The Impact of Human Resource Management

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Requirement

The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance

Solution

Literature Review

The main intention of this literature review is to understand the past research work done on the subject, “The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance”, and thoughts related to this field of study. This will serve as a guide for my further research work. This review will try to find out gaps that are yet to be addressed in the field of human resource practices and its influence of various elements within an organization like turnover, productivity, and financial performance.
According to Boudreu (1991), Jones & Wright (1992) and Keliner (1990), human resource management policies and its practices hold greater impact in the fields of people management and industrial and organizational psychology

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While investigating the previous studies relating to the first question that I am trying to address, – How the internal promotion and vacancy filling is helpful as compared to putting someone from outside? –  I found few significant studies from the past that support the notion that internal promotions have greater significance as per success level of an organization is concerned.
According to Naveed, Ushman and Bushra (2011), when employees are promoted, they feel satisfied with their job. It leads the development of the perception that the management is supportive for their career which ultimately transforms into better work performance and eventually to organizational development. The research methodology of Naveed, Ushman and Bushra (2011) included qualitative and quantitative techniques. Various previous research paper were used to drill down to certain factors that contribute to the satisfaction of the employees. Then they surveyed the various organizations to collect required data and through the use of certain statistical tools such as SPSS to do demographic, descriptive, and regression analysis to confirm their findings. Through their research, they tried to prove two hypothesis, which were: (i) “H1: Promotion is a predictor of job satisfaction”, and (ii) “H2: Promotion is not a predictor of job satisfaction”.
A similar study done by Khan and Mishra (2013), found out that the promotion can be a responsible factor for the job satisfaction. The regression analysis done in the paper suggested that a positive relationship exists between promotion and job satisfaction. The factors that were the determinants of promotion such as length of service, ability and skills also had  moderate effect on the satisfaction level of the employees getting a promotion. The paper suggests that the management should take care of employees’ preferences regarding their jobs and work as a bridge between the employees and their career development. The paper uses both, qualitative and quantitative techniques for the research. The questionnaire used by the researchers was designed by Paul Spector. The analysis was conducted on 155 questionnaires that came back to the researchers accurately filled. The hypotheses were same as the previous (i) “H1: Promotion as a factor of job satisfaction”, (ii) “Promotion is not a factor of job satisfaction”.
According to a whitepaper by Byham and Bernthal (2000), the leadership failure can be very costly for an organization. According to the Corporate Leadership Council (as cited in Byham and Bernthal, 2000), the cost of derailment can go upto $275,000 that excludes costs that are not incurred directly. The derailment costs consist of “fees of the firm that searched the candidate, costs incurred in interviewing and assessing the candidate, bonus given to the candidate, and costs given to relocate, training, pay, and other packages”. This whitepaper was completely based on qualitative research, and various journals and reports were consulted to reach the required conclusions. The same paper suggests that there is 34 percent probability of fail for executives that are externally hired, whereas there is 24 percent probability of failing of the executives that are internally promoted.
From the papers discussed above, it can be stated that internal promotion brings enthusiasm among the employees and an environment of positivity that eventually contributes to the success of the organization. It is obvious, that if an organization is not promoting its employees, then it is bringing new employees from outside to fill the gaps. Moreover, as the studies suggest that internal promotions are more beneficial for the employees, thus organizations indulging in external hires most of the time may downgrade its employee morale, that may hamper the organizational productivity.
Taking over my second research question – How non-structured approach within the company is helpful in motivating employees and increase corporate financial as a result? –I came to papers that advocate that employee motivation be imperative for the success of organization and a non-structured approach, that is, giving autonomy to employees’ work culture may improve the success rate
According to Ovidiu-Illiuta Dobre (2013), when employees are empowerment and recognized within the organization, their motivation level for work increases, which eventually lead to increased achievements and the performance of the firm. Employees are dissatisfied with the monotonous jobs and also, heavy pressure from customers often leads to weak organizational performance. This will lead to high absenteeism rates and employees might consider leaving the organization for the nearest competitor.
