sub-objectives of the study are as follows:

Broad Objective

The study endeavors to address the following broad objective:

To develop a reliable and valid instrument for measuring the role of top

management, line managers (i.e. internal agents) and external service providers

(i.e. external agents) in management of HR and to investigate the impact of their role

on the effectiveness of HRM and status of HRM. The study also seeks to establish

differences as well as association between organizational profile and various

dimensions of the above roles.

Sub-objectives

The broad objective can be divided into four categories of sub-objectives:

84

Category I: Developing an instrument for measuring the role of internal and

external agents in HRM

❖ To develop a reliable and valid instrument for measuring various

dimensions of role of top management, line managers and external service

providers in management of HR.

Category II: Investigating the impact of role of internal and external agents in

HRM

(a) Investigating the impact of role of top management in HRM

•:• To investigate the impact of role of top management in HRM on the

effectiveness of HRM.

❖ To investigate the impact of role of top management in HRM on the status

of HRM

(b) Investigating the impact of role of line managers in HRM

•.• To investigate the impact of role of line managers in HRM on the effectiveness of HRM

❖ To investigate the impact of role of line managers in HRM on the status of

HRM

(c) Investigating the impact of role of external agents in HRM

❖ To investigate the impact of role of external service providers in HRM. on

the effectiveness of HRM

❖ To investigate the impact of role of external service providers in HRM on

the status of HRM -

(d) Investigating the impact of status of HRM on the effectiveness of HRM

•,• To investigate the impact of the status of HRM on the effectiveness of HRM

Category III: Assessing the differences between company type i.e. sector


organizations) on the role of internal and external agents in HRM

85

•;+ To assess differences in role of top management in HRM on the basis of


•.+ To assess differences in role of line managers in HRM on the basis of company sector (i.e. manufacturing and service).

❖ To assess differences in role of external servi* providers in HRM on the basis of company sector (i.e. manufacturing and service).

❖ To assess, differences in role of top management in HRM on the basis of company size (small, medium and Iarge organizations).

•,• To assess differences in role of line managers in HRM on the basis of company size (small, medium and large organizations).

W- ❖ To assess differences in role of external service providers in HRM on the

basis of company size (small, medium and large organizations).

Category IV: Establishing association between company type i.e. sector

(manufacturing and service) and company size (small, medium and large organizations) with the role of internal and external agents in HRM.

❖ To establish association between the role of top management in HRM and


❖ To establish association between the role of line managers in HRM and


•3 To establish association between the role of external service providers in

HRM and company sector (i.e. manufacturing and service).

•2• To establish association between the role of top management in HRM and


••• To establish association between the role of line managers in HRM and


❖ To establish association between the role of external service providers in

HRM and company size (i.e. small, medium and large organizations).

4.3 Research Design

Mainly research designs are of two types: conclusive research design and

exploratory research design (Cooper & Schindler, 2003). In conclusive research

design, information needed is clearly defined to test specific hypotheses and

analyze the relationships. Moreover, in conclusive research design; research

process is formal and structured. Exhibit 4.1 illustrates the classification of

research design as suggested by Maihotra and Dash (2011).

Exhibit 4.1 Classification of Research Design

Research Design

Coiichisive Research Design

'I

F Descx ti edteseare

Cass tional Design

1 ~~~~r~g eg~~~st~e~ha~nal Des k

Exploratory Research Design

Causal Research

Longitudinal Design I

Multi Crass-Sectivaal

* Shaded boxes represent the design followed for the present research Source: Adapted from Malhotra, N. H & Dash, S. (2011). Marketing Research: An applied orientation. New Delhi: Pearson Education.

The shaded boxes suggest the path followed for the present research. The present

research is conclusive, descriptive and based on single cross-sectional design. In

accordance with Yin's (1994) suggestions, the current research attempts to decrease

any divergence with the help of a rigorous research methodology which is

necessary for the development of a reliable and valid instrument in order to boost

87

up the process of theory building. Quantative data was generated to test the research

hypotheses.

In order to collect the data on the various dimensions of the study, a research

instrument was designed based on extensive literature review. The, questionnaire

was pilot tested and after required changes, it was administered on the study

sample. The reliability and validity of the research instrument were established.

Data generated was then subject to analysis.

4.4 Research Constructs and Measures

Research construct and items related to both dependent and independent variables

were identified. In addition, mediating and moderating variables were also

considered in the study.

4.4.1 Independent Variables: Measures of Role

Valverde et al. (2006) argued that HRM is not the sole responsibility of HR

departments but also of other agents. These are both external and internal agents.

Thus, all managers are people managers and there are many people involved in the

HR function (Khatri & Budhwar, 2002; Papalexandris & Panayotopoulou, 2005;

Whittaker, 1990). Research studies have indicated the role of line managers

(Brewester & Larsen, 1992; Budhwar, 2000a, 2000b; Budhwar & Sparrow, 1997;

Casco'n-Pereira et al., 2006; Clark, 1998; Hall & Torrington, 1998; Legge,1995;

Lemmergaard, 2009; Papalexandris & Panayotopoulou, 2005; Renwick, 2000;

Valverde et ad., 2006), top management (Chung et al., 1987; Finegold & Frenkel,

2006; Harper, 1993; Jonas et al., 1990; Papalexandris & Panayotopoulou, 2005;

Penrose, 1959; Welbourne & Cyr, 1999) and external agents (Cook, 1999;

Galanaki & Papalexandris, 2005; Mahoney & Brewster, 2002; Papalexandris &

Panayotopoulou, 2005) in HRM but their degree of involvement varies with

respect to decision-making, process/activities and budgeting for different HRM

functions. Researchers in the area have pointed out the need to explore the role of

internal and external service providers with respect to decision-making capacity,

process/activities and budgeting for management of human resources (Casco'n-

Pereira et al,, 2006; Valverde et al., 2006). Moreover in the individual HR areas

88

too, decision-making and process/activities (Budhwar, 2000a; Budhwar &

Sparrow, 1997; Currie & Procter, 2001; Hall & Tarrington, 1998; McConville,

2006; Poole & Jenkins, 1997) have been assessed. In addition to this, some

researchers such as McConville and Holden (1999) and Casco!n-Pereira et al. (2006) have also explored the dimension of financial power and pointed out its

importance in performing HR tasks. Hall and Tarrington (1998) opined that

budgetary controls have an important effect vis-a-vis involvement in HR activities.

Prior studies have recognized the role of line managers in decision-making (Bond

at al., 2002; Hall & Torrington, 1998; Larsen & Brewster, 2003) and

process/activities (Brewster et al., 2004; Fombrun et al. 1994; Guest, 1987; McConville, 2006; Nehles et al., 2006; Thornhill & Saunders, 1998). Hutchinson

(1995) and Industrial Relation Survey (1995) reported increasing line managers

involvement in recruitment, discipline and training decisions. Papalexandris &

Panayotopoulou (2005) opined that CEOs, line managers and external service

providers participation and decision-making in HR activities have helped the

organizations to gain competitive advantage. Thus, it can be seen from the above

discussion that decision-making, process/activities and budgeting vis-a-vis HRM

are the major dimensions of interest in the studies on the role of top management,

line managers and external service providers in HRM.

The above three dimensions have been explored in light of individual as well as

groups of HR activities. Some of the studies in the individual HR areas where there

is involvement of Iine managers, top management and external service providers

include performance appraisal (Andersen et al., 2007; Redman, 2001), pay (Currie

& Procter, 2001; Hope-Hailey at al., 1997), family leave policies (Bond & Wise,

2003), employee engagement (Fenton-O'Creevy, 2001; Marchington, 2001),

identification of training needs (Green at al., 2006), counseling (Nixon & Carroll,

1994), absence management (Dunn & Wilkinson, 2002), training and development

(Heraty & Morley,1995; Lever, 1997), training (Ardichvili & Gasparishvili, 2001;

Woodall at al., 2002), human resource development (Watson & MaxweIl, 2007),

industrial relations, health & safety (Hope-Hailey at al., 1997), recruitment &

selection (Hope-Hailey at al., 1997; Wood, 1995), workforce expansion &

reduction (Kramar & Lake, 1998) and reward management (Brown & Purcell,

2007). However, several studies have focused on more than one HRM function

(e.g. Alewell et al., 2009; Andolsek & Stebe, 2005; Budhwar, 2000b; Casco'n-

Pereira et al., 2006; Cook, 1999; Cunningham & Hyman, 1995; Gautam & Davis,

2007; Hall & Torrington, 1998; Mahoney & Brewster, 2002; Papalexandris et al.,

2001; Shaw & Fairhurst, 1997; Smith et al., 2006; Srimannarayana, 2010; Watson

et al., 2007). For instance, the main focus of the researchers are on the following

HRM functions i.e. HR planning, recruitment and selection, training &

development, pay and benefits, performance appraisal, workforce expansion or

reduction and industrial relations (e.g. Alewell et al., 2009; Budhwar, 2000a;

Casco'n-Pereira et al., 2006 ; Larsen & Brewster, 2003; Mahoney & Brewster,

2002; Papalexandris et al., 2001; Srimannarayana, 2010).

Thus, it can be concluded that most studies on role of internal and external agents

in HRM have explored the involvement of top management, line managers and

external service providers with respect to the dimensions decision-making,

budgeting and process/activities vis-a-vis HRM. Therefore in this research too; role

of internal and external agents was studied on the basis of their involvement in

decision-making, process/activities and budgeting vis-a-vis HRM. The dimension

decision-making seeks to explore the level of involvement of internal and external

agents in HRM decisions and policy making. The second dimension i.e.

process/activities aims at exploring the level of involvement of internal and

external agents in actual day-to-day HR activities. The third dimension i.e.

budgeting focuses on the level of involvement of internal and external agents in

financial issues vis-a-vis HRM.

The above three dimensions were explored in the present study with reference to

the HRM functions of HR planning, recruitment and selection, training and

development, pay management, performance appraisal and industrial relations.

Thus in the present study, the role of internal agents i.e. top management and line

managers and external agents i.e. external service providers was explored on the

following dimensions viz, decision-making, process/activities and budgeting vis-a-vis HRM functions of HR planning, recruitment and selection, training and

development, pay management, performance appraisal and industrial relations.

The independent variables considered for the study were:

❖ Top management involvement in decision-making vis-a-vis HRM

❖ Top management involvement in process/activities vis-a-vis HRM

❖ Top management involvement in budgeting vis-a-vis HRM

❖ Line managers involvement in decision-making vis-a-vis HRM

•:• Line managers involvement in process/activities vis-a-vis HRM ❖ Line managers involvement in budgeting vis-a-vis HRM

❖ External service providers involvement in decision-making vis-a-vis HRM

❖ External service providers involvement in process/activities vis-a-vis HRM

❖ External service providers involvement in budgeting vis-a-vis HRM

4.4.2 Dependent Variable: Effectiveness of HRM

As a result of changes in the business environment, people management issues are

becoming business issues and internal and external agents are reaching out to take

control over the HR function. A number of research studies have indicated the

positive impact of involvement of top management, line managers and external

service providers on the overall effectiveness of HRM (Budhwar, 2000a, 2000b;

Budhwar & Sparrow, 1997; Valverde et al_, 2006). The new role of line managers

has led to enhanced organizational effectiveness in addressing people management

issues (Schuler, 1990).

In order to study the influence of degree of involvement of top management, line

managers and external service providers in HR activities, the effectiveness of HR

function was considered as the dependent variable. Ferris et al. (1999) reveal that

there are two perspectives of effectiveness of HRM that are in need of theoretical

and empirical attention: (1) the effectiveness with which HRM policies and

practices are implemented; and (2) the effectiveness of these practices in producing

desired results. Effectiveness of HRM has been explored as a construct by several

researchers (Teo & Crawford, 2005; Yusoffet al:, 2009).

Teo and Crawford (2005) have tested three measures of effectiveness of HRM

which were used in this study too:

:• Influential Effectiveness: This item measures the influence of HR

department on the organization.

91

:• Relationship Effectiveness: This item measures the relationships of HR

department with major stakeholder.

4. Overall Effectiveness: This item measures the overall effectiveness of HR

department.

4.4.3 Mediating Variable: Status of HRM

Edwards and Lambert (2007) and Frazier et al. (2004) explained that mediator is

an intervening variable that explains the relation between exogenous and

endogenous variables. Mediating variable helps to identify the mechanism through

which the change occurs (Tang et al., 2009). Prior studies have indicated that there

is an indirect relationship between the role of internal (i.e. line managers and top

management) and external agents (i.e. external service providers) in management

of human resources and effectiveness of HRM (Guest & Conway, 2011; Hope

Hailey et al., 2005; Valverde et al., 2006). It is assumed that there are variables

that mediate the relationship between the role of internal and external agents in

HRM and effectiveness of HRM. For instance, Larsen and Brewster's (2003) study

have indicated the likely implications of line manager involvement in HRM as

effects on the size and shape of HR department; effects on the shape of the

organization and effects on the shape and role of HR department, besides

enhancing organizational effectiveness (Schuler, 1990).

In order to study the impact, of role of internal and external agents in HRM on

effectiveness of HRM, status of HRM was seen as a mediating variable. Various

indicators of status of HRM have been identified by researchers (e.g. Budhwar,

2000a, 2000b; Budhwar & Boyne; 2004; Budhwar & Sparrow, 1997; Green et al. 2006; Hope-Hailey et al. 1997; Kelly & Gennard, 1996; Mayrhofer & Brewster,

2005; Sheehan, 2005; Teo & Crawford, 2005; Truss, 2003; Wood, 1995).

In the current study, status of HRM was measured through six items focusing on

whether the HR function had an important place in strategic affairs. It focuses on

issues like position of HR departments, representation of HR department at board

level, position and responsibility of HR executives, HR executives' role in

strategic decisions, relationship of HR executives with CEO, general managerial

training to HR executives etc.

4.4.4 Moderating Variable: Organizational Profile

Researchers have investigated the role of a number of moderating variables such as

size, sector, technology, ownership, nationality, life cycle stage, unionization (e.g.

Cohen & Pfeffer, 1986; Lawler et al., 1995; Shaw et. al., 1993; Snell, 1992) in

similar kinds of studies. Andersen et al. (2007) and Huselid (1995) have used firm

size and industry sector as control variables to study HR link with performance.

Budhwar and Sparrow (1997) have considered the nature of organization (private

and public sector); age of the organization; life cycle stage of organization (growth

or maturity); size of the organization.

For the present study, four dimensions of organizational characteristics were

deemed to be moderating variables viz, sector to which the company belongs

(manufacturing/service), ownership pattern (public sector i.e. companies owned by

the government/private sector i.e. companies owned by private players), country of

origin (Indian/Foreign) and the size of the company determined by number of

employees (smalllmedium/large). For classification of small, medium and large

organizations, Budhwar and Sparrow's (1997) criteria was followed i.e.

organizations with less than 1000 employees were considered small, those between

1001-5000 employees were considered medium and those with more than 5001

employees were considered large.

4.5 Questionnaire Development Process

The process of questionnaire development encompasses various stages from

identification of constructs/items from the literature to identifying the information

that is needed, wording and sequence of questions, structuring of questionnaire,

development of draft questionnaire, re-examination of draft questionnaire to pilot

testing for finalization of items (Churchill & lacobucci, 2002; Malhotra, 2007;

Malhotra & Dash, 2011). Moreover, the issue of validity associated with the

questionnaire development needs to be addressed during this process.

The present research followed the guidelines recommended by Churchill and

Iacobucci (2002), Malhotra (2007), Malhotra and Dash (2011) and Sekaran (2006)

for generating the questionnaire. Exhibit 4.2 reveals the questionnaire development

process of the present study.

Exhibit: 4.2: Flowchart Illustrating the Questionnaire Development Process

Stage 1 j

Identification of constructs/items

[Stage 2 Wording of questions

Stage 3 Sequence & arrangement of questions

Lsta 4 Structuring of scales

Stage 5 Development of draft questionnaire

Stage 6 Re-examination of stage 1-5

Stage 7 Pilot Testing

TStage 8 Finalization of questionnaire items, layout and physical characteristics of the questionnaire

Prepared by the Researcher

4.5.1 Stages of Questionnaire Development

Stagel: Identification of constructs/items: On the basis of an extensive literature

review, study constructs/measures were identified to specify the information that is

needed. Relevant content of the items was determined to ensure that every item

included in the questionnaire contributes to the information required.

Stage 2: Wording of questions: Selecting question wording is the most important

and critical part of the questionnaire development process. Poorly worded items

increase non-response (Malhotra & Dash, 2011) and ambiguous question wording

can create confusion or even shift the meaning of the construct and its items

(Huselid & Becker, 2000; Podsakoff et al., 2003). Researchers should design the

questionnaire items that capture the specific substantive focus of the HR

component being assessed (Arthur & Boyles, 2007). Therefore, proper question

94

wording guidelines as suggested by Malhotra and Dash (2011) were followed to

keep the items as simple, specific and objective as possible.

Stage 3: Sequence/arrangement of questions: In order to avoid common method

bias, items related to the independent variables should precede the items related to

dependent variable of the survey instrument (Podsakoff & Organ, 1986; Salancik

& Pfeffer, 1977). Thus, the questionnaire was structured in such a way so that the

items related to the independent variables i.e. involvement of internal and external

agents in decision-making, process/activities and budgeting preceded the items

related to status of HRM and effectiveness of HRM items.

Stage 4: Structuring of scale: In the present research, structured questions were

used and the responses were obtained on 5-point Likert scale anchored with end

points labeled as No Involvement (1) to High Involvement (5). For certain items, 5-

point scale anchored with end points labeled as Strongly Disagree (1) to Strongly

Agree (5) was also used. Five point scale has been commonly used by other

researchers in the area too (Budhwar, 2000a; Budhwar & Sparrow, 1997; Heraty &

Morley, 1995; Valverde et al., 2006).

Stage 5: Development of draft questionnaire: A preliminary draft of the

questionnaire was prepared keeping in view the constructs/measures identified in

Stage I as well as the subsequent stages of the questionnaire development process.

Stage 6: Re-examination of stage 1-5: Modification in draft questionnaire on the

basis of inputs and suggestions from academicians/practitioners: Before moving

for pilot testing of the questionnaire/instrument, draft questionnaire was reviewed

in the light of the guidelines recommended by Churchill and Iacobucci (2002),

Malhotra (2007) and Malhotra and Dash (2011). This stage involved a re-

examination of stage 1-5 and the main objective was to incorporate the changes in

draft questionnaire if necessary, on the basis of inputs and suggestions from

academicians and practitioners as well as to ensure the translation validity (i.e.

content and face validity) of the instrument.

When the initial draft questionnaire was conceptually developed, the researcher

approached three other senior researchers in the area with a request to propose

items for the questionnaire which were then broadly compared with the items in

the draft questionnaire and modifications were made accordingly. After

incorporating the changes in the draft questionnaire, it was reviewed by four

researchers/academicians; two from HRM area and the other two who were

methodology experts. The purpose was to ensure that the questionnaire possessed

translation validity (discussed in detail in next sub-section). This re-examination of

the instrument provided useful insights in addressing the weaknesses of the

instrument and helped in addressing the issue of translation validity.

Stage 7: Pilot testing; This stage of the questionnaire development process deals

with the pilot testing or pretesting with actual respondents (i.e. HR managers in

this case). It is noted that languages used by people from different backgrounds

(i.e. academicians and potential informants) may be different, so the questionnaire

was administered on HR managers to assess their feedback. HR managers were

asked not only to give their responses but also to provide their critical feedback of

the questionnaire in general and scale items in particular. In all fifteen HR

managers were targeted at this stage. The basic objective was to capture any

ambiguities in questionnaire wording, question structure, sequence/arrangement of

questions, layout and physical characteristics of the questionnaire and other

difficulties encountered by the respondents in completing the questionnaire to

ensure the translation validity (i.e. content and face validity).

Stage 8: Finalization of questionnaire items, layout and physical characteristics

of the questionnaire: The last stage in the questionnaire development process

deals with the finalization of items based on the inputs obtained during pilot testing

stage. Consequently, necessary changes were incorporated mainly in question

structure and sequence/arrangement of questions. Suggestions of Podsakoff et al.

(2003) of separate scale formats for predictor variables (i.e. the role of internal and

external agents) and criterion variables (i.e. effectiveness of HRM) have been used

to reduce the biases. In addition to this, the researcher followed the instructions of

Malhotra, (2007) and Malhotra and Dash (2011) to address the. issue of formatting,

spacing and positioning of the questions. Besides, the questionnaire colour was

given due consideration to make the questionnaire attractive and distinct as the

questionnaire colour has an effect on the response rate (Bender, 1957; Fox et al.,

1988; Jobber & Sanderson, 1983; Phipps et al., 1991). Keeping this in view, the

researcher has used different colour combinations (Bender, 1957) for both

GIB

electronic and hard forms of the questionnaire. The hard form of the final

questionnaire was printed in card-form.

Assessing validity is an essential part of questionnaire/instrument development

process because it provides information about the accuracy of measurement,

stability and consistency of the results being obtained (Adams et al., 2007; Colton

& Covert, 2007; Cooper & Schindler, 2003; Hair et al., 2008; Malhotra, 2007;

Malhotra & Dash, 2011).

4.5.2 Translation Validity: Face and Content Validity

A scale has validity if it is measuring the concept that it was intended to measure

(Bagozzi, 1981; Sekaran, 2006). Broadly, there are two types of validity i.e.

theoretical and empirical validity. Empirical validity includes construct validity

(i.e. convergent, discriminant and nomological validity) and criterion validity and

is assessed after data collection (discussed in detail in next chapter) however,

translation validity includes face and content validity which was determined during

instrument development (Garver & Mentzer, 1999). Translation validity focuses on

the operationalization of the construct and aims to assess the degree to which

constructs are precisely translated into question items (Trochim, 2009). Translation

validity is of two types: 1) face and 2) content validity.

Face validity subjectively assesses the correspondence* between the individual

items and the concept to see if the operationalization of construct on its face

appears to be a good translation of the construct or not (Trochim, 2009) and if it

`looks like' it is going to measure what it is supposed to measure (Ahmad &

Schroeder, 2003; Colton & Covert, 2007).

Content - validity checks the operationalization against the related content domain

for the construct (Trochim, 2009) and depends on how well the researchers created

measurement items using the appropriate literature (Nunnally, 1978). An

instrument has content validity if the items sufficiently span the scope of the

construct (Churchill, 1979; Stratman & Roth, 2002) and items of an instrument are

derived from comprehensive analysis of literature and discussed with experts

(Bohrnstedt, 1983; Shin et al., 2000; Stratman & Roth, 2002). Since it is

judgemental in nature and not open to statistical evaluation, therefore, researcher

97

insight must be applied (Cooper & Schindler, 2006; Garver & Mentzer, 1999). The

scales must first be tested for content validity before any scale refinement is

undertaken (Ahire et al., 1996; Anderson & Gerbing, 1988).

On the basis of an extensive literature review, an initial draft of questionnaire was

prepared. As suggested by Ahmad and Schroeder (2003), face validity of the

questionnaire was insured by requesting three different researchers to propose

items for the questionnaire as discussed in Stage 6 of questionnaire development

process. The items proposed by them were compared with the items in the draft

questionnaire which was then modified accordingly. Thereafter, four other

researchers/academicians were asked to review the questionnaire items and guess

what the questionnaire was intended to measure in order to ensure that the

questionnaire appeared reasonable and acceptable. This has also been discussed in

the previous sub-section. Besides this, changes were made in the question

structure/form of response, sequencefarrangement of questions, layout and physical

characteristics of the questionnaire based on the inputs obtained from pilot testing.

Thus, translation validity of the instrument/questionnaire was ensured.

4.6 Research Instrument/Questionnaire

The final survey instrument contained the following variables:

Exogenous/Independent Variables: The survey instrument consists of nine

independent variables measuring the role of internal and external agents in HRM:

❑ Top management involvement in decision-making vis-a-vis HRM (TDM) ❑ Top management involvement in process/activities vis-a-vis HRM (TPA) U Top management involvement in budgeting vis-a-vis HRM (TBU) ❑ Line managers involvement in decision-making vis-a-vis HRM (LDM) ❑ Line managers involvement in process/activities vis-a-vis HRM (LPA) U Line managers involvement in budgeting vis-a-vis HRM (LBU) ❑ External service providers involvement in decision-making vis-a-vis HRM

(EDM) U External service providers involvement in process/activities vis-a-vis HRM

(EPA) ❑ External service providers involvement in budgeting vis-a-vis HRM (EBU)

All the nine exogenous variables were measured with six items scale each. The six

items scale comprised of six HRM - functions. Each HRM function was measured

with single item scale. Thus, each of the above nine variables were examined on a

six item scale with respect to following HRM functions:

■ HR Planning ■ Recruitment & Selection ■ Training & Development ■ Pay Management

■ Performance Appraisal Industrial Relations

Endogenous Variable/Dependent Variable: The endogenous/dependent variable

considered for the study was:

❑ Effectiveness of FIRM (EFF): Three-item scale

■ Influential Effectiveness ■ Relationship Effectiveness ■ Overall Effectiveness

Mediating Variable: The mediating variable considered for the study was:

❑ Status of HRM (STA): Six-item scale

Moderating Variable: The moderating variable considered for the study was:

❑ Organizational Profile

■ Sector (Service/Manufacturing)

■ Ownership (Public/Private sector) • Nationality/country of origin (Indian /Foreign) ■ Size/Number of employees (small/medium/large)

Respondents were also asked to mention their designation, experience in terms of

years in the present position and total experience in the organization. The

instrument utilized a 5-point Likert scale anchored with end points Iabeled as No

Involvement (1) to High Involvement (5) as well as Strongly Disagree (1) to

Strongly Agree (5) for certain items.

