CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter provides conceptual clarification and a review of related

literature and theories of human resource management and empirical framework

concludes the chapter.

2.2 Conceptual Clarification

2.2.1 Human Resource Management Practices (HRMPs)

HRMPs refers to the techniques and approaches used to manage people to

achieve the set goals of a firm (Schuler & MacMillan, 1984; Armstrong, 2012).

To get the maximum out of the many HRMPs, organizations have been found to

bundle these practices together (Capelli & Neumark, 2001). Some organizations

have also been found to use individual HRMPs into their management (Batt,

2002).

Numerous researchers have attempted to come up with the best HRMPs

For instance, Guest (1999) listed selection, training, job design, communication,

and employee share ownership programs as the main HRMPs that organization

should embrace. Redman and Mathews (1998) thought that careful recruitment,

training and learning, vast remuneration system, teamwork and job flexibility,

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employee involvement, and productivity-based appraisal systems were

prerequisites practices to support organizational services.

Moreover, according to Delery and Doty (1996), the overall growth and

productivity of an organization required an application of internal career

ladders, formal training, result-based appraisal system, and compensation based

on productivity, provision of job security, listening to the employee's voice, and

having clearly defined jobs as the key HRMPs.

Overall, this study will investigate the HRMPs according to Pfeffer

(1998). The author put forward recruiting, work security, independent groups;

elite based remuneration, extensive training, and decrease in status contrast, and

information sharing as the best HRMPs. This study will solely focus on

compensation, workers’ participation, internal communication system, and

employment security as the key HRMPs that determine employees’

productivity.

The rewards given to workers in return for their work offered to an

organization constitutes compensation. Compensation may include both

monetary and nonmonetary benefits offered to employees. Compensation may

include flexible benefits, medical care, work-life balance, as well as employee

perquisites and salaries or wages. Good compensation to an organization is key

in determining staff retention, motivation, job satisfaction, high productivity,

and low turnover (Gerhart & Milkovich, 1990).

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 Additionally, when workers participate in the decision-making process in

an organization through delegation of duties, this makes them have a sense of

connectedness in the firm and helps them feel in control (Noah, 2008). Proper

employee participation builds their assurance and thus expanded usefulness

(Chang & Lorenzi, 1983), furnishes them with the chance to apply their

intellectual capabilities (Witte, 1980), increases their sense of control and trust

(Chang & Lorenzi, 1983), and helps an organization with diverse perspectives

on which to structure decision making (Kemelgor, 2002).

According to Titang (2013), proper internal communication is vital in

enhancing cooperation among workers and provides an organization with an

opportunity to work efficiently. Internal communication provides a basis for

internal sharing of information, knowledge, and ideas. Internal communication

is central to ensuring efficiency, effectiveness of an organization, ensuring that

employees deliver as required, and clarity of their duties is guaranteed. Such a

clear system promotes employees’ speed in execution of tasks as well as

ensuring the quality of delivery (Argenti, 2007).

Finally, employment security is a basic need for any organization that

aims to grow. Such organizations must ensure that employees’ feel secure and

safe even as they deliver on their job descriptions (Lucky, Minai, & Rahman,

2013). Even in the wake of business, disruptions through restructuring,

employees who fear job losses are prone to poor productivity as their attentions

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are at a crossroad. Therefore, when organizations safeguard employees’ jobs

through contracts and permanent positions, such employees are known to do

well in their jobs and hence increased productivity (Kraja, 2015).

Schuler and Jackson (1987) described HRM as organizational activities

for talent pool management with the motive of resources are utilized aligning

with organizational goal. According to them, HRM consists of various practices

and its associated functions could be used for managing people in the

organizations. Besides that, definition offered by Delery and Doty (1996) stated

that HRM contributes to the achievement of business objectives by having an

internally rational policies and practices designed for firm's human capital.

HRM practices included recruitment, appraisal and selection of perspective

employees at which influencing the human resource policies and lastly provide

direction for the development of human resource philosophies as a whole in an

organization. HRM practices acts as the backbone of the organization structure

and its main responsibility is to transform the operational system into modern

system in order to fulfil present requirements and needs regardless of the rapid

technological development (Priyadarshini & Venkatapathy, 2005). On top of

that, HR practitioner better focuses on system approach rather than implement

specific practices (Lepak, Bartol, & Erhardt, 2005). Furthermore, HRM

practices complement each other and it is better to be looked from an integrated

perspective for a more comprehensive and holistic view (Lepak and Snell, 1999;

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Lepak et al., 2005). According to Purcell (2003), employee commitment is

positively influenced by the HRM practices. HRM needs can be identified

within the context of organizational objectives through HRM planning and

many kinds of micro-staffing can be introduced for meeting the needs as long as

the needs are identified and understood in advance (Montgomery, 1998; Heraty

and Morley, 1998; Paul and Anantharaman, 2003). Saha and Gregar (2012)

revealed that HRM acts as the backbone of any business for better competitive

advantage as these competitive practices are designed for productivity

enhancement and has driven the knowledge development process in the aspect

of knowledge transfer.

There is no agreement on what constitutes HRM practices let alone a

prescribed set of them, (Boxall, 2007). Researchers have over the years

proposed countless varied lists of practices however; there is no agreement on

what or which practice qualifies as an aspect of HRM (Beer et al., 1984; Boselie

et al. 2005; Guest 1997; Storey 1995). It is interesting to note that there are still

some practices that form the core of the various practices proposed. These

include recruitment and selection, training and development, productivity

management and reward scheme, however, others such as job design and

employee involvement are more sporadic and are yet to gain grounds in the

HRM literature. Guest (1997) however puts forward seven practices namely,

selection, training, appraisal, rewards, job design, involvement and status and

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security. However, the study focuses on six out of the seven practices in its

analysis. Selection of the practices for study is based on its recurrence in the

literature reviewed, its significance and measurability. The following is a list of

the practices and definitions in relation to this study.

