the influence of human resource management in savings bank performance

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The influence of human resourcemanagement in savings bank performancePetra De Saá Pérez & Juan Manuel García Falcóna Edif. Departamental de CC. EE. y Empresariales, Módulo C. CampusUniversitario de Tafira, 35017 Las Palmas de Gran Canaria, SpainPublished online: 04 Jun 2010.

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The Influence of Human ResourceManagement in Savings Bank Performance

PETRA DE SAÁ PÉREZ and JUAN MANUELGARCÍA FALCÓN

The aim of this article was to analyse the value of humanresources (HR) for competitive advantage and their influence onthe firm’s performance in the service industry. To achieve ourgoal, we have first proposed a resource-based framework todiscuss the circumstances under which human resources can bea source of competitive advantage. Then, an empirical researchwas developed in the Spanish savings bank sector to analyse therelationship between HR management and the firm’sperformance. Our results, suggest that those savings bankswhich better combine their HR practices to create and to developa strategic human capital pool have shown better levels ofprofitability and productivity.

INTRODUCTION

In this research article we will investigate why human resource managementhas an important influence on the firm’s performance. This way, drawing onthe theoretical insights of the resource-based view (RBV) of strategicmanagement, we will try to describe why human resource management(HRM) decisions, embedded in an HR system, have an important influenceon the firm’s performance, following Wright and colleagues’ [1994: 320]proposition:

HR practices moderate the relationship between the human capitalpool and sustained competitive advantage only when matched withappropriate HR practices that elicit productive employee behaviour.

To achieve our goal, we have developed empirical research in theSpanish savings bank industry. Given their character as service companies,

Petra De Saá Pérez and Juan Manuel García Falcón, Edif. Departamental de CC. EE. yEmpresariales, Módulo C. Campus Universitario de Tafira, 35017 Las Palmas de Gran Canaria,Spain

The Service Industries Journal, Vol.24, No.2 (March 2004), pp.51–66PUBLISHED BY FRANK CASS, LONDON

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savings banks need to rely on highly motivated and committed personnel tobe successful in a new competitive context where structural changes,brought about by the forces of deregulation, technological development andglobalisation, have diverted the competitive emphasis from being largelymarket based to being more resource based.

In a highly competitive economic context, people and the way they aremanaged acquire greater importance because many other sources ofcompetitive success are less powerful. But, to achieve competitive successthrough people involves changing our way of thinking about employmentrelationships. It means successfully working with people, and to see HR asa source of competitive advantage more than as merely a cost [Peffer, 1994].

THE STRATEGIC VALUE OF HUMAN RESOURCES MANAGEMENT

FROM A RESOURCE-BASED VIEW OF THE FIRM

The resource-based view of the firm (RBV) is a new approach whichconsider that the human resource, or human capital in which the firminvests, has the potential to create superior performance, providing animportant perspective on the debate about human resource management(HRM) and organisational success [e.g. Wright, McMahan andMcWilliams, 1994; Wright et al., 1998; Lado and Wilson, 1994; Kamoche,1996; Mueller, 1996; Boxall, 1996; Guest, 1997; Barney and Wright, 1998].

The RBV has been developed in the strategic management field as a newframework in which to study the competitive advantage of the firm.According to the resource-based theorists [e.g. Wernerfelt, 1984; Barney,1991, 1995; Grant, 1991; Peteraf, 1993; Teece, Pisano and Shuen, 1997,Foss, 1997] bundles of resources, rather than the product marketcombinations chosen for their deployment, lie at the heart of a firm’scompetitive advantages. This approach requires that a firm be seen, notthrough its activities in the product market, but as a unique bundle ofresources that are complex, intangible and dynamic. But why is a resourceunique? What makes it valuable? What allows it to maintain its value in thefuture? To answer these and other questions we should start from theresource and capabilities definitions. This way, according to Amit andSchoemaker [1993], the firm’s resources are defined as stocks of availablefactors that are owned or controlled by the organisation. Resources areconverted into final products or services by using a wide range of the firm’sother assets and bonding mechanisms, such as technology, managementinformation systems, incentive systems, trust between management andlabour, and so on. Thus, capabilities refer to a firm’s capacity to deployresources, usually in combination, applying organisational processes toeffect a desired end. They are information-based, tangible or intangible

52 THE SERVICE INDUSTRIES JOURNAL

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processes that are firm-specific and are developed over time throughcomplex interactions among the firm’s resources. Unlike resources,capabilities are based on the development, carrying and exchanging ofinformation within the firm’s human capital.

