Impact of HR Policies on Employee’s Performance: An ...ejsit.org/journal3/dec55.pdf · Impact of...

SIT Journal of Management Vol. 3. No. 2: December 2013, Pp.654-674

Hazra, Sengupta, & Ghosh

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Impact of HR Policies on Employee’s Performance: An Empirical Study of

Selected Hospitality Organizations.

Krishnendu Hazra*, Partha Pratim Sengupta**, & Prosenjit Ghosh***

Abstract

HR work is not only concerned with old traditional activities of recruitment and selection, training and

development but its activities have been spread up to very far end corners of many new and distinguished

areas. Organizations having qualified and experienced manpower give competitive edge and it is said to

be most sustainable source of competitive advantage. The result of this study can provide human resource

professionals with useful and valuable information to decide what human resource practices should be

effectively implemented in their organizations. The study will further testify the relationship among them,

and provide valuable information for future hotel management needs. For the management level, it helps

to formulate strategies and identify the factors to guide administrators in policymaking, and also provide

employees a path that maximizes their service performance. Therefore, it is very crucial to work out in

more detail on relationship between the HRM practices of the hotel industry and their employee

performance.

This study investigated the impact of HRM practices namely compensation, performance evaluation,

appraisal, training and development and promotion practices on employee performance of selected

Hospitality organization.

Keywords: Human resource management (HRM), Employee performance, hotel industry, compensation, performance evaluation, appraisal, training and development and promotion.

*Krishnendu Hazra, Associate Professor, Dept. of Hotel Management, NSHM Knowledge Campus Group of Institution, West Bengal University of Technology, Durgapur, West Bengal, India. E-mail:

[email protected]

** Prof Partha Pratim Sengupta, Professor & HOD, Department of Humanities & Social Science, NIT, Durgapur, West Bengal. E-mail- [email protected]

***Prosenjit Ghosh, Asst. Professor, Dept. of Travel & Tourism Management, NSHM College of Management and Technology, West Bengal University of Technology, Durgapur, West Bengal, India. E-

mail: [email protected]



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Introduction

Hospitality industry displayed its significance in world‟s market with tremendous contribution to

the Indian economy. The entry of global players in Hospitality Industry has created huge

challenges to the Indian companies. Owing to that, Indian hospitality companies were forced to

adopt and implement innovative changes in their HR practices. They have realized that in today's

competitive business milieu, human Resource practices is the one which forms the framework

for the culture in the business management; create awareness towards the need to achieve the

business goals by the employees in the best possible and ethical manner. It is widely accepted

that employees constitute a vital part of organization resource, with the potential to improve the

organization‟s viable modest advantage.

Consequently, human resource manager in hospitality Industries would target potential work

force and would lay stress on skill development, technical development and effective job

performance by adopting effective human resource practices. We will observe the relationship

between the high performance HR practices such as job design, training and development,

motivation, supervisory support, working environment and compensation on employees‟ job

performance in Hospitality organization in Kolkata. It also analyses the impact of high

performance HR practices on employees‟ job performance.

Nature and mechanism of performing various operations have been changing with rapid pace.

World is now a global village where globalization is a major entity. Countries with proactive

approaches have identified globalization as a major element in business world and business

world is now more dynamic. Previously it was considered that allocating resources to HR

activities like training and development, organization development and human resource

devolvement is a major expense but now people call it as an investment. One of the common

emerging beliefs is that “employees are capital” and are considered most valuable assets.

In particular HR practices such as job design, training and development, motivation, supervisory

support, working environment and compensation are widely believed to improve the

performance of employee as well as organizations. This study focuses on the impact that high

performance human resource practices have an improvement on employee‟s job performance.

Nature of HRM practices and their implementation and utilization in organizations in our

country are yet to be standardized. I intend pinpointing issue of HRM practices and their impact

on employee performance in selected hospitality organizations.



