Based on the Guest 1997 organizational outcome model, this explanatory study examined the effects of five dimensions of practices of HR. i.e. performance evaluation, recruitment& selection, compensation & reward, career opportunities within organization and training and development on proximal business outcomes (Flexibility and Quality of Operations). The study validates components of GUEST model by integrating between HRM dimensions and banking operations, thus strengthens the existing theoretical model of GUEST by improving the comprehensiveness as it provides analytical framework for studying HR. Exploratory factor analysis (EFA) and confirmatory factor analysis (CFA)was utilized in the current study, and tested the study hypotheses by SEM to analyze the proposed conceptual model. It was found that all five chosen HR practices had significant influence on the quality of operations however for flexibility of operations, performance appraisals and career within organization have shown significant role for banking industry of the country, Pakistan. The study contributed to the construction and validation of structural. path and measurement models(MM) of SHRM practices and two selected operational competitive outcomes based on theoretical and empirical foundations, which will help progress the human resource management future researches and important implications for HR mangers, as very little work has been done on interdisciplinary framework of HR and OM specifically within context of South Asian banking Industry

.Keywords: Strategic Human Resource Management (SHRM);operational performance management; competitive priorities; banks; Pakistan


Guest (1997) model illustrated that behaviors of workers are affected by HR practices in terms of increase in employee commitment, quality of work and flexibility of Operations. In modern organization Operations management (OM) is a key function, core study area in business schools, still operations mangers are facing the challenge of working efficiently at low cost along with managing quality1. This paper will conduct analysis to investigate the effects of HRM practices on the operations’ quality and flexibility of banks, including objective as well as quantitative methodology with where previous studies are synthesized on a relevant topic resulting into an overall specific finding. The study is carried out on banking employees as they can exercise considerable discretions in managing the operations of banks, also supported by Bartel4. As per the GUEST theory 1997 HR policies are the only way to get HR outcomes including adaptability, flexibility, employees’ commitment and quality of operations. The same theory of linkage between Human resource enhancement in an organization and operational performance of enterprises was also researched by Youndt5and his co-authors. Internationally a mutual decision is agreed for localizing the HRM practices in the business world for supporting and augmenting the enterprise performances6,7. In economies, financial institutions’ strong development is essential for effective transition to a market based economy, also viable banking system needs qualified, competent professionals to handle the daily operations in highly dynamic environment. There are 23 private sectors and three public sectors banks in Karachi (State Bank of Pakistan: 2017).Browning9suggested meeting employees’ needs through efficient HR practices leading to quality organizational operations, in turn influencing the employees’ behavior which results in better business value, the concept in line with GUEST 1997 model. Actually, the implicit and explicit motivational factors leads to positive employees’ behavior ultimately producing affectively committed employees, low turnover and high quality performance. As enterprises facing the challenges of globalization and free market economies, Sabeen concluded that at that time HRM practices were adopted in Pakistan in response to face these challenges, though still in developmental phase. Many authors and researchers have postulated through their empirical researches that human resources can be observed as a source of attaining persistent competitive advantage for enterprises14,15,16,17. It is also important to observe the definition of strategic human resource management (SHRM)along with different organizational strategies, “Human Resource Management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” Wright(p.298) Lepak and Shaw19literature review on SHRM is also built on this definition. While proceeding further another broader definition of SHRM is needed. Subsequently, for that purpose SHRM is defined as ‘an inter-reliant bundle of intended or promising human resource activities that are intended to achieve positive organizational outcomes’. Five selected intended HRM functions based on evidence from literature review i.e. performance evaluation., recruitment & selection, compensation & reward, career opportunities within organization and training & development were studied as independent variables to check their impact on flexibility and Quality of organizations’ operations performance, an HRM outcome, treated in this study as dependent variables. Thus the study authors tried to integrate HR functions with competitive priorities as a measure of organizational performance, the results will play a moderate role for Bank HR managers in strategic decision making. Assessing the different aspects of the business processes outcomes is defined as Operational performance, which includes the reliability, flexibility, production cycle time, and quality of productions. Piercy in his very detailed analysis of the historical development of the subject ‘Operations management’ and its business history highlighted a continuous lack of consistency and accuracy in the subject, being portrayed and suggested business community shall work alongside operations colleagues and generate original or/and integrative. approaches to operations management(OM) for the next generation. As researches has identified that better performance in operations in turn affects different performance indicators of business performance such as market share and customer satisfaction23and customer loyalty. Some of the challenges faced by todays’ managers operations are to improve the quality as the same time reduces the cost while working efficiently and facing increased global competition, dominate. Sanchez defined flexibility as “firm’s abilities to respond to various demands from dynamic competitive environments” (pg. 138), an important performance dimension to achieve competitive priorities.