The research paper of Ovidiu-Illiuta Dobre (2013) has been specifically based on qualitative method. The various paper had been consulted to form opinions. Its reviews included numerous papers and drilled down to few factors such as informal work groups, implementation of theory X and theory Y, interpersonal competence, and factors that enhance employee motivation.
It has emphasized the fact that any organization consists of various characteristics of employees, and it depends on the employees and the orientation of management to choose structured or non-structured organizational approach. If the employees are motivated and pro-active, then it is better to be with the non-structured approach, and if the employees always need some negative external motivation, then it is better to choose structured organizational approach where set hierarchy is followed.
A study done by Q. A. Manzoor (2012) found that if the employees are empowered and recognized, then it affects them positively and they feel motivated. The motivated employees and their work is directly correlated with the degree to which they are empowered and recognized within the organization. Moreover, the increased level of employee motivation positively impacts the work culture, which eventually lead to higher “organizational performance and success”.
This paper used the qualitative method to reach to its conclusion. The qualitative research helped the researcher to build logically relationship between factors that affect the employee motivation. Through the help of various studies, the paper builds a conceptual framework for factors of employee motivation and organizational effectiveness. According to the framework, recognition and empowerment lead to employee motivation that combined leads to organizational effectiveness.
This paper used three hypotheses namely, they were effect of employee recognition and employee empowerment on their work motivation. Empoyee. The third hypotheses was the presence of any relation between motivated employees and effective organization.
The major deficiency that can be pointed in this paper is the lack of any quantitative research to reinforce the concepts and findings. The shortcoming of a single mode of research technique can be that researcher might have been biased enough towards his conclusion that he did not select the contradictory paper for better presentation. Keeping this ideology in purview, the current paper will focus on both forms of research.
My quest to address the third research question – How the right employee selection is helpful in increased productivity and influence aggregate turnover? Moreover, how the reduction in employee turnover beneficial for the company – brought me to few more previous studies that take into consideration various factors that influence productivity and turnover.
Turnover. According to Baysinger and Mobley (1983) and Arnold and Feldman (1982), the existence of a union, expectation of secure jobs, the level of compensation and tenure of the organization were good predictors of employees’ leaving the job. Also, variables like age, sex, education, commitment of organization, the expectation of an individual from the job and the likely intention of for another job were counted for the aggregate turnover.
One study done by Brown and Medoff (1978), suggests that the amount of turnover that takes place in an organization has a significant impact on its productivity. Theoretical consensus on the direct correlation between turnover and company performance is present in ample amount, but a straight forward is rare. This gives me the opportunity to go further with my research and bring out the relevant explanation.
Productivity.The research was done in the field of HRM practices within an organization, and its influence on productivity has been done extensively. According to Cutcher-Gershenfeld (1991), those firms that adopt transformational labor relations and emphasize on cooperation and dispute resolution had better output – higher productivity, low input costs, and reduced scrap – compared to firms that are into traditional labor relations practices.
According to Bartel (1994), there is a link between productivity growth and adoption of good training programs.As per Holzer (1987), extensive recruitment effort – selecting candidates who are the right fit for organization –has resulted in increased productivity. A research done by Guzzo, Jette, and Katzell (1985) demonstrated that sociotechnical systems design, training and goal setting – motivating employees – had positive effects on productivity.
Corporate financial performance. As per Terpstra and Rozell (1993), there is a positive relation between the firm’s profits and validity of selection test, use of systematic selection processes and extensiveness of training. A link between organization’s financial performance and training programs was demonstrated by Russell, Terborg, and Powers (1985). According to Berman (1991), and Gerhart and Milkovich (1992), using and linking performance appraisals and compensations also have a significant connection with increased firm profitability. These studies conducted in the area of turnover, productivity, and financial performance will help me to understand how fewer turnovers will be beneficial for the company. 
The previous studies have concluded that if the human resource techniques are applied successfully, then it improves the company’s performance. The major variables were performance appraisals, attitude assessment, training procedures, selection and extensive recruitment. However, the studies conducted have few shortcomings that I will be addressing throughout my research paper. Significant studies have not been done as per direct correlation between turnover and productivity is concerned. Also, fewer studies are there to rely on as per HR practice of non-structured approach is concerned. My study will try to fill these gaps.