However, a firm’s having many resources and capabilities is not enoughin itself to guarantee success. Competitive advantage emerges fromdistinctive resources or capabilities that firms control, that is, somethingthat firms do particularly well in comparison with their competitors[Peteraf, 1993].1 So, although traditional sources of competitive advantagesuch as natural resources, technology, economies of scale, and so forth,create value, the RBV argument is that these sources are increasingly easyto imitate, especially in comparison to a complex social structure such as anemployment system [Becker and Gerhart, 1996]. If that is so, a properlydeveloped HR system may be an especially important source of sustainedcompetitive advantage [Lado and Wilson, 1994; Pfeffer, 1994; Wright,McMahan and McWilliams, 1994].

Consistent with previous ideas, we propose a model whose mainhypothesis suggests that HR constitute a source of competitive advantagebecause they are a valuable, rare, inimitable and non-substitutable resource[Barney, 1992; Wright, McMahan and McWilliams, 1994, Wright et al.,1998]. This model also considers that firms that know how to establish anHR system that incorporates HR policies and practices in order to create andmaintain the strategic human capital could have a sustainable competitiveadvantage.

53HR MANAGEMENT AND SAVINGS BANK PERFORMANCE

��

HUMAN RESOURCE

SYSTEM

HR Policies andPracticies

HUMANCAPITAL BASE

(Employees)

ORGANIZATIONAL CAPABILITIES

* HETEROGENEITY* EX-POST LIMITS TO COMPETITION

* IMPERFECT MOBILITY* EX- ANTE LIMITS TO

COMPETITION

CONDITIONS TO ACHIEVE THE COMPETITIVE ADVANTAGE

FIGURE 1A STRATEGIC MODEL OF HUMAN RESOURCE MANAGEMENT

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According to our model, HR meets the RBV conditions for being asource of competitive advantage. We can say that HR adds value to theorganisation because people differ in their capacities and abilities, andtherefore, in their contribution to the firm. HR are rare because it is difficultto find people who guarantee high performance levels in the organisationdue to the labour market’s heterogeneity. Their inimitability emerges fromthe difficulty in duplicating people’s knowledge, abilities, experience andbehaviour, at least in the short term. Moreover, the high transaction coststhat people recruitment would involve can be a significant obstacle to theirmobility or acquisition. Finally, people are a resource non-substitutablebecause not everybody has the same capacity to adapt to the differentenvironments and technologies, and those who are able to create value inone context are unable to do so in others [Wright, McMahan andMcWilliams, 1994; Wright et al., 1999; Dolan, Shuller and Valle 1999].

Having pointed out the importance of HR in the creation of firm-specificcompetitive advantage, the question then is whether, or how, firms cancapitalise on this potential source of profitability. Our argument nowfocuses on HR strategy that involves the integration of the HR genericfunctions: selection, appraisal, promotion and compensation [Tichy,Fombrun and Devanna, 1982]. According to Bailey [1993], managers canuse HR practices, such as the development of selection, appraisal, trainingand compensation systems to attract, identify and retain high qualityemployees. Thus, a firm which develops a valid selection system and hasattractive HR programmes, such as higher than normal compensationpackages and numerous development opportunities, can attract, select andmaintain the highest quality resource pool [Wright, McMahan andMcWilliams, 1994]. Also, reward systems, communication systems,training programmes and socialisation systems that encourage employees toact in the interests of the firm can be developed [Shuler and MacMillan,1984]. Thus, HRM practices influence employee skills through theacquisition and development of a firm’s human capital. Recruitingprocedures that provide a large pool of qualified applicants, coupled with areliable and valid selection regimen, will have significant influence over thequality and type of skills that new employees possess. Providing formal andinformal training, such as basic skills training, on-the-job experience,coaching, and so on, can further influence the employees’ development. AsBoxall [1996] points out, by hiring and developing talented staff andsynergising their contributions within the resource bundle of the firm, HRMmay lay the basis for sustained competitive advantage. Then, organisationalHR policies can, if properly shaped, provide a direct and economicallysignificant contribution to the firm’s performance [Huselid, 1995; Huselid,Jackson and Schuler, 1997]. This way, a firm which creates an effective HR


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system incorporating HR practices to exploit the potential for synergiesamong such practices has the capability to recognise the intrinsic value ofHR in developing new strategies before its competitors [Barney, 1992;Collis, 1994; Boxall, 1996; Mueller, 1996]. Thus, for the purposes of thisarticle, an HR system is defined as an organisational capability whichinvolves the strategic integration of the set of HR activities, functions andprocesses: selection, training, appraisal, promotion and compensation,carried out to attract, develop and maintain the strategic HR that allow thefirm to achieve its goals [De Saá, 1999].

