IMPACT OF HUMAN RESOURCE PRACTICES

ON
ORGANIZATIONAL COMMITMENT

By Khadim Jan1

1
Khadim Jan
PhD Scholar
Faculty of Business Administration and Social Sciences
Muhammad Ali Jinnah University, Islamabad

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 IMPACT OF HR PRACTICES ON
ORGANIZATIONAL COMMITMENT

Abstract

This study had examined the relationship between HR practice bundle from four HR
practice areas and Organizational Commitment. Findings of the research reveals a
positive relationship between a bundle of HR practices, which includes practices
from four HR areas namely Selection, Training, pay for performance and
participation and Organizational Commitment. We have studied 9 business units of
a life insurance company.2 This study had laid foundation for future studies
exploring the effect of Organizational Commitment on different constructs of
Organizational Performance thus completing the chain of relationship from HR
practices to organizational performance.

Key Words: (Organizational Commitment, Selection, Training, Pay for

Performance, Participation, Performance, Life Insurance, Developing Nations)

Introduction

This study is the first step in an attempt to explore the impact of a bundle of HR best practices
on Organizational Performance. It has followed the argument of a large group of researchers
(Wright et al, 2003; Huselid, 1995; Becker, 1998; Guest 2002) that HR practice effects
organizational performance through Organizational Commitment. We have studied HR
practices and its impact in a single financial services (Life Insurance) organization. Subsequent
study will follow the surveyed organization for post survey performance.

In Pakistan’s business environment, HRM is still a new concept and most of the large firms are
performing personnel management functions to the level of compliance to existing labor laws.
In the process HR Managers fail to engage the commitment of workers to the benefit of their
organizations (Guest, 2002). Finding value creation processes generated by HR practices will
encourage businesses to use available human resource to the benefit of individual
organizations. The positive relationship revealed by this study will also impact well being of
employees by brining improvement is quality of life. Human Resource is the most precious
resource through which any business is able to create value and if this resource is strategically
deployed it can also be a great source of competitive advantage but only if we are able to retain
them through innovative measures adopted in the field of HRM (Becker & Huselid, 1998;
Guest, 2002).

Literature Review

A new interest has emerged in human capital as a source of competitive advantage. To get and
retain intellectual assets is a major element of an organization’s strategy (Becker & Huselid,

2
Patrick M Wright in a study of similar nature had studied one organization in catering having various business
units

2
1998). Previously majority of research has demonstrated significant relationship between HR
practices and Individual and Organizational Outcomes (Sels, 2006) but could not establish the
processes through which HR practices created value for individuals and organizations (Wright
et al, 2003).

As Best strategic plans always cater for its human side. A competent, committed and highly
involved work force is the one required for best implementation of business strategy (Wood,
1999). To achieve this goal, we should be able to know the mechanism and modus operandi of
making available such a work force. While in search of this mechanism Wright et al (2003)
have found that there is a positive relationship between a bundle of HR best practices and
Organizational Commitment. They broadly categorized HR practices in four areas of Selection,
Training, Pay for Performance and Participation.

Earlier Ichniowski et al (1995), while studying 26 steel plants for impact of certain HR practice
bundle have found that a system of HR best practices have tremendous effects on worker of the
plants. They have however found considerably low effect of individual employment practices.
Consistent with the findings of Ichnowiski stated above, Michie and Seehan-Quinn (2001)
have found that those HR practices are more likely to succeed which are introduced as a bundle
of complementary practices. Research have found that each practice area has its own
importance, but alignment in all these areas is required to achieve significant improvement in
employee commitment, which can be an explanation of the lower effect of individual practice
areas on performance of employees (Collins & Porras, 2004), as Huselid (1995) pointed out
earlier that by adopting best practices in selection, inflow of best quality of skill set will be
inducted adding value to skills inventory of the organization. He stressed upon the alignment
between selection and training as the skills of employees selected through a rigorous and
competitive process can be polished more by way of formal and informal training. Visionary
companies like 3M, American Express, Citicorp spend almost 40 hours per annum at average
for training of its employees (Collins & Porras, 2004). Through training the organizational
culture and employee behavior can be aligned to produce positive results. This will further the
process of employee development.