Research Topic, Objectives, Contexts, and Rationale

The research will try to evaluate the various links between human resource management and the performance of the firm. It is one of the important topics that are discussed whenever human resource management is talked about. Many national and international level surveys have been done and by the surveys, it is quite evident that these practices have a high economical and statistical impact on the employee outcomes.
The development of human resource management is directly linked to the betterment and execution of the organization’s strategic plans. The entire assignment is conceptual and with the help of various sources justifies that human resource management and its practices work in the favor of the organization and aides in maintaining a competitive advantage over the others.
The impact of a single individual’s work and his/ her performance in the organization has been for long talked about by the analysts and other academicians. Recently, the impact of all the employees collectively in the organization is also taken as something important and crucial in today’s era. If (Barney, 1991) theory is observed closely, then it can be said that if four requirements are met then Human Resource Management can provide an emphatic and sustained advantage for the company over other competitors. These four basic requirements will be talked about in the main section of the assignment.
The things that will be discussed in detail in this research are: 

  • Turnover

  • Productivity

  • Financial performance (corporate)

If studies by (Arnold, Feldman, 1982) are evaluated then it can be easily said that various things like job security, established union, good levels of compensation, organizational tenure, smaller but crucial factors like age, education and gender, a job meeting the expectations of the employee and various other factors lead to a change in the company’s turnover. Thus, it can be said the effect of HRM lies mainly on these individual factors concerning the turnovers. Some of the factors like job interventions enrichment and previews of realistic jobs are also to some extent responsible for reducing the turnovers.
The effect of HRM and its several practices on the productivity is more intensive on the productivity of the organization. As per ( Cutcher, 1991), the organizations which practised transformational relations with the labours which promoted cooperation and resolutions of the dispute were the once which had to face lower costs, fewer scrap and very high productive and also had greater return from the labour hours than the organizations practising the same traditional labour management practises and policies. (Weber, 1985) Explained in his report that organizations with modern labor relation policies fewer disciplinary actions and less absenteeism had a direct impact on their productivity and the efficiency of the labors. The quality of living of the labors, good circles, and the labor management teams increases productivity. Even the employee turnovers have a positive effect on the productivity of the firm. In various studies links between incentive systems for compensation and organizations productivity can be found easily (Kruse, 1990).
Links between HRM practice and corporate financial performances have been for long explored various academicians and researchers. Some of these studies include (Cascio, 1991) and (Flamholtz, 1985) have researched and argued on the effect of financial returns that are gained due to the execution of various HRM practices by the firms, and these are substantially large in amount. If the more factual information is looked at, then it can be said that an increase of one standard deviation in the employee’s performance is somewhat equal to 40% salary of each employee.
It is true that most of the word on this particular phenomenon has been conducted in the labs, but then a report by (Becker, 1992) clearly showcases that SD deviation may pretty easily be more than 40 % salary per employee. Many studies showcase the positive and significant impact of intensive recruitment, use of selection procedures that are formal and various profits of the firm between the HRM training practices and the financial performances of the organization (States, 1997).
This led us to other subtopics. They are:
The various problems and prospects that arise in measurement of firm performance in strategic HRM
HRM practices that help in providing competitive advantage to the organization.
Align recruitment plans with co-operating goals and strategy: how recruiting can prove its business impact
Rationale for particular Methodology and relations to research questions
The methodology picked for the research is based on two different type of work. The primary and secondary research. Out of the two methods, secondary research is imperative for the research question that I have been trying to address. From the previous work, it becomes easy to find answers to the current situations and problems. However, the answer might not be 100% apt for the given situation. 
My chosen topic is about the impact of human resource management practices on the corporate performance. Using the previous studies it has become easier to find a different perspective to my research questions. For example, one of the research questions is “Filling internal vacancies is helpful as compared to outside hire”. There can be multiple perspectives to this question. One of the research paper points out that it is always beneficial to fill the vacancy from someone working with the company for a long time. It promotes trust among employees as everybody stands a chance if any similar opportunity comes up in future. However, another view states that it is good to hire someone from outside if someone is qualified and has competitive skills as compared to the people working within the organization. It brings the fresh outlook for the company, and things might change for a good rather than following the monotonous process. 
In a nutshell, secondary research quantifies the facts about the internal hire vs. external hire. Hence, it is easy to establish a correlation using the secondary method of research.  Another methodology adopted for the research is survey research. It is helpful in gathering personal perception data from the public based on their real life experience. This will be helpful in answering the second question about non-structured approach within in an organization and its impact on the employee perception and productivity.