4.7 Sampling Procedure

This section provides a brief overview of the sampling procedure followed by the

researcher. The current research follows the sampling procedure as suggested by

Churchill and Iacobucci (2002), Malhotra (2007), Malhotra and Dash (2011),

Sekaran (2006) and Wilson (2006) and others. Sampling procedure begins with a

definition of target population followed by sampling frame, sampling approach and

sample size. The Exhibit 4.3 presents the sampling procedure adopted in this

research.

Exhibit 4.3: Flow Chart Representing the Sampling Procedure

Defining the target population

Identifying the sampling frame

Selecting sampling method

Determining the sample size

Collecting the data from the sample

Prepared by the Researcher

4.7.1 Target Population

Target population includes set of elements that contain the information needed by

the researcher and about which the inferences are to be made (Malhotra, 2007;

Malhotra & Dash, 2011). In other words, target population was defined in terms of

sampling unit and sample elements.

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4.7.1.1 Sampling Unit

The present research is based on the study of selected leading business

organizations operating in India. The organizations covered in the study included

both Indian and foreign companies, public and private sector companies,

organizations of different sizes based on number of employees and companies

from both manufacturing and service sectors (The criteria for selecting the

sampling units suitable for the study is discussed in detail under sampling frame in

section 4.7.2).

4.7.1.2 Sampling Element

The respondents of the study were senior HR managers (one from each firm). The

use of single respondent is recommended when data is collected from senior HR

executives regarding human resource management (Huselid & Becker, 2000;

Klass et al, 1999). These are the subject matter, experts and believed to be in a

good position to provide the necessary information (Chan et al., 2004; Huselid &

Becker, 2000). Senior HR executives have been used as respondents in similar

other studies too (e.g. Andersen et. al., 2007; Andolsek & Stebe, 2005; Budhwar,

2000a, 2000b; Caldwell, 2003; Fisher & Dowling, 1999; Gautam & Davis, 2007;

Hsu & Leat, 2000; Huselid et al., 1997; Jones, 1996; KIass et al, 2001; Larsen &

Brewster, 2003; Perry & Kulik, 2008; Tremblay et al. 2008; Valverde et al., 2006;

Woodall et al., 2009). These studies considered the perception of senior HR

practitioners since they have direct responsibility for HR issues. Prior studies have

also considered the perceptions of a single respondent (HR executive) as

appropriate (Arthur & Boyles, 2007; Becker & Huselid, 2006; Katou, 2008; Teo,

2000). Selecting a familiar and knowledgeable respondent provides researchers

more valid and reliable data than that gathered from multiple respondents (Huselid

& Becker, 2000).

Senior level HR executives are believed to be suitable to provide information

concerning HR issues. Additionally, research in the area too has commonly

assumed human resource systems to be objective and recognizable characteristics

of organizations, not individuals and hence, the data does not suffer much from

101

subjectivity problems (Arthur & Boyles, 2007). Thus, keeping the above in mind,

senior HR managers were considered as sample elements for collecting data.

4.7.2 Sampling Frame

Following the footsteps of other researchers in the area (Budhwar, 2000a, 2000b;

Budhwar & Sparrow, 1997; Chan et al., 2004; Caldwell, 2003; Katou, 2008; Kydd

& Oppenheim, 1990) top ranking companies were considered in the present study.

The sampling frame for the study was derived from the ranking of Top 550

companies in India published in Business World (2009). It is to be noted that

when the survey for the present study began in 2010, the rankings of 2010 had not

come-out; hence, 2009 ranking list was considered for the present study. These

top-ranked organizations are believed to be at the leading edge of HR practices.

Studying such organizations that are high performing, researchers could assume

that HRM is at least nominally supported (McGovern et al., 1997; Sheehan, 2005).

Andolsek and Stebe (2005) conducted a study in the area of devolution in public

services and commercial companies having more than 200 employees. A similar

criteria for selecting the sample frame on the basis of number of employees (i.e.

more than 200) has been adopted by other researchers too (Budhwar, 2000a,

2000b; Budhwar & Sparrow, 1997; Deny etal., 2008; Mayne et al., 1996).

Perry and Kulik (2008) selected the organizations with 250 or more employees

operating across number of industries. Companies of this size are considered to

ensure that the recognized firms had HR departments in which HR practices were

more formalized (de Kok & Uhlaner, 2001). Green et al. (2006) who studied

organizations with more than 250 employees also suggested that large

organizations are likely to have well-established HR functions. In the present

research too, responding organization had more than 250 employees, thus, they

were found fit for inclusion.

} Business World and Centre for Monitoring Indian Economy (CMIE)-an independent research house-annually publish rankings of public limited companies in India. These companies have to file their annual accounts with the Registrar of Companies. The, published rankings are based on a number of parameters e.g. sales, ROCE, shareholder's return etc.

102

4.7.3 Sampling Approach and Sample Size

In order to collect the data from the companies identified through the above

mentioned sample frame, a census approach to sampling was used. All companies

(i.e. 550) in the sample frame were contacted. For obtaining the addresses of the

companies, professional bodies in India such as National HRD Network (NHRD),

Delhi Management Association (DMA), All India Management Association

(AIMA) and Indian Society for Training and Development (ISTD) were

approached as these bodies maintain lists of member companies and senior HR

executives. Some addresses were obtained from Directory of Senior Executives of

Central and States Public Sector Undertakings 2009-10, Handbook of Top Indian

Companies, Trainer and Training Institutions Directory 2009 and websites of the

companies as well. Certain contacts were obtained during HR meets organized by

industry bodies like Confederation of Indian Industry (CII), Associated Chambers

of Commerce and Industry of India (ASSOCHAM) and Federation of Indian

Chamber of Commerce Industry (FICCI). Moreover, .the researcher also visited the

corporate offices of some sample companies.

4.8 Questionnaire Administration and Data Collection

Data was collected from the sample organizations through e-mail, land mails, HR

meets, and personal visits. Mail methodology has been used by other researchers in

the area too e.g. Budhwar and Sparrow (1997), Caldwell, (2003), Klass et al.

(1999), Klass et al., (2001), Perry and Kulik (2008), Wood (1995). In order to

collect data from the respondents, questionnaires were sent through e-mail and in

some cases through postal mail. Follow-up reminders were sent to those who did

not respond after the initial mail. Besides, HR managers were approached during

HR meets and HR conclaves organized by HR wings of different industry bodies

like Confederation of Indian Industry (CII), Associated Chambers of Commerce

and Industry of India (ASSOCHAM), Federation of Indian Chamber of Commerce

Industry (FICCI), Delhi Management association (DMA) and professional HR

associations like ISTD and NHRD Delhi Chapter. These meets provided a good

platform for interaction with senior HR managers.

103

Techniques associated with higher response rate were adopted such as personalized

cover letters (Andersen et al., 2007; Bruvold et al., 1990; Duncan, 1979; Nowack,

1990; Perry & Kulik, 2008; Roth & Be Vier, 1998), the use of reminders and

follow-ups (Duncan, 1979; Harvey, 1987; Heberlein & Baumgartner, 1978; Hsu &

Leat, 2000; Kanuk & Berenson, 1975; Linsky, 1975; Perry & Kulik, 2008; Roth &

Be Vier, 1998), questionnaire colour (Bender, 1957; Crittenden et a1.,1985; Fox et

al., 1988; Jobber, 1986; Jobber & Sanderson, 1983; Matteson,1974; Phipps et al.,

1991) and assured anonymity of the respondents (Roth & Be Vier, 1998;

Yammarino et al., 1991). An affiliation with a professional organization increases

the response rate (Perry & Kulik, 2008).The researcher is a life member of several

leading HR associations and professional bodies in India. These associations

served as valuable gateways in contacting HR executives of several organizations

and increasing the response rate. Several measures were taken to improve the

response rate:

❑ Length of the questionnaire is generally assumed to reduce response rates

(Nowack, 1990). Yammarino et al. (1991) argued that surveys start to lose

responses after four pages. Roszkowksi and Bean's (1990) study pointed

out a 28% difference between a long (i.e. 4 pages) and short version of

questionnaire (i.e. large post card). The focus of the current study was

senior HR professionals, who were assumed to be time-pressed. Thus, the

researcher designed the questionnaire accordingly (i.e. 2 pages for e-mail

and an attractive printed card-form for personal visits).

U Return postage affect the response rates (Andersen et al., 2007; Duncan,

1979; Harvey, 1987; Linsky, 1975; Nowack, 1990). Yammarino et al.

(1991) argued that return postage is considered as requirement by

respondents. In case of postal mails, a self-addressed, stamped return

envelope was included by the researcher.

U Questionnaire colours have a positive effect on mail survey response rates

(Bender, 1957; Fox et al., 1988; Jobber, 1983; Jobber & Sanderson, 1983;

Phipps et al., 1991). Questionnaire colours appeal to the respondent's

sensory and emotional faculties (Bender, 1957). In an office environment,

colour might be more noticed than white papers (Phipps et al., 1991).

Bender (1957) tested the combinations of colours (i.e. blue, green and

104

pink,) to check the response rate and found that colour combinations

increased response rate. Keeping this in view researcher has used the colour

combinations i.e. green, blue, pink, yellow and red for both soft and hard

forms of the questionnaire.

❑ The questionnaire was designed in such a way so that it appeared user-

friendly and attractive. Besides, the questionnaire was closed ended (it

required responding on a five-point Likert scale), and therefore, it did not

require much time in filling.

❑ In some cases, where addresses of HR managers could not be arranged,

senior level managers were contacted with a request to forward the

questionnaire to concerned HR officials. In many cases, the request was

promptly acceded to.

❑ The university in which the researcher is working is running an Executive

PhD program in association with All India Management Association

(AIMA). Executives enrolled in the program, whose organizations were

part of the sample, were contacted. In many cases, these executives were

not in the HR department and were requested to forward the same to a

senior HR executive.

❑ The researcher contacted the alumni of the university if they were in the

sample. in case they were not part of the HR department, they too were

requested to forward the questionnaires to a senior HR executive.

❑ Respondents were assured anonymity in order to increase the response rate

(Roth & Be Vier, 1998; Yammarino et al., 1991) and to reduce the

evaluation apprehension (Podsakoff et al., 2003), since assured anonymity

increases the response rate.

The respondents accepted to participate with the understanding that at no stage

their companies would be identified, and this constraint was acceptable as the

research objectives of the present study were to identify general/sectoral trends

rather than the specific company policies. Moreover, researcher followed the

concept of social exchange theory which reveals that human behaviour is

motivated by psychological returns (i.e. whatever is pleasurable or gratifying to the

person) and psychological costs (i.e. factors that inhibit behaviours such as

105

physical or mental effort, pain) associated with behaviour (Emerson, 1987; Foa &

Foa, 1980; Greenberg, 1980). Individuals are thought to be motivated to engage in

behaviour associated with high returns and low costs (psychological costs). Hence,

following the social exchange theory, the researcher offered to share results of the

study to those who were interested. It was intended to minimize psychological and

other costs through questions designed to have a minimal chance of embarrassing a

respondent and providing stamped self-addressed envelopes to minimize cost for

those who were contacted through post.

4.9 Conceptual Models of Research

In order to test the relationship between the variables, alternative research models

were considered by the researcher. A research model may have both endogenous

and exogenous variables. Endogenous constructs have their casual antecedents

specified within the model under consideration, whereas the causes of exogenous

constructs are outside the model and not of interest (Anderson & Gerbing, 1991).

When structural models are specified, observed measures of exogenous constructs

are denoted as X, whereas observed measures of endogenous constructs are

denoted as Y. These are simultaneously estimated with the structural model to

ascertain if any relationship exists (Joreskog & Sorbom, 1993).

Following the approach followed by other researchers (e.g. Bontis et at 2007;

Knight et al., 1999; Mustapha et al., 2010), three alternative conceptual models

were considered for the current study i.e. Direct Effect Model, Partially Mediated

Model and Fully Mediated Model. Model specifications of all the three models are

discussed subsequently.

Direct Effect Model (Ml): Exhibit 4.4a illustrates the direct effect conceptual

model developed by the researcher for the study. In the exhibit 4.4a, the

hypothesized relationship between independent and dependent constructs is

depicted by arrows. The curved lines indicate correlation between two variables. In

this model, direct relationship between independent variables i.e. the role of the

three agents and dependent variable i.e. effectiveness of HRM is assessed. No

mediating variable is considered in this case.

106

Exhibit 4.4a: Direct Effect Conceptual Model of Research (Mt)

Partially Mediated Model (M2): Exhibit 4.4b represents M2, the partially

mediated model, in which both direct and indirect effects (through mediating

variable i.e. status of HRM) of the hypothesized relationship is depicted by arrows.

Exhibit 4.4b:

tiallv Mediated Conceptual Model of Research

107

Fully Mediated Model (M3): Exhibit 4.4c illustrates the fully mediated conceptual

model (M3) for the study. It assumes that independent variables will directly affect

the intervening variable or mediating variable i.e. Status of FIRM (STA) which, in

turn, will affect the dependent variable i.e. Effectiveness of FIRM (EFF).

Exhibit 4.4c Fully Mediated Conceptual Model of Research

The model specification for the three conceptual research models is as under:

Direct Effect Model (MI)

EFF;--- f (TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU)

Partially Mediated Model 2

STA= f {TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU);

EFF= f {TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU};

EFF=f [STA]

Fully Mediated Model (1113)

STA= f {TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU);

EFF= f {STA}

108

Where,

EFF = Effectiveness of HRM

STA = Status of HRM

TDM =Top management involvement in decision-making vis-a-vis HRM

TPA =Top management involvement in process/activities vis-a-vis HRM TBU =Top management involvement in budgeting vis-a-vis HRM

LDM=Line managers involvement in decision-making vis-a-vis HRM LPA= Line managers involvement in process/activities vis-a-vis HRM

LBU=Line managers involvement in budgeting vis-a-vis .HRM

EDM=External service providers involvement in decision-making vis-a-vis HRM EPA.=External service providers involvement in process/activities vis-a-vis HRM

EBU=External service providers involvement in budgeting vis-a-vis HRM

4.10 Research Hypotheses

Following three sets of hypotheses were considered in light of the study objectives.

First set of hypotheses deals with the three conceptual research models i.e. direct

effect model (Ml), partially mediated model (M2) and fully mediated model (M3).

The second and third set of hypotheses deal with assessing the differences and

establishing the association between company type and role of internal agents (i.e.

top management and line managers) and external agents (i.e. external service

providers) in management of HR.

Category 1: Hypotheses for Alternative Conceptual Research Models

Following other researchers (e.g. Bontis et al., 2007; Fried et al., 2008; Knight et

al., 1999; Mustapha et al., 2010), separate hypotheses were considered for all the

three models:

Hypotheses for Direct Effect Model (M1)

For the direct effect model (M1), nine hypotheses were considered to test all the

possible relationships between exogenous and endogenous variables. In model M1,

direct effect of independent variables (i.e. role of agents) on the dependent variable

(i.e. effectiveness of HRM) is studied:

109

H1TDM: Top management involvement in decision-making vis-a-vis HRM (TDM)

has a direct and positive impact on the Effectiveness of HRM (EFF).

H2TFA: Top management involvement in process/activities vis-a-vis HRM (TPA)


H3TBu: Top management involvement in budgeting vis-a-vis HRM (TB U) has a

direct and positive impact on the Effectiveness of HRM (EFF).

H4LDM: Line managers involvement in decision-making vis-a-vis HRM (LDM) has

a direct and positive impact on the Effectiveness of HRM (EFF).

HSLpA: Line managers involvement in process/activities vis-a-vis HRM (LPA) has a

. direct and positive impact on the Effectiveness of HRM (EFF).

H6LBU: Line managers involvement in budgeting vis-a-vis HRM (LB U) has a direct

and positive impact on the Effectiveness of HRM (EFF)

H7EDM: External service providers involvement in decision-making vis-a-vis HRM

(EDM) has a direct and positive impact on the Effectiveness of HRM

(EFF)

H8EPA: External service providers involvement in process/activities vis-a-vis HRM

(EPA) has a direct and positive impact on the Effectiveness of HRM (EFF)

H9EBU: External service providers involvement in budgeting vis-a-vis HRM (LB U)

has a direct and positive impact on the Effectiveness of HRM, (EFF)

Hypotheses for Partially Mediated Model (M2)

In partially mediated model (M2) nineteen hypotheses were considered to test all

the possible relationships between exogenous and endogenous variables. In model

M2, first nine hypotheses deal with the indirect effect of independent variables on

the Status of HRM, while second set of nine hypotheses deal with the direct effect

of exogenous variables on the Effectiveness of HRM. Last hypothesis deals with

the impact of Status of HRM on the Effectiveness of HRM. Following hypotheses

were considered for partially mediated model (M2):

HIOTDM: Top management involvement in decision-making vis-a-vis HRM (TDM)

has a direct and positive impact on the Status of HRM (STA).

110

HJ1TpA: Top management involvement in process/activities vis-a-vis HRM (TPA)


HJ2TBU: Top management involvement in budgeting vis-a-vis HRM (TB U) has a

direct and positive impact on the on the Status of HRM (STA)


a direct and positive impact on the Status of HRM (STA)

H14L PA: Line managers involvement in process/activities vis-a-vis HRM (LPA)


HI5LBU: Line managers involvement in budgeting vis-a-vis HRM (LB U) has a

direct and positive impact on the Status of HRM (STA).

H16EDM: External service providers involvement in decision-making vis-a-vis

HRM (EDM) has a direct and positive impact on the Status of HRM

(STA).

H17EpA: External service providers involvement in process/activities vis-a-vis

HRM (EPA) has a direct and positive impact on the Status of HRM (STA)

H18EBU: External service providers involvement in budgeting vis-a-vis HRM

(EBU) has a direct and positive impact on the Status of HRM (STA)

Hl9TDM: Top management involvement in decision-making vis-a-vis HRM (TDM)


H2OTpA: Top management involvement in process/activities vis-a-vis HRM (TPA)


H21TBU: Top management involvement in budgeting vis-a-vis HRM (TB U) has'a

direct and positive impact on the Effectiveness of HRM (EFF)

H22,1: Line managers involvement in decision-making vis-a-vis HRM (LDM)

has a direct and positive impact on the Effectiveness of HRM (EFF)

H23LpA: Line managers involvement in process/activities vis-a-vis HRM (LPA)

has a direct and positive impact on the Effectiveness of HRM (EFF)

H24LBU: Line managers - involvement in budgeting vis-a-vis HRM (LB U) has a

direct and positive impact on the Effectiveness of HRM (EFF)

111

H25EDM: External service providers involvement in decision-making (EDM) vis-a-

vis HRM has a direct and positive impact on the Effectiveness of HRM

(EFF)

H26EPA: External service providers involvement in process/activities (EPA) vis-a-

vis HRM has a direct and positive impact on the Effectiveness of HRM

(EFF)

H27EBU: External service providers involvement in budgeting vis-a-vis HRM

(EB U) has a direct and positive impact on the Effectiveness of HRM

(EFF)

H28STA: Status of HRM (STA) has a direct and positive impact on the Effectiveness

of HRM (EFF)

Hypotheses for Fully Mediated Model (M3)

In the fully mediated model (M3) ten hypotheses were considered to test the

indirect effect of exogenous variables on the mediating variable i.e. Status of HRM

and then the relationship between the mediating variable i.e. Status of HRM on

Effectiveness of HRM:

H29TDM: Top management involvement in decision-making vis-a-vis HRM (1DM)

has a direct and positive impact on the Status of HRM-(STA)

H30TpA: Top management involvement in process/activities vis-a-vis HRM (TPA)

has a direct and positive impact on the Status of HRM (STA)

H3ITBU: Top management involvement in budgeting vis-a-vis HRM (TB U) has a

direct and positive impact on the on the Status of HRM (STA)



H33LFA: Line manager involvement in process/activities vis-a-vis HRM (LPA) has


H34r.Bu: Line managers involvement in budgeting vis-a-vis HRM (LB U) has a

direct and positive impact on the Status of HRM (STA)

112

H3SEOM: External service providers involvement in decision-making vis-a-vis

HRM (EDM) has a direct and positive impact on the Status of HRM (STA)


HRM (EPA) has a direct and positive impact on the Status of HRM (STA)

H37E5O: External service providers involvement in budgeting vis-a-vis HRM

(EB U) has a direct and positive impact on the Status of HRM (STA)

H38sr,4: Status of HRM (STA) has a direct and positive impact on the Effectiveness

ofHRM(EFF)

Category I[: Hypotheses for Establishing Differences

The hypotheses in this category deal with establishing differences on study

variables on the basis of company type. Company type was categorized as sector to

which the company belongs (service/manufacturing) and size of the company

determined on the basis of number of employees (small, medium and large). Poole

and Jenkins (1997) and Shaw et al. (1993) reported that size of the organization

plays an important role in determining the role of agents in HRM. Bennett et al.

(1998) described the industry's influence on human resource practices. Some

researchers maintained that business organizations in the service sector were more

likely to have a strategic approach to HRM than manufacturing organizations (e.g.

Marginson et al., 1988; Othman & Ismail, 1996). Srimannarayana (2010) reported

the differences between manufacturing and service sector companies. Following

hypotheses were considered to establish the differences on the basis of company

type vis-a-vis role of top management and line managers (internal agents) and

external service providers (external agents) in management of HR. The first nine

hypotheses deal with establishing the differences on the basis of sector and the next

nine hypotheses deal with establishing the differences on the basis of size.

On the basis of sector:

Ho.l: There is no significant difference in the mean scores of top management

involvement in decision-making vis-a-vis HRM (TDM) between companies

from manufacturing and service sectors.

113

Het: There is no significant difference in the mean scores of top management

involvement in process/activities vis-a-vis HRM (TPA) between companies


Ho3: There is no significant difference in the mean scores of top management

involvement in budgeting vis-a-vis HRM (TB U) between companies from

manufacturing and service sectors.

H4: There is no significant difference in the mean scores of line managers

involvement in decision-making vis-a-vis HRM (LDM) between companies



involvement in process/activities vis-a-vis HRM (LPA) between companies

from manufacturing and service sectors


involvement in budgeting vis-a-vis HRM (LB U) between companies from

manufacturing and service sectors

H7: There is no significant difference in the mean scores of external service

providers involvement in decision-making vis-a-vis HRM (EDM) between

companies from manufacturing and service sectors

H8: There is no significant difference in the mean scores of external service

providers involvement in process/activities vis-a-vis HRM (EPA) between


Hog: There is no significant difference in the mean scores of external service

providers involvement in budgeting vis-a-vis HRM (EBU) between


On the basis of size:


involvement in decision-making vis-a-vis HRM (TDA) between small,

medium and large organizations.

114

Holl: There is no significant difference in the mean scores of top management

involvement in process/activities vis-a-vis HRM (TPA) between small,


H12: There is no significant difference in the mean scores of top management

involvement in budgeting vis-a-vis HRM (TB U) between small, medium and

large organizations.


involvement in decision-making vis-a-vis HRM (LDM) between small,



involvement in process/activities vis-a-vis HRM (LPA) between small,


11o15: There is no significant difference in the mean scores of line managers

involvement in budgeting vis-a-vis HRM (LB U) between small, medium and

large organizations.

H0!6: There is no significant difference in the mean scores of external service

providers involvement in decision-making vis-a-vis HRM (EDM) between

small, medium and large organizations.

H0!7: There is no significant difference in the mean scores of external service


small, medium and large organizations.

