hpws in pakistan

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DECEMBER 2011 VOL 3, NO 8

IMPACT OF HIGH PERFORMANCE WORK PRACTICES SYSTEM

ON MOTIVATION

Mr. S. M. M. Raza Naqvi6 Mohammad Ali Jinnah University, Islamabad

Dr. Sadia Nadeem7 National University of Computer and Emerging Sciences

Abstract High performance work practices system is of key importance not only in strategic human resource literature but also for the organizations that are striving for excellence in today’s competitive markets. This research study highlights the contribution of high performance work practices to further the level of motivation through developing high performance work practices system in the banking sector. These systems provide a source of competitive advantage if they are inimitable because of their historic time paths and rareness. The study is based on middle and senior level managers of the banking sector. Questionnaires were used to collect responses; 3000 questionnaires were sent to the bank managers in all three banking regions of the country through Pakistan postal services and personal visits where regions were reachable. Out of 3000 questionnaires 1704 responses were received making a response rate of more than 56.8%. Multiple regression analysis was used to study the impact of high performance work practices system on motivation which provides competitive advantage. Results clearly indicate that these practices turned out to be positively and significantly related with employees’ motivation. Key words: High performance work practices system, Motivation.

Introduction

Most of the research focused on employee’s motivation reflects that it is a result of the impact of different HR practices used as a system. Such a system is known as high performance work practices system (HPWPS). This system of HR management practices is focused to motivate employees by adopting best HR practices such as employment security, job design, training and skill development (Delery and Doty, 1996), selectivity in recruiting, comparatively high wages (Snell and Dean, 1992), incentive pay based on performance appraisal (Wright et al, 2003), employee ownership (Huselid, 1995; Huselid and Becker, 1995), information sharing (Martı´n-Tapi et al, 2009; Guthrie et al, 2009), participation and empowerment (Delery and Doty, 1996; Godard, 2001), self-managed teams (Evans and Davis, 2005; Guthrie et al, 2009), reduced status distinctions and barriers (Murphy, 2006; 6 Ms HRM (MAJU), MA Economics (PU) Assistant Professor Faculty of Management Sciences, Mohammad Ali Jinnah University, Islamabad 7 Chartered MCIPD, PhD in Management (UK), MBA (UK), BSc Engg.(Pak) Associate Professor FAST School of Business, National University of Computer and Emerging Sciences



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Macky and Boxell, 2007), and measurement of the HR practices through regular employee surveys (Huselid and Becker, 2000; Guthrie et al, 2009; Martin et al, 2009).

There is consensus that bundling of HR practices develops the work system known as HPWPS which helps the organization to develop required competencies (Dyer, 1993; Levine, 1995; Pfeffer, 1994) that keeps employees motivated. These systems are however, developed to further the level of employees’ skills and motivation so that employees become a source of sustainable competitive advantage (Levine 1995; Pfeffer 1998). The focus of the current study is to find out the relationship between the above mentioned HRM practices constituting HPWPS and motivation. This study uses the universalistic perspective, as several studies have indicated that this approach can be particularly accurate for understanding the relationship between HR practices and outcome (Guest, 2001). Our arguments are drawn from the work of Delery and Doty (1996) to justify our choice for the universalistic perspective. Delery and Doty (1996) gave an extensive overview of three alternative modes of theorizing the HRM practices and performance link. They concur with the universalistic approach which states that a fixed set of best practices can create surplus value in various business contexts. Irrespective of strategy, the introduction of these practices has an additional effect on performance. The same perspective is supported by Huselid (1995) and Pfeffer (1994) in their work and shared by this research. However, human resource practices are not effective independently; they always operate in an interrelated complex system. In the literature of strategic human resource management (SHRM) such a system of interrelated HRM practices is known as high performance work practices (HPWP) system (Becker and Huselid, 1998). Unfortunately, only limited theory specifies exactly how the HRM practices should be bundled together. The arguments above are based on resource-based theory, supporting the statement that HR practices affect performance (Guest, 1997; Paauwe, 1998; Pauuwe and Boselie, 2003; Youndt et al., 1996). The researcher uses these to empirically test the impacts of thirteen HR practices on motivation as perceived by the respondents (middle and senior level managers). It is argued that these practices are positively and significantly related to outcomes such as motivation. Therefore we have hypnotized

Ho: High performance work practices system positively and significantly affects employees’ motivation.