Although HR management is not a sufficient condition in itself forcompetitive advantage, it can still play a necessary role in stimulatingchange and start a process that results in a more extensive tapping of theorganisation’s hidden reservoir [Mueller, 1996]. This way, strategic HRMcan only lead to competitive advantage if effective resource mobilitybarriers exist. Thus, from the RBV, and according to Becker and Gerhart[1996], a properly developed HR system is an ‘invisible asset’ [Itami, 1987]that creates value when it is so embedded in the operating systems of anorganisation that it enhances the firm’s capabilities. An HR system deeplyembedded in the organisation is difficult to imitate because, first, it isdifficult to identify the precise mechanisms by which HR practices interactand create value. To imitate a complex system, it is necessary to understandhow the elements interact. Without being able to understand how an HRsystem works, it is impossible to imitate it (by, for instance, reverseengineering it). It is even difficult for a competing firm to imitate a valuableHR system by hiring away one of or a few of the top executives because theunderstanding of the system is an organisational capability that is spreadacross not just a few, but many people in the firm. Second, these HRsystems are path dependent. They consist of policies that are developed overtime and cannot simply be purchased in the market by competitors. Acompetitor, although able to understand that a system is valuable, isprecluded from immediate imitation by the time required to fully implementthe strategy (assuming the system could be understood). Furthermore, theremay be limits to the management’s ability to successfully reproduce sociallycomplex elements, such as interpersonal relationships and culture.

The theoretical model we have just proposed also suggests that thebehaviour of employees within firms has important implications fororganisational performance. These HRM practices embedded in a firm’s HRsystem can affect individual employee performance through their influenceon employees’ skills and motivation [Wright, McMahan and McWilliams,1994; Wright et al., 1999]. If this is so, a firm’s HR policies and practicesshould be related to at least two dimensions of performance [Huselid, 1995].First, if superior HR practices increase employees’ discretionary effort, we


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would expect their use to directly affect intermediate outcomes, such asturnover and productivity, over which employees have direct control.Second, if the returns from investments in superior HR practices exceedtheir true costs, then lower employee turnover and greater productivityshould in turn enhance corporate financial performance. This way, RBValso provides an alternative approach to the question of HRM andorganisational performance sustaining an important line of research thatvery directly focuses on estimating the causal impact of HRM decision onobjective measures of business performance [e.g., Arthur, 1994; Huselid,1995; MacDuffie 1995; Delany and Huselid, 1996; Delery and Doty, 1996;Koch and McGrath, 1996; Youndt et al., 1996; Huselid, Jackson andSchuler, 1997]. These works have consistently found statistical significantrelationship between HRM decisions and firm performance, making animportant contribution to the field progress, although more conceptual andempirical work is needed to develop and test a more sophisticated theory ofHRM [Becker and Gerhart, 1996; Guest, 1997]. Thus, and in order to followthis line of contributions our hypothesis can be stated as follows:

H1: Firms with an HR system that create and develop a strategichuman capital will have better performance (will diminish employeeturnover and increase productivity and profiability)

METHODOLOGY

Industry Context

The setting for this study is the Spanish savings bank industry. The choiceof this industry is due to some fundamental structural changes that havediverted the competitive emphasis from being largely market based to beingmore resource based. In this sector there have been tremendous changes inrecent years, brought about by the forces of deregulation, technologicaldevelopment and globalisation. These changes have provided much greateropportunities for competitive differentiation and have led to a significantincrease in the degree of competition in this previously regulated andlargely uniform industry. Along with the increase in the intensity ofcompetition, there has been a concomitant shift in the nature or the bases ofthe competition. While competition previously focused on pre-emptiveentry into key geographical or product markets to establish advantage, itnow focuses more on developing key organisational resources andcapabilities, such as innovation, strong good service culture, highlyqualified personnel, etc. This shift in competitive emphasis has occurredbecause the regulatory protection and other collective imperfections whichpreviously provided sustainable advantage in this industry are slowly dying


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out. Consequently, market participants increasingly deem the accumulationand development of valuable resources, such as HR, to be the most durablesource of competitive advantage in the banking industry.