Research Methodology and Methods

Before delving into the current methodology and methods adopted to conduct this research, it would be fruitful to understand the difference between both the terms. 
Methodology tells us how research has been done and how we will find out things we want to and the process that will be used to gain the knowledge. It explains the reason for using certain methods in the research.
On the other hand, Methods denote to the tools and techniques that are used in research such as surveys, interviews or observation. It includes the statistical tools that are applied to drill down to the results.
This research paper will be going through two distinct research methods:

  • Primary research

  • Secondary research

Secondary research will include consulting all the previous related studies to understand the relationship, and reach necessary conclusions.
The major benefits of doing secondary research are:
existing information helps form a base
it will work as a base for further primary research
the categories and elements will give background about the preferred way of corporations to structure the world.
However, this method has certain limitations as we saw in the analysis of a research paper previously. Most of the papers mentioned in the literature review done earlier, lack specificity or does not exactly address the question of concern. Also, most papers were from a different period, so it might be possible that circumstances have changed a lot after that period. The introduction of new generation employees with a different set of cultures might impact the study, that are not taken into consideration in most of the studies, and, therefore, the universality of any of those research studies cannot be approved. 
The secondary research done – few during literature review – and upcoming reviews will aid to our paper. However, due to the existing limitations of secondary research, this paper also focuses on the collection of primary data. 
Survey Method will gather unique information that is not available from other sources. It will help in getting to standardized measurement as same information will be collected from every respondent. The survey data will act as a complement to existing data from secondary resources.
Survey Design: Our survey design will be cross-sectional. Collection of cross-sectional data was facilitated from a sample that represented substantial population. Therefore, this will give us the fair idea to judge whole business throughout the world. 
Survey Model: Our survey method is decided based on seven critical elements. They are population, features of sample, question prepared, question subtopics, response taken from respondents, and cost incurred, and expected time. Adding all these elements will help us choose what is best for our research.
Population: Our population is very large – targeting all industries as a whole, without discriminating by demographics and industry – and employed in various industries. Therefore, we will use the random sampling technique to choose our sample for data collection.
Types of Question: Research question that is to be answered through this research will require answers to set of multiple choice questions that will be sent to various candidates. 
Question Topic: All the questions will try to know the answers to the first part of all three questions and factors – through multiple choice questions.
Response rate: Our research will identify the response rate to any questionnaire of our sample and based on that will try to send only to those number of respondents from where reply can be expected.
Cost Incurred: Cost incurred in this method will be negligible as we will be sending emails and to our respondents to gather the data. This will save our time and money, and along with that, it will give respondents enough freedom to answer the questionnaire as per their convenience. 
Time: This method will take at least a week as gathering and compilation of data will take some time. It is obvious that all the respondents will not answer within a single day, and some might take even a week to reply.

Data Collection Method: 

There are various methods to collect data in Survey Design Methodology. We chose two of them – Mail and The Web – and discarded the rest –Personal Interview and Telephone – because of certain limitations.
Reason we choose to distribute question paper through mails and put an online survey through internet because:

  • These methods are low on cost

  • No extra team effort is required to handle the data collection and can be done by even few team member

  • Helps get access to even those populations that can’t be accessed through otherwise, even to international populations

  • Gives freedom to consult others while answering the questions.

  • Reduces time implementing the methodology

  • Web surveys can help formulate complex skip patterns in programming

However these two methods have certain limitation that should not be ignored:

  • Good sample is always required for the survey purpose

  • Incentives are required to make respondents fill the questionnaire

  • Data collection period slows down

  • While representative samples get difficult to focus on web surveys, however as our research sample is broad, this limitation will not be a constraint

Reasons why we ignored telephone and personal interview options for data collection:
Interview:

  • Cost incurred in conducting specific interview will be costly

  • Data collection period will lengthy

  • Have to select proper unbiased expert interviewers

Telephonic interview:

  • Those respondents can be left whose telephone numbers are not available or  those who do not sport telephone connections.