Recruitment/Selection

This involves two interrelated processes, recruitment is the process of

generating a pool of capable people to apply for employment to an organization

whiles selection is the process by which specific instruments are employed to

choose from a pool of applicants persons most suitable for the job taking into

consideration management goals and legal requirements (Bratton & Gold 2003).

Armstrong (2001) categorizes recruitment and selection into three stages:

defining requirement, attracting candidates and selecting candidates.

The recruitment and selection process is one of the most important HRM

functions as it is the point of entry into most organizations and in addition

where most organizations recruit talents that drive their goals and interest. It

also reflects the requirements and philosophy of the organization as reflected in

the caliber of people chosen for the job.

Various techniques are employed in the recruitment and selection process

and these include various forms of interviews, assessment centres, curriculum

vitae, references amongst others.

Training/Development

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 "Training is the formal and systematic modification of behavior through

learning which occurs as a result of education, instruction, development and

planned experience”(Armstrong, 2001). Training can be on the job or off the job

depending on the need in question. Appropriate training is required for various

needs such as: to solve pertinent problems, to boost productivity, and also for

continuous development of human resource.

The practice is one of the most important aspects of HRM needed to keep

organizations ahead of their competitors Hilb (1992). A rigorous study

conducted by Koch and Mcgrath (1996) demonstrated that firms that engage in

systematic training of their workforce are more likely to enjoy the rewards of a

more productive workforce.

Training and development has three main activities such as training

individuals, educating internal customers and lastly their development. Training

can either on the training and development pertaining to regular work task

which given by superior or the vocational training which given off the job.

Training and development is a planned process which let employee expose to

new knowledge and acquire new skills and technologies in order to maintain or

improve the productivity in the workplace. Therefore, training is one of the

crucial HRM practices especially successful organizations (Robbins S. P.,

2003). Kuballa (2007) suggested that the investment on workforce is actually

for the organization's own benefit as the trained workforces have higher

productivity and contribute to higher organizational effectiveness and such

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organization is capable to attract workforce with higher quality. Furthermore,

timely training helps to increase the adaptability and flexibility of workforce,

ensure the employees acquire high level of skill and at the same time develop

the knowledge and positive attitudes in order to maintain the competitive

advantage (Schuler & MacMillan, 1984; Sherman & Snell, 1998; Hale, 2005).

Training and development can be used to enhance employee's capability, help

the employee to achieve the lifelong career capability and promote the

organization commitment towards achievement of company's goals (Paré &

Tremblay, 2007 ). Samuel and Chipunza (2009) reported that training and

development is known as the most crucial tool for every employee to expose

and acquire new knowledge and skills in order to maintain the productivity in

this highly competitive work environment. Furthermore, Arthur et al. (2003)

concluded that training has positive effect on job-related behaviors or

productivity. Moreover, Khalid, Rahman, & Ilyas (2014) and Sattar, Ahmad, &

Hassan (2015) proposed that training showed positive and significant effect on

employee productivity. Hassan (2016) concluded that training plays a positive

role in increasing employee's productivity.

Employee Involvement

The concept of treating employees as the most important assets of an

organization is an underlying assumption of HRM. As such, to facilitate and

enhance greater employee influence and involvement is obviously basic to

successful HRM practice in organization. Poole and Jenkins (1997) proposed

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three principle routes to greater employee involvement which includes:

Legislated standards on employee participation (example work councils,

support for employee financial participation) trade unions for both formal and

informal collective bargaining and management initiatives to support employee

participation in the work itself and to provide opportunities for employees to

voice their views on development and problems (see Beer et al., 1984; Poole &

Mansfield, 1993).

Reward/Remuneration, Compensation and Benefits

The remuneration process is crucial and a source of contention in most

organizations. It deals with rewarding people in accordance with their value in

the organization. It is concerned with both financial and non financial rewards

and embraces the strategies, philosophies plans and processes employed by

organizations to develop and maintain reward systems.

An inclusive and effective HRM strategy has a coherent approach to

rewards as one of its most central component (Armstrong & Murlis 1991; Poole

& Jenkins 1997). It plays a motivational role in management hence the

importance attached to it. Pay strategies include productivity related pay,

production based pay, skill based, knowledge based and base pay (Brown

1989).

Compensation is a process of offering monetary value to employees for

the effort they directed in their tasks performed. Employee compensation and

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benefits is described as any form of pay, monetary rewards, bonuses,

commissions, leaves, recognition programs, flexi work hours and medical

insurance (Sherman & Snell, 1998). Another description of compensation is any

form of monetary returns including the intangible service and benefits that paid

to an individual (Milkovich & Newman, 1999). Bergmann and Scarpello (2001)

described that compensation system is useful in enhancing the efforts of

promotes output towards the company's objectives accomplishment. Besides

that, compensation is also supposed to incur the highest cost in running a

business. In the same vein, compensation system acts as motivation tool for

enhancing job productivity (Chiu, Luk, & Tang, 2002) . Many past studies have

clearly established the roles of compensation and benefits in affecting

productivity of employees. Compensation system which based on excellence is

the most effective HRM practice as it encourages high level productivity of

employees. Besides that, compensation system which based on productivity is

claimed as the best indicator in measuring the productivity of employee at both

individual and group level (Osterloh, Frey, & Homberg, 2007 ). Likewise,

Dubrin (2006) concluded that the employees tend to get motivated for perform

job task efficiently if their pay is linked with the productivity measurement at

individual or group level. A study conducted by Huselid (1995) showed a

noteworthy relationship between compensations and employee productivity.

