Human Resource Management and Organizational Performance in Nepalese Commercial Banks

Abstract

The main motivations for this study were to examine the intermediate linkages (mechanisms) through which human resource management (HRM) influences organizational performance (OP). This study is important since Nepalese organizations are not convinced that HRM would be a source of competitive advantage through enhanced organizational performance. To address this issue, a model linking HRM with organizational performance (OP) was tested with data obtained through structured questionnaire from 252 middle and top level employees drawn from 11 commercial banks in Nepal employing random sampling methods. The descriptive as well as casual research designs were used for attainment of study objectives. The data were collected through Likert scale ranging 1 to 7. The descriptive analysis and structural equation modeling (SEM) were used for data analysis. The descriptive analysis revealed that the states of HRM Practices and OP as perceived by the employees of Nepalese commercial banks are in satisfactory states. The employees perceived organizational learning capability (OLC) in weak states in their respective organizations. This study tested the configuarational approach that states HRM practices should be ‘bundled’ to be most effective. Eight different dimensions/practices of HRM were configured to form a single HRM construct. Likewise, it supported the Universalist approach since the universal best HR practices taken from the extant literature and used in this study were perceived satisfactory by the employees. The outcomes of structural equation modeling suggest that HRM affects OLC and OP significantly. Further, OLC affects OP significantly. The results of this study also revealed that OLC mediates the relationship between HRM and OP partially. The significant positive relationship between HRM and OLC implies that OLC in Nepalese commercial banks are dictated by their HRM policies and practices irrespective of its weaker state. The mediation of OLC between HRM and OP demands the organizations to focus their HRM initiatives towards building OLC for the enhancement of OP. The direct as well as indirect effect on OP by HRM shows that HRM is central in OP enhancement in Nepalese commercial banks. Irrespective of a weak state of OLC in Nepalese commercial banks, this study revealed OLC to affect OP directly as well as through HRM. This study has made a significant contribution in understanding the relationship mechanism between HRM and OP. The support of configurational and Universalist perspective as well as mediation by OLC between HRM and OP contribute the HRM-OP literature significantly in context of Nepal.