markov analysis hypothesis testing

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Strategic Managem ent Journal, Vol. 8, 387-392 1987)

RESEARCH NOTES AND COMMUNICATIONSHUMAN RESOURCE PLANNING ANDORGA NIZATION PERFORMANCE ANEXPLORATORY ANALYSISSTELLA M NKOMO

blbLLA M NMJMUCollegeo Business Adm inistration University o North Carolina Charlotte Northr arnlina


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388 Research Notes and Comm unicationsone was dealing with (e,g, corporate-level plan-ning, or business-unit planning, or functional-level planning), Armstrong (1982), in a reviewof the published field research on the evaluationof formal planning, recommended the use of pre-and post-test measurement in future researchefforts.The present study does not treat planning asa broad phenomenon, but focuses on strategichuman resource planning efforts in organizations.Strategic human resource planning is viewedas an important component of functional-levelstrategic planning. Theoretically, human resourceplanning should result in a 'human resourcestrategy' congruent with the organization's corpo-rate and business strategies (Miles and Snow,1984), Human resource planning is future-oriented and addresses two questions: (1) Whatkinds of people will be needed to manage andoperate the organization in the future? and (2)What kinds of human resource policies andprograms are needed to achieve human resourceand organization objectives? (D evann a, Fo mbrunand Tichy, 1981; Dyer, 1982), Walker (1980)has noted that human resources infiuence anorganization's capacity to achieve its strategicobjectives in three ways: (1) cost economics; (2)capacity to operate effectively; and (3) capacity toundertake new enterprises and change operation s.Walker (1980) further argues that these factorsaffect organization performance.

In addition to traditional measures of perform-ance, measures geared towards assessing theimpact of human resources on organizationperformance are also employed. The financialcriteria used in this study cover the periods priorto the time when any distinction is made betweenthose firms using formal human resource planningand firms who do not. If anything, one wouldexpect benefits to come well after the introductionof formal human resource planning.

HYPOTHESESTo test the effect of human resource planningon organization performance, two hypotheseswere tested.

Hypothesis1. here isnosignificantdifference

Hypothesis2: here isnosignificantdifferebetween pre-planning and post-planning peformance for those firms engaging in formstrategic human resource planning.

M E T HOD OL OGYSampleThe sample for this study consisted of thofirms listed in the 1981 Fortune 500 DirectorQuestionnaires were mailed to the vice-presideof personnel/human resource management each of these 500 companies. The 287 replirepresented a response rate of 57 percent. Othe replies, 264 were usable, resulting in a usabresponse rate of 53 percent. Over 35 perceof the respondents were top-level personnofficerssenior vice-presidents and vicpresidents of personnel/hum an resources. V ariocharacteristics such as size (e.g. total assetnumber of employees, etc.) and industry grouwere compared to detect any possible responbias. No significant biases were discovered. It recognized that companies doing human resourplanning, and especially those who felt it habeen beneficial, were more likely to respond.QuestionnaireTo measure a firm's human resource planninprocess, respondents evaluated five phases human resource planning:

(1) Analyzing the external environ me nt human resource management.(2) Linking HRP to strategic business planing.(3) Analyzing hum an resource supply andemand,(4) Ge ner ating , analyzing, and developinfunctional area human resource strategie(5) Reviewing and mo nitoring planninresults.

Respondents were asked to indicate the phasused in their process,* Companies were algiven the option of providing copies or samplof their human resource planning manualforms, or other documents which illustrated the


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Research Notes and Communications 389Three human resource planning categories

Category 1: No formal human resource plan-ning.Category 2: Partial or incom plete hum anresource planning.Category 3: Fully integrated human resourceplanning.

al lfive phasesn its plann ing pro cess was classified into C atego ry If a firm did not meet all of the requirements

The first four variables represent traditional

(1) Sales growth: average annual percentagegrowth over a 5-year period.(2) Earnings growth: average annual percent-age growth over a 5-year period.(3) Earning s/sales ratio: average annual earn-ings as a percentage of sales over a 5-yearperiod.(4) Earning s/total assets: average annual earn-ings as a percentage of total assets over a5-year period.

979). These measures are:(5) Earnings/employees: average annual earn-ings per employee over a 5-year period,(6) Assets/employees: average annual assetsper employee over a 5-year period.

technology or even company strategy. Compari-sons within industries correct for some of thesedifferences. Additionally, comparisons beforeand after the initiation of human resourceplanning also overcomes most of this noise. Thesix performance variables were measured over a5-year period (1976-80) using data from theStandard and Poor's Compustat Files.