------------------------------------ Insert Figure 1 about here ------------------------------------ Population, Sample and Data Collection The current research probes through the use of questionnaires to understand perceptions of the managers of senior and middle levels in the Pakistan banking industry. This inquiry involves all Karachi Stock Exchange (KSE) listed banks. This study departs from other human resource literature as the level of analysis is of sector-level impact of SHRM, and the perspective is strategic rather than functional.



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The population for this study is the managers at senior and middle level in KSE listed commercial banks. Currently there are 25 listed commercial banks. Collectively, those banks have more than 9,570 branches all over the country. It was not possible to collect data of all senior and middle level managers because the exact number of managers in each bank branch is unknown. The number of managers in each branch depends upon the volume of the deposit that branch have. We selected all 25 KSE listed banks in the three key regions i.e. south, central and north. The study is based on middle and senior level managers of the banking sector. Questionnaires were used to collect responses; 3000 questionnaires were sent to the bank managers in all three banking regions of the country through Pakistan postal services and personal visits where regions were reachable. Out of 3000 questionnaires 1704 responses were received making a response rate of more than 56.8%. Instruments The following instruments were used to measure the independent and dependent variables of the study.

• High performance work practices system (Huselid, 1995; Huselid & Becker, 1995; Delery & Doty, 1996; Becker & Huselid, 2000; Hartog & Verburg, 2004; Snell and Dean, 1992; US Department of Labor, 1993). (71 items)

• Motivation (Katou & Budhwar, 2006) (03 items)

For HPWS, 13 practices were included and respondents were asked to identify the extent to which these selected high performance work practices were implemented in their organization. All of the questions were measured on a 7-point likert scale, selected for low to high. High Performance Work Practices Table 1 presents all 13 high performance work practices along with their sources, number of items and Cronbach alphas. Employment Security measures the extent to which employees feel secure. Selectivity in Recruiting measures the extensiveness of a firm's selection process. High Wages measures the compatibility of wages offered by the organization; Incentive Pay Based on Performance Appraisal measures the extent to which pay is related to performance; Employee Ownership measures the extent to which stock options are offered; Information Sharing measures the extent to which information is shared with the employees; Participation measures the extent to which employees are encouraged to participation in decision making; Empowerment measures the extent to which employees are empowered. Self-Managed Teams measures the extent to which organization relays on such teams; Training and Skill Development measures the extent to which such opportunities are offered; Reduced Status Distinctions and Barriers measure the intensity of such barriers; Job Design measures the clarity of job description and involvement of managers to design jobs; and, Measurement of the HR Practices measures the extent to which organization conducts employee satisfaction surveys. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ Insert Table 1 about here --------------------------



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Motivation Motivation was a 3-item scale with the Cronbach alpha value of .714; these items have been used by Katou & Budhwar, (2006; p1231) measuring the extent to which managers are motivated and ready to help the organization. RESULTS Table 2 explains descriptive statistics. All of the variables appear to be significantly associated with each other. The strength of correlation is not that high which can result in multicolinearity as reflected in table. --------------------------------- Insert Table 2 about here --------------------------------- Table 3 present the key results of the study. In these tables high performance work practices are regressed on motivation. 13 high performance work practices are entered with motivation, as dependent variable. With motivation as dependent variable in Table 3, out of 13 practices 10 practices were emerged to constitute high performance work practices system. These practices increase the motivation to such a level where it becomes a source of competitive advantage. -------------------------------- Insert Table 3 about here -------------------------------- Regarding Hypothesis, it appears in Table 3 that the high performance work practices system that effects the employees’ motivation consists of 10 practices that significantly emerged out of 13 practices. They are high wages, incentive pay based on performance appraisal, employee ownership, information sharing, participation, training and skill development, job design, reduced status distinctions and barriers, self managed teams and measurement of HR practices. The three practices employment security, selectivity in recruitment and empowerment turned out to be insignificant. DISCUSSION Strategic human resource management researchers such as Wright & McMahan (1992), Pfeffer (1994), Lado & Wison (1995), Huselid (1995), Jackson & Schuler (1995), Becker & Gerhart (1996), Delany & Huselid (1996), Boxall (1996), Hartog & Verburg (2004) and many others have tried to measure the effects of single or multiple human resource management practices on firm performance to support the relationship between HRM practices, sustainable competitive advantage (SCA) and firm performance. As a result we have seen the incremental development in the methods used to manage human resources that can have a substantial impact on organizational outcomes. This research focuses on the development of HPWPS model for middle and senior level managers in the banking industry of Pakistan. The model serves as a medium to integrate