According to Wright, (2003), the effective integration of productivity and

compensation can enhance the efficiency of employee. On top of that, Ahmad

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and Shahzad (2011) found that the productivity of university teachers will go up

if compensation is enhanced and Mohammad A. Al Qudah, Osman, & M. Al.

Qudah (2014) revealed that compensation has positive effect with employee

productivity. On top of that, Hassan (2016) concluded a significant relationship

between compensation and employee's productivity.

Work-life Policies

Work-life policies are similar to working environment with low conflict

between work and family issue at which the needs of the employees are taken

into account by the organizations (Honeycutt and Rosen 1997; Kopelman et al.

1983). Work-life balance policies are properly designed and practiced at the

organizational level, normally by HR directors or managers. On the other hand,

Work-life balance programs were introduced with the intention of facilitating

employees for better integration and management in work and family

responsibilities (De Cieci et al., 2005) at which intended to help employees cut

down the levels of stress, conflict of work– family, and create more positive

output between work and family (Thompson & Prottas, 2006; Glass & Finley,

2002; Rupert et al, 2009). Kopelman, Ptottas, Thompson, and White Jahn

(2006) investigated the relationship between work-life balance program and

positive attitudes and behaviors at the HR manager and employee levels. They

concluded that the more work-life balance programs offered, the better the

commitment and perceived organizational family support. According to Konrad

and Mangel (2000), Work Life Balance program in 195 firms created significant

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positive impact on productivity if large portion of workforce were women and

when professional was employed (McConville & Holden, 1999; Parris et al.,

2008; Purcell & Hutchinson, 2007; Ryan & Kossek, 2008). With work-life

balance policies, employees could have less stress, minimum work-family

conflict and more positive output between work and family (Thompson &

Prottas, 2006; Glass & Finley, 2002; Rupert et al, 2009). In a study of 55 firms,

the company representative stated that the employee productivity is maintained

when the administrative employees are allowed to bring their children to work

during unexpected occurrence such as childcare arrangements broke down

(Secret, 2006). Therefore, based on the above explanation,

Productivity Appraisal

Productivity appraisal is described as a formalistic process at which

monitor the work and evaluate the productivity of employee regularly. It is also

used as a management tool for improving the employee productivity and

productivity and minimizes the error rate (Daley, 1992; Brown and Heywood,

2005). Productivity appraisal is the fundamental element of human resource

management; almost all of the HR decisions are made based on the results of

the appraisal (Brown et al, 2010). Productivity appraisal is also known as

employee evaluation; it is important not only for the advancement of the

employees but also crucial for the operation of organizations (Francis X. &

Brian H., 1994) and (Boice & Kleiner, 1997). In an organization, the

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identification of people for the leading position is normally done by rating the

employees. Proper reviewing the employees‟ work and reward appropriately is

necessary as it helps to acknowledge the efforts of employee. It is complicated

and difficult in implementing productivity appraisal system because the

appraisal must be accurate and fair for all employees. Arbaiy and Suradi (2007)

proposed that managers can assess the efficiency of employee in the aspects of

resources management within the organization through productivity appraisal

and then this creates competitive advantages amongst employees. According to

Kelly et al (2008), it is over 80 percent of the respondents in the study wants

appraisal system and 45 percent of the respondents wish to have improvement

on their current appraisal system. As per stated in the study, an appropriate

appraisal system with fairness and clarity resulting satisfaction, productivity

development, motivation and perception towards productivity bonuses. On top

of that, the well-managed appraisal system aids the identification of essential

job competencies and encourages the professional growth in competitiveness

and innovation. It was proposed that the evaluation of employee shall not focus

on the personality characteristics and general traits factors but on the job related

productivity. Boice and Kleiner (1997) suggested that committed and motivated

employees are the “product” of effective appraisal system. Therefore, many

researchers urge that an effective appraisal system shall be accurate,

measurement system which evidently defined, with good record keeping and

most importantly is with regular review of productivity. Moreover, the

objectives are defined with full consultation between two parties.

Maintenance

Maintenance is the administration and monitoring of workplace safety,

health and welfare policies to retain a competent workforce and comply with

statutory standards and regulations. It is also an organizational activity of

Sustaining and improving working conditions, retentions, employee

communication etc. Maintenance in organizations is usually achieved through

employee’s welfare and motivation. So welfare and motivation are used to be

able to retained them (employees) and make them be committed to their jobs.

Separation

Separation is defined as an act of strategic approach towards employee

development and ensuring continuity by taking positive steps to fill resource

gaps caused by resignations, terminations, layoffs, death, medical sickness etc

2.1.2 Human Resource Management

Human resource management is the function within an organization that

focuses on recruitment of employees and providing direction for the people who

work in an organization. Human Resource management can also be performed

by line manager. Human resource management is the organizational function

that deals with issues related to people such as compensation, hiring,

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performance management, organization development, safety, wellness, benefits,

employee motivation, communication, administration and training (Susan

2012). Human resource management is also a strategic and comprehensive

approach to managing people and the work place, culture and environment.

Effective Human resource management enables employees to contribute

effectively and productively to the overall company direction and the

accomplishment of the organization’s goals and objectives (Susan 2012).