D T N LYSIS ND RESULTSBased on the classification procedure the 264respondent firms were divided into 121 Category1 planners, 104 Category 2 planners, and 39Category 3 planners. Because of the disportion-ately small number of firms classified as Category3 human resource planners, this group wascomb ined with Category 2. Table 1 shows thetwo-group classifications stratified by industry.The analyses in this section tested for differencesin performance between firms who practicehuman resource planning and those who do not.Results of hypothesis testingHypothesis I.For each firm in the sample, the six performancemeasures were calculated over the 5-year period(1976-80). Results ofthe MANOVA analysis arepresen ted in Table 2. The main effect for catego ryof human resource planning was not significant(F=0.64; p=0.69); while the main effect forindustry was significant (f=3,63; p


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390 Research Notes and Comm unicationsTable 1. Respondents by industry group and humanresource planning category (=264)

20222324252627282930323334

35363738

Industry and codeFood and kindredTextile mill productsApparel and other finishedgoodsLumber and wood productsFurniture and fixturePaper and allied productsPrinting/publishing andallied productsChemicals and alliedproductsPetroleum refining andrelated industriesRubber and miscellaneousStone, clay and glassproductsPrimary metalFabricated metal products,except machinery andtransportation equipmentMachinery not electricalElectrical and electronicTransportation equipmentMeasuring, analyzing andcontrolling instrumentsOthers

Total

Humanplanning

(1)16420144

14111212

5176949

121

resourcecategory(2)12322065

2513439

513131675

143 First two digits of Standard Industrial Classification codeas reported in the Standard and Poor Compustat Data Tapes.

priately test Hypothesis 2 a standard comparison was necessary. Accordingly, a hypthetical date was assigned to a control group non-human resource planners. These dates wethe same as the actual dates human resourplanning was initiated by the planners, so ththe same time periods were studied. These datwere randomly assigned to the control group non-human resource planners using a table random numbers. The selection of this compason group was made so that the industdistribution of human resource planners and nohuman resource planners was the same.

This hypothesis was tested using a onway repeated measures MANOVA to compachanges in performance. The results of thanalysis for the 5-year time period are shown Table 3. There was no significant difference the change in performance across the two grou(Fe.73=1.13; p = 0.35). While the difference wnot significant, the change scores for firms usinformal human resource planning were slighthigher on five of the six performance measure

D IS C U S S IO NHuman resource planning proponents have cotended that human resource planning has positive impact on organization performancThis study attempted to empirically examine thproposition. Overall the results of the twanalyses did not indicate any significant differenin performance between users of formal huma

Table 2. Multivariate analysis of variance (univariate ratios) reduced set of dependent variables (n=135)

Dependent variables Main and interaction effects HRP Category xHR P Category Industry Industry(Multivariate F=0.64) (Multivariate F=3.63***) (Multivariate f= 1. 0)Univariate F- ra t io Univariate F- ra t io Univariate F- ra t io1.2.3.4.5.

Sales growthEarnings growthEarnings/salesR O AEarnings/employee

1.750.250.000.490.26

1.95*1.67*5.28**2.84*'8.00**

1.491.300.620.830.09


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Research Notes and CommunicationsTable 3. Results of F Tests: Hypo thesis 2 (5-year time per iod) (= 80 )

391

Pre-HRP timeperiodHRP firmsNon-HRP firmsPost-HRP timeperiodHRP firmsNon-HRP firmsChangeHR P firmsNon-HRP firmsUnivariate F

Salesgrowth

12.0212.7112.8214.250.801.540.120.72

Earningsgrowth

11.3916.0614.5717.763.181.700.070.79

Earnings/sales

13.3214.5413.3813.620.06-0 . 9 22.210.14

R O A

16.3315.9617.2216.750.890.790.010.91

Earnings/employees

$5,457$7,022$8,772$8,940

3,3151,9181.370.24

Assets/employees

$29,840$38,480$50,850$59,230

21,01020,7500.000.96

Multivarite r = 7.26; n40 for each group. 3;p=0.35.

resource planning and non-users. There areseveral possible explanations for these findings.Becau se self-selection has oc cu rre d, it is qu itepossible that another variable or variables(market position, foreign competition, etc.) mayaccount for differences in organization perform-ance. Firms were not randomly assigned to groupsrepresenting users and non-users of formal humanresource planning. Nevertheless, several stepswere taken to minimize confounding variables.Ratios were used to facilitate comparisons amongfirms, pre- and post-measurements were used,and industry effects were considered.