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Rewards can be direct and indirect. Providing respectable compensation to persons working in

organization have soothing effect on both employee and organizational performance. People get

paid but living from hand to mouth. How anyone can expect that such an employee will give

his/her hundred percent, how can government or private sector will promote the idea of

organizational citizenship behavior, how you can believe there will be presence of organizational

or employee commitment? Performance evaluation and promotion practices are normally based

on standard criteria, procedures, and policies and performance by qualified and experienced

persons of organization. Employee belief and perception about the fairness of such practices

matters a lot. For conducting performance evaluation employees must know what is expected

from them and what they can do. Promotion is the recognition of employee efforts and his

commitment to work. Getting higher and higher promotion is the ultimate desire of each person

working in any sort of organization.

The theoretical literature suggests that HMR practices increase productivity by increasing

employees‟ skills and motivation. Moreover, HRM practices contribute to business objectives

through strategic innovation or technical competence. Recent empirical studies on larger

companies supported the basic assumptions of HRM theory [1], [2], [3]. However, does this

theory apply to small-scale enterprises as well? HRM also carries costs and they might neutralize

the positive effects of HRM in small-scale enterprises. HRM is an investment, and thus, it costs

time and/or money. The current performance of employees may even be decreasing because of

the time spent on training. Moreover, HRM can only have effects when employees stay in the

company for a certain period of time. Otherwise the company suffers a loss because of the

investments in HRM. Thus, the benefits of HRM must exceed costs invested in HRM. Since

small-scale enterprises have limited financial resources it is very well possible that large

investments in HRM do not pay off.

During the last decade, the personnel/HRM field has shifted from a micro focus on individual

HRM practices to a debate on how HRM as a more holistic management approach may

contribute to the competitive advantage of the organizations. Three different perspectives have

been used in recent researches on the relationship between HRM practices and employee‟s

performance.



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Review of Literature

It is an acknowledged fact that the utmost asset of any institution is its Human Resources (HRs).

These resources perform a pivotal role in achieving the institutional goals. The institution‟s

administration cannot achieve the desired goals without the proper utilization of HRs. For this

purpose, the administration needs to manage these resources effectively and efficiently. The

activities done by the administration to manage (attract, select, train, motivate and retain) their

employees are called Human Resource Management Practices (HRMP‟s).

There is considerable support among those involved in strategic HRM for the notion that how a

firm manages its workforce affects its performance. This idea is strongly reflected in the high

performance human resource management (HPHR) discussion where the effect of HR is

assumed to impact positively at the employee level [4].

We are living in an era where the business world has become a village and the business

organizations are facing cutthroat competition from around the globe. One of a source of

competitive advantage for any business is its human resources [5].

Based on these empirical evidences, it is also becoming increasingly clear that the human

resource is one important element that can help an organization to be more effective and achieve

competitive advantage. Using a resource-based perspective of the organization, Barney (1995)

[6] suggests that organizations can simply develop sustained competitive advantage by

generating value in a unique way, which is difficult for competitors to replicate, through

employees.

More organizations are now considering their employees as assets in an attempt to gain

competitive advantage, as other organizational resources, such as technology, new product,

natural resources and economies of scale, are easier to replicate by competitors [7].

Impact of HRM on employees‟ job performance depends upon worker‟s response to HRM

practices, so the impact will move in direction of the perception of HRM practices by the

employee [8]. By adopting best practices in selection, inflow of best quality of skill set will be

inducted adding value to skills inventory of the organization [9]. Use of best HR practices shows

a stronger association with firm‟s productivity in high growth industry [10]. Ample of the

existing research on the relationship between HR practices and performance of the employees

and proposed that there is a positive relationship between the HR practices on employee job



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performance and also revealed that in the competitive environment of modern era organizations

are persistently improving performance of their employees by improving HR practices [11].

Parallel to the understanding those human resources are vital for an organization; human

resource management function is also going up in organizational hierarchy. Human resource

management aims to ensure that the organization obtains and retains the skilled, committed and

well motivated workforce it needs. This means taking steps to assess and satisfy future people

needs and to enhance and develop the inherent capacities of people – their contributions,

potential and employability – by providing learning and continuous development opportunities.

It involves the operation of recruitment and selection procedures, management development and

training activities linked to the needs of the business. [12]

Cooke (2000) [13] has included efficiency and effectiveness as ingredients of performance apart

from competitiveness and productivity. S(he) further argued that training is the tool to develop

knowledge and skills as means of increasing individual‟s performance (efficiency and

effectiveness).