Ho18: There is no significant difference in the mean scores of external service

providers involvement in budgeting vis-a-vis HRM (EBU) between small,


Category III: Hypotheses for Establishing Association

The next set of hypotheses deal with establishing association between company

type viz. sector (service/manufacturing), and size of the organizations (small,

medium and large organizations) and role of top management and line managers

(internal agents) and external service providers (external agents) in management of

HR. On the basis of above, following hypotheses were considered to ascertain the

115

association between company type and role of top management, line managers and

external service providers in management of HR. The first nine hypotheses .deal

with. establishing the association on the basis of sector and the • next nine

hypotheses deal with establishing the association on the basis of size.

On the basis of sector:

Hot: There is no association between company's sector i.e. manufacturing and

service sector and top management involvement in decision-making vis-a-vis

HRM(IDf)

Hot: There is no association between company's sector i.e. manufacturing and

service sector and top management involvement in process/activities vis-a-

vis HRM (TPA)

H3: There is no association between company's sector i.e. manufacturing and

service sector and top management involvement in budgeting vis-a-vis HRM

(TBU)


service sector and line managers involvement in decision-making vis-a-vis

HRM (LDM)

Ho5: There is no association between company's sector i.e. manufacturing and

service sector and line managers involvement in process/activities vis-a-vis

HRM (LPA)


service sector and line managers involvement in budgeting vis-a-vis HRM

(LBU)


service sector and external service providers involvement in decision-making

vis-a-vis HRM (ED*


service sector and external service providers involvement in

process/activities vis-a-vis HRM (EPA)

116


service sector and external service providers involvement in budgeting vis-a-

vis HRM (EBU)

On the basis of size:

H10: There is no association between company's size i.e. small, medium and

large organizations and top management involvement in decision-making

vis-a-vis HRM (TDM).

H0l1: There is no association between company's size i.e. small, medium and

large organizations and top management involvement in process/activities

vis-a-vis HRM (TPA)


large organizations and top management involvement in budgeting vis-a-vis

HRM (TB U)


large organizations and line managers involvement in decision-making vis-

a-vis HRM (LDM)

Halo: There is no association between company's size i.e. small, medium and

Iarge organizations and line -managers involvement in process/activities vis-

a-vis HRM (LPA)


large organizations and line managers involvement in budgeting vis-a-vis

HRM (LBU)


large organizations and external service providers involvement in decision-

making vis-a-vis HRM (EDM)

Ho17: There is no association between company's size i.e. small, medium and

large organizations and external service providers involvement in


E

117


large organizations and external service providers involvement in budgeting

vis-a-vis HRM (EBU)

4.11 Methods of Analysis

Statistical methods are primary tools for data analysis in the social science research

(Nachmias & Nachmias 2008). But primarily multivariate methods share a

common constraint of investigating one relationship at one time (Hair et al. 2008;

Malhotra & Dash, 2011). Recognising the objectives of the present study to

examine the pattern and interrelationships of multiple exogenous variables,

moderating variables, mediating variable and endogenous variable, structural

equation modelling (SEM) is regarded as the most effective analytical instrument

(Byrne 2001; Hair et al., 2008) which is useful when assessing models that are

path analytic with mediating variables, and include underlying constructs that are

being measured with multiple items (Luna-Arocas & Camps, 2008).

Descriptive statistics of the responses were generated through SPSS 19.0. After

initial estimation of the response rate, non-response error and common method

bias, Exploratory Factor Analysis (EFA) was carried out to see if items in a scale

load on one single factor. After establishing the unidimensionality of the study

constructs, indicator and scale reliability were assessed. Various types of validity

were, also ascertained (e.g. construct validity i.e. convergent, discriminant,

nomological validity and criterion validity). The relationship between exogenous

and endogenous variables was measured using Structural Equation Modeling

(SEM) capabilities of LISREL 8.50. For proceeding with SEM, Maximum

Likelihood Estimation (MLE) method was employed.

Tests of differences (independent sample T-test and one way ANOVA) and test of

association (Chi-square Test) were also deployed in SPSS 19.0 to find out whether

differences as well as association existed between organizations on role of internal

and external agents in HRM vis-a-vis company type i.e. on the basis of sector

(service or manufacturing) and size (small, medium and large). All these methods

and procedures are explained in detail in Chapter 5.

118

4.12 Limitations of the Study

Although efforts were made to carry on a research that was theoretically and

empirically sound, the study does suffer from several limitations:

❑ In this study quantative research design is followed to analyze the data.

Although such a design has its own merits, if supplemented with a

qualitative research could have enabled in generating more comprehensive

and valid models. However, budget and time constraints do not permit this.

❑ The study was cross-sectional in design and hence suffers from the

limitations associated with cross-sectional designs. In the study both the

endogenous and exogenous variables are measured on one occasion only. A

longitudinal study design could have more accurately captured casual_

relationship between role of internal and external agent in management of

human resources and effectiveness of HRM.

❑ While in this study, a reliable and valid instrument has been developed for

measuring the role of internal and external agents in management of human

resources in the Indian context only, it needs to be cross-validated. for other

cultures and settings (Kelloway, 1998).

❑ The study is based on the responses provided by HR managers. However,

surveys administered on a single source may raise concerns of common

method bias. Thus, data collected from HR managers should be handled

with caution due to the multiple constituency nature of HRM function

(Tsui, 1984). Although the researcher tested for common method bias with

the results supporting the contention that the bias does not significantly

impact the study results; the research was not designed to be a multi-

respondent study and hence may be considered a limitation.

❑ The study is based on a limited sample. Hence, the study might have

suffered from small sampler size related problems. Larger number could

have given more generalizable results.

❑ The data for the study was obtained from HR managers only. Data from

other stakeholders such as internal and external agents would have an

impact on the final analysis.

119


5.1 Plan of Analysis 5.2 Profile of Responding Firms and Respondents 5.3 Estimation of Response Rate 5.4 Estimation of Non-response Bias 5.5 Estimation of Common Method Bias 5.6 Measurement Model

5.6.1 Factor Analysis 5.6.2 Assessment of Reliability 5.6.3 Assessment of Validity

5.7 Structural Model 5.7.1 Structural Model Fit 5.7.2 Fit Indices, Path Coefficients & Hypotheses Testing

5.8 Criterion Validity 5.9 Comparison of Alternate Models 5.10 Tests of Differences 5.11 Tests of Association

i"


Chapter Overview

The chapter begins with a discussion of the plan of analysis. Subsequently, it

provides details of the profile of responding firms and the respondents. The first

part of the analysis deals with an estimation of response rate, non-response bias,

and common method bias. After that, measurement model and structural model fit

are estimated and path analysis carried out for testing of research hypotheses of

three alternate research models. This is followed by the assessment and

comparison of alternate models on the basis of fit measures. The chapter comes to

an end with tests of difference and association with respect to company type and

agents' involvement in HRM.

5.1 Plan of Analysis

Data analysis begins with an account of the profile of the responding organizations

and respondents. This is followed by an estimation of response rate, non-response

error and common method bias. Subsequent section follows the two step approach

recommended by Anderson and Gerbing (1988) and Gerbing and Anderson (1988).

Two-step approach is considered as most appropriate for the present analysis due to the simultaneous estimation of both measurement and structural models. In the

present study, first the measurement model is estimated followed by structural

model. This two-step approach has been endorsed by several researchers (Garver

& Mentzer, 1999; Hennig-Thurau et al., 2002; Vieira, 2011 etc.). In this approach,

first the measurement model assesses the unidimensionality, reliability and validity

of each construct followed by structural model which involves path analysis and

comparison of alternate models on the basis of fit measures (Anderson & Gerbing,

1988). Separate measurement models are specified for each construct (Joreskog &

Sa rbom, 2002). The testing of the structural model may be meaningless unless it is

first established that the measurement model holds. If the chosen indicators for a

construct do not measure that construct, the specified theory cannot be tested. In

fact, the potential for interpretational confounding is minimized by prior estimation

120

of the measurement model followed by structural model (Anderson & Gerbing,

1991). Thus, the measurement model was estimated first to establish scale

unidimensionality, reliability and validity followed by structural model to establish

relation between exogenous, endogenous, mediating and moderating variables.

Exploratory factor analysis (EFA) followed by Confirmatory factor analysis (CFA)

were used for estimating the measurement model. The unidimensionality and

reliability of the scales were assessed. The scales were subject to different types of

construct validity that is convergent, discriminant and nomological validity. After

the measurement models were validated, the researcher advanced to the next step

that is the assessment of the structural relationships between latent variables. The

conceptual models were tested during this stage. The structural models were

analyzed and the standardized path coefficients of the structural models were

estimated followed by comparison of alternate models on the basis of fit indices.

Structural equation modeling (SEM) is one of the most powerful analytical

techniques for data analysis in the social sciences (Hair et al., 2008; Hooper et al., 2008; Shook et al., 2004; Widaman & Thompson, 2003). SEM can analyse a series

of dependence relationships among multiple variables (Hair et al., 2008; Malhotra

& Dash, 2011) as it combines the confirmatory factor analysis (measurement

model) and path or regression analysis (structural model) into simultaneous

statistical test. SEM programs such as LISREL (Joreskog & Sorbom, 1993, 1996)

make it easier and faster for the researcher to investigate the multifaceted structural

models (Cooper & Schindler, 2006; Hair et al., 2008; Malhotra & Dash, 2011;

Widaman & Thompson, 2003). Structural equation modeling capabilities of

LISREL 8.50 were deployed for assessment of measurement model and structural

model. One of the benefits of SEM is that a variety of methods may be used to

analyze the appropriateness of hypothesized models and to compare the fit among

alternate models (Knight et al., 1999). LISREL generates variety tests and fit

indices that can be used to assess model fit. For proceeding with SEM, use of

Maximum Likelihood Estimation (MLE) method was made. MLE is commonly

used estimation method (Anderson & Gerbing, 1988; Baumgartner & Homburg,

1996; Diamantopoulos & Siguaw, 2000), uniform at producing efficient estimation

contrary to moderate violations of the normality assumptions (Diamantopoulos &

Siguaw, 2000). MLE method is recommended if sample consist of I00 or more

121

observations (Anderson & Gerbing, 1988; Steenkamp & Van Trijp, 1991). The

MLE estimates are obtained by means of an iterative procedure that minimizes a

particular fit function by successively improving the parameter estimates (Joreskog

& Sorbom, 2002). SEM accounts for measurement error in latent variables when

estimating path relationships (Hair et al., 2008) as it estimates measurement error

variances from the data and model specification where as traditional statistical

techniques do not (Ahire et al., 1996). It is also useful when testing models that are

path analytic with mediating variables, and include latent constructs that are being

measured with multiple items (Luna-Arocas & Camps, 2008). SEM is ideal for

testing theoretical models, refining and testing validity (Graver & Mentzer, 1999).

Tests of differences (independent sample t-test and one-way ANOVA in SPSS

19.0) were deployed to find out whether differences existed between organizations

on role of internal and external agents in management of HR vis-a-vis company

type i.e. on the basis of sector (service or manufacturing) and size (small, medium

and large). A test of association was also deployed using Chi-square in SPSS 19.0

to explore if there existed any association between company type i.e. sector

(manufacturing or service), size (small, medium and large) and role of internal and

external agents in management of HR.

176 companies responded out of 550 companies contacted, two questionnaires

were found incomplete and dropped from further analysis. Hence, the final number

of usable questionnaires was 174. LISREL technique depends on large sample

properties so an important consideration is sample size required to obtain

meaningful estimates. For proceeding with SEM using MLE, minimum sample

size of 50 is required but in order to ensure stable MLE solutions, minimum

sample size is 100-150 (Hair el al., 2008). Similar sample size was reported in

studies with SEM using MLE with LISREL as for example 76 responses (Knight

et al., 1999) 100-200 responses (Lindquist et al., 2001). Following Joreskog and

Sorbom's (1993) formula [k (k - 1)/2; where k equals the number of variables], to

compute the minimum sample size for estimation of the asymptotic covariance

matrices; the total number of latent variables in this research was 11, resulting in a

recommended minimum sample size of 51 significantly smaller than our final

sample size of 174. Thus, it can be safely concluded that structural equation

modeling was appropriate for the present research.

122

Exhibit 5.1: Flow Chart Depicting the Sequence of Analysis

PROFILE OF RESPONDING FIRMS AND RESPONDENTS

ESTIMATION OF RESPONSE

NON-RESPONSE ERROR

COMMON METHOD BIAS

Structural Equation Modeling MLE (Estimation Technique)

Measurement Model Exploratory Factor Analysis ■ Scale Unidimensionality

Confirmatory Factor Analysis ■ Reliability (Indicator and Scale) ■ Validity (Convergent, Discriminant and Nomological)

Structural Model ■ Relationships (Moderation and Mediation) • Path coefficients (Hypotheses testing) • Validity (Criterion Validity) • Comparison of Alternate Models

5.2 Profile of Responding Firms and Respondents

A profile of both responding firms and respondents is presented below:

Profile of Responding Firms

Sector: The responding organizations were categorized into service and

manufacturing. While 47.1% of organizations belonged to the service sector,

52.9% belonged to the manufacturing sector. Table 5.1 presents the profile of the

responding organizations on the basis of these sectors.

123

Table 5.1: Resoondina Organizations- Sector Sector Frequency Percent Cumulative Percent Service 82 47.1 47.1

Manufacturing 92 52.9 100 Total 174 100.0

Ownership: On the basis of ownership, responding organizations were classified

into public (21.3%) and private sector organizations (78.7%). Table 5.2 shows the

ownership pattern of the responding organizations.

Table 5.2: Resnondina Orctanizations- Ownership Ownership Frequency Percent Cumulative Percent

Public sector 37 21.3 21.7 Private sector 137 78.7 100.0

Total 174 -100.0

Nationality: On the basis of country of origin, the organizations were classified as

Indian (85.1%) and foreign (14.9%). Table 5.3 illustrates the nationality of

responding firms.

Table 5.3: Resoondina Organizations- Nationality

Nationality Frequency Percent Cumulative Percent

Indian 148 85.1 85.1 Foreign 26 14.9 100.0

Total 174 100.0

Size: Responding organizations were classified into different sizes on the basis of

number of employees according to criteria suggested by Budhwar and Sparrow

(1997). Accordingly, organizations with less than 1000 employees were considered

small, those between 1001-5000 employees were considered medium and those

with more than 5001 employees were considered large. The break-up is presented

in Table 5.4

Table 5.4: Resnondina Organizations- Size

Size Frequency Percent Cumulative Percent

Small 34 19.5 19.5 Medium 43 24.7 44.3

Large 97 55.7 100.0 Total 174 100.0

124

Profile of Respondents

Designation: The respondents of the study were HR managers (one from each

responding fixm). About 64.4% of respondents occupied senior level HR positions (e.g. ED-HR, Director-HR, Chief People Officer, Vice President-HR, DGM HR, General Manager-HR, Assistant GM-HR etc.), while 35.6% occupied managerial

level HR positions (e.g. Senior Personnel Officer, Senior Officer HR, Senior Manager-HR, Deputy Manager-HR, Assistant Manager-HR, Personnel Manager,

Manager-HR etc). Table 5.5 gives a picture of the profile of the respondents on the basis of designation.

Table 5.5: Respondent Profile- Desianation Designation Frequency Percent Cumulative Percent

Senior Managerial Level HR positions 112 64.4 64.4

Managerial level HR positions 62 35.6 100

Total 174 100.0

Experience: Almost 79% of the respondents had an experience of 1-5 years in the current position, 13.8% had an experience of 6-10 years while nearly 5% had an experience of more than 11 years. Table 5.6 illustrates the profile on the basis of experience in the present position.

Table 5.6: Resaondent Profile- Experience in Present Position Experience Frequency Percent Cumulative Percent 1-5 years 139 79.9 79.9 6-10 years 24 13.8 93.7 11-15 years 11 6.3 100.0

Total 174 100.0

Total Experience: Approximately 34.5% of respondents had a total experience of 0-10 years, 30.5% had an experience of 11-20 years, 21.3% had an experience of

21-30 years while 13.8% had an experience of more than 30 years. Table 5.7 shows the profile of the respondents on the basis of total experience in the

organization.

125

Table 5.7: Respondent Profile- Total Experience in the Oraanization Total Experience Frequency Percent Cumulative Percent

0-10 years 60 34.5 34.5 11-20 years 53 30.5 64.9

21-30 years 37 21.3 86.2 More than 30 years 24 13.8 100.0

Total 174 100.0

5.3 Estimation of Response Rate

Usually low response rates are common in industrial research and conventional

mail methodology accounts 10.8% response rate (Harmon et al., 2002). In Indian

cultural context, postal surveys result in poor response rate (Budhwar & Sparrow,

1997). Response rates ranging from 5% (Perry & Kulik, 2008), 8.56% (Hall &

Torrington, 1998), 10.5% (Valverde et al., 2006), 16% (Wood, 1995), 17% (Larsen

& Brewster, 2003), 18.6% (Budhwar, 2000a, 2000b) 22.7 % (Klass et al., 1999;

Klass et al., 2001) were reported in different researches conducted in the area.

Out of the 550 organizations initially contacted by researcher, 176 organizations

provided their responses giving a response rate • of 32%. Since, in most research

studies response rate has been low hence, a response rate of 32% can be considered

to be high and gives a sizeable number of total respondents to generate consistent

statistical results.

In addition to response rate, item completion rate is used as another measure of

survey effectiveness (Klassen & Jacobs. 2001). Klassen and Jacobs (2001) define

item completion rate as "the proportion of survey items answered relative to all

applicable items" (p. 717). The item completion rate for this study was 98.86%,

suggesting high survey effectiveness. Responses with 50% or more missing data

should be deleted (Hair et al., 2008). Out of 176 responses, two responses were

found to be incomplete having more than 60% missing data and were eliminated as

suggested by Hair et al. (2008), Lopez et al. (2005) and Maihotra (2007). Finally,

the total number of usable questionnaires was 174.

126

5.4 Estimation of Non-response Bias

Non-response bias is checked to ascertain any potential bias due to the failure of

elements in the sample to respond. At the first sight, a visual comparision of the

characteristics of the responding organizations indicated that the firms were

representative of those surveyed since they represented a cross-section of

industries thus, indicating no evidence for non-response bias as suggested by Chan

et al. (2004) and Teo (2000).

Further, evidence for any possible non-response bias was also checked statistically.

It is usual to use late respondents as substitute for non-respondents to test for non-

response bias (Dean et al., 2007; Nwachukwv et al., 1997). Armstrong and

Overton (1977) have argued that non-respondents have been found to descriptively

resemble late respondents.

Lambert and Hanington (1990, p. 21) describe a common approach to assessment

by comparing early and late respondents and assuming that "non-response bias is

non-existent if no differences exist on the survey variables". Similar method of

comparing early and late respondents was followed to analyze the non-response

bias (Dalecki et al., 1993; Israel, 2009; Kellerman & Herold, 2001; Lahaut et al.,

2003; Lin & Schaeffer, 1995; Lopez et al., 2005).

Following this approach, respondents were classified into two groups as early and

late respondents. Early respondents (56.32%) are those that responded in first

contact and late respondent (43.67%) are those who responded after follow-ups. In

order to find out if there were any differences in the means of all the variables used

in this study between early and late respondents, independent sample t-test was

carried out for each construct. The comparison of responses of the two groups did

not reveal any significant differences. Since non-respondents are similar to late

respondents (Armstrong & Overton, 1977), it indicates that non-response bias was

not a serious issue in this study.

Table 5.8 and 5.9 present the group statistics and results of the independent sample

t-test.

127

Table 5.8: Group Statistics for Non-response Error

Constructs RESPT N Mean Std. Deviation

Std. Error Mean

TDM ER 98 24.36 4.419 .446 LR 76 24.72 4.048 .464

TPA ER 98 22.08 5.025 .508 LR 76 21.57 4.965 .569

TBU ER 98 22.57 5.868 .593 LR 76 23.33 5.493 .630

LDM ER 98 22.74 4.452 .450 LR 76 22.32 3.641 .418

LPA ER 98 19.47 3.503 .354 LR 76 19.29 3.417 .392

LBU ER 98 19.67 . 6.814 .688 LR 76 18.11 6.198 .711

EDM ER 98 11.02 5.223 .528 LR 76 10.96 4.611 .529

EPA ER 98 12.22 5.261 .531 LR 76 11.76 4.504 .517

EBU ER 98 9.98 4.831 .488 LR 76 9.59 4.570 .524

STA ER 98 24.48 4.765 .481 LR 76 24.00 4.956 .568

EFT ER 98 12.03 2.481 .251 LR 76 I1.82 2.667 .306

Key: RESPT--Respondent Timing, ER=Early Respondents, LR=Late Respondents

Table 5.9: Independent Samoles Test for Non-response Error

Construct Nature of Variance Levene's Test T-test Results F Sig. T df Sig.(2-tailed)

TDM Equal variances assumed .030 .862 -.563 172 .574 TPA Equal variances assumed .000 .985 .675 172 .500 TBU Equal variances assumed 1.377 .242 -.868 172 .386 LDM Equal variances assumed 3.076 .081 .682 172 .496 LPA Equal variances assumed .388 .534 .359 172 .720 LBU Equal variances assumed 1.592 .209 1.566 172 .119 EDM Equal variances assumed .196 .659 .079 172 .937 EPA Equal variances assumed .927 .337 .610 172 .542 EBU Equal variances assumed .000 .995 .537 172 .592 STA Equal variances assumed .089 .765 .647 172 .518 EFF Equal variances assumed .946 .332 .548 172 .584

128

5.5 Estimation of Common Method Bias

When data for the predictor and criterion variables are collected from same

respondent, common method bias may lead to inflated estimates of the relationships (Chang et al., 2010; Doty & Glick, 1998; Podsakoff & Organ, 1986;

Podsakoff et al., 2003). In addition to this, the correlations between variables

measured with the same methods are exaggerated owing to common method bias

(Bagozzi et al., 1991; Podsakoff et al. 2003; Spector, 2006). Common method bias

is a problem since it is one of the major sources of measurement error (Podsakoff

et al. 2003), which may in turn undermines the validity of the conclusions about

relationships between measures (Nunnally, 1978). The problem of common

method bias is mainly increased when cross-sectional, self-reported surveys are

employed as a research instrument (Spector, 2006). In order to address the problem

of common method bias, two types of remedies are available i.e. procedural and statistical as recommended by Chang et al. (2010), Malhotra et al. (2006), Podsakoff and Organ (1986), Podsakoff et al. (2003), Wall and Wood (2005).

Procedural Methods

Procedural method involves eliminating or minimizing the bias through the design

of the research instrument. Following procedural methods have been followed in

the present research to control the problem of common method bias:

1) Protecting respondent anonymity and reducing evaluation apprehension

Respondent axe allowed to respond anonymous and also assured that there are no

right or wrong answers and that they should answers the questions as honestly as

possible in order to protect respondent anonymity and reducing evaluation

apprehension as recommended by Podsakoff et al. (2003). Moreover, the cover

letter that was attached with the questionnaire addressed the above issues to ensure

that respondent apprehensions were adequately taken care of.

2) Scale reordering & improving scale items

Scale reordering is another procedural method for minimizing common method

variance which requires the reordering of the items on the questionnaire such that

the items related to the independent variable precede the dependent variable on the

survey instrument (Podsakoff & Organ, 1986; Salancik & Pfeffer, 1977; Williams

129

& Buckley, 1989). The survey instrument used in this study was structured such

that role related items for internal and external agents preceded the status of HRM

and effectiveness of HRM items. Similar procedure has been followed by other

researchers too (e.g. Camison & Villar-Lopez, 2010; Spanos & Lioukas, 2001).

Structuring scale items also reduces the common method bias. Following

Podsakoff et al., (2003) different scale formats for the predictor and criterion

measures have been used to reduce the biases. Additionally, efforts were made to

keep the items as simple, unambiguous and objective as possible to avoid bias as

suggested by Huselid and Becker (2000); Podsakoff et al., (2003).

Statistical Method

Statistical remedies are used to address the common method bias problem after the

variables in the study have already been measured. Harman's one-factor test

(Harman, 1967) was used to examine any bias. In this method all variables were

entered into exploratory factor analysis and the results are examined. Common

method variance is indicated by the emergence of either a single factor or one

general factor that explains a majority of the variance (Gibbons & O'Connor,

2005; Podsakoff & Organ, 1986; Podsakoff et al., 2003). This method has been

used and recommended by Takeuchi et al. (2003) too.

Results of the exploratory factor analysis on all variables revealed 15 factors. On

the basis of the Eigen value greater than I heuristic (Delgado-Ballester et al.,

2003), fifteen principal components were extracted that accounted for 72.29% of

the total variance. While the first factor accounted for 12.12 % of the total

variance, it did not account for a majority of the variance. Thus, the results indicate

that all the items did not load on a single construct, thereby negating presence of

common method bias. This suggests that although the responses to all items in a

questionnaire were provided by a single respondent, common method or common

source error of providing inflated or positive responses has not crept in. Based

upon these results, it can be said that study does not suffer from common method

bias. Table 5.10 presents the total variance explained by -fifteen principal

components having Eigen values greater than 1 heuristic.