The present research is developed in four (4) sections, section 1 includes the introduction of the topic, Section 2 sheds light on review of literature involving the linkage between SHRM practices and its impact on operations performance mentioning theoretical background. Section 3 comprises of the empirical studies and discussion on hypothesis; section 4 presented analysis of data and results achieved through hypotheses testing and future implications of the present research.

Literature Review

One concern regarding HRM-performance linkage were the theoretical foundations of HRM, firstly examined by Ferris; Wood; Guest; with a view to find out and reveal its underlying assumptions and to test new hypotheses debated by resource based view(RBV) theory34,35as human resource being the unique resource, inimitable and therefore a firm can achieve superior performance on the basis of high performing HR practices. Another concern throughout the empirical researches in top international refereed journals was issues related to validity of research methodological design and the techniques used for the concept. Our research focus is to check certain assumptions on the above linkage between practices of SHRM with operational performances as depicted in Figure1 within the scope of banks, Karachi. Boselie39also did the Meta analysis including all the previous empirical studies till 2003 on the debate of HRM-performance linkage. The HRM-performance relationship model developed by Guest (1997)–depicted in Figure 1,serves as a useful pictorial representation of the constructs involved.

Human Resource Management (HRM)Practices and Operations Management Success

Pakistan with a population of approximately 180 million ranks sixth among the most populous countries in the world. Karachi being the hub of economic activities with lots of employment opportunities, the focus of study would be banks of Karachi. Scarcity and maladaptation of HRM practices have resulted in potentially reducing the performances of the organizations in Pakistan, with majority of SMEs enterprises merely concentrate on administration functions only with no separate dedicated HR departments. The diverse nature of the topic of Strategic human resource management (SHRM) has produced number of empirical researches that had studied the impact of HRM practices on performance of organizations. Still, the issue of impact of HRM practices on operations performance has received very little attention except few of the work byYoundt47, Ahmad and Birdi to generalize the findings across different sectors.Bartel50has studied the impact of HRM with the view managers have considerable discretion in banking operations of Canada. The analysis of Walls and Woods51based on twenty five previous studies focused on the impact of SHRM activities on operational practices performance. Similarly, Perez Lopez(2005) found a direct effect of human resource practices on the business performance with significant mediating effect of organizational learning between the relationships.

Wright; Yang and Ahmad also examined the extent to which HRM-Performance linkage has been addressed by literature, The impact of HRM practices on banks financial performance was also validated by Quresh, Al-Zahrani and Taamnehet al., Patrick in his study on finding the gap between OM and HRM concluded that improving the Human factors resulted in joint positive human and productivity effects. Boselie (pg: 81)in the conclusion of his empirical research concluded that research on HRM has been found to positively impacting organizations’ operational performance60,61.De Menezes62in the integrated model tested the impact of seven core practices of Operations Management and HRM related practices, a longitudinal study based in UK using 24 years of data. Khan and Adil noticeably were perhaps the last relevant contributions on HRM–firm performance relationship in Pakistan however, the study was conducted in the oil & gas and manufacturing sector of the country. Due to lack of studies HRM-OM relationship on Banking context of Asian region and as Banks play an instrumental role in the economic development of a economy, with mangers having considerable discretion in improving banking operations and thus superior performance. Therefore HR-OM relationship was important to be checked and validated within banking context, the present study aimed to fill this gap of empirical validation of the integration of HR functions with strategic competitive priorities and also strengthens the dimensions of GUEST theoretical model supported by RBV theory. Moreover, it will also will provide a more comprehensive view and outcomes that can be generalize to different environments for conceptual understanding and theory development.

Empirical Studies

The importance and linkage between SHRM and OM is an accepted way of achieving competitive advantage in businesses by enabling the enterprises to design a unique strategy that will lead to increase the firms’ ultimate performances. In our study, these concepts are reviewed in the perspective of banking sector of Pakistan. Within strategic human resource management practices few approaches like training and development, selection processes and performance evaluation are considered as vital in achieving the sustainable competitive advantage, thus five HR practices were shortlisted based on significance evident form literature review, from the list of 26-HRpractices provided by Guest78, also adapted from Boselie79. Instead of conventional financial measures, taken as a means of measuring organizational performance in previous studies, the author has taken two competitive dimensions Quality & Flexibility in Business operations as measure of Bank performances adapted from Jayaram, Droge and Vickery. Karthiand Graf in their research concluded effectiveness of training programs is vital for growth of the banks. In a comparative analysis of Greek banks in 2005 stressed upon focus on differentiation in terms of quality to achieve competitive advantage, increased emphasis on strategic T&D efforts, leads to increased employee’s commitment, customer satisfaction and finally improvement in the Banks’ operations quality. Besides the Gronroos in his book of service marketing, asserted that training is a prerequisite for achieving and improving the operations quality in service oriented businesses.

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