According to several researchers, monetary compensation and job satisfaction are positively

associated with each other. Compensation is a systematic approach of providing monetary value

to employees in exchange for work performed. It may help to achieve several purposes such as

recruitment, job performance and job satisfaction. [14].

Moral and job satisfaction is affected by compensation. Often there is a balance that must be

reached between the monetary value the employer is willing to pay and the sentiments of worth

felt by the employees. In hospitality industry it is one of the very strong issues, so that hotel

industry cannot ignore it. [14]

Job definition is combination of job description and job specification. It clearly outlines duties,

responsibilities, working conditions and expected skills of an individual performing that job [9].

Ichniowski (1995) [15] while observing productivity of steel workers have found that

complementary HR practice System effects workers performance.

Majority of previous research has verified significant relationship between HR practices and

Employee Outcomes [16]

Training programs helps in making acquaintance of employees with more advance technology

and attaining robust competencies and skills in order to handle the functions and basics of newly

introduced technical equipment [17]. Training not only mentally develops the employee but also



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prepare them to make better their health in order to be with active mind and more productive

thought for the organization [18]. Improving employee‟s self-efficacy at work will also assist in

pushing their performance to an improved and effective level and increasing their momentum on

their own behalf. This one also is achievable through adding it into the contents of training

program [19] is of the opinion that for every employee to perform well there is the need for

constant training and development. The right employee training, development and education

provide big payoffs for the employer in increased productivity, knowledge, loyalty, and

contribution to general growth of the firm

Motivation plays an important role in performance and other activities and as such the manager

should know what motivation is and how subordinates can are motivated towards performance.

When employees have high autonomy, receive feedback about their performance, and have an

important, identifiable piece of work to do which requires skill variety, they may experience

feelings of happiness and therefore intrinsic motivation to keep performing well [20].

A motivated employee is more likely to output more to the benefit of the organization [21]. They

continue to argue that most of the successful people are around, have been proved to be very

efficient time managers. A reward strategy can develop teamwork. Lawler states, “Reward

systems can support change and motivate people to accept change and gain the skills that fit the

changing nature of the business” [22].

It is the duty of supervisors to ensure that employee job performance is at maximum potential, it

would be advantageous for managers in all trades and industry sectors worldwide to understand

what types of employee-supervisor interactions are associated with employee job performance. If

more work is delegated and responsibility is increased, employees are likely to see it as a sign of

appreciation and trust in their performance, which translates to a boost in self-esteem and

motivation to perform [23]. Perception of supervisors has an impact on many employee

outcomes related to production. They went on to explain that perception of a supervisor has a

positive correlation with motivation and a negative correlation with stress in employees [24].

Work environment is considered to be an important factor affected by transformational

leadership and affecting performance. It is composed of all factors related to job and

organization, which influence the relationship between employees, their job and the organization

[25]. Organizations in order to boost productivity design work environment in a way that



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satisfies employees [26]. Social, organizational and physical context serve as the impetus for

tasks and activities, and considerably influence workers‟ performance and work output [27].

Singh (2004), [28] whose observations are more relevant in our cultural context, argues that

compensation is a behavior aligning mechanism of employees with business strategy of the firm.

Wright et al (2003) [29] have argued that an employee will exert discretionary effort if proper

performance management system is in place and is supported by compensation system linked

with the performance management system.

The general purposes of the compensation policy covers respecting employees‟ performance,

maintaining a competitive labor market conditions, maintain justice employee salaries,

motivating employee performance and reduce employee turnover [30]. Compensation

performance is the result work of employee because it is the strongest link for the planned goal

and economy [31]. Providing respectful compensation to the employees of an organization has

soothing effect of both organization and employees‟ performance.

This study is very prolific for HR managers in Hospitality organization as they would get a clear

idea about the relationship of HR practices and employees‟ job performance; as a result they can

have more productive employees and can retain efficient employees in their organization. Only

the high performance HR practices such as job design, training and development, motivation,

supervisory support, working environment and compensation influencing employees‟ job

performance was considered for the study. It has both practical and theoretical significance. It

advances knowledge and understanding of how HR practices affect employees‟ job performance

in Hospitality organization in Kolkata; and it may also be used to assist other service

organizations in formulating effective HR practices to increase performance of the employees.