Human resource management is composed of the policies, practices and system

that influence employee behaviour, attitude and performance (Noe, Hollenbeck,

Gerbat and Wright 2007). According to (Lazar, 2001). Human resource is the

division of a company that is focused on activities relating to employees. These

activities include recruiting and hiring of new employees, orientation and

training of current employees, employee benefit and retention formerly called

personnel. Therefore human resources are the most important asset of an

organization. It forms a greater and reasonable portion of an organizations

resources. Human resource is directly connected to the success of any

organization and therefore must be planned, the process by which management

attempts to provide for its human resources to accomplish its task is called

manpower planning (Kyagya, D.T 2017).

2.1.3 Employee Productivity

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 The use of knowledge, skills, experiences and abilities to complete the

mission assigned in an effective and efficient way is known as employee's

performance (Dubrin, 2006). Employee performance helps to take the cost of

resources used into consideration (Mathis & Jackson, 2004), assess the quantity

and quality of work performed (Mathis & Jackson, 2004), survive and outshine

among firms (Lee & Carter, 2011), measure and achieve preset performance

goals and lastly improve the efficiency of the employee performance for

decision making (Boysen, Demery, & Shake, 1999). The evaluation of

employee performance is based on several criteria such as employee attributes,

employee behaviour and employee achievement (Kaplan, 2003). Many

researchers claimed that organizational performance is positively affected by

Human resource management practices (Huselid, 1995; Sun, Aryee, & Law,

2007; Liao, Toya, Lepak, & Hong, 2009). Nevertheless, Huselid (1995)

proposed that there was no concrete evidence to support this presumption. Good

organizational performance relies on employee's involvement as suggested by

different researchers. Besides that, employee's attitude is the determining factor

when translating HRM policies and practices into specific performance

(Ramsay, Scholarios, & Harley, 2000; Nishii, L., 2008). An employee with

good performance is motivated by intrinsic motivation and encouragement.

These high performers boost up organizational performance. That is the reason

why most of the research on human resource practice is conducted in

employees‟ perspective (Bowen & Ostroff, 2004; Nishii & Wright, 2008). The

16
strategy and contextual circumstances of an organization is shown through the

way of implementation of HR management system as the pattern of human

resource capital management depends on the organization's decision. This

pattern reveals the information sharing between the organization and the

employees (Bretz & Judge, 1994). The existence of difference between

managers and non-managers in the aspect of perceptions creates gap among

managers and non-managers regarding the influence of human resource practice

on employee's performance. Therefore, research for seeking perceptive

agreement between these two parties on human resource practice is necessary

(Nishii & Wright, 2008 ). Organizational performance is highly dependent on

the employee performance and successful organization agrees that human

resource contributes to performance (AL-Qudah, Osman, Ab Halim, & Al-

Shatanawi, 2014). HRM practices are implemented for employee's performance

evaluation and in this highly competitive era, improve HRM practices could

have boost up employee performance (Caliskan, 2010; Bowra, Z. et.al, 2012).

2.2 Review of Related Literature

2.2.1 HRM Practices and Employee Productivity

Early studies linked individual HRM practices such as training, selection,

productivity appraisal and compensation to firm financial productivity

(Milkovich, 1992; Huselid, 1995; Guest, 1997). Research has led to the

identification of a number of Human Resource Management practices that

17
contribute to productivity across different organizations (Huselid, 1995). In a

literature review, Delery & Doty (1996) identified seven such practices that

have been consistently considered HRM practices. They defined HRM practices

as those that are theoretically or empirically related to overall organizational

productivity. These practices include internal career opportunities, formal

training systems, results-oriented appraisals, employment security, participation,

job descriptions, and profit sharing.

The relationship between Human Resource practices and work out comes

is an increasingly researched topic in human resource management (e.g. Edgar

& Geare, 2005; Truss, Gratton, Hope-Hailey, McGovern & Stiles, 1997). More

specifically, HRM is hypothesized to fulfil employees’ needs which enhances

favourable attitudes, and subsequently improves productivity outcomes (Edgar

& Geare, 2005; Kuvaas, 2008; Meyer & Allen, 1997). This is consistent with

social exchange theory (SET) which argues that HRM practices contribute to

positive exchange relationships between employee and employer – especially

when the needs of individual workers are considered – to which employees

reciprocate with favourable attitudes and behaviour (Gould-Williams & Davies,

2005).

Luna-Arocas and Camps (2008) found HRM practices such as training,

empowerment, rewards, job enrichment, and job stability to affect turnover

intention through job satisfaction and organizational commitment. Similarly,

Saks, and Rotman (2006) found that while job characteristics such as autonomy

18
and feedback foster work engagement, a higher level of work engagement

subsequently lowers employees’ intention to quit.

Previous studies have also shown that implementing HRM practices is an

important means through which favourable outcomes can be fostered. For

example, the presence of strong recruitment and selection practices,

promotional opportunities, grievance resolution mechanisms, flexible benefit

plans, employee responsibility, autonomy, and team work were found to relate

positively to organizational commitment while compensation cuts were

negatively associated with organizational commitment (Caldwell, Chatman &

O’Reilly, 1990; Fiorito, Bozeman, Young & Meurs, 2007; Gould-Williams &

Davies, 2005; Heshizer, 1994). In addition, satisfaction with and perceived

adequacy of career development, training opportunities, and productivity

appraisal were established as predictors of organizational commitment (Kuvaas,

2008).