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Table 5.10: Common Method Bias-Total Variance Exnlained

Initial Eigen Values Extraction Sums of Squared Loadin s

Rotation Sums of Squared Loadin s Comp.

Total % of Var. Cum. % Total % of Var.

Cum. o % Total % of

Var. Cum.

o /o

1 11.894 18.879 18.879 11.894 18.879 18.879 7.637. 12.123 12.123

2 8.313 13.194 32.073 8.313 13.194 32.073 5.608 8.902 21.025

3 4.643 7.369 39.442 4.643 7.369 39.442 5.565 8.833 29.858

4 3.782 6.003 45.445 3.782 6.003 45.445 4.191 6.652 36.510

5 2.427 3.852 49.298 2.427 3.852 49.298 3.896 6.184 42.694

6 2.313 3.672 52.970 2.313 3.672 52.970 2.324 3.688 46.383

7 1.835 2.913 55.883 1.835 2.913 55.883 2.313 3.672 50.055

8 1.628 2.584 58.467 1.628 2.584 58.467 2.291 3.636 53.691

9 1.548 2.458 60.925 1.548 2.458 60.925 2.165 3.436 57.127

10 1.411 2.239 63.164 1.411 2.239 63.164 2.099 3.332 60.458

II 1.264 2.007 65.170 1.264 2.007 65.170 1.983 3.147 63.605

12 1.234 1.959 57.130 1.234 1.959 67.130 1.607 2.550 66.155

13 1.191 1.891 69.021 1.191 I.891 69.021 1.313 2.084 68.239

14 1.053 1.671 70.692 1.053 1.671 70.692 1.304 2.070 70.309

I5 1.001 1.589 72.282 1.001 1.589 72.282 1.243 1.973 72.282 Extraction Method: Principal Component Analysis Key: Comp. = Component, Var. = Variance, Cum. = Cumulative *Vote: Only the 15 factors that were generated are shown in the table

5.6 Measurement Model

Measurement model is the starting point to explain how well the observed

indicators serve as a measurement instrument for the latent variables. Measurement

model consists of identifying Iatent constructs and assigning indicator variables to

latent constructs (Graver & Mentzer, 1999; Hair et al., 2008). A comprehensive

measurement on research instrument is necessary because measurement model

offer methods in which the observed measurements can be improved (Joreskog &

Sorbom, 1993). Measurement model highlights the key issues of

unidimensionality, reliability i.e. indicator and scale reliability, construct validity

i.e. convergent, discriminant and nornological validity (Hair et al., 2008; Malhotra

& Dash, 2011). It gives support that the results appropriately indicate the intended

constructs. Besides, empirically validated scales can be used in other studies on

different populations. Measurement scales have to illustrate unidimensionality,

131

reliability, discriminant validity and convergent validity (Green et al., 2006). The

first test in the measurement model is to test the scales for unidimensionality. After

each scale is established as unidimensional and reliable, the next step is to test

convergent, discriminant and nomological validity (Anderson & Gerbing, 1982;

Anderson & Gerbing, 1991; Steenkam & Trijp, 1991; Vieira, 2011).

Measurement analysis was performed on all study scales. The effectiveness of

HRM scale (EFF) used in the study has been developed and tested in previous

research (Teo & Crawford, 2005). Moreover, it consisted of three single-item sub-

scales which cannot be subjected to a measurement analysis as suggested by

Hennig-Thurau et al. (2002) and Joreskog & Sorbom (2002). Table 5.11 shows the

exogenous, endogenous, mediating and moderating variables of the study.

Table 5.11: Variables/Measures Considered for the Study ■ Top management involvement in decision-making'

vis-a-vis HRM (TDM) ■ Top management involvement in process/activities

vis-a-vis HRM (TPA) N Top management involvement in budgeting vis-a-

vis HRM (TBU) • Line managers involvement in decision-making

vis-a-vis HRM (LDM) Exogenous Variables ■ Line managers involvement in process/activities

(Role of Agents) vis-a-vis HRM (LPA) • Line managers involvement in budgeting vis-a-vis

HRM (LBU) ■ External service provider involvement in decision-

making vis-a-vis HRM (EDM) ■ External service provider involvement in

process/activities vis-a-vis HRM (EPA) ■ External service -provider involvement budgeting

vis-a-vis HRM (EBU) Endogenous Variable ■ Effectiveness of HRM (EFF) Mediating Variable ■ Status of HRM (STA)

■ Sector (service/ manufacturing) Moderating Variable ■ Ownership pattern (public/private sector)

(Organizational Profile) ■ Country of origin (Indian/Foreign) ■ Size (small, medium and large)

5.6.1 Factor Analysis

Factor analysis tests the unidimensionality of the measurement scales to refine the

variables which are not related (Henson & Roberts, 2006) and therefore, helps to

eliminate multiple, overlapping constructs in research (Cascio, 2011). In general,

132

factor analysis is categorized as exploratory and confirmatory factor analysis. In

this study it was decided to apply exploratory factor analysis first followed by

confirmatory factor analysis. Principal component analysis with varimax rotation

was used in the exploratory factor analysis performed.

Exploratory Factor Analysis (EFA)

Exploratory factor analysis describes factors that are there among a group of data

and its main objective is to unfold the hidden factors which explain the covariance

between the measured data (Kahn, 2006). Eigen Values more than 1 is most often

used criteria in factor analysis (Delgado-Ballester et al., 2003; Fabrigar et. at, 1999; Henson & Roberts, 2006; Ritter et al., 2001). EFA was carried out to check

unidimensionality of each scale separately. Unidimensionality of the scale consists

of items loading highly on a single factor (Hair et. al., 2008). Unidimensionality is

an essential precondition for reliability and validity (Anderson & Gerbing, 1991;

Cascio, 2011).

Before proceeding with EFA, it is important to assess the factorability of the

overall set of variables and individual variables using Kaiser-Meyer-Olkin (KMO)

measure of sampling adequacy and the overall significance of correlation matrix

with Bartlett's Tests of Sphericity (Dziuban & Shirkey, 1974; Williams et al,

2010). KMO and Bartlett's tests, reveals the appropriateness of the. data for factor

analysis (Ang & Huan, 2006; Liu & Treagust, 2005; Peterson, at al., 2000). KMO

quantifies the degree of inter-correlations among the variables and thus, tests

appropriateness of factor analysis. KMO values must exceed 0.50 before

proceeding with the factor analysis (Hair at al., 2008; Malhotra, 2007). The KMO

values of all the scales were found to be acceptable acting as an indicator that data

was suitable for factor analysis. Another method is Bartlett's Test of Sphericity

which examines the presence of correlations among the variables. It provides the

statistical significance that the correlation matrix has significant correlations

among at least some of the variables. Thus, a significant Bartlett's Test of

Sphericity is required (Hair et al., 2008; Malhotra, 2007). Because p =0.000 (its

significance is less than 0.05) for all scales, we could proceed with factor analysis.

133

The results of KMO and Bartlett Test of Sphericity for all scales are given in Table

5.12.

Table 5.12: KMO and Bartlett's Test of Sphericitv

Measures Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO)

Bartlett's Test of Sphericity

Approx. Chi-Square df Sig.

TDS 0.826 277.037 15 .000 TPA 0.816 353.622 15 .000 TBU 0.878 591.326 15 .000 LDM 0.750 178.826 10 .000 LPA 0.774 167.286 10 .000 LBU 0.874 731.853 15 .000 EDM 0.823 403.767 15 .000 EPA 0.786 322.318 15 .000 EBU 0.826 626.065 15 .000 STA 0.852 439.407 15 .000 EFF 0.694 159.844 03 .000

Results of Exploratory Factor Analysis

TDM Scale: Results of EFA revealed that the scale was unidimensional. Delgado-

Ballester et al. (2003) reported that on the basis of Eigen value greater than 1

heuristic; one component was extracted that accounted for 50.15% of the total

variance. Thus, EFA on the TDM scale yielded only one factor. The result is given

in Table 5.13A and Table 5.13B

Table 5.13A: TDM Scale-Total Variance Explained

Component Initial Eigen Values Extraction Sums of Squared

Loadin s

Total ~o of Variance % Cumulative

% Total ~o of % Variance

Cumulative °lo

1 3.009 50.153 50.I53 3.009 50.153 50.153 2 .758 12.633 62.786 3 .709 11.813 74.600 4 .655 10.924 85.523 5 .492 8.203 93.726 6 .376 6.274 100.000

Extraction Method: Principal Component Analysis

134

Table 6.138: TOM Scale-Component Matrix Items Component

TDM-1 .630 TDM-2 .752 TDM-3 .790 TDM-4 .654 TDM-5 .755 TDM-6 .652

Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization

TPA Scale: On the basis of Eigen value greater than 1, one principal component

was extracted that accounted for 53.01 % of the total variance. Thus, EFA on the

TPA scale gives one factor. The results are given in the Tables 5.14A and 5.14B.

Table 5.14A: TPA Scale-Total Variance Explained

Componen

t Initial Eigen Values Extraction Sums of Squared

Loadings

Total % of Variance

Cumulative °la Total % of

Variance Cumulative

1 3.181 53.013 53.013 3.181 53.0I3 53.013 2 .857 14.282 67.295 3 .696 11.605 78.900 4 .562 9.373 88.272 5 .432 7.208 95.480 6 .271 4.520 100.000


Table 5.14B: TPA Scale-Component Matrix Items Component TPA-1 .682 TPA-2 .793 TPA-3 .858 TPA-4 .682 TPA-5 .748 TPA-6 .570

Extraction Method: Principal Component Analysis Rotation Met/sod: Varimax with Kaiser Normalization

TBU Scale: On the basis of Eigen value greater than 1, one principal component


TBU scale gives one factor. The results are given in the Tables 5.15A and 5.15B.

r

Table 5.15A: TBU Scale-Total Variance Explained


Loadings

Total % of Variance

Cumulative % Total % of

Variance Cumulative

1 3.927 65.455 65.455 3.927 65.455 65.455 2 .608 10.136 75.591 3 .508 8.465 84.056 4 .4I6 6.926 90.982 5 .379 6.317 97.299 6 .162 2.701 100.000


Table 5.15B: TBU Scale-Component Matrix Items Component TBU-1 .816 TBU-2 .877 TBU-3 .886 TBU-4 .686 TBU-5 .811 TBU-6 .761


LDM Scale: On the basis of Eigen value greater than 1, one principal component

was extracted. Although, EFA on the LDM scale yielded one factor but the loading

of one item was less than 0.50. Loading value of 0.50 is considered necessary for

practical significance (Hair et al., 2008). Following this criterion, item with low

loading was deleted and EFA was again run on the remaining items. As a result of

this, factor loadings improved and accounted for 48.76 % of the total variance. The

results of EFA are given in the Tables 5.16A and 5.16B.

Table 5.16A: LDM Scale-Total Variance Explained


Loadin

Total % of Variance


Variance Cumulative

1 2.438 48.768 48.768 2.438 48.768 48.768 2 .878 17.552 66.320 3 .720 14.397 80.7I7 4 .553 11.051 91.767 5 .412 8.233 100.000


I36

Table 5 Matrix .16B: LDM Scale-Component Items Component

LDM-I .724

LDM-2 .834 LDM-3 .702 LDM-4 .629 LDM-5 .575

Method.• Principal C m Extraction pal o ponent Analysis Rotation Method: Varimax with Kaiser Normalization

LPA Scale: On the basis of Eigen value greater than 1, two principal components

were extracted that accounted for 35.42% and 26.16 % of the total variance. All the

items load on component one except item no 1 and 6. Following the criteria of Hair

et al. (2008), deletion of one item in having low loading, was carried out. After

deleting item number 6 which had weak loading, one principal component was

extracted that accounted for 48.97 % of the total variance and all the loadings were

above 0.5. The results of EFA are given in the Tables 5.17A and 5.17B

Table 5.17A: LPA Scale-Total Variance Explained Extraction Sums of Squared Initial Eigen Values

Component Loadings

Total % of Cumulative Total % of Cumulative Variance % Variance

1 12.449 48.977 48.977 2.449 48.977 48.977 2 .826 16.510 65.487 3 .675 13.507 78.995 4 .560 11.190 90.185 5 .491 9.815 100.000

Extraction Met/sod: Principal Component Analysis

Table 5.17B: LPA Scale-Component Matrix

Items Component

LPA-1 .604 LPA-2 .682

LPA-3 .758 LPA-4 .739

LPA-5 .706. Extraction Method: Principal Component Analysis Rotation Method: Yarimax with Kaiser Normalization

137

LBU Scale: On the basis of Eigen value greater than 1, one principal component


LBU scale yielded one factor. The results are given in the Tables 5.18A and 5.18B.

Table 5.18A: LBU Scale-Total Variance EYnlained


Loadings

Total % of Variance


Variance Cumulati

ve % 1 4.270 71.170 71.170 4.270 71.170 71.170 2 .522 8.698 79.868 3 .464 7.741 87.609 4 .324 5.400 93.009 5 .269 4.490 97.499 6 .150 2.501 100.000


5.18B: LBU Scale-Component M Items Component

LBU-1 .815 LBU-2 .905 LBU-3 .867 LBU-4 .860 LBU-5 .820 LBU-6 .789

Extraction Method: Principal Component Analysis Rotation Method: Varirnax with Kaiser Normalization

EDM Scale: On the basis of Eigen value greater than 1, one principal component

was extracted that accounted for 56.30% of the total variance. Thus, EFA on the

EDM scale gives one factor. The results are given in the Tables 5.19A and 5.19B.

Table 5.19A: EDM Scale-Total Variance Exo1ained

Component Initial Eigen Values

Extraction Sums of Squared Loadings

Total % of Variance


Variance Cumulative

% 1 3.378 56.301 56.301 3.378 56.301 56.301 2 .861 14.348 70.649 3 .657 10.952 81.601 4 .426 7.103 - 88.704 5 .358 5.971 94.675 6 .319 5.325 100.000


Tabi atrix

138

'on d: PnWcfi al Com onent A Extractr Metho p p nalysis Rotation Method: Varimax with Kaiser Normalization

Tabl e 5.20B: EPA Scale-Component M Items Component EPA-1 .687 EPA-2 .665 EPA-3 .740 EPA-4 .806 EPA-5 .768 EPA-6 .597

atrix

Table 5.19b: EDM Scale-Component Ni

Items Component

EDM-1 .799 EDM-2 .762 EDM-3 .715 EDM-4 .707 EDM-5 .805 EDM-6 .708


EPA Scale: On the basis of Eigen value greater than 1, one principal component


EPA scale yielded one factor. The results are given in the Tables 5.20A and

5.20B.

Table 5.20A: EPA Scale -Total Variance Exnlained

Component

Initial Eigen Values Extraction Sums of Squared Loadings

Total °

j'O of Variance

Cumulative % Total % of.

Variance Cumulative

1 3.057 50.949 50.949 3.057 50.949 50.949 2 .927 15.442 66.392 3 .691 11.515 77.907 . 4 .621 10.348 88.254 5 .371 6.178 94.432 6 .334 5.568 100.000

Extraction Method. Principal Component Analysis

atrix

139

EBU Scale: On the basis of Eigen value greater than 1, one principal component


EBU scale yielded one factor. The results are given in the Tables 5,21A and 5.21 B.

Table 5.21 A: EBU Scale-Total Variance Exnlained


Loadings

Total. Variance % /o of Cumulative

% Total % of Variance

Cumulative _

1 3.828 63.808 63.808 3.828 63.808 63.848 2 .946 15.766 79.573 3 .432 7.197 86.770 4 .379 6.320 93.090 5 .227 3.788 96.878 6 .187 3.122 100.000


Table 5.21B: EBU Scale-Component Matrix Items Component EBU-1 .788 EBU-2 .795 EBU-3 .849 EBU-4 .798

EBU-5 .805 EBU-6 .755


STA Scale: On the basis of Eigen value greater than 1, one principal component


STA scale gives one factor. The results are given in the Tables 5.22A and 5.22B.

Table 5.22A: STA Scale-Total Variance Exnlained


Loading

Total % of Variance.


Variance Cumulative

1 3.547 59.115 59.115 3.547 59.115 59.115 2 .749 12.478 71.593 3 .599 9.985 81.578 4 .457 7.618 89.196 5 .357 5.950 95.146 6 .291 4.854 100.000


140

G-.

Table 5.22B: STA Scale-Component Matrix Items Component STA-1 .787 STA-2 .814 STA-3 .825 STA-4 .625 STA-5 .746 STA-6 .798


EFF Scale: On the basis of Eigen value greater than 1, one principal component


EFF scale gives one factor. The results are given in the Tables 5.23A and 5.23B.

Table 5.23A: EFF Scale-Total Variance Explained

Initial Eigen Values Extraction Sums of Squared Loadings Component

Total % of Cumulative Total % of Cumulative Variance % Variance %

1 2.129 70.963 70.963 2.129 70.963 70.963 2 .507 16.897 87.860 3 .364 12.140 100.000


Table 5.23B: EFF Scale-Component Matrix

Items Component

EFF-1 .876

EFF-2 .824 EFF-3 .826


Overall, the results of EFA revealed that all the scales were unidimensional with

items loading of all the scales exceeding the acceptable value of 0.5 as

recommended by different researchers such as Bagozzi et al (1991), Garver and

Mentzer (1999), Hair et al. (2008), Malhotra and Dash (2011). However, in LDM

and LPA scales, one item was deleted in each scale having low loadings (i.e. less

141

than 0.5), following the procedure recommended by Hair et al. (2008).

Consequently, loading of all other items improved.

Confirmatory Factor Analysis (CFA)

Researchers have opined that CFA provides a more stringent test of construct

validity compared to traditional methods (Medsker et al., 1994). Although the

results obtained in the EFA confirmed the unidimensionality of all the scales,

however, as a further check, CFA was performed using LISREL 8.50 to assess the

SEM based reliability and validity of the unidimensional scales. High loading

values obtained in CFA provided further strength to the fact that scales were

unidimensional. The fit indices of the scales obtained in CFA were also acceptable. The next sections on assessment of reliability and validity are based on the results

of CFA.

5.6.2 Assessment of Reliability

After the unidimensionality of the scales is ascertained, estimation of the statistical

reliability is essential prior to runningvalidity analysis (Anderson & Gerbing,

1991; Cooper & Schindler, 2006; Hair et al., 2008; Mentzer et al., 1999). Hair et

al. (2008) opine that for a scale to be valid, it must meet the necessary levels of

reliability. Reliability is an assessment of the degree of dependability, stability and

internal consistency of a scale. Theoretically, reliability is defined as the degree to

which measures are free from random or unstable error and therefore yield

consistent results. Two types of reliability estimates were computed: (1) Indicator

reliability and (2) Scale reliability.

Indicator Reliability

Indicators are items used to measure a particular construct or latent variable.

Indicator reliability presents the reliability of individual indicators. It is measured

for every single indicator (Wu, 2005). It generally ranges from 0 to I (Joreskog &

Sorbom, 2002). Indicator reliability should preferably be 0.5 or greater (Long,

1983; Schumacker & Lomax, 2004). Even values close to the recommended are

142

considered acceptable (Wu, 2005). In the present study, indicator reliability was

more than 0.5 or close to it in most cases. Table 5.24 reveals the indicator

reliability for indicators in each scale.

Table 5.24: Indicator Reliability of the Scales Item TDM TPA TBU LDM LPA LBU EDM EPA EBU STA EFF 1 0.39 0.46 0.66 0.52 0.36 0.66 0.63 0.47 0.62 0.61 076,; 2 0.56 0.62 0.76 069 `" 0.46 ''1 0;'.81<;f. 0.58 0.44 0.63 0,66 0.67 3 0 62.°r 073 078 0.49 0:57:{ 0.75 0.51 0.54 F 072 ;; ,0 68_' 0.68 4 0.42 0.46 0.47 0.39 0.54 0.73 0.49 064 ; 0.63 0,39 - 5 0.57 0.55 0.65 0.33 0.49 0.67 L4` 0.58 0.64 0.55 - 6 0.42 0.32 0.57 - - 0.62 0.50 0.35 0.57 0.63 -

Note: Shaded boxes represent indicator with highest reliability in each scale

Scale Reliability

Cronbach alpha is the most common measure used to assess the construct's

internal consistency (Cronbach, 1951). The generally agreed upon lower limit for

Cronbach alpha is 0.70 (Hair et al., 2008; NunnaIly, 1978; Nunnally & Bernstein,

1994; Werts et al., 1974), even values as low as 0.35 have been found acceptable

(Roberts & Wortzel, 1979). Reliability assessment of the study scales returned

Cronbach alpha values that are more than the lower limit of 0.70. Cronbach alpha

values given in Table 5.25 suggest high reliability of each scale.

However, Coefficient alpha may underestimate or overestimate scale reliability

(Graver & Mentzer, 1999; Hair et al., 2008). Thus, apart from Cronbach's alpha,

reliability measures derived from CFA using LISREL are also available such as

construct-reliability and variance extracted (Hair et al., 2008). Garver and Mentzer

(1999) recommend computing the SEM construct-reliability and variance extracted

measures for scale reliability. SEM construct reliability values do not assume that

the individual items have equal reliabilities. Fornell and Bookstein (1982), Garver

and Mentzer (1999) and Hair et al. (2008) have described construct-reliability and

variance-extracted measures as:

Construct Reliability (CR). Construct reliability is a LISREL-generated estimate

of internal consistency similar to Cronbach's alpha. It is calculated by a formula.

Let sli be the standardized loadings for the indicators for a latent variable. Let ei be

143

the corresponding error terms, where error is I minus the reliability of the

indicator. The formula for CR is:

n 12

sl ; CR= 1=1 2

n n

Esl ; +Ye;

Variance Extracted (VE): An equivalent measure of construct reliability is the

variance extraction measure. Variance extracted estimates assesses the amount of

variance captured by a construct in relation to variance due to random

measurement error. Its formula is given below:

n

~ sl r 2 VE= i=1

n n

~sl12 +~e~

f=1 i=t

Hair et al. (2008) suggested that CR value higher than 0.6 implies that there is high

internal consistency. Variance extracted at 0.5 or higher is generally considered

acceptable (Fornell & Larcker, 1981). The CR and VE values as computed by the

above formulae exceeded or were close to the recommended values. The Cronbach

alpha, CR and VE values of all the scales are given in Table 5.25.

Table 5.25: Scale Reliability Estimates Scale Cronbach Alpha Construct Reliability Variance Extracted TOM 0.799 0.79 0.40 TPA 0.820 0.82 0.44 TBU 0.892 0.89 0.58 LDM 0.726 0.74 0.37 LPA 0.728 0.73 0.36 LBU 0.919 0.91 0.65 EDM 0.841 0.84 0.47 EPA 0.801 0.80 0.41 EBU 0.886 0.88 0.56 STA 0.849 0.86 0.51 EFF 0.794 0.79 0.57

144

5.6.3 Assessment of Validity

Validity is the degree to which a scale or set of measures accurately represent the

concept of interest (Hair et al., 2008). Validity of a scale is checked if it is

unidimensionaI and meets the necessary level of reliability (Gerbing & Anderson,

1988; Hair et al., 2008). As unidimensionality and reliability of the scales have

been assessed, the next step involved is assessing validity. Translation validity

(i.e. content and face validity) was assessed during scale development and pilot

testing. After final data collection, construct validity such as convergent,

discriminant, nomological and criterion validity were assessed in line with the

approach of other researchers (e.g. Cooper & Schindler, 2006; Hair et al., 2008;

Malhotra, 2007; Trochim, 2009).

Construct Validity

Construct validity is the extent to which a set of measured items actually reflect the

theoretical latent construct. Hence, it deals with the accuracy of measurement.

Evidence of construct validity provides confidence that measures taken from a

sample represent the actual true score that exists in the population (Hair et al.,

2008). Following forms of construct validity viz, convergent, discriminant and

nomological validity were assessed.

Convergent Validity

Convergent validity assesses the degree to which two measures of the same

concept are correlated (Campbell & Fiske, 1959). A construct is said to possess

convergent validity if items that are indicators of a specific construct converge or

share a high proportion of variance in common (Hair et al., 2008; Kaplan &

Sacuzzo, 1993).Various techniques are available to estimate the convergent

validity:

On the basis of factor loadings: Convergent validity can be assessed on the basis

of factor loadings. The items of different scales should load or converge on their

respective constructs. Graver and Mentzer (1999) suggested parameter estimates

145

for the individual measurement items criteria to check the convergent validity. All

the items should load on their hypothesized dimensions and the estimates are

positive and significant (Bagozzi et al., 1988; Bagozzi et al., 1991). Item loading values within each construct should be greater than 0.50 for convergent validity

(Hair et al., 2008; Malhotra & Dash, 2011, Mentzer et al., 1999). Factor loading of all scales were more than 0.5, thus indicating presence of convergent validity.