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findings about the dimensions of HRM work practices and motivation. The outcome dimensions of employees’ motivation can be utilized to determine the effectiveness of HPWPS which are pertinent dimensions for the banking industry. Based on prior empirical work this study started with 13 HRM work practice dimensions and dependent variables i.e. motivation. Figure 1 put forth a conceptual model to clarify the relationships between the above mentioned practices and motivation. Our argument was that to affect motivation the practices must emerge significantly to constitute high performance work practices system.

As per results, the HPWPS effecting motivation consisted of 10 components or practices They are high wages, incentive pay based on performance appraisal, employee ownership, information sharing, participation, training and skill development, job design, reduced status distinctions and barriers, self managed teams and measurement of HR practices. The three practices employment security, selectivity in recruitment and empowerment turned out to be insignificant. According to resources base view any firm can have competitive advantage and can sustain it, if the process of value creation is rare and complex for competitors to imitate (e.g. Barney, 1991, 1995; Grant, 1991; Peteraf, 1993; Teece et al., 1997). Organization’s capacities to deploy practices, creating combinations which are firm specific are developed over time (Amit and Schoemaker, 1993). If high performance work practices are carefully developed, implemented in way that competitors are unable to imitate, then it results in competitive advantage (Peteraf, 1993). Therefore a properly developed high performance work system can be an important source of sustained competitive advantage (Lado and Wilson, 1994; Pfeffer, 1994; Wright et al., 1994) because such system is considered as an ‘invisible asset’ (Itami, 1987). Even if a competitor is capable of understanding the complexity of high performance work practices system, it cannot be immediately imitated (Saá-Pérez and García-Falcón, 2009) because of complex dynamics of employee’s motivation. The results reflect that the commercial banks in Pakistan enjoy competitive advantage regarding highly motivated employees’ on the bases of 10 high performance work practices Contribution of the Study and Limitations Since last two decades SHRM used RBV to establish competitive advantage. Most of the renowned researchers have highlighted and explored the linkage between RBV and SHRM to gain competitive advantage (Lado & Wilson, 1994; Boxall, 1996; Kamoche, 1996; Ferris et. al., 1999; Wright, Dunford & Snell, 2001) and advocated the rational of using human resource practices to produce competitive advantage (Ferris et. al., 1999). The main purpose of this study was the identification of the components of a successful HPWP system for commercial banks and incorporation of RBV dimensions to develop competitive advantage. Therefore, the present study contributes to the body of knowledge by defining what the HPWP system is for commercial banks in a developing country like Pakistan. More specifically, it determines the human resource practices that comprise a HPWP system construct for middle and senior level managers. Our study has a number of limitations. First, motivation is a complex behavior that required deeper treatment. Secondly this study could not establish causality because this study was based on cross-sectional set of data and to establish causality longitudinal set of data was required which was not possible to collect under the circumstances.



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Conclusion The basic objective of this study had been served. The results have clearly indicated that the survival of Pakistan’s banking industry depends upon its human resource management practices as reflected through the perceptions of the middle and senior level managers. The purpose of this study was to explore the probability of competitive advantage through RBV in the cut throat competition of Pakistani banking sector. The objective was to prove that adaptation of high performance work practices can lead to higher level of motivation. In conclusion only those banks would excel in the market regarding performance which will develop high performance work practices system in the due course of time that motivates their employees. The banks who intend to gain competitive advantage through highly motivated employees must focus on the mentioned practices. Such high performance work practices system provides the base for competitive advantage because it is difficult to imitate.