2.2.2 Importance of Human Resources Management

The usefulness of HR is an organization that can never be

overemphasized as they provide the creative spark that drives organizations.

Noe et al., (2004) suggested the following qualities that distinguished HR from

other forms of organizational resources, they are: HR are valuable: High quality

employees provide a needed service as they perform many critical functions.

HR are rare in the sense that a person with high level of the needed skills and

19
knowledge is not common. An organization may spend several months

searching for talented employee.

HR cannot be imitated. It will be impossible to find and employ HR that

can do precisely the same thing so that advantage of a competitor could easily

be eliminated.

HR have no good substitutes: Proper training and motivation will cause

employees to learn, develop their abilities, and care about customers. It is

difficult to imagine another resource that can match committed and talented

employees.

2.2.3 Objectives of Human Resource Management

Human Resource Management core objective is corporate survival

through the achievement of personnel satisfaction. Ivancevich (2004) affirmed

that the contributions HRM makes to organizational effectiveness include the

following:

Helping the Organization Reach its Goal: Since every business issue has

HR implications, it is the objective of the HR function to ensure that the

organization has the pole that will bridge the gap between where the

organization is and where it wants to be.

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Efficiently Employing the Skills and Abilities of the Workforce: The HR

function seeks to develop an organizational climate that will ensure the skills

and abilities of the workforce.

Providing Well-Trained and Well-Motivated Employees: It is the objective of

the HR function to ensure that organizational employees are well

trained and well-motivated so that they can perform at optimal levels.

Increasing Employee’s Job Satisfaction and Self-Actualization: To ensure that

employees are productive by matching them to jobs that meet their abilities and

also ensuring that they are equitably treated.

Achieving Quality of Work Life: This is closely related to increasing

employee's satisfaction and self-actualization. Quality of work life generally

refers to several aspects of the job experience. These include factors

as management and supervisory style, freedom and autonomy to make

decisions on job satisfaction, physical surrounding, job safety, satisfaction

working hours and meaningful tasks.

Communicating HRM Policies to all Employees: To communicate HRM

policies, programmes and procedures in the fullest sense to all

employees in the organizations. This also include communicating with

top-management people to illustrate what it can offer on these areas in

21
the form of support, counsel, and techniques and to increase its

contribution to the overall strategic mission and goals of the organization.

Maintaining Ethical Policies and Socially Responsible Behaviour: In carrying

out the HR functions, the HR managers is to show by example that each

employee is important and will be treated ethically, i.e. an assurance that any

activity engaged in by the HRM area will be fair, truthful, and honorable,

people will not be discriminated against and other basic rights will be protected.

These ethical principles should apply to all activities.

Managing Change: The fast pace of change taking place in the workplace is

giving new meanings to the employment relationship. What these change mean

to the HR manager is that new, flexible approaches must be initiated and used

effectively without jeopardizing the survival of the organization.

2.2.4 Reasons for the Failure of Human Resources Management

The HRM function does not exist in isolation they are carried out within

the larger environment of business organizations. The environment of business

are those forces that are external to the business which have either negative or

positive impact to the organization, and which the organization cannot easily

control. Igbinomwanhia (2010) observed the following environmental factors

that affect HRM in Nigeria:

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Economic Factors: The degree of resources in an economy affects the

condition of HRM management of such society, the more buoyant an economy,

the more the resources that are available to organizations to prosecute HRM

programmes and the reverse is true. In the oil boom era in Nigeria,

organizations could pay ‘fat salaries', send employees on training both locally

and abroad, and administer a wide range of attractive benefits including paid

vacation. However, when the tide changed and the economy began to contract,

HRM was adversely affected. Banjoko (2006) affirmed that “as the recession

and austerity become more severe many companies resorted to cut-back in

essential HRM activities. Cash loans were slashed or completely

suspended...training programmes were cut back and many other employee

programmes were also reduced”. In recent times, the global economic meltdown

has added a new dimension to the challenge that HRM have to deal with in

Nigerian organization.

Political Factors: Politics in Nigeria have not allowed the HRM function to be

effective in recruiting and selecting the best candidate for the organizational job.

Merit is no longer the order of the day. Political affinity, ethnic balancing

(Federal character) and 'godfatherism' have become the norm for securing

employment. This development has highly jeopardized the GRM function of

objective recruitment and reward for performance.

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Legal Factors: HRM has to operate within the confines of the law that relates to

its activities, as well as other government orders, law court decisions, and

rulings of the industrial attribution panel, it is the duty of HR function to draw

the organization attention to such laws and rulings and ensure that they are

complied with. The minimum wage law determines the wage and salaries of the

employee even where they deserve a better wage or salary.

Social and Religious Factors: Similar to political factors, social and religious

factors are also exerting considerable influence on hiring, promotions and

employee discipline. It is no news that social groups and 'cliques' within the

organization lobby for 'one of their own’ when it comes to hiring and

promotion. This jeopardizes adequate compensation for committed employees.

Technological Factors: This is the most dynamic of all environmental factors

that affect HRM. The same way around the world, technological

development is significantly affecting the practice of HRM in Nigeria.

Computer and ICT knowledge is increasingly being weighted significantly in

the recruitment process. Almost all employees entering organization today are

required to have one form of computer knowledge or the other. The rapid rate of

change in technology poses great technical problems to the HRM function.

2.3 Theoretical Framework

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2.3.1 Human Capital Theory (HCT)

This theory as pointed out by Schultz (1961), offers the view that the

appreciation of the expansion of individuals within an association can add to the

more likely presentation of the firm. The hypothesis of human resources

perceives individuals as resources and not as an expense within an association.