Objectives of the Study

Today HR department is going through tremendous pressure to get and retain skilled man power

for organization especially in hotel industry. To motivate, retain and satisfy the employee for

getting maximum effort, HR policies are really going through acid test. Employee‟s performance

is depending on various factors. Often there is a balance that must be reached between the

monetary value the employer is willing to pay and the sentiments of worth felt by the employees.

In hospitality industry it is one of the very strong issues, so that hotel industry must address it



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with right sprite and should think / take appropriate action. Here main objectives of the study

given below:

1. To evaluate the impact of HR policies on employee‟s performance at 3 stars and above stars

category hotels in Kolkata, West Bengal (WB).

2. To recognize the deficient areas in HR policies which are needed to improve to satisfy the

employees for their better performance in hospitality sector in Kolkata, WB.

Methodology of the Study

The study required to identify the employee performance on the basis of HR Policies impact in

three starts and above hotels at Kolkata in West Bengal. The data of this study have collected

through questionnaire designed on a 5-point Likert-type scale ranging from 1 to 5 where 1 means

very dissatisfied and 5 means very satisfied. The respondents were asked to evaluate the HR

policies impact on employee performance at various hotels, where they are working.

The sample population for this study was composed of employee of various departments of three

stars and above hotels in WB between October 2012 and July 2013. In this study we have 120

observations and are statistical analyzed such as factor analysis and multiple regression analysis

according to the respective objectives of the study with using the Statistical Package for Social

Sciences (SPSS) version 16.

Hypotheses are utilized to fulfill the objectives of the study. These hypotheses are

expressed as follows:

H₀: The HR policies have no impact on employee‟s performance in three stars and above hotels

in Kolkata, WB.

H₁: The HR policies have strong impact on employee‟s performance in three stars and above

hotels in Kolkata, WB.

Factor analysis is variable redundancy technique and this analysis was conducted to create

correlated variable composites from the original 23 attributes and to identify a smaller set of

dimensions or factors. In this study, factors were retained only if they had values greater than or

equal to 1.0 of Eigen value and a factor loading greater than 0.6.5.



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After the derived factor scores, we have applied in subsequent regression analysis where the

dependent variable was regressed against each of the factor scores derived from the factor

analysis and independent variables are the variables of each factors. The linear equation

commonly used for a regression analysis is Y= a + bx₁ +cx₂ + dx₃…… Where, Y is the

dependent variable and x₁, x₂, x₃… are the independent variables, and b, c, d are the coefficients

of the respective independent variables. In this study, multiple regression analysis was used to

examine employees‟ levels of job satisfaction at their working place like three stars and above

hotels in Kolkata, WB.

Findings of the Study

This chapter is divided into two major sections. The first section provides the demographic

characteristics of the respondents. The second section presents results on the respondents‟ on 23

attributes of the impact of HR policies at three stars and above hotels in Kolkata, WB and also

concentrates on the results of testing the proposed research hypotheses in terms of factor

analysis, multiple regression analysis.

Demographic Characteristics of the Respondents (N=120)

The demographic characteristics of the respondents are shown in Table 1 (in annexure I). The

gender distribution of the respondents was not equal, with 28.33% female respondents and

71.67% male respondents. The result shows age group of the respondents was below 20 years

(5%), followed by 21 to 30 years (68.33%), 31 to 40 years (25%), 41 & above (1.67%) was very

less.

In terms of level of education, almost 59.16% of the respondents had a university education level

(graduate); 11.68% of the respondents had a post graduate & above education, 20% of the

respondents are belonging under graduate and other 9.16%. The result shows the educational

attainment of the respondents is quite good and we can say better than average. With regard to

respondents' monthly salary of the job at three stars and above hotel in WB, the largest group

included those with a monthly salary of INR 11000 to 20000 (47.5%), INR 10,000 or less than

10,000 (14.16%), INR 21000 – 30000 (28.34%), and INR 31000 & above (10%). We can

conclude from the above income status that salary, which they are getting, is better than the

average and quite good also.