On the basis of internal consistency: Reliability is another indicator of convergent

validity which seeks to assure that there is moderate correlation among the

indicators (Hair et al., 2008; Kaplan & Sacuzzo, 1993). In the present case, the

condition applied well. As unidimensionality and high internal consistency of the

scales has already been established, this is proof of moderate convergent validity.

On the basis oft- values of scale items: Convergent validity can also be examined

on the basis of t-values for the factor loadings (Anderson & Gerbing, 1988). For

convergent validity, Anderson and Gerbing (1988) recommended that all the t-

values should exceed 2 (p=0.001) whereas Mentzer et al. (1999) suggested that t-

values should be more than 1.96. In the present case too, the t-values of items in

each scale were more than the prescribed limit of 1.96 and 2, which is an indication

of high convergent validity. Table 5.26 shows the t-values for all the items of all

the scales.

Table 5.26: T-values of Scale Items Item TDM TPA TBU LDM LPA LBU EDM EPA EBU STA EFF

1 6.7 7.9 11.5 7.7 5.8 11.9 11.4 7.9 11.5 10.8 11.4 2 9.6 11.4 14.7 11.0 6.9 15.5 9.5 6.9 I2.2 11.6 9.3 3 10.6 13.6 15.1 7.1 8.5 13.7 8.5 8.7 13.7 11.8 9.3 4 7.0 7.4 8.1 6.4 8.2 13.2 . 8.2 11.5 10.6 7.0 - 5 9.3 9.4 10.9 5.8 7.7 11.4 11.5 10.3 10.0 9.2 - 6 7.3 5.7 9.7 - - 10.5 8.9 6.5 8.9 11.1 -

On the basis of CFA fit indices: The convergent validity of scales is also

computed using CFA fit indices viz. Bentler-Bonett Coefficient and GFI in SEM.

146

Ahire et al. (1996), Green et al. (2006) recommended Bentler-Bonett coefficient

(Nonmed Fit Index and Non-normed Fit Index) method of assessing convergent

validity. Bentler-Bonett coefficient values greater than 0.9 indicates strong validity

and in the present case too all the scales have a Bentler-Bonett coefficient of

greater than or close to 0.9, which is a proof of strong convergent validity.

GFI values of all the scales are either within the acceptable limits or close to

generally agreed upon limit of 0.90 which provides strong evidence of convergent

validity of study scales. Table 5.27 presents the results of Gentler-Bonett

coefficient and GFI values indicating high convergent validity of the scales.

Table 5.27: Bentler-Bonett Coefficient and GFI Values Scale TDM I TPA TBU LDM LPA J LBU EDM EPA EBU LsTA I EFF NFX .96 J .95 .97 .95 .96 .96 .91 .90 .84 L95 .95

NNFI 97 .94 .97 .95 .96 .94 .87 .86 .75 .94 .94 GFI J .97 1 .95 .96 .97 .98 .92 .90 .92 .78 .94 r 1.95

Discriminant Validity

Discriminant validity is the degree to which two theoretically alike concepts are

unrelated. In this case, low correlation confirms that the scale is acceptably

different from other related scales (Hair et al., 2008). In order to assess the

discriminant validity of the scales, a two-step approach is followed.

On the basis of Harman's one factor test: In the first method, Harman's one-

factor test was conducted that loaded all of the variables into a principal

component factor analysis. This method has been used by Wu & Sukoco (2010).

The results of the factor solution revealed that no single factor dominated, fourteen

factors were generated with 71.30% of the total variance, and factor 1 had only

12.70% of the variance. Thus, the results indicate that all the items did not load on

a single construct, thereby indicating the presence of discriminant validity of the

scales. Table 5.28 presents the components that were generated and the total

variance explained by EFA.

I47

Table 5.28: Discriminant Validity-Total Variance Explained

Initial Eigen Values Extraction Sums of S uared Loadin s

Rotation Sums of Squared Loadin s Comp.

Total % of Var. Cum. ©° Total % of Var. Cum. Q`° Total % of

Var. Cum.

o /° I 11.489 18.834 18.834 11.489 18.834 18.834 7.751 12.706 12.706 2 8.279 13.573 32.407 8.279 13.573 32.407 5.767 9.454 22.160 3 4.629 7.589 39.995 4.629 7.589 39.995 5.601 9.182 31.342 4 3.779 6.195 46.190 3.779 6.195 46.190 4.145 6.794 38.136 5 2.399 3.933 50.123 2.399 3.933 50.123 3.786 6.207 44.343 6 2.266 3.714 53.837 2.266 3.714 53.837 2.422 3.971 48.314 7 1.782 2.921 56.758 1.782 2.92I 56.758 2.349 3.852 52.166 8 1.592 2.6I0 59.368 1.592 2.610 59.368 2.300 3.771 55.936 9 1.482 2.430 61.798 1.482 2.430 61.798 2.182 3.578 59.514 10 1.276 2.092 63.890 1.276 2.092 63.890 2.116 3.469 62.984 11 1.253 2.054 65.944 1.253 2.054 65.944 1,312 2.151 65.134 12 1.193 1.956 67.900 1.193 1.956 67.900 1,270 2.083 67.217 13 1.074 1.761 69.661 1.074 1.761 69.661 1.258 2.062 69.279 14 1.001 1.642 71.303 1.001 1.642 71.303 1.235 2.024 71.303

Extraction Method: Principal Component Analysis Key: Comp. = Component, Var. = Variance, Cures = Cumulative *Note: Only the 14 factors fit at were generated are shown in the table

On the basis of variance extracted and squared correlations: While in the second

method, variance-extracted estimates for all possible pairs of constructs are

compared with the square of correlation estimate between these two constructs.

The variance extracted estimates were higher than the squared correlation

estimates in most of the cases. This indicates that the items of a latent construct

explain that construct better than they explain another construct which gives proof

of discriminant validity. In the second method, variance-extracted estimates for all possible pairs of

constructs are compared with the square of correlation estimate between these two

constructs. The variance extracted estimates of each scale should be higher than the

squared correlation estimate indicating that the Iatent construct explains its item

measures better than it explains another construct which gives evidence of

discriminant validity (Hair et al., 2008; Malhotra & Dash, 2011). The VE of most

of the scales are higher than the squared correlation estimates which provides

another evidence of discriminant validity. Table 5.29 presents the squared

correlation.

148

31

Table 5.29: Discriminant Validity of Scales Scale TDM TPA TBU LDM LPA LBU EDM EPA EBU 1 VE TDM 1 .600 .289 .04 .09 .066 .054 .0001 .0009 I'0 40r TPA 1 .303 .020 .064 .07I 0.01 .001 .0006 U.44 TBU 1 .017 .020 .073 .0003 .001 .0005 0.58 .

LDM 1 .77 .40 .012. .028 .012.03 LPA 1 .42 . .004 .01 .011 S0 36 LBU 1 .067 .046 .096 X0.65;;; EDM 1 .781 .64 4 0.4'1, EPA 1 .69 x.0.41. EBU 1 Q:56

*Note: Squared correlation estimates between the scales are given in the above table and shaded boxes represent the variance extracted values of each scale

Nomological Validity

Nomological validity refers to the degree to which the scale correlates in a

theoretically predicted ways with measures of different but related constructs (Hair

et al., 2008; Malhotra, 2007; Malhotra & Dash, 2011). Graver and Mentzer (1999)

recommend measuring nomological validity by determining whether the scales of

interest correlate as expected. Since the nine scales are part of role measures,

theoretically they are expected to correlate.

SEM capability of LISREL 8.50 was used to find out the correlation and establish

nomological validity. In the current study, Cohen's (1988) guidelines for the

interpretation' of the correlation coefficient have been followed. The correlation

values between the scales were positive and significant, hence giving a proof of

. nomological validity as presented in Table 5.30 and Exhibit 5.2.

Table 5.30: Nomoloalcal Validity of Scales: Correlation Values Scale TDM TPA TBU LDM LPA LBU EDM EPA EBU TDM I 0.775 0.538 0.208 0.258 0.234 0.I47 0.013 0.030 TPA - 1 0.551 0.143 0.253 0.267 0.033 0.025 0.033 TBU - - 1 0.132 0.143 0.271 0.019 0.035 0.023 LDM - - - 1 0.878 0.640 0.111 0.169 0.111 LPA - - - - 1 0.653 0.064 0.100 0.105 LBU - - - - - 1 0.260 0.215 0.310 EDM - - - - - - 1 0.884 0.800 EPA - - - - - - - 1 0.832 EBU - - - - - - - - 1

149

Exhibit 5.2: Nomological Validity: Measurement Model with Correlations

0.73 S1 0.48 S2

n c+- 0.53 S5 0 5~~ 0,6 S6 0,63 S7 0.38 SS 0.28 S9 n ►n 0,71 S10 n c't 0.55 S11 "A' 0.78 S12 0.42 S13 0.22 S14 n P7a 0.18 S15 nn 0.6 S16 n-7A 0.45 S17 0.68

0.54 518 0.57 S19 0.4 1 520 n '4 n ~-r 0.63 S21 n C ; - 0.72 S22 0.' 4 0.8I S23

0.54 S2fi 1rni~cn 0.61 S27 n AA 0. S28 ,0.56

0.18 532 n M 0.28 S33 n o,r w-1 0.31 S34 ~p 72

042-4 J.S37 0.53 S38 n a

0.62 S40 0.65 0,41 S41 O,S8 S42 0.57 S43

nICA 0.7 S44 ncl -

n en_ 0.65 S}5 0.42 S4G 0.57 0.46 2S47 0.68 S48 0.39 S49 n -sn 0.38 S50 no's` 0.29 S51 n '7' 4.~#8 S52 0.65 0.49 S53 0.58 S54 Ct~i-Square=2604.01, df-1238, P-value=0.00000, F-M SEA=0.080

150

5.7 Structural Model

As already discussed in section 4.9, three alternative conceptual research models

were proposed for the study viz, direct effect (Ml), partially mediated (M2) and

fully mediated (M3) structural models. In direct effect model, direct relationship

between exogenous and endogenous variables is considered. In case of partially

mediated model, both direct and indirect effects (through mediating variable i.e.

status of HRM) of exogenous variables on the endogenous variable is analysed.

Fully mediated model (M3) assumes that exogenous variables will have no direct

effect on the endogenous variable but will affect the intervening variable i.e. Status

of HRM (STA) which, in turn, will affect the endogenous i.e. Effectiveness of

HRM (EFF).

Structural Equation Modeling (SEM) using LISREL 8.50 was applied to find out

the pattern of relationships among the variables of the three alternative models

proposed. SEM is appropriate for testing theoretical models (Graver & Mentzer,

1999; Hair et al., 2008; Malhotra & Dash, 2011) and it offers several unique

advantages over other traditional statistical techniques (Bagozzi, 1981). SEM

assesses both measurement properties and tests the key theoretical relationships as

well as it takes into account measurement error by estimating measurement error

variances from the data and model specification and it also undertakes comparison

of alternate models (Ahire et al., 1996; Raykov & Marcoulides, 2006).

57.1 Structural Model Fit

Structural model fit was assessed to examine the statistical relationships between

the study variables.

Model Fit Indices

Fit measures or fit indices provide necessary information for evaluation of alternate

models. Fit measures aim at quantifying the differences between the observed and

estimated covariance matrices among the indicator items as well as how the model

that best represents the data reflects underlying theory. Model fit are of three types:

absolute, incremental and parsimony fit indices (Hair et al., 2008; Hooper et al.,

2008). In an absolute fit measure, each model is assessed separately of other

possible models (Hair et al., 2008; Malhotra & Dash, 2011) and an absolute fit

151

measure find out how well a priori model fits the sample data (Malhotra & Dash,

2011; McDonald & Ho, 2002). Incremental fit indices measure how well a

specified model fits relative to some alternative baseline models (Hair et al., 2008;

Malhotra & Dash, 2011) and is based on the assumption that the observed

variables are uncorrelated (Malhotra & Dash, 2011; McDonald & Ho, 2002).

Incremental fit indices are also known as comparative (Miles & Shevlin, 2007) or

relative fit indices (McDonald & Ho, 2002). Parsimony fit indices assess the

overall goodness-of-fit representing the degrees of model fit per estimated

coefficient (Hair et al., 2008). Parsimony fit indices aim to correct for any over-

fitting of the model and evaluates the parsimony ratio of the model compared to

goodness-of-fit. Exhibit 5.3 illustrates the classification of fit indices as suggested

by Malhotra & Dash (2011).

Exhibit 5.3: Classification of Fit Measures

Fit Measures

Absolute Fit Indices Incremental Fit Indices Parsimony Fit Indices

Goodness-of-fit

Badness-of-tit Goodness-of-fit

Goodness-of-fit GFI, AGFI

RMSEA, SRMR, NFI, NNFI, CFI, PGFI, PNFI RMSR TLI. RNI

Source: Adapted from Malhotra, N.K. and Dash, S. (2011). Marketing research: An applied orientation, New Dellti: Pearson Education.

Consistent with the suggestions of researchers (e.g. Hair et al., 2008; Jackson et al., 2009; MaIhotra & Dash, 2011), the researcher followed the criteria of reporting

one fit index from each fit measure for description and comparison of alternate

models. Table 5.31 provides a brief account of the fit indices chosen for analysis

and the recommended or acceptable threshold levels based on prior studies

(Baumgartner & Homburg 1996; Ping, 2004; Viera, 2011).

152

Table 5.31: Fit Indices, Recommended Values and Descriptions Fit Index AV Descriptions

A' p>0.05 It indicates the discrepancy between hypothesised model and data if any. Low values suggests better fitting models

CFI >

• It is used for comparison of alternate models and higher values indicates better fitting models

GFI >0.70 Used for model comparisons and better fitting models signify higher values GFI adjusted for the degrees of freedom. Generally penalizes more complex models and favors those with minimum number

AGFI <GFI of free paths. AGFI values are lower than the GFI values in proportion to model complexity. Higher values indicate better fitting models.

,eIdf <3 Low for better fitting models

RMSEA <0.1 It illustrates how well the model fits the population covariance matrix considering the number of df Helpful for comparing fit across models and easier to interpret SRMR <0.08 due to standardised nature. Lower values represent better fit. Measures fit relative to a baseline model which assumes no

NFl >0.90 covariance between the observed variables. Higher values indicates better fit

NNFI >0.80 Higher values reveal better fitting model No threshold levels have been recommended therefore it is

PGFI & 0.50 or possible to obtain parsimony fit indices within the 0.50 region PNFI >0.50 with other goodness-of-fit achieves values over 0.90. High value

indicates the better performance of the models

Note: Values close to recommended are also acceptable Key: A V=Acceptable Values, X' =Chi-Square, CFI=Comparative Fit Index, GFI= Goodness-of-fit Index, AGFI=Adjusted Goodness-of-fit Index, ,Id =Chi-SquarelDegrees of Freedom, RMSEA=Root Mean Square Error of Approximation, SRMR =Standardized Root Mean Square Residual, NFI=Nonmed Fit Index, NNFI=Non-Normed Fit Index, PGFI=Parsimony Goodness-of-fit Index, PNFI=Parsimony Normed Fit Index

Source: As recommended by Alden et aL, 2006; Bagozzi and Yi, 1988; Bender and Bonett, 1980; Cote et aL, 2001; Hair et aL, 2008; Hu and Bentler, 1999; Hart, 1994; Hooper of al., 2008; Joreskog and Sorbom, 1993; Judge and lIulin,1993; Kline, 2005; Loehlin, 2004; Malhotra and Dash, 2011; Mulaik et aL,1989; MacCallum et at, 1996; Ping, 2004; Pedhazur and Pedhazur-Schelkin, 1991; Schumacker and Lomar, 2004; Tabachnik and Fide11,2007; Vfeira, 2011.

Study Variables

All the exogenous, endogenous and mediating study variables included in the

structural models are given below:

❑ Top management involvement in decision-making vis-a-vis HRM (TDM)

❑ Top management involvement in process/activities vis-a-vis HRM (TPA)

153

❑ Top management involvement in budgeting vis-a-vis HRM (TBU) ❑ Line managers involvement in decision-making vis-a-vis HRM (LDM) ❑ Line managers involvement in process/activities vis-a-vis HRM (LPA) ❑ Line managers involvement in budgeting vis-a-vis HRM (LBU) ❑ External service providers involvement in decision-making vis-a-vis HRM

(EDM) ❑ External service providers involvement in process/activities vis-a-vis HRM

(EPA) U External service providers involvement in budgeting vis-a-vis HRM (EBU) U Effectiveness of HRM (EFF) ❑ Status of HRM (STA)

Moderating Variables

In the current study, organizational characteristics such as sector to which the company belongs (manufacturing/service), ownership (public/private sector), size of the company (number of employees) and nationality (Indian/foreign) were

analyzed as moderating variables. In order to check the need to control for the

effect of moderating variables in the structural analysis, correlation matrix of all

the moderating variables and the constructs of study were assessed for significance. Similar technique was adopted by Green et al. (2006). The results of

the correlation matrix are given in Table 5.32. As all the correlation values

indicate weak correlation between the study constructs and moderating variables, it

was established that the assumed moderating variables did not have a significant

influence on the relationships and consequently none of them was included in the

structural model. Thus, the structural model was assessed using exogenous variables (TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA and EBU), mediating

variable (STA) and endogenous variable (EFF).

Table 5.32: Moderatina Variables - Correlation Values Matrix TDM TPA TBU LDM LPA LBU EDM EPA EBU STA EFF

SEC .012 .101 .205 .037 .153 .208 .023 .020 .117 .097 .022 OWN .164 .207 .002 .482 .321 .288 .065 .116 .043 .221 .084 SIZE .021 .096 .092 .054 .041 .066 .145 .118 .006 .038 .064 NAT .099 .115 .076 .041 .026 .028 .110 .108 .095 .325 .437

154

5.7.2 Fit Indices,Path Coefficients and Hypotheses Testing

The standardized path coefficients of the three alternate models viz, direct effect

(MI), partially mediated (M2) and fully mediated (M3) structural models as

estimated by LISREL 8.50 are given in Exhibits 5.4, 5.5 and 5.6. The path

coefficients are used to assess the magnitude and direction of relationships and test

the study hypotheses.

Fit Indices of Direct Effect Model (M1)

In the direct effect model (MI), it was examined whether there is direct

relationship between independent variables viz, role measures and the dependent

variable viz, effectiveness of HRM (EFF). The fit indices of Ml as produced by

LISREL 8.50 are given in Table 5.33.

Table 5.33: Ml- Fit Indices from LISREL 8.50 Fit Indicators Value

Goodness- of-Fit Index GFI 0.732 Adjusted Goodness-of- fit Index (AGFI) 0.690 Chi-Square Goodness-of- fit test 2774.16 Root Mean Square Error of Approximation (RMSEA) 0:076 Root Mean S uare Residual (RMSR) 0.0948 Standardized Root Mean Square Residual SRMR 0.0763 Comparative fit Index (CFI) 0.992 Normed Fit Index(NF 0.912 Non-Normed fit Index(NNFI) 0.984 Relative Fit Index (RFI) 0.899 Incremental fit Index (IFI) 0.993 Parsimony Goodness- of-fit Index GFI) 0.668 Parsimony Normed- of-fit Index (PNFI) 0.857 Akaike's Information Criterion (AIC) 3080.165 Consistent Akaike's Information Criterion (CAIC) 3728.819 Chi-Square/Degrees of Freedom 2774.I6/1385=2.00

From the Table 5.33, it may be inferred that most of the fit indices of M1 are

within the acceptable limits or close to the recommended values. Therefore, it can

be concluded that MI represents satisfactory model fit.

155

Path Coefficients and Hypotheses Testing: Direct Effect Model

On the basis of standardized path coefficients of the direct effect structural model

(M1), the hypotheses were tested. Exhibit 5.4 presents the direct effect structural

model (M1). The results of hypotheses testing of direct effect model (M1) are

presented below:

Hl TDM: Top management involvement in decision-making vis-a-vis HRM (TDM)

has a direct and positive impact on the effectiveness of HRM (EFF).

TDM had no direct and positive impact on EFF as indicated by the structural path

coefficient (fl=-0.08) from TDM to EFF. Thus the hypothesis H1TDM was rejected.

H2rp4: Top management involvement in process/activities vis-a-vis HRM (TPA) has a direct and positive impact on the effectiveness of HRM (EFF)_

TPA had a direct and positive impact on EFF as indicated by the structural path

(8=0.20) from TPA to EFF. Thus the hypothesis H2jPA was not rejected.

H3mt- Top management involvement in budgeting vis-a-vis HRM (TBU) has a

direct and positive impact on the effectiveness of HRM (EFF).

TBU had a direct and positive impact on EFF as indicated by the structural path

(/3=0.22) from TBU to EFF. Thus the hypothesis H3TBU was not rejected.

H4LDi : Line managers involvement in decision-making vis-a-vis HRM (LDM) has

a direct and positive impact on the effectiveness of HRM (EFF).

LDM had a direct and positive impact on EFF as indicated by the structural path

(/3-0.07) from LDM to EFF. Thus the hypothesis H4LOM was not rejected.

156

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HSLPA: Line managers involvement in process/activities vis-a-vis HRM (LPA) has

a direct and positive impact on the effectiveness of HRM (EFF).

LPA had a direct and positive impact on EFF as indicated by the structural path

(8=0.27) from LPA to EFF. Thus the hypothesis HSLPA was not rejected.

H6LBU: Line managers involvement in budgeting vis-a-vis HRM (LB U) has a direct

andpositive impact on the effectiveness of HRM (EFF).

LBU had no direct and positive impact on EFF as indicated by the structural path

(8=0.00) from LBU to EFF. Thus, the hypothesis H6LBU was rejected.

H7EDM: External service providers involvement in decision-making vis-a-vis HRM

(EDM) has a direct and positive impact on the effectiveness of HRM (EFF).

EDM had no significant direct and positive impact on EFF as indicated by the

structural path (#=-0.06) from EDM to EFF. Thus the hypothesis H75DM was rejected.

H8EPA: External service providers involvement in process/activities vis-a-vis

HRM (EPA) has a direct and positive impact on the effectiveness of HRM (EFF).

EPA had a direct and positive impact on EFF (EFF) as indicated by the structural

path (/3=-0.19) from EPA to EFF. Thus, the hypothesis H8EPA was not rejected.

H9E&u: External service providers involvement in budgeting vis-a-vis LIRM

(EB U) has a direct andpositive impact on the effectiveness of HRM (EFF).

EBU bad a direct and positive impact on EFF as indicated by the structural path

(8=0.04) from EBU to EFF. Thus the hypothesis H9EBU was not rejected.

Table 5.34 presents a summary of results of Direct Effect Model (Ml) hypotheses

testing through SEM.

158

Table 5.34: MI-Hypotheses Testing through SEM M"Iee_Hpotbeses.a,.~_m . ~Results _ q

HI TDM Re ected H2 TPA Not Rejected H3TLu Not Rejected H4LDM Not Rejected HSLPA Not Rejected H6LBU Rejected H?EDM Rejected H8EPA Not Rejected

H9EBU Not Rejected

Fit Indices of Partially Mediated Model (M2)

In the partially mediated model (M2), first of all the relationship between role

measures as exogenous variables and status of HRM as endogenous was checked

which is followed by the relationship between role measures as exogenous

variables and effectiveness of HRM as endogenous variable and status of HRM as

exogenous variable and effectiveness of HRM (EFF) as endogenous variable. The

fit indices of M2 are given in Table 5.35.

Table 5.35: M2- Fit Indices from LISREL 8.50 Fit Indicators Value

Goodness- of-Fit Index GFI) 0.725 Adjusted Goodness-of- fit Index AG 0.686 Chi-Square Goodness-of- fit test 3171.99 Root Mean Square Error of Approximation (RMSEA) 0.070 Root Mean Square Residual (RMSR) 0.0910 Standardized Root Mean S uare Residual SRMR 0.0735 Comparative fit Index CFI 0.901 Normed Fit Index(NFI) 0917 Non-Normed fit Index(NNFI) 0.994 Relative Fit Index (RFI) 0.904 Incremental fit Index (IFI) 0.902 Parsimony Goodness- of-fit Index PGFJ) 0.666 Parsimy Normed- of-fit Index (PNFI) 0.865 Akaike's Information Criterion (AIC) 3525.995 Consistent Akaike's Information Criterion (CAIC) 4262.148 Chi-Square/Degrees of Freedom 3171.99/1714=1.85

It can be seen from the Table 5.35 that most of the fit indices of M2 are either

within the recommended range or close to it, hence signifying a good model fit.