  • Constraints as per lengthy questionnaires are concerned

  • A questionnaire has been given at the end of the report, taken from a research company (Qualtrics) prepared by Scott Smith.

Statistical Tools:
We will be using correlation and regression to come up with the required correlation between different factors. Also, data summary will help us understand the data in the light of collected questionnaire. For the purpose of regression and correlation, MS Excel will be used. Also, to get a better understanding, data analysis pack ‘r’ will also be used.
Alternative Methods:
There were various other research methodologies that didn’t consider for the purpose of research. They are mentioned below with the suitable reasons on why we did not find it fit.
Case Study Method:
This method could have been used for our research. Analyzing
case studies would be cost effective but following limitations hold us back:
 The wider population cannot necessarily fit into the collected data of a case.
This reduces the relevancy of the study.
Lack of scientific case studies will not help us reach some concrete conclusions
Most of the case studies are done on specific industry or person and therefore, there will be difficulty in getting unbiased collected data.
Through case studies, a reliable cause and effect can be determined.
Observation Method:
Instead of using ears and voice, eyes could be brought to play through this method, and might have helped us. However, below limitations could not be ignored:
Observer’s bias can come into play
Past problems, opinions, and attitude cannot be studied
a conjunctive occurrence of event and observer’s presence is rare
This concludes our selection of research methodology and selection of one method over another.
Strengths and weakness of choosing a particular methodology and why other methodologies would not be as useful or appropriate
Chosen methodologies have their limitations. First of all, the secondary research methodology is based on studying the research papers from the previous years. The authors adopted different methodologies to analyze the results, but the corporate have changed manifolds from the past. Hence, the results and analysis might not apply to the current study. 
Apart from the secondary research, there are a few limitations associated with the survey design and data collection methodology. The first problem is with the anonymity of the behavior of the chosen sample set. For example, one of the research questions is about filling the vacancies from the people working within the company. Hence, people on the top level management will differ in perspective as compared to the people who are trying to move up the ladder within the company. Hence, the survey questions might get extreme views depending on the chosen subset. 
On the other hand, if I talk about the relevance of the current methodologies to my research, I find both the methods to be useful. Quantitative information can only be collected by interacting with the people from different positions and companies working in the HR unit. It will be easy to quantify the results. However, I have to ensure that I take views from varied positions and people working with a company. It will give a broader perspective to the research question rather than limiting it to a few set of answers. Secondly, the secondary research is very important because there have been numerous studies from the area of HR based on productivity, corporate performance, etc. All the previous studies are limited to a certain area, but insightful information is provided about the human resource management practices. It is hard to substitute this methodology because there is no other method that can summarize the qualitative results better than secondary study.

Data collection tool methodology and sample size appropriateness determination

Qualitative data is collected from the previous studies based on the human resource management concepts and related topics. The previous year studies will help in establishing and refining the hypothesis. Quantitative data will be collected using surveys.  A survey model will be designed and followed to collect data for the given research question. E-mailing and conducting online survey is one way to execute the data collection methodology. The first set of respondents will come from my company as it is the research that I am conducting to improve the HR practices within my company. I will pick people from different division and based on their positions; I will send across survey questions. For example, if I need an answer to the question that how can qualified people can contribute to the organization success, and then a manager leading a team is a better option than the newly joined fresher. It is because someone working at a higher position is more informed about the work of the people and their productivity. For employees working low down the hierarchy, I will ask questions intended to collect information about the internal filling of a vacancy. It is highly probable that people working on the lower end of the chain might be biased in their views. Hence the inputs from the higher management is a must. Moreover, someone who is an external recruit will be able to counter the argument and response provided by the employees internal to the company. 

Ethical Issues in the research and resolution on the problem

There can be one major ethical issue that come from secondary research. It is not possible to establish that researcher was not biased while conducting a study. It might be a case that researcher only collected the data that supports their notion or ideas. Hence, it provides an incorrect picture to the readers. It is possible to avoid the ethical issue by diligent study. As a researcher, it is my first responsibility not to include data in the research without verifying the validity of the research. Hence, referring multiple studies for one component of corporate performance is a must. It will give a multiple perspective to the problem and an unbiased and balanced output can be provided. 