As per Bontis (2008), HCT refers to the human factor in the association. These

are common abilities, insights and skills that give the association its unique

character. It accentuates the extra worth that people can add to an association.

Human resources are an inescapable resource. In addition to the absence of real

responsibility for human accounts, firms can and do profit from the undeniable

degrees of training and information on their workers through strategies such as

building a learning culture to create unity.

The theory is divided into categories of capital such as the symbolic,

economic, social and cultural capital. Economic activity is measured by the

ability to perform a function that generates income. Education, job training and

appealing skills are ascribes that increase the capacity of individuals to obtain

information and to create higher wages. The human resources hypothesis is that

the higher education, the higher the pay. This is accomplished by going to the

classroom; obtaining instruction that builds skills, increases in skills, increases

in profitability and increases in efficiency is equally remunerated through a

higher salary. (Becker, 1964; Mincer, 1974). It represented the view that

education and training would bring future profitability, not only in the use of

25
assets. From this point of view, firms and employees rely on the same human

resource interests to be increased.

Boxall (1996), places that social, symbolic and cultural capital alludes to

the connections and impact that people have on society. Social, cultural and

symbolic capital is difficult to gage, but it is essential to understand its value.

Suspicion of the HCT hypothesis is based on the limitless idea of a number of

structures that are largely fundamental to including human resources.

2.3.2 Resource Based View Theory (RBV)

The hypothesis is established by the major works published by Penrose

(1959). There is strong evidence that the RBV vision shows that organizations

are struggling in a dynamic business environment. Barney, (2001), a supported

upper hand can be achieved by associations through their workers. This can be

refined if the company acquires a large number of personal assets that can be

imitated by its competitors or competitors. As a competitive profit system, RBV

is actually based on the use of a number of valuable company assets. Galbreath,

(2005) the firm must decide on potential assets that can satisfy the volatility of

value, unusual, immeasurable and unchanging competing organizations in the

positions in which the company operates.

The central issues of the RBV hypothesis are that organizations must be

constrained to decide on their potential key assets and to assess whether these

assets meet the resulting standards identified as valuable, rare, inimitable and

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non-substitutable (VRIN). An asset should be significant in adjusting a firm to

use a value-added methodology, either by beating its rivals or by reducing its

own shortcoming. Rare – to be significant, an asset, by definition, should be

uncommon. In an appropriate competitive and vital issue, the asset market, the

estimation of the asset was a reflection of the normal limited future on top of

normal returns. Inimitable – if a significant asset is constrained by just one firm,

it can be a source of competitive profit. (Barney, 1986; Barney, 2001; Amit and

Schoemaker, 1993). Within the longstanding period, this favorable position

could likely be property if contenders are unable to easily copy this essential

quality (Peteraf, 1993; Barney, 1986).

Apart from the fact that an asset is rare, which may be worth making and

may be improperly imitated, an equally important factor is the lack of exchange.

Organizations need to be prohibited from bringing care and security to the table

with assets that have this test, as doing so will improve the productivity of the

framework. (Dierickx and Cool, 1989; Barney, 2001). The indicated features of

VRIN are important independently, but there are not sufficient competent

profitability conditions (Dierickx and Cool, 1989; Priem and Butler, 2001).

Human resources practices affect the competitive edge of the organization.

Employees are considered the most valuable assets an organization can have. As

a result, companies should provide these resources with incentives, motivation,

and training to ensure that they have a stronger competitive advantage than their

competitors do. (Wright & McMahan, 1992)

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2.3.3 Expectancy Theory

Victor Vroom suggested the expectation principle of productivity

management in 1965. According to him, people act in a particular way because

the desired result of such actions motivates them. An individual’s productivity

should always be in line with the organization’s expectations regarding the

achievement of future goals (Salaman et al. 2005). An incentive for people to

act in a certain way in certain types of actions is their expectation. This

expectation is related to the effect of the selected action. Anticipation is

determined by the individual's expectation that the productivity of a particular

type of behavior will definitely help the person achieve the desired productivity

objectives. This property therefore enables individuals to assess if they have the

requisite skill sets to effectively perform a job. However, the resulting

motivation often decreases when success targets are beyond accomplishment.

(Bhattacharya, 2016)

The expectancy concept is used in almost all types of organizations. This

is applied extensively to all aspects of employment relations, with a particular

focus on employee productivity management (Eisenberger et al. 1990). In

organizational processes such as the hiring of employees for a specific task, the

application of this principle is clear. It is additionally used to investigate the

results of organizational training and to assess the routine of employees

according to organizational objectives. This concept is also used for dynamic

identification that motivates workers in the firm. Particularly in the context of

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the hiring process, this vision assists to identify the motivational factors

contributing in terms of past needs, goals and experience of the people joining

the organization. (Bhattacharya, 2016).

In organizational productivity appraisal, this concept works to interpret a

particular characteristic of an employee's productivity in terms of individual

expectations.

It should be noted here that the doctrine of waiting often suggests that

different people want different things in their organization. This ranges from a

good salary to job security to professional advice. As a result, in terms of

organizational training, this perspective contributes to the results of the

behavioral map. In other words, this view helps to identify specific decisions on

the consequences of student behavior (Lunenburg 2011; Bhattacharya, 2016).