159

Path Coefficients and Hypotheses Testing: Partially Mediated Model

In the partially mediated model (M2), both the direct and indirect relationships

between role measures, status of HRM (STA) and effectiveness of HRM (EFF)

were tested on the basis of standardized path coefficients. Partially mediated

structural model (M2) is presented in Exhibit 5.5. The results of hypotheses testing

of partially mediated model (M2) are presented below:

HIOTDM: Top management involvement in decision-making vis-a-vis HRM (TDM)

has a direct and positive impact on the status of HRM (STA).

TDM had no direct and positive impact on STA as indicated by the structural path

(/3=-0.03) from TDM to STA. Thus the hypothesis H10ThM was rejected.

H11 TpA: Top management involvement in process/activities vis-a-vis HRM (TPA)


TPA had a direct and positive impact on the STA as indicated by the structural

path ((3=0.18) from TPA to STA. Thus the hypothesis H11TPA was not rejected.

H12TBU• Top management involvement in budgeting vis-a-vis HRM (BU) has a

direct and positive impact on the on the status of HRM (STA).

TBU had a direct and positive impact on STA as indicated by the structural path

(&0.12) from TBU to STA. Thus the hypothesis H12TBU was not rejected.

H13WM: Line managers involvement in decision-making vis-a-vis HRM (LDM)


LDM had no direct and positive impact on STA as indicated by the structural path

(/3=-0.21) from LDM to STA. Thus the hypothesis H13LDM was rejected.

160

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H14LP,A: Line managers involvement in process/activities vis-a-vis HRM (LPA)


LPA had a direct and positive impact on STA as indicated by the structural path

(13=0.53) from LPA to STA. Thus the hypothesis H14LPA was not rejected.

H15LBU: Line managers involvement in budgeting vis-a-vis HRM (LB U) has a

direct and positive impact on the status of HRM (STA).

LBU had a direct and positive impact on STA as indicated by the structural path

(J3=0.02) from LBU to STA. Thus the hypothesis H15LBU was not rejected.

H16EDm.- External service providers involvement in decision-making vis-a-vis

HRM (EDM) has a direct and positive impact on the status of HRM (STA).

EDM had no direct and positive impact on STA as indicated by the structural path

(i=-O.24) from EDM to STA. Thus the hypothesis H16EDM was rejected.


HRM (EPA) has a direct and positive impact on the status of HRM (STA).

EPA had a direct and positive impact on STA as indicated by the structural path

(/3=0.43) from EPA to STA. Thus the hypothesis H17EPA was not rejected.

H18EBU: External. service providers involvement in budgeting vis-a-vis HRM

(EBU) has a direct and positive impact on the status of HRM (STA).

EBU had no direct and positive impact on STA as indicated by the structural path

(5=-0.07) from EBU to STA. Thus the hypothesis Hi8EBU was rejected.

H19TDM: Top management involvement in decision-making vis-a-vis HRM (TDM)


TDM had no direct and positive impact on EFF as indicated by the structural path

(J3=-4.06) from TDM to EFF. Thus the hypothesis H19TDM was rejected.

162

H2OTPA: Top management involvement in process/activities vis-a-vis HRM (TPA)


TPA had a direct and positive impact on EFF as indicated by structural path

(/3=0.02) from TPA to EFF. Thus the hypothesis H2OTPA was not rejected.

H21TBu: Top management involvement in budgeting vis-a-vis HRM (TBU) has a


TBU had a direct and positive impact on EFF as indicated by the structural path

(/j-0.10) from TBU to EFF. Thus the hypothesis H21TBU was not rejected.

H22LDM; Line managers involvement in decision-making vis-a-vis HRM (LDM)


LDM had a direct and positive impact on EFF as indicated by the structural path

(/3=0.25) from LDM to EFF. Thus the hypothesis H22LDM was not rejected.

H23LPA: Line managers involvement in process/activities vis-a-vis HRM (LPA)


LPA had no direct and positive impact on EFF as indicated by the structural path

(J3=-0.25) from LPA to EFF. Thus the hypothesis H23LPA was rejected.

H24LBU: Line managers involvement in budgeting vis-a-vis HRM (LBU) has a


LBU had no direct and positive impact on EFF as indicated by the structural path

(J3=-0.02) from LBU to EFF. Thus the hypothesis H24LBU was rejected.


HRM (EDM) has a direct and positive impact on the effectiveness of HRM (EFF).

EDM had a direct and positive impact on EFF as indicated by the structural path

(8=0.15) from EDM to EFF. Thus the hypothesis H25EDM was not rejected.

163


HRM (EPA) has a direct and positive impact on the effectiveness of HRM (EFF).

EPA had no direct and positive impact on EFF as indicated by the structural path

(3=-0.22) from EPA to EFF. Thus the hypothesis H26EpA was rejected.

H27EBu: External service providers involvement in budgeting vis-a-vis HRM

(EB U) has a direct and positive impact on the effectiveness of HRM (EFF).

EBU had a direct and positive impact on EFF (EFF) as indicated by the structural

path (8=0.12) from EBU to EFF. Thus the hypothesis H27EBU was not rejected.

H28STA: Status of HRM (STA) has a direct and positive impact on the

effectiveness of HRM (EFF)

STA had a direct and positive impact on EFF as indicated by the structural path

(8=1.01) from STA to EFF. Thus the hypothesis H28STA was not rejected.

Table 5.36 corresponds to the summary of results of Partially Mediated Model

(M2) hypotheses testing through SEM.

Table 5.36: M2-Hvootheses Testina throuah SEM

HIOTDM Rejected H2OTPA Not Rejected

HIlTPA Not Rejected H21 BU Not Rejected

H12T2c Not Rejected H22LDM Not Rejected

HI3LDM Rejected H23LPA Rejected

H14LPA Not Rejected H241BU Rejected

H15LBU Not Rejected H25EDM Not Rejected

Hl6EDM Rejected H26EPA Rejected

HI7Epq Not Rejected H27EBu Not Rejected

H18EBU Rejected H28STA Not Rejected

H19mM Rejected - -

164

Fit Indices of Fully Mediated Model (M3)

In the fully mediated model (M3), the direct effect of role measures on status of

HRM (STA) was tested. It also tests the effect of relationship between STA and

EFF. In this fully mediated model the effect of role measures on EFF was not

tested. Table 5.37 presents the fit indices of M3.

Table 5.37: M3-Fit Indices from LISREL 8.50 Fit Indicators Value

Goodness- of-Fit Index (GFI) 0.724 Adjusted Goodness-of- fit Index (AGFI) 0.688 Chi-Square Goodness-of- fit test 3175.60 Root Mean Square Error of Approximation (RMSEA) 0.070 Root Mean Square Residual (RMSR) 0.0912 Standardized Root Mean Square Residual SRMR 0.0737 Comparative fit Index (CFI) 0.901 Normed Fit Index(NFI) 0.916 Non-Normed fit lndex(NNFI) 0.995 Relative Fit Index (RFI) 0.905 Incremental fit Index (IFI) 0.902 Parsimony Goodness- of-fit Index (PGFI) 0.669 Parsimony Normed- of-fit Index (PNFI) 0.868 Akaike's Information Criterion (AIC) 3511.598 Consistent Akaike's Information Criterion (CAIC) 4210.319 Chi-Square/Degrees of Freedom 3175.6011723=1.84

Since most of the fit indicator values are within the recommended range or close to

the recommended values, it provides support to the model M3. Thus,'it can be said

that data fairly well supports the model.

Path Coefficients and Hypotheses Testing: Fully Mediated Model

In case of fully mediated model (M3), the different relationships between

exogenous and endogenous variables as discussed above were verified on the basis

of path coefficients. Exhibit 5.6 presents the fully mediated structural model (M3).

The results of hypotheses testing of fully mediated model (M3) are presented

below:

H29TDM: Top management involvement in decision-making vis-a-vis HRM (TDM) has a direct and positive impact on the status of HRM (STA).

TDM had no direct and positive impact on STA as indicated by the structural path

(5=-0.06) from TDM to STA. Thus, the hypothesis H29TDM was rejected.

H3OTPA: Top management involvement in process/activities vis-a-vis.HRM (TPA) has a direct and positive impact on the status of HRM (STA).

TPA had a direct and positive impact on STA as indicated by the structural path

(f3= 0.19) from TPA to STA. Thus, the hypothesis H30TPa was not rejected.

H31 mU: Top management involvement in budgeting vis-a-vis HRM (TBU) has a significant direct and positive impact on the on the status of HRM (STA).

TBU had a direct and positive impact on STA as indicated by the structural path

(/3=0.16) from TBU to STA. Thus the hypothesis H31TDM was not rejected.

H32LDM: Line managers involvement in decision-making vis-a-vis HRM (LDM) has a direct and positive impact on the status of FIRM (STA).

LDM had no direct and positive impact on STA as indicated by the as indicated by the structural path (Q=-0.10) from LDM to EFF. Thus, the hypothesis H32LDM was rejected

H33LPA: Line managers involvement in process/activities vis-a-vis HRM (LPA) has a direct and positive impact on the status of HRM (STA).

LPA had a significant direct and positive impact on STA as indicated by the

structural path (fi=0.43) from LPA to STA. Thus the hypothesis H33LPA was not

rejected.

Exhibit 5.6: Fully Mediated Structural Model (M3)

0.73 Si 0.48 S2 0.43 S3 0.74 S4 0.53 SS 0.66 S6 0.62 S7 0.38 SS 0.28 S9 0.71 SLO '7 0.54 Sll 'CO 0.78 S12 •gig 0.42 Sl3 ~l; .c, 022 514 ec 0.18 SLS "' R.6 0.66 S16 0.47 0.45 S17 ,

0.54 S18 ea 0.57 S19 -'p r ~

0.4'2 S?0 0.68\ -0.06 0.74 S6 .37

0.61 S21 0.73 S22 '71 0.19 0.79

S57 439 AAl 0.1 7

0.61 S25 0 '~ 1~ 0.10 0.5

S58 .69 0.65 S26 n .c~ 0.33 .66

0.74 S59 .56 0.67 328 0.]5 01

4.69 S29 7 03 0.99 S60 .36 0.38 S31 ^ ae -0.03 0.18 S32 n Oe~

0.28 S33 0 72 ~V. S61 .28 0.31 S34 0.85 0.$3 S35 n , X0.66 S62 _56 418 S36 "` EFF.

0.53 S3S 0.65 S63 15

0.57 S39 ^ A z

0.62 S40 A 0.41 S41 A 5?: 0.58 S42 0.56 S43 I?/

0.65 S45 A 0.42 S46 0.6, 4.-L6 S47 0.68 S48 0.39 S49 0.38 5S0 0.29 S51 0.47 552 Chi-Square=3175.60, dfL723, P-value=0.00000, RMSSEA 0.070

0.49 SS3 0.58 S54

167

H34L5u: Line managers involvement in budgeting vis-a-vis HRM (LBU) has a

direct and positive impact on the status of HRM (STA).

LBU had a significant direct and positive impact on STA as indicated by the

structural path (fl=0.02) from LBU to STA. Thus the hypothesis H34LBU was not

rejected.


HRM (EDM) has a direct and positive impact on the status of HRM (STA).

EDM had no direct and positive impact on STA as indicated by the structural path

(/3=-0.18) from EDM to STA. Thus the hypothesis H35EDM was rejected.

H36EPA: External service providers involvement in process/activities vis-a-vis

HRM (EPA) has a direct and positive impact on the status of HRM (STA).

EPA had a direct and positive impact on STA as indicated by the structural path

(&0.35) from EPA to STA. Thus the hypothesis H36EPA was not rejected.

H37EnU: External service providers involvement in budgeting vis-a-vis HRM

(EBU) has a direct and positive impact on the status ofHRM (STA).

EBU had no direct and positive impact on STA as indicated by the structural path

(fl=-0.03) from EBU to STA. Thus, the hypothesis. H37EBU was rejected.

H38STR: Status of HRM (STA) has a direct and positive impact on the

effectiveness of HRM function (EFF)

STA had a direct and positive impact on EFF as indicated by the structural path

(/3=0.99) from STA to EFF. Thus the hypothesis H38STA was not rejected.

1AQ

Table 5.38 depicts the summary of results of Fully Mediated Model (M3)

hypotheses testing through SEM.

Table 5.38: M3-Hypotheses Testing through SEM ~' Hypn~leses `" ' ~ Results

H297DM Rejected H30PPA Not Rejected

H31 mU Not Rejected

H32LDM Rejected

H33LPA Not Rejected

H34113u Not Rejected

H35EDM Rejected

H36Epg Not Rejected

H37EBU 'Rejected

H38 -A Not Rejected

5.8 Criterion Validity

Criterion-related validity is a measure of how well scales representing the various

exogenous variables are related to endogenous variables. To establish the criterion

validity of various constructs, the exogenous variables are correlated with the

endogenous construct. Ahire et al. (1996) recommended using SEM to estimate the

correlations between the various constructs because it takes into account

measurement error by estimating the measurement error variances from the data.

The relationship between exogenous and endogenous variables for direct effect

model (Ml), partially mediated model (M2) and fully mediated model (M3) as

measured by LISREL 8.50 are presented in Exhibits 5.4, 5.5 and 5.6 which

illustrate evidence of criterion-related validity. Further, from the tables 5.34, 5.36

and 5.38, it may be concluded that in cases where the hypotheses have not been

rejected, there is a direct and positive relationship between variables which is a

proof of criterion validity. Criterion-validity of direct effect model is high as

compared to partially mediated model and fully mediated model. Thus,

requirement of criterion validity is sufficiently well addressed.

169

5.9 Comparison of Alternate Models

Hair et al. (2008) suggested a competing models approach to SEM when

alternative formulations are suggested by the underlying theory. A model

comparison approach is consistent even if a given proposed model exhibits an

acceptable fit and cross-validates well, there may be alternative models, containing

different associations among the variables, which could show the same level of

goodness-of-fit. Thus, to compare one model to alternative models is a

fundamental practice in SEM (Bagozzi & Yi, 1988; Diamantopoulos & Siguaw,

2000; Hair et al. 2008). SEM generates variety of fit indices that can be used to

compare the alternate models. Appropriate indices close to the global fit are

obtained by estimating the structural models.

Graver and Mentzer (1999) pointed out that it is not possible to achieve perfect

values for all the fit indices as many fit indices are sensitive to sample size. It is

difficult to establish index values that differentiates good model from a poor model

across all situations (Hair et al., 2008). It is not necessary to report all the indices

of all the fit measures (Hooper et al., 2008; Hair et al., 2008) as there are no golden

rules for assessment of model fit, reporting a variety of indices is essential

(Crowley & Fan, 1997) since different indices indicate a different aspect of model

fit. Moreover, there is no agreement among researchers on the appropriate index

for assessing the overall goodness-of-fit of a model (Ping, 2004). However, it is

important to consider more than one fit measure (Jackson et al., 2009) and report at

least one goodness-of-fit index from both incremental and absolute index and one

badness-of-fit index besides, the chi-square value and associated degrees of

freedom (Hair et al., 2008; Malhotra & Dash, 2011). Even though many problems

are linked with the model chi-square, it is still important to recount chi-square

along with its degrees of freedom at all times (Hayduk et al., 2007). Chi-square is

one of the most commonly used fit index (Bagozzi & Heatherton, 1994;

Baumgartner & Homburg, 1996; Ping, 2004) and that is recommended with

moderate samples of 100 to 200 (Shook, et al., 2004).

Different researchers have recommended the use of different fit indices. CFI, GFI,

NFI and NNFI, are most commonly reported fit indices (McDonald & Ho, 2002).

CFI is one of the most popular fit index that is used for evaluation as it is the index

that is Ieast effected by sample size (Fan et al., 1999; Malhotra & Dash, 2011) and

170

the most stable fit index (Shook et al., 2004). RMSEA is also less affected by

sample size (Malhotra & Dash, 2011). Both AIC and CAIC indices are useful in

model comparison (Tabachnick & Fidell, 2007).

In the current study, structural models converge for all the three models (i.e. direct

effect model, partially mediated model and fully mediated model) but mixed

support is found for the hypothesized relationships between constructs. While in

some cases, direct and positive relationship existed between exogenous and

endogenous variables, in some cases the relationship was indirect through

mediating variables. In the present study, a number of fit indices were considered

to compare the alternate models (M1, M2 and M3).

As recommended by different researchers (e.g. Alden et al., 2006; Akaike, 1987;

Edelman, 2010; Hair et al., 2008; Hennig-Thurau et al., 2002; Knight et al., 1999;

Pajo et al., 2010; Rust et al. 1995; Tabachnick & Fidell, 2007; Vieira, 2011;

Williams & Holahan 1994), the fit indices used to compare the three models were

Xl, GFI, AGFI, AIC, CAIC, IFI, CFI. With the chi-square test, low values are

preferred. When using GFI, AGFI, or CFI, higher values signify better fit of the

model (Hair et al., 2008; Malhotra & Dash, 2011). With regard to the AIC and

CAIC, the lower the value, better the fit (Alden et al., 2006; Vieira, 2011).

Table 6.39: Comparison of Fit Indices of Alternate Models Alternate A2 GFI AGFI CFI IFI AIC CAIC models

Ml ' 274l6 J 732 0, 90 4 992 ` 0 993v. _3080 165 3728'81 M2 3171.99 0.725 0.686 0.901 0.902 - 3525.995 - 4262.14 M3 3175.60 0.724 0.688 0.901 0.902 3511.598 421031

Note: The shaded fit indices highlights the fit indices of the best model 1:e. the Direct Effect Model (M1) for the present research

Overall, the fit indices indicated that all three models fit the data. Although the

result supports both direct and indirect effect of role measures on status of HRM

and effectiveness of HRM. On the basis of fit indices values presented above, it

can be inferred that the direct effect model (MI) is the best alternative model. The

result strengthens the robustness of the direct effect model.

5.10 Tests of Differences

An independent sample t-test was carried out in order to test the hypotheses Hal to Hog. For hypotheses Ho10 to H018, one-way ANOVA was deployed since it

involved comparing three groups.

On the Basis of Sector (Manufacturing and Service)

11: There is no significant difference in the mean scores of top management involvement in decision-making vis-a-vis HRM (TDM between companies from manufacturing and service sectors.

Significant differences were not observed on the dimension TDM (t [172] =0.829,

p>0.05 between companies from manufacturing sector (Mean=24.48, SD=4.436)

and service sector (Mean=24.56, SD=4.065). Thus, the null hypothesis Holwas not rejected

H02: There is no sign ficant difference in the mean scores of top management involvement in process/activities vis-a-vis HRM (TPA) between companies from


Significant differences were not observed on the dimension TPA (t [172] =0.667,

p>0.05 between companies from manufacturing sector (Mean=22.26, SD=5.042) and service sector (Mean=21.40, SD=4.924). Thus, the null hypothesis H02 was

not rejected

Hai: There is no significant difference in the mean scores of top management

involvement in budgeting vis-a-vis HRM (TBU) between companies from


Significant differences were not observed on the dimension TBU (t [172] =0.675,

p>0.05 between companies from manufacturing sector (Mean= 22.74, SD=5.833)

and service sector (Mean= 23.09, SD=5.585). Thus, the null hypothesis H03was

not rejected.

172

Ho4: There is no significant difference in the mean scores of line managers

involvement in decision-making vis-a-vis HRM (LDAV between companies from manufacturing and service sectors.

Significant differences were not observed on the dimension LDM (t [172] =0.590, p>0.05 between companies from manufacturing sector (Mean=22.61, SD=4.269) and service sector (Mean=22.50, SD=3.989). Thus, the null hypothesis H04 was not rejected

Hoy: There is no significant difference in the mean scores of line managers involvement in process/activities vis-a-vis HRM (LPA) between companies from manufacturing and service sectors

Significant differences were not observed on the dimension LPA (t [172] =0.813,

p>0.05 between companies from manufacturing sector (Mean-23.32, SD=3.986) and service sector (Mean= 22.74, SD= 4.094). Thus, the null hypothesis H0 5was not rejected.

H6: There is no significant difference in the mean scores of line managers involvement in budgeting vis-a-vis HRM (LBO between, companies from manufacturing and service sectors

Significant differences were not observed on the dimension LBU (t [172] =0.987, p>0.05 between companies from manufacturing sector (Mean=18.98, SD= 6.650)

and service sector (Mean= 19.00, SD= 6.541). Thus, the null hypothesis Ho6 was

not rejected

H7: There is no significant difference in the mean scores of external service providers involvement in decision-making vis-a-vis HRM (8DM) between companies from manufacturing and service sectors

Significant differences were not observed on the dimension EDM (t [172] =0.819,

p>0.05 between companies from manufacturing sector (Mean=I 1.01, SD=5.107) and service sector (Mean=10.98, SD=4.802). Thus, the null hypothesis Ho7 was not

rejected

173

HQ8: There is no significant difference in the mean scores of external service



Significant differences were not observed on the dimension EPA (t [172] =0.621,

p>0.05 between companies from manufacturing sector (Mean= 12.09, SD=4.736)

and service sector (Mean= 11.95, SD=5.180). Thus, the null hypothesis H08 was

not rejected


providers involvement in budgeting vis-a-vis HRM (EB U) between companies

from manufacturing and service sectors

Significant differences were not observed on the dimension EBU (t [172] =0.346,

p>0.05 between companies from manufacturing sector (Mean=9.75, SD=4.544)

and service sector (Mean=9.88, SD= 4.915). Thus, the null hypothesis H09 was

not rejected

Table 5.40A and 5.40B presents group statistics and results oft-test:

Table 5.40A: Group Statistics Construct Company type- sector N Mean Std. Deviation Std. Error Mean

TDM SER 82 24,56 4.065 .449 MAN 92 24.48 4.436 .463

,SPA SER 82 21.40 4.924 .544 MAN 92 22.26 5.042 .526

TBU SER 82 23.09 5.585 .617 MAN 92 22.74 5.833 .608

LDM SER 82 22.50 4.269 .471 MAN 92 22.61 3.989 -.416

LPA SER 82 22.74 4.094 .452 MAN 92 23.32 3.986 .416

LBU SER 82 19.00 6.541 .722 MAN 92 18.98 6.650 .693

EDM SER 82 10.98 4.802 .530 MAN 92 11.01 5.107 .532

EPA SER 82 11.95 5.180 .572 MAN 92 12.09 4.736 .494

EBU SER 82 9.88 4.915 .543 MAN 92 9.75 4.544 .474

174

Table 5.408: Indenendent Samnles T-Test

Construct Nature of Variance Levene's Test for

equality of variances t-test for equality of means

F • Sig. t df Si 2-tailed

TDM Equal variances assumed .047 .829 .I28 172 .899

TPA Equal variances assumed .185 .667 1.133 172 .259

TBU Equal variances assumed .177 .675 .399 172 .691

LDM Equal variances assumed .292 .590 -.174 172 .862

LPA Equal variances assumed .056 .813 -.932 172 353

LBU Equal variances assumed .000 .987 .022 172 .983

EDM Equal variances assumed .053 .819 -.047 172 .963

EPA Equal variances assumed .246 .621 -.181 172 .857

EBU Equal variances assumed .893 .346 .179 172 .859

On the Basis of Size (Small, Medium and Large)

H010: There is no significant difference in the mean scores of top management

involvement in decision-making vis-a-vis HAM (TDM) between small, medium

and large organizations.

Significant differences were not observed in the mean scores of small, medium

and large organizations on TDM (p>0.05). Thus, the null hypothesis Ho10 was not

rejected.

Holl: There is no significant difference in the mean scores of top management

involvement in process/activities vis-a-vis HRM (TPA) between small, medium



and large organizations on TPA (p>O.&5). Thus, the null hypothesis foil was not

rejected.

175


involvement in budgeting vis-a-vis HRM (TB U) between small, medium and large organizations.


and large organizations on TBU (p>0.05). Thus, the null hypothesis H012 was not

rejected.

Ho13: There is no significant difference in the mean scores of line managers involvement in decision-making vis-a-vis HRM (LDM) between small, medium



and large organizations on LDM (p>0.05). Thus, the null hypothesis H013 was not

rejected.


involvement in process/activities vis-a-vis HRM (LPA) between small, medium and large organizations.


and Iarge organizations on LPA (p>0.05). Thus, the null hypothesis H014 was not rejected.

Ho1S: There is no significant difference in the mean scores of line managers involvement in budgeting vis-a-vis HRM (LBU) between small, medium and large

organizations.


and large organizations on LBU (p>0.05). Thus, the null hypothesis HO15 was not

rejected.

176


providers involvement in decision-making vis-a-vis HRM (EDM) between small,



and large organizations on EDM (p>0.05). Thus, the null hypothesis H016 was not

rejected.