Sample and Data Collection

The data collection process began in the summer of 1997 with an initialround of interviews with leading academics and professionals in the field.At these preliminary interviews, discussions centred on exploring theparticular aspects of human resource management in the industry. Basingour views on the input from these experts, as well as from a review ofliterature, we developed a structured questionnaire that was pre-testedbefore being sent to every savings bank’s human resources managerbetween February and June 1998. We also obtained secondary data aboutperformance from El Banco de España y La Asociación de Cajas deAhorros Confederadas (CECA).

Since the target population was 50 savings banks, we decided to send thequestionnaires to all of them. Thirty valid responses were obtained, yieldingan overall response rate of 60 per cent. The final sample thus represent 66.3per cent of the industry’s total assets and generates sales of 2,000 billionpesetas which are 66.3 per cent of the industry’s total revenues, and employsalmost 65 per cent of the industry’s workforce.

Measurement

HR practices. In this research, we have adopted those HR practices mostconsistent with the prior theoretical and empirical work in the field [Arthur,1994; Lado and Wilson 1994; Wright, McMahan and McWilliams, 1994;Dyer and Reeves, 1995; Huselid, 1995; MacDuffie, 1995; Becker andGerhart, 1996; Koch and McGrath, 1996; Ulrich, 1997]. These practicesincluded aspects like personnel selection, performance appraisal, incentivecompensation and so on. Thus, we tried to analyse, among other aspects, themanner in which candidates were attracted (internal/external recruitment),the selection criteria used (general/specific knowledge and skills), trainingand career development, the main characteristics of the pay system, whetheror not it had an established system for assessing performance, etc.Therefore, using a seven-point Likert scale, respondents were asked toindicate the importance their firm attached to 18 items of these HRpractices.

Performance variables. While multiple measures of performance have beenused in some of the recent savings bank studies [Flavian, Fuentelsaz andPolo, 1998], three are the performance variables used in this work:profitability, productivity and turnover. Profitability is one of the


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performance variable used in this work and it has been obtained by dividingthe operating margin (net interest income) by the average assets. This ratiowas calculated as the interannual average variation for the years 1995, 1996and 1997 with financial data obtained from the annual public statisticsprovided by CECA. Employee productivity is another importantperformance criterion for a service organisation such a savings bank, wherehuman resources are its biggest asset [Mehra, 1996]. This variable wasobtained dividing the interanual average variation of the operating marginby the number of employees. Turnover is another important factor toconsider in our analysis because the lost of strategic HR could be a criticalaspect which limits knowledge stock accumulation. The level of turnoverwithin each firm was assessed with a single questionnaire item about therate of turnover during the period of three years studied.


TABLE 1FACTOR ANALYSIS

Factors Eigenvalue COM XF

F1A Internal development of personnel 3.5V12 Periodic employees’ appraisal 0.88 0.82V13 Promotion according to the assessment 0.77 0.69V9 On-the-job training 0.77 0.68V7 Retaining socialized personnel 0.53 0.48

F2A Planning of internal development of personnel 2.4V20 Careers plans 0.75 0.70V4 Candidate recruitment and selection according to firm’s culture .67 0.76

F3A Promoting an internal labour market 2.1V14 Promotion vs external hiring forimportant positions 0.82 0.83V8 Continuous training 0.85 0.77

F4A Strategic importance of specific human capital 1.8V10 Specific skills and knowledge development 0.82 0.83V3 Strategic importance of HR aspects 0.75 0.63

F5A Public and collective incentives 1.6V11 Public criteria for promotion 0.88 0.89V19 Collective salary incentives 0.82 0.79

F6A Compensation not subject to collective agreement, loss of qualifed personnel 1.2V15 Collective agreement on general compensationa 0.88 0.91V6 Loss of qualified personnel 0.81 0.57V16 Collective agreement on variable compensationa 0.70 0.51

F7A Target incentives for executives only 1.0V17 Viable target compensation 0.83 0.85V18 Salary incentives at all levels 0.85 –0.44

F8A Selection of qualified personnel 0.9V5 Selection of qualified personnel 0.85 0.91

Alpha = 0.59Proportion of variance accounted for = 79.8%

aItem was reverse coded.

