Strategic Human Resource Management And Organisational .

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Strategic Human Resource Management and OrganisationalPerformance: An Investigation in the Country of JordanA thesis submitted for the degree of Doctor of PhilosophybyTamer Khalil DarwishBrunel Business SchoolBrunel UniversityApril, 2012

AbstractThe purpose of this research is to contribute to the understanding of the debatesurrounding strategic human resource management (SHRM) and organisationalperformance. The relationship between SHRM and organisational performance hasbeen a heavily deliberated issue over the last decade. A survey of literature on SHRMand its impacts in terms of performance reveals that empirical results on this topic are,as yet, inconclusive. Whilst some studies have found the impact to be positive, theresults from several other studies cast doubts concerning the overall efficacy of(positive) HR practices on firms’ performance. Moreover, researchers have arguedthat there is a need for additional studies on the HRM-performance link, and thatfurther investigations in different contexts are required.This study responds to the call of researchers, and is conducted in a new non-Westerncontext in the country of Jordan. The work contributes to our understanding of HRpractices’ impacts on employee turnover rate as well as on the actual and perceivedfinancial performance of organisations. The empirical analysis is based on theoreticalpropositions which state that motivated employees, through good HR practices,remain in their positions longer and contribute positively to the overall financialperformance of organisations. Rigorous statistical testing of the data on the populationof financial firms shows that careful recruitment and selection, training, and internalcareer opportunities all have a positive impact in terms of reducing employee turnover.Training, in particular, is found to have a strong positive impact on actual andperceived financial performance. The findings do not support the indirect HRMperformance relationship mediated by employee turnover. The study provides strongsupport for the universalistic approach that a group of best HR practices willcontinuously and directly generate superior performance for the companies. We alsofind no evidence to support the notion that bundles or complementarities of HRpractices impact better on financial performance than individual HR practices.We test the impact of strategic HR involvement (involving HR functions in the overallI

strategic process of the company) and HR devolvement (delegating the day-to-day HRissues to line managers) on organisational performance. Our results show that financialperformance can be enhanced and employee turnover rate decreased by involving HRdirectors in the overall strategic decision-making process of the companies. The resultsindicate that the alignment of HRM with organisational strategy would improve thefinancial performance of the companies; however, our results suggest that thedevolvement of routine HR issues to line managers may not be positively related tothe financial performance of the companies or negatively related to employeeturnover.II

Table of ContentsAbstract . IList of Abbreviations . XIIDedication . XIIIAcknowledgments . XIVAuthor’s Declaration . XVPublications associated with this Thesis . XVCHAPTER ONE: INTRODUCTION . 11.1 Research Background . 11.2 The Problem Statement and Research Question. 21.3 Research Aim and Objectives. 41.4 Statement of Significance . 61.5 Jordan: A Country Profile. 71.5.1 Historical and Political Background. 71.5.2A Cultural Overview . 91.5.3 An Economic Profile. 111.6Human Resource Management in Jordan . 161.6.1Recruitment and Selection . 171.6.2Training and Development . 181.6.3Incentives, Rewards and Employee Relations . 191.6.4HRM Challenges in Jordan and Future Developments . 201.7 Rationale for the Context and the Industry . 221.8 Research Methodology . 251.9 Structure of the Thesis . 26CHAPTER TWO: LITERATURE REVIEW . 28III

2.1 Introduction . 282.2 Human Resource Management . 282.2.1 Strategic Human Resource Management . 302.2.2 The Departure from HRM to Strategic HRM . 312.3 The Concept of Organisational Performance . 322.4 Human Resource Management and Organisational Performance . 342.4.1 The Nature of the HRM-Performance Link . 352.4.1.1 The Direct Relationship between HRM and Performance:. 352.4.1.2 The Indirect Relationship between HRM and Performance . 372.4.2.1 Studies Showing a Positive Link on HRM-Performance . 422.4.2.2 Studies Showing a Limited/Partial Link on HRM-Performance . 442.4.2.3 Studies Showing Little or No Link on HRM-Performance . 492.4.2.5 Summary of Research on HRM-Performance link . 622.5 Concepts Underlying SHRM Theory . 642.6 The Concepts of Strategic HR Involvement and HR Devolvement . 642.6.1 Strategic HR Involvement/Integration . 642.6.2 HR Devolvement . 652.7 Theoretical Perspectives on SHRM and Organisational Performance. 662.7.1 Universalistic Approach (Internal or Horizontal Fit) . 672.7.2 Contingency Approach (External or Vertical Fit). 682.7.3 Configurational Approach (Internal and External Fit). 692.8 SHRM and the Resource-based View of the Firm . 692.9 The Role of the HR Director . 712.10Summary. 76CHAPTER THREE: THEORETICAL FRAMEWORK AND HYPOTHESESDEVELOPMENT . 783.1 Introduction . 78IV