H01 7: There is no sign if cant difference in the mean scores of external service

providers involvement in process/activities vis-a-vis HRM (EPA) between small,



and large organizations on EPA (p>O.05). Thus, the null hypothesis Ho17 was not

rejected.

H0 18: There is no significant difference in the mean scores of external service

providers involvement in budgeting vis-a-vis HRM (EBU) between small, medium



and large organizations on EBU (p>0.05). Thus, the null hypothesis H01 was not

rejected.

Table 5.41A and 5.41B presents group statistics and results of independent

samples t-test respectively.

177

Table 5.41A: ANOVA Descriptives Constructs Size N Mean Std. Deviation

TDM

SMA 34 23.91 5.440 MED 43 24.91 3.778 LAR 97 24.56 3.997 Total 174 24.52 4.253

TPA

SMA 34 21.26 6.307 MED 43 22.33 4.951 LAR 97 21.86 • 4.502 Total 174 21.86 4.991

TBU

SMA 34 22.29 7.355 MED 43 22.67 5.899 LAR 97 23.22 4.954 Total 174 22.90 5.703

LDM

SMA 34 22.53 5.212 MED 43 22.02 4.601 LAR 97 22.80 3.418 Total 174 22.56 4.112

LPA

SMA 34 22.41 4.787 MED 43 23.05 3.786 LAR 97 23.27 3.874 Total 174 23.05 4.036

LBU

SMA 34 19.88 6.870 MED 43 17.07 7.350 LAR 97 I9.53 5.995 Total 174 18.99 6.580

EOM

SMA 34 I0.91 4.337 MED 43 10.16 4.348 LAR 97 I1.39 5.382 Total 174 . 10.99 4.951

EPA

SMA 34 11.79 4.721 MED 43 11,23 4.854 LAR 97 12.45 5.046 Total 174 I2.02. 4.937

EBU

SMA 34 9.82 4.026 MED 43 8.63 3.848 LAR 97 10.33 5.198 Total 174 9.81 4.709

178

Table 5.41B: ANOVA Results Construct Sum of Squares dl Mean Square F .Si .

TOM Between Group 19.147 2 9.573 .526 .592 Within Groups 3110.301 171 18.189

• Total 3129.448 173

TPA Between Groups 21.369 2 10.685 .426 .654 Within Groups 4288.039 171 25.076

Total 4309.408 173

TBU Between Groups 24.385 2 12.192 .372 .690 Within Groups 5602.954 171 32.766

Total 5627.339 173

LDM Between Groups 18.200 2 9.100 .535 .586 Within Groups 2906.726 171 16.998

Total 2924,925 173

LPA Between Groups 18.459 2 9.229 .564 .570 Within Grou s 2799,173 171 16.369

Total 2817.632 173

LBU Between Groups 213.471 2 106.736 2.508 .084 Within Groups 7276,506 171 42.553

Total 7489.977 173

EDM Between Groups 45.285 2 22.643 .923 .399 Within Groups 4195,709 171 24.536

Total 4240.994 173

EPA Between Groups 46.634 2 23.317 .956 .386 Within Groups 4169.274 171 24.382

Total 4215.908 173

EBU Between Groups 86.310 2 43.155 1.968 .143 Within Groups 3750.431 171 21.932

Total 3836.741 173

Table 5.42 presents a summary of results for independent samples t-test and one-

way ANOVA.

Table 5.42: Tests of Differences H 91a ses : ePerforrc ~~ Hol to Hog t-test Not Rejected

H070 to HIIS ANOVA Not Rejected Significant at p<0.05

5.11 Tests of Association

Chi-square test was performed in order to establish association, if any, between

company type and role measures. Scores on role measures were classified into

three categories viz, high, medium and low based on percentiles. Company type

I—

,(

was classified into two categories viz, on the basis of sector (manufacturing and

service) and size (small, medium and large). Following hypotheses were tested:

On the Basis of Sector (Manufacturing and Service)

Hol: There is no association between company's sector i.e. manufacturing and

service sector and top management involvement in decision-making vis-a-vis HRM (TDM).

Significant association does not exist between company type i.e. manufacturing and service organizations and top management involvement in decision-making

vis-a-vis HRM (TDM). Thus, the null hypothesis Hol was not rejected. The results

have been given in table 5.43.

Table 5.43: Chi-Square Tests Measures Value df Asymp. Sig. (2-sided)

earson Chi-Square 26.804 17 .061 Likelihood Ratio 29.458 17 .031 inear-by-Linear Association .016 1 .898 of Valid Cases 174

H02: There is no association between company's sector i.e. manufacturing and service sector and top management involvement in process/activities vis-a-vis

HRM (TPA).

Significant association does not exist between company type i.e. manufacturing

and service organizations and top management involvement in process/activities

vis-a-vis HRM (TPA). Thus, the null hypothesis Hot was not rejected. The results


Table 5.44: Chi-Sauare Tests Measures Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 17.490 20 .621 Likelihood Ratio 21.140 20 .389 Linear-by-Linear Association 1.283 1 .257 N of Valid Cases 174

180


service sector and top management involvement in budgeting vis-a-vis HRM

(TBU)


and service organizations and top management involvement in budgeting vis-a-vis

HRM (TBU). Thus, the null hypothesis H03 was not rejected. The results have

been given in table 5.45.

Table 5.45: Chi-Sauare Tests Measures Value df Asymp. Sig.(2-sided)

Pearson Chi-Square 9.735 22 .989 Likelihood Ratio - 11.032 22 .974 Linear-by-Linear Association .160 1 .689 N of Valid Cases 174


service sector and line managers involvement in decision-making vis-a-vis HRM

(LDM)


and service organizations and line managers' involvement in decision-making vis-

a-vis HRM (LDM). Thus, the null hypothesis Ho4 was not rejected. The results


Table 5.46: Chi-Sauare Tests Measures Value df Asymp. Sig.(2-sided)

Pearson Chi-Square 17.073 18 .518 Likelihood Ratio 19.341 18 .371 Linear-by-Linear Association .030 1 .862 N of Valid Cases 174


service sector and line managers involvement in process/activities vis-a-vis HRM

(LPA)

181


and service organizations and line managers involvement in process/activities vis-

a-vis HRM (LPA). Thus, the null hypothesis Ho5 was not rejected. The results


Table 5.47: Chi-Sauare Tests Measures Value df' Asymp. Sig. (2-sided)

Pearson Chi-Square 16.942 18 .527 Likelihood Ratio 20.537 18 .303. Linear-by-Linear Association .869 1 .351 N of Valid Cases 174


service sector and line managers involvement in budgeting vis-a-vis HRM (LBU)


and service organizations and line manager involvement in budgeting vis-a-vis

HRM (LBU). Thus, the null hypothesis Hob was not rejected. The results have


Table 5.48: Chi-Square Tests

Measures Value df Asymp. Sig. (2-sided) Pearson Chi-Square 28.449 24 .242 Likelihood Ratio 33.319 24 .098 Linear-by-Linear Association .000 1 .983

N of Valid Cases 174


service sector and external service providers involvement in decision-making vis-

a-vis HRM (EDM)


and service organizations and external service providers invdlvement decision-

making vis-a-vis HRM (EDM). Thus, the null hypothesis Ho7 was not rejected.

The results have been given in table 5.49.

182



Hob: There is no association between company's sector i.e. manufacturing and

service sector and external service providers involvement in process/activities

vis-a-vis HRM (EPA)


and service organizations and external service providers involvement in

process/activities vis-a-vis HRM (EPA). Thus, the null hypothesis H08 was not

rejected. The results have been given in table 5.50.

Table 5.50: Chi-Square Tests Measures Value df Asymp. Sig-sided)


H09: ' There is no association between company's sector i.e. manufacturing and

service sector and of external service providers involvement in budgeting vis-a-

vis HRM (EBU)


and service organizations and external service providers involvement in budgeting

vis-a-vis HRM (EBU). Thus, the null hypothesis Hog was not rejected. The results


Table 5.51: Chi-Sauare Tests Measures Value df Asymp. Si (2-sided)

Pearson Chi-Square 13.344 19 .821 Likelihood Ratio 16.905 I9 .596 Linear-by-Linear Association .032 1 .858 N of Valid Cases 174

183

On the Basis of Size (Small, Medium and Large)

Ha10: There is no association between company's size i.e. small, medium and

large organizations and top management involvement in decision-making vis-a-

vis HRM (TDM.

Significant association does not exist between company type i.e. small, medium

and large organizations and top management involvement in decision-making vis-

a-vis HRM (TDM). Thus, the null hypothesis HoI0 was not rejected. The results


Table 5.52: Chi-Square Tests Measures Value df As m . Si 2-sided


Hall: There is no association between company's size i.e. small, medium and

large organizations and top management involvement in process/activities vis-a-

vis HRM (TPA)


and large organizations and top management involvement in process/activities vis-

a-vis FIRM (TPA).Thus, the null hypothesis Hell was not rejected. The results


Table 5.53: Chi-Sauare Tests Measures Value df As m . Si (2-sided)



large organizations and top management involvement in budgeting vis-a-vis HRM

(TBU)

184


and large organizations and top management involvement in budgeting vis-a-vis

HRM (TBU). Thus, the null hypothesis Ho12 was not rejected. The results have




HQ13: There is no association between company's size i.e. small, medium and

large organizations and top line managers involvement in decision-making vis-

a-vis HRM (LDM)


and large organizations and line managers involvement in decision-making vis-a-

vis HRM (LDM). Thus, the null hypothesis H013 was not rejected. The results


Table 5.55: Chi-Square Tests Measures Value df Asymp. Si.(2-sidç4)

Pearson Chi-Square 45.790 36 .127 Likelihood Ratio 46.569 36 .112 Linear-by-Linear Association .338 1 .56I N of Valid Cases 174


large - organizations and line managers involvement in process/activities vis-a-

vis HRM (LPA).


and large organizations and line managers involvement in process/activities vis-a-

vis HRM (LPA). Thus, the null hypothesis Ho14 was not rejected. The results


185

Table 5.56: Chi-Square Tests

Measures Value df Asymp. Sig. (2- sided)



large organizations and line managers involvement in budgeting vis-a-vis HRM

(LBU).


and large organizations and line managers involvement in budgeting vis-a-vis

HRM (LBU). Thus, the null hypothesis H015 was not rejected. The results have





large organizations and external service providers involvement in decision-

making vis-a-vis HRM (ED.M).


and large organizations and external service providers involvement in decision-

making vis-a-vis HRM (EDM).Thus, the null hypothesis H016 was not rejected.

The results have been given in table 5.58.

Table 5.58: Chi-Sauare Tests Measures Value df Asymp. Sig.(2-siIed)


186


large organizations and external service providers involvement in



and large organizations and external service providers involvement in

process/activities vis-a-vis HRM (EPA).Thus, the null hypothesis Holz was not

rejected. The results have been given in table 5.59.

Table 5.59: Chi-Square Tests Measures Value df Asymp. Si (2-sided)

earson Chi-Square 35.127 40 .689 Likelihood Ratio 38240 40 .550 Linear-by-Linear Association .931 I .335

of Valid Cases 174


large organizations and external service providers involvement in budgeting

vis-a-vis HKM (EBU)


and large organizations and external service providers involvement in budgeting

vis-a-vis HRM (EBU). Thus, the null hypothesis H018 was not rejected. The

results have been given in table 5.60.

Table 5.60: Ghi-Sauare Tests Measures Value df Asymp. Sig. (2-sided)


Table 5.61 presents a summary of results for chi-square test.

Table 5.61: Tests of Association

Hof to Ho18 Chi-square Not Rejected -Significant at p<0.05

187

CHAPTER 6: FINDINGS, DISCUSSIONS AND CONCLUSIONS

6.1 Findings and Discussions 6.2 Conclusions

CHAPTER 6: FINDINGS, DISCUSSIONS AND CONCLUSIONS

Chapter Overview

This chapter begins with a brief description of the findings based on the analysis

carried out. A discussion of the findings of the current research is carried out in

the light of prior research studies by other researchers. The last part deals with the

conclusions of the present study.

6.1 Findings and Discussions

Respondent/Responding Firm Profile

The respondents of the study were HR executives i.e. one from each organization

with around 64% of them occupying senior- level positions (e.g. Director-HR,

Chief People Officer, Vice President-HR etc.). Senior level HR executives are

believed to be suitable to provide information concerning HR issues. Since

research in the area too has commonly assumed human resource systems to be

objective and recognizable characteristics of organizations and not individuals,

therefore, the use of single respondent is justified. Prior studies in the area have

also considered the perceptions of a single. respondent as appropriate (Becker &

Huselid, 2006; Katou, 2008; Teo, 2000), Additionally, HR managers have been

used as respondents in other similar studies too (e.g. Andersen et. al., 2007;

Andolsek & Stebe, 2005; Budhwar, 2000a, 2000b; Budhwar & Sparrow, 1997;

Cunningham & Hyman, 1995; Fisher & Dowling, 1999; Gautam & Davis, 2007;

Hsu & Leat, 2000; Klass et. al., 1999; Larsen & Brewster, 2003; Perry & Kulik,

2008; Valverde et al., 2006).

The responding organizations represent a cross-section of industries, belonging to

companies of Indian and foreign origin, private and public sectors, service and

manufacturing sectors and companies of different sizes based on number of

employees. Cook and Ferris (1986), Dyer and Reeves (1995) and Purcell (1999)

have opined that the use of multiple industries can help to expand the scope of the

findings. All the responding organizations were relatively large in size having

more than 250 employees which is in line with suggestions of other researchers

188

such as Andolsek and Stebe (2005), Budhwar and Sparrow (1997), Dany et al.

(2008), Green et al. (2006), Mayne et al. (1996) and Perry and Kulik (2008).

Companies of this size are considered to ensure that the recognized firms had HR

departments in which HR practices were more formalized (de Kok & Uhlaner,

2001). Green et al. (2006) who studied organizations with more than 250

employees also suggested that large organizations are likely to have well-

established HR functions.

Therefore, the selection of respondents and responding organizations in the

current research was appropriate for a study on role of internal and external

agents in management of HR.

Response Rate

The response rate of the study was 32% which is high as compared to other

studies conducted in the area. The response rate of other similar studies have been

as low as 5% (Perry & Kulik, 2008), 8.56% (Hall & Torrington, 1998), 10.5%

(Valverde et al., 2006), 16% (Wood, 1995); 17% (Larsen & Brewster,

2003),18.6% (Budhwar, 2000a, 2000b) to 22.7% (Klass et al. ,1999). In the

current study, the response rate of 32% gives a considerable number of

respondents in absolute terms to produce consistent statistical results. Moreover,

item completion rate of 98.86% is another indication of the interest of the

participants in providing the response.

In order to proceed with SEM capabilities of LISREL using Maximum

Likelihood Estimation (MLE), the recommended minimum sample size is 50 but

in order to ensure stable MLE solutions, preferable sample size is 100-150 (Hair et

al., 2008). Joreskog and Sorbom (1993) suggested a formula [k (k - 1)12; where k

equals the number of variables] to compute the minimum sample size for SEM.

Following this, the minimum acceptable sample size for the present study would

be 51 since K=11.

In view of the fact that the present study had a sample of 174 companies, it well

exceeds the minimum requirement suggesting that SEM capabilities of LISREL

could be utilized. The sample size as reported in other similar studies with SEM

I89

using MLE with LISREL was 76 (Knight et al., 1999) and 100-200 (Lindquist et

al., 2001).

Non-response Bias

A comparison of responses of the two groups i.e. early and late respondents using independent sample T-test did not reveal any significant differences. Since non-

respondents are more similar to late respondents (Armstrong & Overton, 1977), it

points out that non-response bias has not affected the current study. Comparision

of firm characteristics indicated that the firms were representative of those

surveyed since they represented a cross-section of industries thus, also indicating

no evidence for non-response bias as suggested by Chan et al. (2004) and Teo (2000).

Since non-response bias has not affected the study results, thus, responses may be considered as suitable and representative of the target population.

Common Method Bias

Common method bias issue is addressed following the procedural and statistical

remedies as recommended by different researchers (e.g. Chang et al., 2010; Malhotra et al., 2006; Podsakoff & Organ, 1986; Podsakoff et al., 2003). In case of procedural methods, bias is minimized through design of the research

instrument such as protection of respondent anonymity and scale reordering.

While in statistical method, Harman's one-factor test was deployed. The results of EFA on all the variables revealed 15 factors with Eigen values greater than 1,

which accounted for 72.28% of the total variance. Since the first factor accounted

for 12.12 % of the total variance, it did not account for a majority of the variance.

Therefore, common method bias, which is one of the major sources of

measurement error in cross-sectional studies when data for exogenous and

endogenous variables are obtained from single respondent, had not crept in the

survey.

Hence, the results of the study reveal that all the items did not load on a single construct, thus, negating the presence of common method bias.

Measurement Model

Measurement model is assessed to explain how well the items represent

measurement instrument for the latent variables. Measurement analysis using EFA

and CFA was performed on all the scales viz. TDM, TPA, TBU, LDM, LPA,

LBU, EDM, EPA, EBU, STA and EFF used in the study.

Exploratory Factor Analysis (EFA): A principal components factor analysis

with varimax rotation was carried out on all items in each scale without placing

any restriction on number of factors to be extracted. EFA was conducted on each

scale independently to check the unidimensionality of constructs. To find out if the

data is appropriate for factor analysis, before proceeding with EFA, Kaiser-Meyer-

Olkin (KMO) Measure of Sampling Adequacy and Bartlett's Tests of Sphericity

were performed which were found acceptable in all the cases. Results of EFA

revealed that all the scales were unidimensional except LPA scale. EFA results for

LPA scale generated two factors whereas in case of LDM only one factor was

generated but the factor loading for. one of the items was less than the desirable

limit of 0.50. Thus in both the cases, EFA was again carried out and one item was

deleted which had the lowest loading. As a result, unidimensionality of both the

scales was achieved with strong item loadings.

The results of EFA revealed that in all cases the scales were unidimensional

except LPA scale. Moreover, loading values of the items for all the scales were

high except for LDM scale. Unidimensionality of LPA and LDM scales was

achieved after deleting an item with lowest loading and running the EFA again

on the remaining scale items to obtain improved loadings.

Confirmatory Factor Analysis (CFA): Although unidimensionality of all the

scales was achieved after running EFA, however, as a further check, CFA was

conducted to measure the SEM based reliability and validity of the scales.

Reliability

After unidimensionality of the scales was established, two types of statistical

reliability were computed viz, indicator reliability and scale reliability.

191

Indicator Reliability

The results of the study revealed that most indicators had loadings of more than 0.5

or close to it on the latent variables. Indicator reliability greater than 0.5 or close to

it is considered acceptable (Long, 1983; Schumacker & Lomax, 2004; Wu, 2005).

The indicator reliability in case of all the scales was found to be satisfactory in

light of the suggested values.

Scale Reliability

Cronbach's Coefficient Alpha: Reliability estimates of all the scales returned

Cronbach alpha values higher than the suggested 0.70.

Construct. Reliability (CR): The construct reliability values as calculated by the

recommended formulae were over 0.70 which is more than the suggested value of

0.6 for all the scales.

Variance Extracted (VE): The variance extracted values as obtained from the

prescribed formulae exceeded or were close to the recommended value of 0.5.

The researcher did not find any study in the area in which both indicator and

scale reliability were measured. Therefore, the current study addresses this gap.

All the scales demonstrated satisfactory indicator and scale reliability.

Validity

Different forms of translation (content and face validity) and construct validity

(convergent, discriminant, nomological and criterion validity) were determined in

the current study. Translation validity was addressed during instrument

development stage as reported in section 4.5 whereas construct validity was

assessed after final data collection. Results of construct validity are discussed

below:

Convergent Validity: Convergent validity was measured using various methods.

As all the scales of the present study possessed unidimensionality and high internal

consistency, proof of at least moderate convergent validity existed. Additionally,

192

all items were found to load on their hypothesized dimensions and the estimates

were positive and significant. Most of the parameter estimates in case of different

scales had loadings more than 0.60 or were close to 0.60, thus also indicative of

relatively high convergent validity. Moreover, all t-values were over 2 (p=0.001),

hence, signifying that convergent validity was high. In addition to this, convergent

validity of scales is computed using CFA fit indices viz. Bentler-Bonett Coefficient

and GFI in SEM. In the current study, Bentler-Bonett coefficient and GFI values of

all the scales were more than 0.9 or close to it, which provides strong evidence of

convergent validity of study scales.

Discriminant Validity: All the scales were tested for discriminant validity

following a two-step approach. In the first method, Harman's one-factor test was

conducted and the results of the study revealed that fourteen factors were generated

with 71.30% of the total variance, and factor 1 had only 12.70% of the variance.

Thus, the results indicate that all the items did not load on a single construct,

thereby indicating the presence of discriminant validity of the scales. While in the

second method, variance-extracted estimates for all possible pairs of constructs are

compared with the square of correlation estimate between these two constructs.

The variance extracted estimates were higher than the squared correlation

estimates in most of the cases. This indicates that the items of a latent construct

explain that construct better than they explain another construct which gives proof

of discriminant validity.

Nomological Validity; Since TDM, TPA, .TBU, LDM, LPA, LBU, EDM, EPA

and EBU are measures depicting role of internal and external agents' vis-a-vis

HRM, theoretically they are expected to correlate. All correlation values were

found to be positive and significant giving proof of nomological validity.

A number of empirical studies on the role of agents in HRM have methodological.

limitations. While most of the studies are case based (e.g. Bond & McCracken,

2005; Bond & Wise, 2003; Cascon-Pereira et al., 2006; Finegold & Frenkel, 2006;

Gennard & Kelly, 1997; Harris et al., 2002; Renwick, 2000; Thornhill & Saunders,

1998; Watson et al., 2007), a few empirical studies in the area do exist (e.g.

Andolsek & Stebe, 2005; Budhwar, 2000a, 2000b; Budhwar & Sparrow, 1997;

193

Dany et al., 2008; Srimannarayana, 2010; Valverde et al., 2006). However, most of

the empirical studies conducted in the area have not addressed the issue of scale

reliability and validity. Thus, the current study is distinct as it addresses the

different forms of validity such as translation (content and face validity) and construct validity (convergent, discriminant nomological and criterion validity)

issues.

All the scales exhibited high convergent, discriminant and nomological validity. Criterion validity was assessed along with the structural model

Structural Model

SEM capabilities of LISREL 8.50 software was used to evaluate the conceptual

research -models viz. Direct Effect Model (Ml), Partially Mediated Model (M2)

and Fully Mediated Model (M3) illustrated in Exhibit 4.4a, 4.4b and 4.4c. Since,

none of the moderating variables were found to be significantly correlated with the

study variables (i.e. all correlation values indicate weak correlations), they were

not included in the structural models.

Structural Model Fit Indices: M1, M2, M3

The three alternate models viz. Direct Effect Model (M1), Partially Mediated

Model (M2) and Fully Mediated Model (M3) were assessed on the basis of fit

measures. In the present study, as depicted in Exhibit 5.3, classification of fit measures as suggested by Malhotra & Dash (2011) was followed. Following other

researchers (e.g. Baumgartner & Homburg 1996; Hair et al., 2008; Jackson et al., 2009; Malhotra & Dash, 2011; Ping, 2004; Viera, 2011), the researcher followed

the criteria of reporting one fit index from each fit measure for description of

alternate models. In the present study, the results revealed that fits indices of the

three structural models represent the data well. The values of fit indices are

presented in Table 5.33, 5.35 and 5.37. All the values of fit indices are either

within the recommended range or close to the recommended values, indicating

good fit. ,

194

The three alternate structural models were assessed on the basis off! measures. Overall, the fit indices of alternate structural models indicated that all the three

models fit the data well, since most of the fit indices of all the three models are either within the recommended range or close to the recommended values.

Path Coefficients and Hypotheses Testing: Direct Effect Model Table 6.1 presents a summary of results of hypotheses testing of Direct Effect

Model (Ml) through SEM.

Table 6.1 Results of Hypotheses Testing: Direct Effect Model (M1)

ypotheses Results ! ,~ remarks ~ ~ ~:

H1TDM Rejected TDM has no direct and positive impact on EFF

H2rpA Not Rejected TPA has a direct and positive impact on EFF

H3TBU Not Rejected TBU has a direct and positive impact on EFF

H4LDM Not Rejected LDM has a direct and positive impact on EFF

H5LpA Not Rejected LPA has a direct and positive impact on EFF

H61u Rejected LBU has no direct and positive impact on EFF

H7EDM Rejected EDM has no direct and positive impact on EFF

HSEpg Not Rejected EPA has a direct and positive impact on EFF

H9EBU Not Rejected EBU has a direct and positive impact on EFF

The results for Direct Effect Model (M1) may be summarized as follows:

❖ TDM had no direct and positive impact on EFF but TPA and TBU have a

direct and positive impact on EFF.