Expectancy theory is more beneficial in various ways than other theories. It

helps, for example, to identify employees in an organization who are willing to

perform at a higher level. These employees can achieve maximum job

satisfaction if they are provided with the right facilitator. Therefore, theory

helps to interpret the minds of the individual. It helps to identify individual

influences that influence people to make decisions based on their expectations

(Kanfer 1990; Ramlall 2004). In addition, this perspective focuses on people's

expectations and organizational ideas about their ethical behavior. It is therefore

helpful to make each employee aware of the organizations’ conduct and the

29
outcomes expected by the organization. Therefore, it is helpful in making each

employee aware of the conduct of the organizations and the results expected by

the business.

Firms using this concept can discern the actual outcome of their

employees. Therefore, this idea helps them to retain employees who augment a

big significance to their company by identifying internal and external

facilitators. (Ramlall 2004; Samuel and Chipunza 2009). According to Robbins

and Judge (2013), expectancy theory is more relevant for organizations with

appropriate infrastructure than other theories such as the idea of establishing

goal theory. In this regard, infrastructure refers to an appropriate way to

measure employee efforts, results, and rewards. However, this idea may not

work well in some organizations where there is no such infrastructure.

(Bhattacharya, 2016)

The Human Capital Theory was adopted by the researcher for this study.

The adoption of "Human Capital Theory" for the study titled "Human Resource

Management (HRM) Practices and Employee Productivity in Organizations: A

study of selected deposit money banks in Benue State" suggests that the

researcher recognizes the theoretical framework as relevant and suitable for

understanding the relationship between HRM practices and employee

productivity. Human Capital Theory emphasizes the importance of investing in

the skills, knowledge, and capabilities of employees. In the context of deposit

30
money banks, where knowledge-intensive tasks are prevalent, this theory helps

in understanding how HRM practices contribute to enhancing the human capital

of employees.

Human Capital Theory posits that investments in education, training, and

other aspects of human capital development leads to increased productivity. The

researcher chose this theory to explore how specific HRM practices, such as

training and development programs, contributes to enhancing employee skills

and, consequently, productivity in the banking sector. The theory takes a long-

term perspective, suggesting that investments in human capital yields benefits

over time. In the banking industry, where employee expertise and knowledge

are crucial, understanding the long-term impact of HRM practices aligns with

the industry's dynamics. The adoption of Human Capital Theory suggests a

recognition of the importance of human capital development in the banking

sector and a desire to explore how specific HRM practices contribute to

enhancing employee productivity in selected deposit money banks in Benue

State.

2.4 Empirical Framework

2.4.1 Compensation and Employee Productivity

Compensation refers to what is paid to an employee in return for their

services (Deckop et. al. 1999). While investigating the impact of compensation

on employee productivity using the banking sector in Pakistan, Hameed et al.,

31
(2014), concluded that compensation had a statistically significant positive

effect on employee productivity. This was in agreement with other several

studies (Abdullah et. al., 2009; Mangale, 2017). Therefore, good compensation

improves employees’ productivity (Milkovich, 2002).

In Kenya, Jean et al. (2017) investigated the effect of compensation

strategies on the productivity of employees in using a case study of Mombasa

Cement Limited. Using stratified sampling, the study used 153 employees and

administered questionnaires on them. The study focused on salary and benefits

on the productivity of employees. Using quantitative methods, the study found

that recognition through benefits and rewards in terms of fair pay, allowances,

has a positive impact on employees' productivity. The study was carried out

with Bishop (1987) and Bowen (2015) who found that recognizing and

rewarding employees improves their productivity.

In the United States of America (USA), Delelaney and Huselid (1996)

investigated the impact of human resource management practices on corporate

productivity ideas using 590 for-profit and non-profit firms. They used data

from the 1991 National Organization Survey (NOS, a special module for the

General Social Survey (GSS). The independent variables were the HRMPs such

as staffing selectivity, training, incentive competition, and grievance procedures

Complaints Investigators found positive and important relationships between

HRMPs such as training, staff selection and robust productivity flexibility.

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In another study, Hameed (2014) investigated the impact of wage increases on

employee productivity. The researcher found that a fixed salary has a positive

effect on job satisfaction, regardless of the risk. The study also revealed that

employers have an expectation that employees will commit on a long-term basis

through regular and consistent pay.

In his study, Khan (2010) vigorously investigated the effects of human

resource management practices on organizational productivity in the oil and gas

industry in Pakistan. His focus was on the five HRMP standards namely

recruitment and selection, training and development, productivity appraisal,

wages and incentives, and staff participation. To evaluate the effectiveness of

the institution, the author used the perceived quality of products and services,

production costs, market share, competitive productivity, and industry-related

productivity as key proxies. The study found a positive relationship between

HRMPs and organizational productivity.

A similar study in Jordan, by Abou-Moghli et. al. (2012) investigated the

relationship between HRMPs and organizational productivity using 13 five-star

hotels in the capital city of Amman. They sampled 170 from hotels. The

HRMPs included, as independent variables were selection and placement,

training and development, productivity appraisal, reward and incentives,

employee participation, internal communication systems, and work groups.

Their diversity was based on organizational productivity that was strongly

33
influenced by employee-related productivity, market-related productivity, and

productivity-related productivity. The study used linear regression analysis and

descriptive statistics to draw conclusions. Research has found that HRMPs have

a positive impact on the productivity of these hotels. The most influential

HRMPs were policy selection and placement, productivity evaluation, and

finally productivity groups.