3.2 Approach of the Present Research . 783.3 Theoretical Framework and Hypotheses Development. 803.4 Human Resource Management Practices . 803.4.1 Recruitment and Selection . 813.4.2 Internal Career Opportunities . 823.4.3 Formal Training System . 833.4.4 Formal Performance Appraisal System . 843.4.5 Incentives and Rewards . 853.5 Organisational Performance and the Mechanism of HRM-Performance Link 863.6 Core Aspects of Strategic HRM and Financial Performance . 893.7 The Complementarities of HR Practices and Financial Performance . 913.8 Control Variables on the HRM-Performance Link . 933.9 HR Practices and Perceived Financial Performance . 933.10The Role of the HR Director . 943.11Theoretical Model of HRM-Performance . 973.12Summary. 98CHAPTER FOUR: RESEARCH METHODOLOGY . 1004.1 Introduction . 1004.2 Scientific Research Paradigms and Rationale for Research Methodology andDesign . 1004.2.1 Rationalism vs. Empiricism . 1004.2.2 Subjectivism vs. Objectivism. 1014.2.3 Positivism vs. Phenomenology . 1024.2.4 Induction vs. Deduction. 1034.2.5 Qualitative, Quantitative or Triangulated Research . 1044.3 Data Collection Methods . 1064.3.1 Primary Data . 107V

4.3.2 Secondary Data . 1074.4 Population and Sample . 1084.4.1 Description of the Sample . 1104.5 Questionnaire Development Process . 1114.5.1 Questionnaire Design . 1124.5.2 Pilot Study. 1134.5.3 An Overview of the Questionnaire. 1134.6 Measurement of the Research Variables . 1154.6.1 Outcome variables . 1164.6.2 Independent Variables . 1184.6.3 Control Variables . 1204.7 Data Analysis Strategy . 1204.7.1 Preliminary Data Analysis . 1214.7.2 Factor Analysis . 1214.7.2.1 Exploratory Factor Analysis: . 1224.7.2.2 Confirmatory Factor Analysis:. 1224.7.3 Multiple Regression Analysis . 1234.7.4 Testing the Mediation effects of Employee Turnover . 1234.7.5 Testing the Complementarities of HR Practices. 1244.8 Summary of the Applied Research Process . 1244.9 Ethical Considerations . 1254.10Summary. 126CHAPTER FIVE: DATA ANALYSIS ‘DATA PREPARATION’ . 1285.1 Introduction . 1285.2 Data Screening . 1285.2.1 Data Coding and Editing. 128VI

5.2.2 Treatment of Missing Data . 1295.2.3 Outliers . 1305.3 Testing for Normality, Linearity, Multicollinearty and Homoscedasticity . 1325.3.1 Normality . 1325.3.2 Homoscedasticity . 1345.3.3 Linearity and Multicolinearity. 1355.4 Factor Analysis . 1375.4.1 Exploratory Factor Analysis . 1385.4.2 Principal Component Factor Analysis . 1395.4.2.1 Principal Component Factor Analysis of Recruitment and Selection:. 1395.4.2.2 Principal Component Factor Analysis of Training: . 1415.4.2.3 Principal Component Factor Analysis of Internal CareerOpportunities: . 1425.4.2.4 Principal Component Factor Analysis of Performance Appraisals: . 1435.4.2.5 Principal Component Factor Analysis of Incentives and Rewards: . 1445.4.2.6 Principal Component Factor Analysis of Perceived FinancialPerformance:. 1475.5 Confirmatory Factor Analysis—Reliability and Validity of the ResearchConstructs . 1475.5.1 Reliability of the Research Constructs . 1485.5.2 Validity of the Research Constructs . 1495.5.2.1 Content/Face Validity: . 1495.5.2.2 Constructs Validity (Convergent and Discriminant): . 1495.6 Summary . 153CHAPTER SIX: DATA ANALYSIS ‘HYPOTHESES TESTING’ . 1546.1 Introduction . 154VII

6.2Multiple Regression Analysis. 1546.2.1 Assumptions of Multivariate Analysis . 1546.3 Test of the First Hypothesis . 1556.4 Test of the Second Hypothesis . 1586.4.1 The Practical Consequences of HR Practices on Financial Performance.1626.5 Test of the Third Hypothesis . 1636.6 Test of the Fourth Hypothesis . 1676.7 Test of the Fifth Hypothesis . 1696.7.1 The Practical Consequences of Strategic HR Involvement on FinancialPerformance . 1716.8 Test of the Sixth Hypothesis . 1726.9 Test of the Seventh Hypothesis . 1786.10Test of the Eighth Hypothesis . 1796.10.1Routine and Strategic HR Functions . 1816.10.2Dynamics of the HR Director’s Role . 1836.10.3Delegation of HR Functions . 1866.11Summary. 191CHAPTER SEVEN: DISCUSSION AND CONCLUSIONS . 1927.1 Introduction . 1927.2 Research Hypotheses and Main Findings . 1927.2.1The First Hypothesis. 1927.2.2 The Second Hypothesis . 1947.2.3 The Third Hypothesis. 1977.2.4 The Fourth and Fifth Hypotheses . 1997.2.5 The Sixth Hypothesis . 2027.2.6 The Seventh Hypothesis . 205VIII

7.2.7 The Eighth Hypothesis . 2067.3 Research Conclusions . 2097.3.1 Theoretical Implications . 2097.3.2 Managerial Implications . 2127.3.3 Methodological Implications . 2147.3.4 Research Contributions . 2167.3.5 Research Limitations . 2197.3.6 F

surrounding strategic human resource management (SHRM) and organisational performance. The relationship between SHRM and organisational performance has been a heavily deliberated issue over the last decade. A survey of literature on S HRM and its impact s in terms of pe rformance reveals that empirical results on this topic are ,

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