•,'• LDM and LPA had a direct and positive impact on EFF but LBU has no


❖ EDM had no direct and positive impact on EFF but EPA and EBU have a


Path Coefficients and Hypotheses Testing: Partially Mediated Model

Table 6.2 presents a summary of results of hypotheses testing of Partially Mediated

Model (M2) through SEM.

Table 6.2 Results of Hypotheses Testing: Partially Mediated Model (M2)

Bypothescs fReul[t ~s yS S v n .y,-.d,. Remarksi"u

HIOTDM Rejected TDM has no direct and positive impact on STA HII TPA Not Rejected TPA has a direct and positive impact on STA H12Tvu Not Rejected TBU has a direct and positive impact on STA H13LDU Rejected LDM has no direct and positive impact on STA H14L,A Not Rejected LPA has a direct and positive impact on STA H1511 Not Rejected LBU has direct and positive impact on STA HI6EDU Rejected EDM has no direct and positive impact on STA H17EPA Not Rejected EPA has a direct and positive impact on STA H18EBU Rejected EBU has no direct and positive impact on STA H19 r, Rejected TDM has no direct and positive impact on EFF

H20TPA Not Rejected TPA has direct and positive impact on EFF

H21TBU Not Rejected TBU has a direct and positive impact on EFF H22LDM Not Rejected LDM had a direct and positive impact on EFF H23LPA Rejected LPA has no direct and positive impact on EFF H24LBu Rejected LBU has no direct and positive impact on EFF

H25EDM Not Rejected EDM has a direct and positive impact on EFF. H26EPA Rejected EPA has no direct and positive impact on EFF

H27EBU Not Rejected EBU has a direct and positive impact on EFF H28STA Not Rejected STA has a direct and positive impact on EFF

The results for Partially Mediated Model (M2) may be summarized as

follows:

❖ TDM had no direct and positive impact on STA but TPA and TBU do have

a direct and positive impact on STA.

❖ LDM had no direct and positive impact on STA, however, LPA and LBU

do have a direct and positive impact on STA.

❖ EDM and EBU had no direct and positive impact on STA but EPA has a

direct and positive impact on STA.

❖ TDM had no direct and positive impact on EFF but TPA and TBU do have

a direct and positive impact on EFF.

:• LPA and LBU had no direct and positive impact on EFF but LDM has a


❖ EDM and EBU had a direct and positive impact on EFF but EPA has no


❖ STA had a direct and positive impact on EFF.

196

Path Coefficients and Hypotheses Testing: Fully Mediated Model

Table 6.3 presents a summary of results of hypotheses testing of Fully Mediated Model (M3) through SEM.

Table 6.3 Results of Hvootheses Testina: Fully Mediated Model [M3l V013'Potheses Results ~Rek irt a !Cs ,.

H29TDM Rejected TDM has no direct and positive impact on STA H30TPA Not Rejected TPA has a direct and positive impact on STA H31TBU Not Rejected TBU has a direct and positive impact on STA H32LDM Rejected LDM has no direct and positive impact on STA H33LPA Not Rejected LPA has a direct and positive impact on. STA H34LBU Not Rejected LBU has direct and positive impact on STA H35EDM Rejected EDM has no direct and positive impact on STA H36EPA Not Rejected EPA has a direct and positive impact on STA H37EBu Rejected EBU has no direct and positive impact on STA H38STR Not Rejected STA has a direct and positive impact on EFF

The results for Fully Mediated Model (M3) may be summarized as follows:

❖ TDM had no direct and positive impact on STA but TPA and TBU do have

a direct and positive impact on STA. ❖ LDM had no direct and positive impact on STA although LPA and LBU do

have a direct and positive impact STA. •• EDM and EBU had no direct and positive impact on STA but EPA" had a

direct and positive impact on STA. :• STA had a direct and positive impact on EFF.

Due to paradigm shift in the business environment, people management issues are becoming business issues and internal and external agents are reaching out

to take control over the HR function. In this context, several researchers have maintained the role of internal and external agents in HRM decision-making,

process/activities and budgeting for different HRM functions (e.g. Casco'n-

Pereira et al., 2006; Cook, 1999; Chung et al., 1987; Finegold & Frenkel, 2006;

Galanaki & Papalexandris, 2005; Hall & Tarrington, 1998; Harper, 1993; Jonas et al., 1990; Khatri & Budhwar, 2002.; Mahoney & Brewster, 2002; McConville

197

& Holden, 1999; Papalexandris & Panayotopoulou, 2005; Valverde et al., 2006;

Whittaker, 1990).

The involvement of agents in HRM has led to the enhanced organizational

effectiveness in addressing people management issues (Schuler, 1990). Some

research studies have indicated the positive impact of involvement of agents on

the overall effectiveness of HRM (Budhwar, 2000a; Budhwar & Sparrow, 1997;

Valverde et al., 2006). Ferris et al.'s (1999) study reported the two perspectives

of effectiveness of HRM that need empirical attention that is the effectiveness

with which HRM policies and practices are implemented and the effectiveness

of these practices in producing desired results. In addition to this, some studies

have indicated that there is an indirect relationship between the role of internal

and external agents in management of human resources and effectiveness of

HRM (e.g. Guest & Conway, 2011; Hope Hailey et al., 2005; Valverde et al.,

2006). The involvement of agents in HRM depends on the size and shape of

HR department, organization and role of HR department (Larsen & Brewster,

2003). The involvement of agents in HR practices lead to better HR outcomes

which in turn affect the effectiveness of HRM and firm performance (e.g.

Andersen et al., 2007; Chand & Katou, 2007; Wan et al., 2002).

In the Iight of prior studies as discussed above, mixed support was found for the

findings of the present study. The result of the present study partially

corroborates with the finding of the previous researchers. In case of all the three

models, direct and positive -relationship was found between the study variables

in most cases (results presented in tables 6.1, 6.2, 6.3), however, in some cases

direct and positive relationship could not be established between the study

variables owing to the fact that there is variations in the work environment of

India and other countries.

Even though the structural models did converge in all the three cases, mixed

support was found for the hypothesized relationships between the constructs.

198

Criterion Validity

The relationship between exogenous and endogenous variables in the current

study shows that there is a direct and positive linkage. It is notable that in most

cases the hypotheses were not rejected. This provides sufficient evidence of

criterion validity. However, criterion-validity of direct effect model is high as

compared to partially mediated model and fully mediated model.

Hence, the requirementfor criterion validity is satisfactorily addressed.

Comparison of Alternate Models

Several fit indices generated in LISREL were used to compare the alternate

models viz. Direct Effect Model (MI), Partially Mediated Model (M2) and

Fully Mediated Model (M3). In line with the suggestions of researchers (e.g.

Akaike, 1987; Edelman, 2010; Hennig-Thurau et al., 2002; Knight et al., 1999;

Rust et al. 1995; Vieira, 2011), model fit indices viz. x2, GFI, AGFI, AIC,

CAIC, IFI, CFI were considered to compare and select the best possible model

for the present study. Table 5.39 presents the values of fit indices used in the

current study. On the basis of fit indices presented in Table 5.39, one conclusion

that could be drawn is that among the three alternate models the fit indices of

Ml are better than M2 and M3. AIthough the results provide mixed support for

both the direct and indirect effect of role measures on the effectiveness of IIRM

but the direct effect of role measures as indicated by the path coefficients was

more as compared to the indirect effect of role measures on effectiveness of

HRM. The role of the mediator was not as strong as the direct effect.

The result of comparision of fit indices suggests that among the three

alternate models, M1 is the best possible model since the fit indices of Ml are

better than the other models.

Tests of Differences and Association

Company type was classified into two categories viz. sector

(manufacturing/service), and size (small/medium/large) of organization. An

independent sample t-test was deployed in order to compare differences in

199

company type on TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA and EBU

for sector (manufacturing/service) and one-way ANOVA for comparision of

differences between three groups based on size. Chi-square test was performed

in order to establish association, if any, between company type and TDM, TPA,

TBU, LDM, LPA, LBU, EDM, EPA and EBU. Scores on role measures were

classified into three categories viz, high, medium and low based on percentiles.

Table 6.4 presents the summary results.

Table 6.4: Results of Tests of Difference and Association

Significant differences were not observed

Hol to Hag T-test Not on the dimensions TDM, TPA, TBU, LDM, Rejected LPA, LBU, EDM, EPA, EBU between

manufacturing and service companies Significant differences were not observed

Not on the dimensions TDM, TPA, TBU, HHo18o ANOVA Rejected LDM, LPA, LBU, EDM, EPA, EBU

between small, medium and large organizations

Significant association does not exist Chi- Not between company type i.e. manufacturing

Hol to Hog square Rejected and service organizations and TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU dimensions Significant association does not exist

Ho'0 to Chi- Not between company type i.e. small, medium

H018 square Rejected and large organizations . and TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA, EBU dimensions

-Significant at p<0.05

Some researchers have pointed out that size of the organization plays an

important role in determining the involvement of agents in HRM (Poole &

Jenkins, 1997; Shaw et al., 1993). Various research studies have indicated the

effect of size of an organization and the involvement of internal agents on the

human resource practices of organizations (Budhwar, 2000a; Shaw et al., 1993).

For instance, Iarge organizations tend to have more formal HR practices

(Budhwar, 2000b). Bennett et al. (1998) explained the influence of industry on

human resource . practices. Several researchers argued that business

organizations in the service sector were more likely to have a strategic approach

to HRM than manufacturing organizations thereby affecting the role of agents

200

(e.g. Marginson et al., 1988; Othman & Ismail, 1996). Srimannarayana (2010)

reported the differences between manufacturing and service sector companies

on the role of line managers in HRM.

From the results presented in Table 6.4, it can be concluded that significant

differences were not observed between company type and different study scales.

The results do not corroborate with the findings of the previous researchers.

Thus, it can be inferred that sector and size do not have any impact on the role

of internal and external agents in management of HR.

Hence, significant differences as well as association were not observed

between company type (i.e. manufacturing and service companies and small,

medium and large organizations) and role of internal and external agents (i.e.

TDM, TPA, TBU, LDM, LPA, LBU, EDM, EPA and EBU) in HRM.

6.2 Conclusions

The conclusion drawn from the findings of the study are given below:

Respondents

❖ Most of , the respondents of the study were senior HR executives (e.g.

Director-HR, Chief People Officer, Vice President-HR etc.).

Responding Firms

❖ The responding organizations represent a cross-section of industries,

belonging to companies of Indian and foreign origin, private and public

sectors, service and manufacturing sectors and companies of different sizes

based on number of employees. All the responding organizations were

relatively large in size having more than 250 employees.

Response Rate

•'r The response rate of the study was 32% which is high as compared to other

studies conducted in the area.

❖ Item completion rate of 98.86% indicates the interest of the participants in

providing the response and therefore, effectiveness of the survey.

201

Non-response Bias

❖ The results of independent sample T-test did not reveal any significant

differences which points out that non-response bias has not affected the

current study.

Common Method Bias

❖ The results of Harman's one-factor test revealed that all the items did not

load on a single construct. Consequently, indicating that common method

bias has not crept in the survey.

Measurement Model

In measurement model, scales unidimensionality, reliability and validity issues

were addressed. Both EFA and CFA were carried out to assess the study scales.

❖ Unidimensionality: Measurement model analysis was performed on all the

study scales. The results obtained in EFA showed that most of the study

scales were unidimensional in nature except LPA (i.e. two factors were

generated) and LDM (i.e. one item was having low loading). Following the

pro cedüre recommended by Hair et al., 2008, EFA was again run on LDM

and LPA to obtain unidimensional scales having statistically strong

loadings. In both LDM and LPA scales, one item each was deleted having low loading after which strong loading values were obtained.

+ Confirmatory factor Analysis: After obtaining the unidimensional scales,

CFA were performed to assess the SEM based reliability and validity.

❖ Reliability: Different types of reliability were assessed:

■ Indicator reliability for most of the indicators was found to be

satisfactory.

■ Scale reliability was assessed by means of Cronbach's coefficient

alpha, construct reliability and variance extracted. All the scales exhibited acceptable scale reliability.

❖ Validity: Two types of validity (translation and construct validity) were

considered in the present research. Translation validity includes content and

face validity and was assessed during instrument development and pilot

testing. After final data collection, construct validity was estimated.

Construct validity includes convergent, discriminant and nomological

validity which were part of measurement model, the last form of validity

was part of structural model. Support for all forms of validity was

established in the current study.

Structural Model

In structural model, SEM capabilities of LISREL were used to find out the

relationship between different variables. The three alternate models were

assessed on the basis of model fit indices and path coefficients to test the

hypothesized relationships. The testing of relationships between the study

variables is followed by criterion validity and comparision of alternate models.

❖ Model Fit Indices: Appropriate indices close to the global fit were obtained

by estimating the structural models. Most of the fit indices of all the three

alternate models were either within the acceptable limits or close to it.

+ Path Coefficients and Hypotheses Testing: In the current study, structural

models converge for all the three models (Ml, M2 and M3) but mixed support

was found for the hypothesized relationships between constructs.. While in

some cases, direct and positive relationship existed between exogenous and

endogenous variables, in some cases the relationship was indirect through

mediating variables.

❖ Criterion Validity: In present study, sufficient support was found for criterion

validity.

❖ Comparision of Alternate Models: All the alternate models were compared

on the basis of select fit indices. The comparision of models revealed that M1

had the best fit indices. It signifies that the direct effect of role measures on

effectiveness of HRM is more as compared to indirect effect of role measures

on effectiveness of HRM.

203

Test of Differences and Association

❖ Companies were classified into two categories viz. sector (manufacturing

and service) and size (small, medium and large). Results of independent

sample T-test and one way ANOVA revealed that significant differences

did not exist between company type (sector and size) and role measures.

❖ Results of Chi-square test revealed that significant association did not exist

between company type (sector and size) and role measures.

CHAPTER 7: MANAGERIAL IMPLICATIONS AND FUTURE

RESEARCH DIRECTIONS

7.1 Managerial Implications and Contributions of the Study 7.2 Future Research Directions

CHAPTER 7: MANAGERIAL IMPLICATIONS AND FUTURE

RESEARCH DIRECTIONS

Chapter Overview

This chapter highlights the managerial implications and contributions of the study

based on the findings and also puts forward the likely directions for future

research.

7.1 Managerial implications and Contributions of the Study

In today's fast changing business environment, HR is a key element in the growth

of an organization. Only effective & efficient HR gives an organization

competitive edge over its competitors. The involvement of top management, line

managers & external, service providers in decision making, process/activities and

budgeting vis-a-vis HRM ensures strategic management of HR issues. The current

study has implications for both academicians and practitioners in the management

of human resources. Some of the contributions of the present study to existing

theory and practice are mentioned below:

U The present study has significant theoretical contributions to make. Since

most of the previous studies have focused on just one of the agents or, at

most, on two agents, there is no developed literature incorporating the study

of all agents. Thus, the present study, by investigating into the role of

internal and external agents in HRM, contributes to the existing theory and

provides useful insights for both academicians and practitioners.

❑ The study offers and tests three alternate conceptual models of role of

internal and external agents vis-a-vis HRM and their linkage with status

and effectiveness of HRM. The results of the study have implications for

both practitioners and human resource researchers in understanding the

contribution of these agents in HRM in organizations in the Indian context.

U The role of internal and external agents vis-a-vis HRM has been a relatively

under researched area. Moreover, most previous studies in the area are

qualitative in nature thus, raising methodological issues. The current study

is based on empirical data and therefore addresses this problem.

❑ An outcome of the study is the development of a reliable and valid

instrument for measuring the various dimensions of role of internal and

external agents vis-a-vis HRM. Thus, the research instrument is expected to

assist HR researchers and practitioners in the analysis of role of these

agents.

U While most of studies on role of agents have been conducted in the Western

world, the current research adds to the literature by drawing its sample from

India, where economic reforms have attracted a large number- of multinationals, due to which there is paradigm shift in the HRM scenario.

❑ The study explores the role of internal and external agents vis-a-vis HRM

and its relationship with status and effectiveness of HRM. The findings of

the study are expected to fill the missing link as most previous studies have

focused on the role of these agents in HRM only without establishing any

relationship with HRM outcomes.

❑ Since the present research investigates the link between role of agents and

status and effectiveness of HRM in Indian context, the results of the

research are likely to throw light on the present scenario of role of agents in

FIRM in India. The findings will be of use to researchers in providing

insights of the Indian corporate terrain.

❑ By linking the various dimensions of role of internal and external agents

vis-a-vis HRM with status and effectiveness of HRM, the results of the

present study provide support to the idea that involvement of agents in

HRM has positive implications. Thus, it can be inferred from the findings

of the study that the involvement of internal and external agents vis-a-vis

HRM has favourable outcomes.

❑ In the current research, structural equation modeling is deployed which is a

robust technique for examining multiple relationships simultaneously in a

single model (e.g. Anderson & Gerbing, 1988; Graver & Mentzer, 1999;

Hair er al., 2008; Malhotra & Dash, 2011). Thus, the current research is

expected to contribute methodologically to the existing stream of research.

❑ The study also throws light on the role of internal and external agents in

HRM with respect to company type (sector and size). The findings on the

basis of company type offer useful insight into the HR landscape in India.

7.2 Future Research Directions

Every research is a small effort in the journey to build theory. Each researcher

starts from where the previous researchers have left, a researcher contributes his

efforts, and finally leaves the matter for future researchers. Based on the present

study, some directions for future research may be forwarded:

❑ Through the present research, an effort was made to develop an instrument

for measuring the role of internal and external agents vis-a-vis HRM. Since

the scope of current study is limited to India, this research instrument can

be replicated in other parts of the world to cross-validate it on other

samples. Wherever necessary, changes can be incorporated in the

instrument and the modified instrument must be tested to further check its

unidimensionality, reliability and validity.

U In the present study, survey methodology was adopted to collect the data

from the respondents. The survey yielded 32% response rate which is high

as compared to other similar researches conducted in the area. However, an

intensive follow-up on non-respondents would enhance the response rate

and would provide further support to the study.

❑ The current study is based on data obtained from HR managers through a

structured instrument. Future researchers may .also include other

stakeholders such as internal and external agents in data collection. This

will help in getting a more comprehensive and a richer view of things.

U The current research attempts to establish the link between role measures

with status and effectiveness of HRM. Although, results provide positive

support for the relationship between role measures, status of HRM and

effectiveness of HRM, there is need to cross-validate the findings of current

study in other countries.

207

❑ In the present study, most findings support the direct and positive

relationship between exogenous and endogenous variables. However, direct

and positive relationship could not be established between some variables.

It is believed that the relationship between the measures may be affected by

the interplay of other mediating variables which needs to be explored in

future researches.

U In the current study, the sample frame consists of 550 business

organizations operating across India. Future researchers can take up more

comprehensive sample frames having organizations operating across the

globe which may help to generate more generalizable results and may also

help in comparing the organizations operating in different countries.

❑ In the current study, data was collected through mail methodology and

personal visits. In future researches, data collection process can be

improved by supplementing with other data collection methods following

Podsakoff and Organ (1986) and Podsakoff et al. (2003).

❑ Since in the present research, the researcher relied on the data obtained

through structured questionnaire, the same may be supplemented with

qualitative methodology to further strengthen the study as suggested by

Becker and Gerhart (1996).

U In the current study, data for both exogenous and endogenous variables

r

were collected simultaneously. In order to further strengthen the study, to

ascertain better relationship between exogenous and endogenous variables,

data for both exogenous and endogenous variables may be collected

following longitudinal research design.

❑ Data for both role measures (exogenous variables) and effectiveness of

HRM (endogenous variable) were collected from the same respondent in

the study. Although, the responses were checked for any possible biases

that may have crept in due to common source problems, future researchers

may obtain the data for role measures and effectiveness of HRM from

different respondents to further eliminate chances of any such bias.

208

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Websites: • www.citehr.com/information-about-hrbpo-vt7351.html

• www.google.com

• www.mca.gov.in

237

4 Take part in decision-making vis-a-vis employee pay management 1 : L:LL

IL

S Take part in decision-making vis-a-vis employee performance a sisal ~~ if

s "~l[ i[i1 ,

6] Take part in decision-making vis-a-vis industrial relations i 2 s j I[J J

J Participate in HR planning processlactivities ❑ °, ' N ' 3 P i J[

j _J

Participate in employee. recruitment & selection processIactivit _j I ❑ .

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[' Participate in employee training & development process/activities ❑ ~; ;; ~x , ;' ;;~ ~ a , P LJjJjLJ 10 Participate In employee reward management processlactivities ❑ ❑ ~ ' T o o , r s a F

11 Participate in employee performance appraisal process!activities i, .0 ❑ ; i .,

12 Participate in maintaining industrial relations ❑ ~ N: ❑ . J j

13 Are involved in budgeting visavis HR planning ❑ ? ra x [:[.L[] . I4 Are

sele ction involved in budgeting vis-a-vis employee recruitment & r

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15 Are involved in budgeting vis-a,vis employee training & development

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16 -

Are involved in budgeting vis-a-vis employee pay management [_J a"~ tiE 1

11 Are involved in budgeting vis-a-vis employee performance appraisal x

i8 Are involved in budgeting vis-a-vis industrial relations 1 ,; I _____

II: Please write (Y) in the appropriate box depending on the extent of your agreement and disagreement with the following statements.

P S0. Strongly Disagree (1) =====r-=r> SA-Strongly Agree (5)

S,N Statements SD Z 3 4 SA

1 FIRM is viewed as a strategically important function in the organization T] ] 2 Top-level strategic decision-making teams include HR head/executive 9 ~Ll

[DStatusofHRdepartmentsisatparwithotherdeparftnents FIR function is represented at the board level 3 k i

HR executives are provided training in general managerial skills 5 i

66 There is frequent information sharing between FIR managers and senior managers i a :1 ] 1~ The HR department has sigriflcant influence on the strategic decision making process m

D[The HR department has positive relationships with stakeholders of the organization

Overall the HR department can be considered as very effective TJZ =

10. The overall performance of the organization is satisfactory ,~JLJ

1, Sector to which the organization belongs; Service (Write S) 2. Primary ownership of the Company viz, Public Sector (V/rite Pu) 3. Your designation 5. Total experience (Yrs) 7. Total No. of employees in the organization "

Manufacturing ('rite M) Private Sector (Write Pr) 4. Experience in the present position (Yrs) 6. Name of the Organization S. Country of Origin of the Company

Thank You

I: Please indicate whether the above agents perform HR roles in your organization using the key give. below Please mark /(tick) in the appropriate box depending on the extent o f involvementa grog f rom

I1Jo— III

HI

1. j Take part in decision-making vis~a•vis HR planning 1 2 3. 4 -5-.

Z', Takepart indecision -mkingvis•a•viscmployccrecruitment&salactior JJ o; 3. Takepartindecision•makingvis-a•visemp1oyeetraining&development

epartindecision makingvis-a•visemployeepaymanagement ? ?~ 51 Take part indecision makingvis-a•visemployce performance appraisal_ 6. Takepartindecision•makingvis-a•visindusirialrelations 7,; ParticipateinHRplanningprocesslactivities EE ; GI 8. Participate in employee recruitment && selectionprocesslactivitiea 9. Patticip teinem to eetrainin &dcve'l pmeatprace„ ssla. civitie s 10' Participatememployeerewardmagage~ncntprocesslactivities `' 11 Participateinemployeeparformauceappraisalprocess/activities ~2 fidicipateinmaintammgindustnalrclati ,IEEE] K, 13 Are mvolveinbudgetmgvis•a•visHRplamrmg 1 06 14; Areinvolvedinbudgetingyis•a•visamploycerecruitment&solcbtion 15T Areinvolvedinbudgefingvis a-visemployeetraining&'development

ry ~ ' 16: kictm g g vis-a -visemplo~eepaymauageinent. 11 Areanvolv

vedanb u

udget pae r. formanceapprai s gvls~ a vise e mpt Ye e_

Im ~a #

18 Aeinvolediubdgingvis•a•visindus_lrelations

II: P.lease marks (dek h the appropriate box depending on the extent of your agrQC►nent and d agr ement :I

I,~~ HRM is viewed as a siratcgieally important function in the organization 2. '.Top-level strategic decision•making team's include HR head/executive ~ '? 3. Status of HR depthracnts is at, par with other departments 4,! HR function is represented at the board level 5,: HR executives are provided training in general managenaI skills b There is frequent information sharing between HR managers and senior managers 0d

The HR department has significant inquence on the strategic decision•making process, ~y ""~'l, 8, The HR deparht ant has positive relationships with stakeholders of the organization 9.: Overall the HR department can be considered as very effective l The overall performance:of the organization is satisfactory

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