2.4.2 Workers' Participation and Employee Productivity

In France, using a set of French cooperatives, Defourney and Jones

(1985) investigated the effects of employee involvement on business

productivity. The value-added function of participation in profits, collective

membership and ownership was observed to be increasing, even when a wide

range of business-specific and ecological conditions are considered. Their

findings suggested that policy makers should investigate ways to increase

employee participation in fundraising and revenue sharing as this improves their

productivity. They thus advocate that companies or organizations that want to

bring the best to employees should not forget the participation of employees as

the HRMP improves employee productivity (Gupta and Shaw, 2014).

In Kenya, Kubaison (2015) examined the extent to which organizational

employee participation practices contribute to organizational productivity. Its

main purpose was to investigate the extent to which direct, indirect and

financial participation schemes affect productivity in the public sector. The

study used a sample framework consisting of 86,878 employees from a list of

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178 state-owned companies that participated in the 2010/2011 productivity

agreement. The study collected data from managers, supervisors and general

staff using a questionnaire. The study found that, unlike indirect involvement,

direct participation in the team significantly affected employee productivity.

Kees et al. (2011), tried to understand the impact of workers’

participation on organizational productivity using an integrated model in

Western European countries and specifically the Netherlands. According to

them, current investigations were lacking an integrated model in which to

investigate the impact of both direct participation and indirect participation by

workers on organizational productivity. They found that direct employee

participation did not only enhance their skills and improved their productivity,

but also improved the overall organizational productivity.

Odero and Makori (2018) used a sample of sixty freelance lecturers from four

public campuses in Western part of Kenya to look at the impact of involvement

in policymaking on productivity by part-time lecturers. The research established

that participation in decision-making accounted for inequality within the work

of freelance staff and had a big impact on their productivity.

2.4.3 Internal Communication System and Employee Productivity

Communication is the data provided to its customers by a company.

Customers can be within staff and stakeholders; can be outside agencies,

channel partners; the media; government; field bodies and institutions:

35
educational and social in general (Riel & Fombrun, 2012). Communication

plays an important role in determining whether employees work well or not.

In Kenya, Atambo and Momanyi (2016) investigated the effects of

internal communication on employee productivity through a study by the Kenya

Power and Lighting Company (KPLC) in South Nyanza. Using a random

sample, the study used 256 KPLC staff and managed questionnaires to collect

the required data. The study found that downward communication was timelier

and appreciated by many employees and hence improved their productivity. The

upward communication was found conducive as it helped employees in giving

feedback and raising any complaints that they had and improved their

productivity.

Additionally, lateral communication was found to be essential since it

enabled social interactions within departments, team building and proper work

coordination. This was in line with a similar study by Karimi (2013), whose

findings showed that communication had a positive impact on the staff of the

Kenya Postal Corporation thus translating this stimulus into job satisfaction and

improving productivity.

Internal Communication Strategy and Productivity-Evidence from the

Nigerian Service and the Alternative Manufacturing Industry et al. (2014)

established an investigation into the impact of internal communication strategy

on increasing organizational productivity in the services and manufacturing

36
industry in Nigeria. Using data from sample management executives and using

multivariate integration analysis the study found that appropriate internal

communication is related to organizational productivity. This was consistent

with Femi's (2014) findings in Nigeria using 120 respondents from sample

organizations; that effective communication and productivity of employees was

closely related to productivity.

2.4.4 Employment Security and Employee Productivity

According to Kraja (2015), the security of being employed in simple

language is defined as knowing that your job is permanent as long as you want

it to be. Employees need to be certain that they will not wake up tomorrow and

their jobs are gone. Pfeffer, J, (1998) cites that when workers have job security,

they are motivated to contribute their knowledge and efforts to increases the

productivity of an organization, and they are encouraged to plan long-term in

line with the organization’s goals.

Maintaining employment security helps to build trust between employees

and their employer. This in turn leads improved cooperation, increased

confidence in bargaining for better wages, and fosters greatly the spirit in the

organization. Employment security must be accompanied by consistent and

good productivity from employees. This is because productivity is vital.

Organizations hire employees, offer them good job securities and they must in

return perform so that the organization can recoup back their investments.

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Overall, proper investment in securing employees’ jobs has been found to boost

organizational productivity (Delery & Doty, 1996; Bjookman & Fey, 2000).

Using a case study of the Albanian public administration, Kraja (2015)

used primary data by conducting 500 interviews of the employees in the public

administration. With employment security as the independent variable and

public administrator's productivity as the dependent variable, the study applied

ordinary least squares (OLS) method, the study concluded that job security was

the most important factor in explaining employees’ productivity.

In Iran, Jandaghi, et al. (2011) conducted descriptive research on the

impact of job security on employees' commitment and job satisfaction. They

employed 158 employees from Qom Municipality. By analyzing systematic

reviews and the use of integration, their study showed that there was a

statistically significant relationship between employed and contract employees

in defining commitment and their overall outcome. They found that job

satisfaction was consistent with employee commitment but was not essential for

final decision-making. Their overall results showed that salary satisfaction with

colleagues was significantly affected by commitment.

In their study in Kenya, Vidija, Peter and Ogutu, (2016) investigated the

impact of HRMPs on the productivity of firms listed on the Nairobi Securities

Exchange (NSE). The study used research that described specific components.

Using a self-help questionnaire, the survey was conducted on 60 listed firms.

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The study focused on HRMPs such as employment security, elective

employment, self-governing groups, work-related earnings, staff training,

classification and information sharing.

To measure solid productivity, the study used a measure of sales growth,

market share, productivity and profitability. With a simple line analysis, the

study found that HRMPs are statistically significant in determining the

productivity of listed firms. These findings were consistent with other studies

such as Huselid (1995), Singh, and Kassa (2016)

39