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ANALYSIS AND RESULTS

To reach our research goal different analyses were carried out. First, touncover the underlying factor structure associated with these practices andtheir synergies, from a system perspective [Lengnick-Hall and Lengnick-Hall, 1998], we factor-analysed each item’s standard score, using principalcomponent extraction with varimax rotation. Eight significant factorsemerged from the analysis, explaining 79.8 per cent of total variance (seeTable 1).

Once the factors that define savings banks’ HR practices had beenestablished, the next step was to identify which savings banks followed eachfactor. Thus, the second step consisted of performing a cluster analysisusing the components resulting from the factor analysis as input. A K-Means clustering algorithm was used and four clusters were considered (seeTable 2).

The first cluster includes five ‘savings banks with contradictory HRpractices’ (one small, less than 50 employees; three medium size, between50 and 2,000 employees; and one big, with more than 2,000 employees).These savings banks have been characterised as contradictory because,although they seemingly have an HR strategic vision according to the highscore they give to this factor, the practices they implement do not seem theappropriate ones to create and develop a strategic HR base. This is sobecause, among other aspects, candidates’ skills and knowledge are notconsidered in selection processes, internal HR development is not planned,and training and promotion are not used to create an internal labour market.

The second cluster encompasses three ‘savings banks with precariousHR practices (one organisation has less than 500 employees and the othertwo have nearly 2,000). With regard to the HR practices followed, in this


TABLE 2CLUSTER ANALYSIS

Factors Cluster1 Cluster2 Cluster3 Cluster4 f p

F1a: Internal development of personnel 0.63 -1.51 0.63 -0.15 5.90 0.00F2a: Planning of internal development of personnel 0.00 -0.60 -0.40 0.26 1.10 0.40F3a: Promoting an internal labor market -0.05 -1.71 0.42 0.18 4.98 0.00F4a: Strategic importance of specific human capital 0.87 -0.09 -1.21 0.19 7.40 0.00F5a: Public and collective incentives -0.97 -0.34 -0.38 0.51 4.7 0.00F6a: Compensation not subject tocollective agreement and loss of qualified personnel -1.01 0.33 0.08 0.22 2.40 0.00F7a: Target incentives for executive only 0.02 -0.05 -0.23 0.10 0.16 0.92F8a: Selection of qualified personnel -0.74 0.39 0.6 -0.06 2.05 0.13

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cluster the companies do not have a defined posture regarding thepersonnel’s strategic importance. In fact, these companies gave very highnegative scores to the main HR factor analysed. Thus, as the data show,these organisations have not established periodical employees’ appraisalsystems, use closed subjective promotion criteria, their employees’ careersare not planned and training is not appropriate to the business. These andother aspects reflect the minor importance these savings banks give to HRas a strategic resource.

The third cluster contains six ‘savings banks with an effective HR policyalthough not strategically planned’ (two small and four medium size). Thiscluster is characterised by being the one which best carries out HR practicesto create and develop a strategic HR base, although they explicitly recognisethat they do not have an HR strategic vision. Thus, as we can see, they aresavings banks which have a selection system based on candidates’ skills andknowledge; they have employees’ periodical appraisal systems, which areconsidered in internal promotion decisions; continuous, on-the-job training,which allows a specific human capital creation; and compensation practiceswhich help to retain qualified and socialised personnel.

Finally, the fourth cluster encompasses sixteen ‘savings banks with astrategically coherent HR policy’ (one is small, ten are of medium size andfive are big). This cluster seems to have a better concept of the strategic roleof human capital as a key resource. As data reflect, albeit in a moderate way,these firms are the ones which carry out the HR practices most coherentwith the creation of a strategic HR base. Thus, they ensure the candidates’adaptation to the whole organisation, not only in the selection process, butalso in their career planning, and they also use training, appraisal andpromotion systems that promote the creation of a qualified HR base. In sum,they plan the internal development of their strategic HR.