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Result on the observation and their satisfaction with 120variables

Initially we had 120 variables and we have done reliability test of our questionnaire and result

shows value of Cronbach‟s Alpha 0.941 which is quite good but further we have done more

study to get Cronbach‟s Alpha based on standardized items 0.944. After that we canceled nine

variables because their value was not matched. Than we have done multicolinearity test to

examine the correlation with each and every variable and found correlation of the variables.

Finally, we got fourteen variables [Satisfactory compensation & Benefit Package, Good

appraisal system, Secured Job, Total health care system satisfactory, Organize various

training regularly, Sufficient Retirement benefit facilities, Reflect your performance

Appraisal on performance, Flexible & satisfactory Working Time, Fair & respectful

treatment from Supervisor, Reasonable Workload, Salary & Responsibilities are equal,

Fair amount of Team spirit, Leave policy satisfactory, Satisfied with Vacation] which are

depicted three factors. Then we run factor analysis and formal test like KMO and Bartlett‟s test

of sampling adequacy also are used to ensure that there are some significant correlations among

the variables in the input data. Here, KMO and Bartlett‟s test result is 0.853 and cumulative

variance explained 74.104%. It ensures the significant correlations among the variables. The

output of factor analysis is obtained through Principal Components Analysis and specifying a

rotation.



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Factor 1 consists with 7 important variables, Factor 2 consists with other 5 important variables,

and Factor 3 consists of another 2 variables. The variables of each factor are given in below table



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Rotated Component Matrixa

Component

1 2 3

Satisfactory compensation & Benefit Package .903

Good appraisal system .843

Secured Job .839

Total health care system satisfactory .818

Organize various training regularly .776

Sufficient Retirement benefit facilities .765

Reflect your performance Appraisal on

performance .651

Flexible & satisfactory Working Time .862

Fair & respectful treatment from Supervisor .830

Reasonable Workload .792

Salary & Responsibilities are equal .752

Fair amount of Team spirit .617

Leave policy satisfactory .816

Satisfied with Vacation .724

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 4 iterations.

All the variables are very important and may influence the employee performance at three stars

and above hotels in WB. But applying statistical tool like factor analysis (Principal Component

analysis) for reduces number of variables that may share the relevant information towards

explaining the employee performance on the basis of HR policies impact.



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Factor 1 is named as Effective HR Policies, factor 2 is named as Useful Fringe benefit, and

factor 3 is named as Non-financial compensation

Factor 1 Named

Satisfactory compensation & Benefit Package

Effective HR Policies

Good appraisal system

Secured Job

Total health care system satisfactory

Organize various training regularly

Sufficient Retirement benefit facilities

Reflect your performance Appraisal on

performance

Factor 2 Named

Flexible & satisfactory Working Time

Useful Fringe benefit Fair & respectful treatment from Supervisor

Reasonable Workload

Salary & Responsibilities are equal

Fair amount of Team spirit

Factor 3 Named

Leave policy satisfactory Non-financial compensation

Satisfied with Vacation

After factor analysis, we also observed the regression analysis on the factor score and found the

R² value 0.942, 0.945 and 0.690 which are approaching 1 and statistically good. It is done to

explain the variation in one variable (employee performance), based on variation in more other

variables (independent variables).



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From the table 1 (Annexure I), the regression equation can be written as follows: Employee

satisfaction = -4.162 + 0.370 (Satisfactory compensation & Benefit Package) + 0.177(Good

appraisal system) + 0.239 (Secured Job) + 0.070 (Total health care system satisfactory) +0.159

(Fair & respectful treatment from Supervisor) + 0.052 (Sufficient Retirement benefit facilities) +

0.026 (Reflect your performance Appraisal on performance).

The measure of strength of association in the regression analysis is given by the coefficient of

determination denoted by R². This coefficient varies between 0 and 1 and represent by proportion

of total variation in the dependent variable that is accounted for by the variation in the factors.