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APPENDIX A

Figure 1 Conceptual Frame Work

High Performance Work Practices System

1. Employment Security 2. Selectivity in Recruiting 3. High Wages 4. Incentive Pay Based on Performance Appraisal 5. Employee Ownership 6. Information Sharing 7. Participation 8. Empowerment 9. Self-Managed Teams 10. Training and Skill Development 11. Reduced Status Distinctions and Barriers 12. Job Design 13. Measurement of the HR Practices

Motivation

o Behavioral contribution in company’s performance

o Positive contribution in company’s performance o Highly motivated employee groups



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APPENDIX B

Table 1

The 13 High Performance Work Practices

HPWP Source Items Cronbach

Employment Security (ES) Delery and Doty (1996; p834) 4 .715Selectivity in Recruitment (SIR) Snell and Dean (1992; p502) 4 .704High Wages (HW) Snell and Dean (1992; p502). 4 .620Incentive Pay Based on Performance Wright et al, (2003; p29). 3 .595Employee Ownership (EO) Huselid (1995; p646) 2 .601Information Sharing (IS) Martı´n-Tapi (2009; p651),

Guthrie et al, (2009; p117)5 .757

Participation (PARTCP) Delery and Doty (1996; p834). 4 .719Empowerment (EMPWR) Godard (2001; p27). 3 .706Self Managed Teams (SMT) Evans and Davis (2005; 760),

Guthrie et al, (2009; p117)3 .727

Training and Skill Development (TSD) Delery and Doty, (1996; p834) 4 .706Reduced Status Distinctions and Barriers (RSDB)

Murphy (2006, p147), Macky and Boxell, (2007; p547)

4 .550

Job Design (JD) Delery and Doty, (1996; p834) 4 .716Measurement of HR Practices Becker and Huselid (2000;

p845); Guthrie et al (2009; p117) and Martin et al, (2009; p651)

4 .790



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APPENDIX C

Table 2

Descriptive statistics and correlations of study variables

Spearman's rho Mean Std. Deviation 1 2 3 4 5 6 7 8 9 10 11 12 13 14

1 Employment Security 4.56 1.26 1

2 Selectivity in Recruitment 4.41 1.22 .135** 1

3 High Wages 4.30 1.19 .149** .291** 1

4 Incentive Pay Based

on Performance Appraisal

4.54 1.28 .083** .329** .192** 1

5 Employee Ownership 4.05 1.46 .155** .078** .166** .058* 1

6 Information Sharing 4.47 1.19 .141** .354** .281** .439** .088** 1

7 Participation 4.56 1.22 .194** .275** .347** .253** .204** .345** 1

8 Empowerment 4.49 1.28 .200** .316** .246** .252** .116** .304** .375** 1

9 Self Managed Teams 4.70 1.21 .215** .320** .290** .286** .101** .288** .451** .298** 1

10 Training and Skill Development 4.43 1.19 .158** .287** .364** .310** .206** .359** .388** .255** .247** 1

11 Reduced Status Distinctions and

Barriers 5.44 0.85 .132** .146** .102** .174** -.007 .112** .188** .156** .231** .123** 1

12 Job Design 4.70 1.31 .090** .231** .263** .267** .089** .442** .284** .178** .300** .357** .139** 1

13 Measurement of HR Practices 4.29 1.30 .136** .273** .318** .223** .207** .243** .324** .245** .291** .380** .092** .291** 1

14 Motivation 4.71 1.21 .112** .244** .318** .315** .051* .464** .333** .229** .365** .347** .098** .480** .325** 1



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APPENDIX D

Table 3

Regression for impact of HPWPS on Motivation

Variables Motivation Intercept

1.150***

Employment Security (ES) -.005 Selectivity in Recruitment (SIR) -.017 High Wages (HW) 0.085*** Incentive Pay Based on Performance Appraisal (IPBPA) 0.076*** Employee Ownership (EO) -0.068*** Information Sharing (IS) 0.236*** Participation (PARTCP) 0.051* Empowerment (EMPWR) .023 Self Managed Teams (SMT) 0.118*** Training and Skill Development (TSD) 0.05* Reduced Status Distinctions and Barriers (RSDB) -0.053*** Job Design (JD) 0.259*** Measurement of HR Practices (MHRP) 0.069**

R2 .368 Adjusted R2 .363

Model F 75.549*** * p< .05 ** p<.01 *** p<.001

hpws in pakistan

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