Practical Considerations and Plan for Completion

A. Data Analysis Explanation:

The general features of data analysis will be used to assess the entire research questions that were mentioned earlier. These data analysis methods have a wide range of application and apply to data that are collected for different objectives. The data analysis does not depend on costly computing resources and can be achieved through basic statistical tools. That is, the discussion will be within the statistically simple level. A well-thought out analysis process will be used to produce results that are never discussed before.
Initially, the data structure will be considered i.e. whether data is simple or hierarchical based on communities, or individuals. The analysis will be separated on three parameters as exploration, analysis and archiving. This will help us in defining the expected outcomes and processes for various elements of overall analysis. The research objective is contrasted with the data obtained, and then we will try to understand the implication of the analysis.The primary focus will be on tabular methods, and then cross-tabulation, and after that, accuracy will be taken into consideration using two and multiway tables.The basic statistical tools that will be used are correlation analysis, exploration through data summary, and regression.

B. Appropriateness of the data analysis approach

The data summary will help us take a bird’s eye view of the whole collected data. The validity of data includes two elements – internal and external validity (Learntech.uwe.ac.uk). Internal validity will be increased by increasing the control of the variables such as experimental treatment, intervening, or confounding variables. External validity tries to understand the applicability of the research findings into the real world, which is beyond the controlled environment of the research. This step will help us to understand how much general our findings are. It is well known that if internal validity is focused more, then external validity will reduce as the whole study gradually drifts from the real world application. We will try to seek a balance between both the validity elements.
Reliability ensures that all the instruments and the collected data are in its reliable nature (Learntech.uwe.ac.uk). We will depend on various elements while judging the reliability. The first element will be used to understand that when a phenomenon is measured at a one point of time then how many observers reach the same conclusion. Next element will be comparing the results of the initial test with further repetition. The assumption behind the use of this element will be that if the instrument that is used is reliable, then all the repeated tests should generate almost similar results.The third form will be to look at the two results from two similar types of test and understand the consistency. The same variable will be used at the same point in time.The fourth element will be to understand the internal consistency throughout the test. This will be tested using the split-half form. In this test, the items are placed apart into two halves, and the correlation is judged using Spearman-Brown formula. Even Chronbach’s alpha can be used in this case.

C. Strategies to present the results of data analysis

There are various stages through which data analysis will pass to reach a well-defined presentation.Exploratory data analysis will be used to look at the data files and understand what inference can be gathered from here. It requires data cleaning, and all the anomalies are removed. This will give a clean data set that can help us in compiling a single version of the final data. This analysis also helps us understand the amount of data we are missing. This stage helps in getting to the data skimming that is quick, and well-organized.Deriving the main finding begins after the previous, thus with a clean set of data. This stage helps us in getting to the summary, relationships, models, findings, and interpretations.
Then comes archiving the data properly in a CD or Pen-Drive for later use in the data analysis. The refined set of data will be easier to analyze later.After all the above procedures, the analysis part will be initiated, and that will be achieved using different statistical tools available. If we begin with the Exploratory phase, we will use tables, graphs, and charts for the purpose of summarizing the data and make it more presentable. Our data will be voluminous, and therefore, proper tabulating will be used.The further methods that will be used are one-way tables, cross-tabulation, tabulation and assessing the accuracy, multiple response data, profiling, group of candidates used, and the various indicators.

D. Challenges that can occur while interpreting and making inferences with the approach mentioned above:

Researcher biases: This may lead us to mold the result according to the result we want to achieve. This will not result in reliable analysis, and thus should be kept in mind while conducting the analysis (Fan, Han, and Liu).
Researcher background: This element is almost related to the previous point. It entails that background of the researcher impacts the study in general due to the varied previous experiences. The interpretation of the same data could be different for different researchers (Bailey and Jackson).
Theoretical Foundation of Data: It might be possible that the theory we analyzed in the beginning might become irrelevant in the end.

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