From the table below, the R² value is 0.942which shows that 94% (approx.) of the variation in

employee performance can be explained by the factor 1 or seven independent variables.


satisfaction (Y) = - 3.059 + 0.223 (Flexible & satisfactory Working Time) + 0.266 (Fair &

respectful treatment from Supervisor) + 0.182(Reasonable Workload) +0.217 (Salary &

Responsibilities are equal) +.067(Fair amount of Team spirit). From the table below (model

summary), The R² value is 0.945 which shows that 95% (approx.) of the variation in employee

performance can be explained by the factor 2 or five independent variables.


satisfaction (Y) = - 3.778 + 0.666 (Leave policy satisfactory) + 0.271(Satisfied with Vacation).

From the table below (model summary), The R² value is 0.945which shows that 95% (approx.)



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of the variation in employee performance can be explained by the factor 3 or two independent

variables.

The result of the regression analysis (R² value 0.942, 0.945 and 0.690) on the basis of factor

score are reasonably good which are approaching 1 it means the variables of factor 1 and factor 2

and factor 3 have a great influence on the employee performance on job at three stars and above

hotels in West Bengal (WB) but there is need to improve the rest attributes related with financial

and non financial compensation of three stars and above hotels employee in WB.

Conclusion

Employee‟s performance is crucial for the organization as it is closely linked to guest

satisfaction. It is therefore in the best interest of an organization to devote a substantial amount

of effort examining ways to improve as well as to maximize the employee‟s performance in their

workplace.

The majority of the studies agreed that HR policies are vital for better performance and also to

solve an organization‟s turnover problem. Many of the studies recommended that when creating

a HR policies, hospitality organizations must make sure their total HR policies are competitive

not only within the industry. Results of this study indicated that many employees satisfied on HR

Policies at three star hotels in Kolkata, West Bengal (WB) only on few attributes; but there is

need to improve the rest attributes related with financial and non financial HR Policies (e.g.

Good physical working condition, Balance between work and person life, Satisfactory working

enthusiasm, Company valued their employee etc.) of three stars and above employees of the



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hotels in WB. Study also indicate that after certain years of experience employee quit from the

hotel sector as because of compensation are not equal to job responsibilities.

Here we have found very a few respondent aged above 40 years. That means to some extant

employees are satisfied at hotel sector in WB but experienced people are not satisfied with the

total HR Policies at the same sector. That is why they switch over other sector or industry for

their betterments. To retain the best manpower for the betterment of organization, the

management should think or take some measure, so that retention rate will become high.

Though in correlation there are 14 variables and we found correlation between them but when

we have done regression then we found that Reflect your performance Appraisal on performance

is not at all significant. It proves that industry should take necessary steps and think seriously.

Not only that we found a few other variables are also not significant (e.g. Sufficient Retirement

benefit facilities, Total health care system satisfactory, Fair amount of Team spirit) means the

employees are not happy also. It may not reflect your performance Appraisal on performance but

it is also a very serious point.

Study also indicates that after certain years of experience employees quit from the hotel sector as

because of those previous points and satisfactory level of the employees are not equal to job.

Here we have found only a very few persons out of total respondents aged above 40 years. Not

only that, if we go through the point reason to continue, we find that most of the respondents

prefer first point i.e. salary. So except salary, other areas require proper care or some more

attention. That means to some extant HR policies have really good impact on employee‟s

performance at hospitality sector in WB but experienced people do not perform well at the same

sector. That is why they switch over other sector or industry for their betterments. To retain the

best manpower for the betterment of organization which is the great challenge for HRM, they

should think or take some necessary measures to keep retention rate high



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Annexure I Demographic Characteristic of the Respondents (N= 120)

Reason to Continue 56

20

17

27

46.68

16.66

14.16

22.50

Switch over Yes

No

47

73

18.82

81.18

Table no 1

Variables Frequency Percentage %

Gender – Male

Female

86

34

71.67

28.33

Age – Below 06

82

30

02

05.00

68.33

25.00

01.67

Education Level - 24

71

14

11

20.00

59.16

11.68

09.16

Income Group 17

57

34

12

14.16

47.50

28.34

10.00

Duration 16

47

34

23

13.34

39.16

28.34

19.16



ISSN: 2278-9111

Table no 2

Table no 3

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