TABLE 3CORRELATION BETWEEN SAVINGS BANKS AND PERFORMANCE (I)

Cluster n Mean SD Kruskall ranges

Profitability 1 5 –0.0004 0.00012 3 –0.0033 0.00273 6 0.0018 0.00154 16 0.0000 0.0017

Productivity 1 5 0.2445 0.2202 12.602 3 –0.9755 0.8399 4.333 6 1.2901 0.4898 24.334 16 0.5245 0.6928 15.99

Turnover 1 5 1.8000 1.78892 3 2.6667 2.08173 6 1.5000 0.83674 16 1.6250 1.4083

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With the aim of examining the level of association and relationshipbetween savings banks and performance, two types of analysis were carriedout: eta and eta2 statistics. A one-way analysis of variance, with the help ofSnedecor’s F statistic, was also carried out to identify the existence ofsignificant differences in the scores for each of the savings banks clusters inrelation to performance variables. Kruskal Wallis variance analysis wascarried out when the Levene test of variance homogeneity failed. Moreover,we used the t-test for paired clusters and the Tukey and Sheffé tests toidentify which pairs of clusters differed most from the point of view of theirperformance (see Tables 3 and 4)

The results shown in Tables 3 and 4 suggest a significant relationshipbetween profitability and savings bank clusters, and also the existence ofsignificant differences (p≤0.01) between cluster 2 (savings banks with aprecarious HR policy), cluster 3 (those with an effective HR policy,although not strategically planned) and cluster 4 (those with a strategicallycoherent HR policy). Therefore, and as the theoretical literature suggests,the behaviour of employees in the organisation has great impact on theperformance of the company [e.g. Ulrich, 1997; Guest, 1997]. The policiesand practices of HR management play an important role in this behaviour,since it can affect individual employees’ achievements both by its influenceon their ability and motivation, and the structures that lead them to higherachievements in their jobs. Moreover, if rents from investing in superior HRmanagement exceed their real cost, then profitability increases [Huselid,1995; Huselid, Jackson and Schuler, 1997].

With regard to the relationship between HR policies and practices andproductivity, the main results obtained seem to show the existence of astrong link between productivity and those institutions implementing thatcombination. It appears that those savings banks with HR policies aimed atthe creation and development of their staff are those that achieved higherproductivity (clusters 3 and 4) than those without such policies (cluster 2).These results clearly show the notion that, when an organisation has aneffective HR system, it will be able to select good employees and placethem in the positions where they perform at their optimum. This means that,


TABLE 4CORRELATION BETWEEN SAVINGS BANKS AND PERFORMANCE (II)

eta eta2 F (p) Tukey/Sheffé Wallis chi2 t (p)2–4 2–3 3–2 4–2

Profitability 0.651 0.425 6.405(0.00) 2–4 2–3 –2.79 (0.01) –3.73 (0.00)Productivity 0.673 0.45 11.43 (0.00) 3.73 (0.00) 2.92 (0.01)Turnover 0.233 0.1 0.498 (0.68) NS 1.10 (0.28) 1.25 (0.25)

NS: Not significant.

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when an organisation excels in the creation of human capital, it will have ahighly productive workforce compared with its competitors [Huselid, 1995;Koch and McGrath, 1996; Ulrich, 1997].

Finally, and regarding the effects of HR policies on staff turnover, whichreflects, on the one hand, the degree of satisfaction and commitment by thenumber of resignations, and on the other hand, the importance which theorganisation attaches to retaining key workers, the results of the analyses donot allow us to verify this hypothesis, since no significant links betweenstaff turnover and the clusters of savings banks was found. These results,however, appear to confirm something that we had sensed a priori, since thesector in which we carried out this study traditionally has one of the lowestrates of staff turnover.

These results suggest that those organisations that wish to improve theirrelationship with their HR, and so convert them into strategic assets, willhave to: (1) give specific human capital the strategic importance and valueit deserves, and (2) promote HR policies and practices that enhance thepersonnel’s internal development [e.g. Bailey; 1993; Lado and Wilson,1994; Wright, McMahan and McWilliams, 1994; Ulrich, 1997].

CONCLUSIONS

The purpose of this research work was to analyse the role of HRM and theirinfluence on the savings banks performance from a resource-based view.Consistent with this theoretical propositions, this work has show that thosesavings banks which better combine their HR practices to create and todevelop a strategic human capital pool have shown better levels oforganisational performance. This is so because, among other things, the wayan organisation manages its HR has a direct effect on its behaviour, andtherefore, on the profitability of the organisation. Thus, our findings add toprevious works that have contributed to enhace the impact of HRM onorganisational performance [Arthur, 1994; Huselid, 1995; MacDuffie, 1995;Delery and Doty, 1996; Koch and McGrath, 1996; Youndt et al., 1996;Huselid, Jackson and Schuler, 1997; Wright et al., 1999; Fey, Björkman andPavlovskaya, 2000 Khatri, 2000].