The relative immaturity of human resourceplanning efforts may have prevented the effectsof planning from being measured. The timeneeded to develop, to install, and to reap thebenefits of a well-functioning comprehensivehuman resource planning system may be greaterthan the time period investigated in this study.No attempt was made to assess the quality ofthe human resource plans produced through theuse of a formal process. It is possible thatthe content of human resource strategies andprograms, and their alignment with businessstrategies, are more important than the mereabsence or presence of a formal process. The

implemented or coordinated throughout theorganization.Interestingly, the firms which instituted fullyintegrated human resource planning processesgenerally experienced lower levels of p erform anceduring the pre-human resource planning period.It is possible that poor-performing firms mayhave instituted human resource planning as arrieans to improve performance. On the otherhand, the non-human resource planners generallyhad higher levels of performance during thepre-planning period. It is possible that themanagement of these firms felt their orgnaniza-tions were successful without such elaborateprograms and saw no reason to change practices.In summary, there is little evidence in thisstudy to suggest that human resource planninghas yet begun to produce the payoffs posited byits advocates. Future research is needed toidentify organization results most affected bystrategic human resource planning activities, andto determine in what situations formal humanresource planning is most useful. In recent yearsthere has been an increasing desire by bothpersonnel scholars and practioners for empiricalexaminations designed to estimate and demon-strate the financial impact of human resourcesand human resource management programs/


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392 Research NotesandCom municationsresource management plays a critical role in theoverall performance of an organization is seldomempirically exmained (Tusi, 1984). Although itis , at best, difficult to directly connect humanresource management processes and organizationperformance, the attempt should be made. Theresults of this study should lead to further researchwhich may prove helpful in supplementing thenormative-descriptive analysis which has charac-terized the study of human resource management.

KNOWLEDGEMENTS

I would like to express appreciation to RobertHornaday and the anonymous reviewers for theircomments on this paper.

REEEREN ES

Ansoff, IgorH., J. Avner, Richard G. Brandenburg,E. Fred Portner and Raymond Radosevich. 'Doesplanning pay? The effect of planning on successand acquisition in American firms', Long RangePlanning. December 1970, pp. 2-7.Armstrong, J. S. 'The value of formal planning forstrategic decisions: review of empirical research'.Strategic Management Journal. 3(3), 1982 pp197-211.Craft, James.'Acritical pers pectiveon human resourceplanning' . Human Resource Planning. 3(2) 1980pp. 39-52.Dahi, HenryJ. 'Measuringthe human ROI' , Manage-ment Review, 68(1), January 1979,pp.44-50.Devanna. Mary Anne, Charles Fombrun and NoelTichy. 'Human resources managment: a strategicperspective' . Organizational Dynamics. Winter1981, pp.51-67.

Dyer, Lee.'Huma n resource p lanning' , in RowlaK. and G. Ferris (eds). The ManagementPersonnel/Human Resources: New PerspectivAllyn and Bacon, Boston, MA, 1962.Dyer, Lee. 'Bringing human resources into tstrategy formulation process', Htiman ResourManagement, Fall 1983,pp. 257-271.Fulmer, Robert M. and LeslieW. Rue.The Pracand Profitabilityof Long-Range Planning. ResearSeries.ThePlanning Executives Ins titute, OxfoO H ,1973.Hofer, Charles W. and Dan E. Schendel. StrateFormulation: Analytical Concepts. West PublishiCompany, St Paul, MN; 1978.Kudla, RonaldJ. 'Theeffects ofstrategic planningcommon stock returns' . Academy of ManagemeJournal, 23(1), 1980, pp. 5-20.Lenz, R. T. 'Determinants of organization perforance;an interdisciplinary review'. Strategic Manament Journal, 2, April-June 1981,pp. 131-154.Lorange, Peter. 'Formal planning systems; their roin strategy formulation and implementation' ,Schendel, D. and Charles Hofer, (eds)StrategManagement: New Viewof Business PolicyaPlanning, Little, Brown&Com pany, Boston MA1979.Miles, R. E. and C. C. Snow. Designing strateghuman resources systems'. Organizational Dynaics, 13, 1984, pp.36-52.Milkovich, George, LeeDyerandThomas Mahone'HRM Planning' , in Carrol ,S. J. and S. Schul(eds). Human Resource Management in the1980Bureauof National Affairs, Washington,DC, 19Tusi, Anne. 'Personnel department effectiveness;tripari te approach' . Industrial Relations, 23(2. Spring 1984,pp. 184-197.Walker, James W. Human Resource PlanninMcGraw-Hill , NewYork,1980.Wood, Robley D. and Lawrence LaForge. 'Thimpact of comprehensive planning on financiperformance' . Academy of Management Journa22(3), 1979,pp.515-526.


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markov analysis hypothesis testing

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