This research has, therefore, important practical and academicimplications for HR management. So, from a practical point of view, themain conclusions of this work concern the manner in which savings banksmust face the relationship with their personnel vis-á-vis the future, a futurethat will be marked by strong competition and the need to make importantstrategic changes, where HR policy may figure as a determining factor incompetitive differential. We must, therefore, support the arguments ofauthors such as Lado and Wilson [1994], Pfeffer [1994], Wright and


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colleagues [1994, 1999] and Ulrich [1997] among others, that thoseorganisations that wish to success will have to improve their relations withHR to convert them into strategic assets, promoting the deployment of HRpolicies and practices to attract, develop and retain them.

From an academic standpoint, this work contributes to HR literature,since, from the point of view of strategic management researchers, the RBVprovides a conceptual framework in which to examine the role of HR as asource of competitive advantage. While traditionally, the costs associatedwith the development of HR strategy have been regarded as an operatingexpense, if, in fact, HR are a source of sustained competitive advantage,then these costs would be better considered as an investment in capitalassets [Pfeffer, 1994]. The empirical results of our research also suggest thatthe way an organisation manages its HR has a perceptible significantrelationship with the organisation’s results, a revelation that supports theRBV, where business competitiveness is related, at least in part, to theinvestments in company-specific assets.

However, the results of this research must be viewed with caution since,although the response was quite high, we do not know whether thecompanies that did not respond behaved substantially differently from thosethat did respond. Moreover, using a sample from within only one industryis a potential limit to the generalisability of the results. Also, the relativelyshort period of time used to analyse performance may not have been longenough to explain the influence of certain practices with a long gestationperiod. It must also be borne in mind that we do not know whether thosesavings banks that obtained better results are those that can afford thedesigning and implementation of the proposed policies and practices, thusgiving rise to the reverse causality problem. Also, the use of postalquestionnaires to obtain information does not explain the facts asprofoundly as qualitative techniques (e.g., case studies),2 which developmore comprehensive and valid models and frameworks [Becker andGerhart, 1996; Boxall, 1996]. Hence, we suggest future qualitative researchthat would allow us to analyse the savings banks in greater depth and socorroborate the results obtained, since qualitative research also shifts focusfrom content to process, which is consistent with the shifting focus of theHRM field from planning to strategising [Khatri, 2000].

It should also be kept in mind that many other factors, besides HRpractices, could influence organisational performance. Also, it is possiblethat complex relationships between HR practices and other resources of thefirm exist, such as technology that goes beyond the objectives of this work.Moreover, we should consider that, although in this initial study the externalfactors have not been borne in mind, we are aware of their influence on thefirm’s performance. For this reason, we suggest the carrying out of further


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investigations attempting to measure the comparative and complementaryinfluence of internal and external factors on the savings bank performance.

Finally, and as some authors suggest [e.g., Coff, 1997,1999; Kamocheand Mueller, 1998], it would be helpful to continue the analysis ofmanagement dilemmas, such rent sharing, associate with human assets thathave not been fully articulated in the human capital literature. Thus, futurestrategy-driven studies that integrate organisational behaviour, humanresource management, and organisational theory literature, arerecommended.

NOTES

1. According to Peteraf [1993], four conditions must be met for a firm to enjoy sustained above-normal returns: (1) Heterogeneity: resource bundles and capabilities underlying productionare heterogeneous across firms because they have intrinsically different levels of‘efficiency’. So, firms with superior resources will earn rents. (2) Ex post limits tocompetition: for heterogeneity to be preserved it should be difficult or impossible forcompetitors to imitate or substitute the resources or capabilities which generate rents. (3)Imperfect mobility: resources that are idiosyncratic to the extent that they have no other useoutside the firm are perfectly immobile. Because immobile or imperfectly mobile resourcesare non-tradable or less valuable to other users, they cannot readily be bid away from theiremployer. (4) Ex ante limits to competition: prior to any firm’s establishing a superiorresource position, there must be limited competition for that position.

2. See the special issue of Human Resource Management [1999] title ‘Strategic HumanResource Management in Five Leading Firms’ for an overview.

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the influence of human resource management in savings bank performance

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