Wright et al (2003) while discussing the impact of HR practices has emphasized that an
employee will be motivated to exert discretionary effort if proper performance management
system is in place and is augmented by compensation system linked with the performance
management system. The employee should be able to see a direct link between his behavior
and personal outcomes to perform better. Whereas if employees have an open system to
communicate and participate, they will be concerned about the organization and will be
pointing out problems and suggesting solution earlier than its identification by management
(Wright et al, 2003).

We, while going through literature on the subject of the relationship between Human Resource
Management practices and Organizational Performance, have felt that the route through which
these practices impact performance is through the link of Organizational Commitment. Gautam
et al (2005) defined Organizational Commitment as a mindset categorizing employee’s
commitment to the organization as a whole. Organizational Commitment gives direction to
behavior and employees having strong organizational commitment will contribute positively to

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the organization (Dockel, 2003). Wright et al (2003) have argued that the linking function of
Organizational commitment can be explained by performance theory presented by Campbell
(1990) which states that people’s actions have an impact on the organizational goals and
performance is behavior which can be classified in to three different types of Job behavior i.e.
In-role or expected behavior, which is the behavior dictated by the company for a particular job
or is expected from the employee in accordance with level of skills, norms and rules of a
profession. Extra-role is going above the expected behavior, meaning use of discretionary
efforts to the benefit of one’s organization above the expected level of performance.
Dysfunctional or counter productive (harmful behavior) is one never expected in organizational
settings and if adopted will harm the organization. Employees with such behavior are a liability
eating up resources, setting off its positive contribution towards organization. Time thefts,
internet surfing/ chatting during working hours are some examples of such behavior. It is the
attitude of the employee which can influence work related behavior and HR practices are a
lever of employee attitude (Wright et al, 2003). As explained by performance theory the use of
discretionary effort in achieving organizational goals is a reflection of commitment of an
employee. This commitment comes through development of a sense of identity and alignment
of personal outcomes to organizational outcomes. Investment on employees through HR
practices helps achieve this goal (Guest, 2002).

From the above discussion it is clear that HR practices are positively related to Organizational
Commitment, thus a theoretical framework is constructed to show the flow of the effects of HR
practices on Organizational Commitment. To apply the model universally, further research is
required in developing nations, which apart from generalizing the model may also help us gain
insight into the cultural difference between developing and the developed economies.

Rationale

This research will be helpful in using the knowledge gained in the process to implement best
HR practices suited to Pakistan’s business culture and environment. We feel that culturally the
business manager of Pakistan is still considering human resource as an expense on profit and
loss account. They are at most following the Taylor’s school of thought and implement such
processes which only increase production without paying attention to the issues of quality,
wastage, maximal use of resources and well being of its employees. This research accompanied
with the follow up study linking Organizational Commitment to Organizational Performance
can act as an agent of change in mindsets of Pakistani Managers.

Theoretical Framework:

HR practice bundle from four HR practice areas of Selection, Training, Performance based
Compensation and Participation effects organizational commitment.

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 Independent variable Dependent Variable

Selection
H
R Training
Pr Organizational
ac Performance Commitment
based
ti
compensation
ce
s Participation)

Methodology

Consistent with Wright et al (2003, 2005) employee attitude surveys were conducted through
two different questionnaires one regarding HR practices and second regarding Organizational
Commitment. Although the questionnaires were administered simultaneously but to two
different groups comprising unionized staff and executives of the same company working at 09
different business units thereby eliminating common method variance. Two questionnaires
were used to collect information; one was regarding HR practices and the other was
organizational commitment questionnaire. These questionnaires have been developed and used
previously in similar context by Wright et al (2003) and Drockel (2003) respectively. We asked
nine questions on HR practices in four HR practice areas of Selection and Staffing, Training,
Pay for performance and Participation. Answers to the questions were Yes, No, I don’t know. In
Organizational Commitment Questionnaire 18 questions were asked. Responses were
measured on likert scale of 1 to 5, strongly disagree to strongly agree. See appendix for
questionnaires used in the research.

Sample:

Initially 300 questionnaires were sent to different business units of a life insurance company.
(150 questionnaires each regarding HR practices and Organizational Commitment). 100 and 97
questionnaires were received back from 10 business units. Thus the response rate for accepted
questionnaire comes at 63.33% and 64.66% respectively. One business unit didn’t responded. 5
responses (HR Practice) from one unit were rejected being completed by respondents who also
reported on organizational commitment. Name of the company is not revealed to maintain
secrecy.

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Using a single company as argued by Wright et al (2003) is to reduce cross sectional noise on
one hand on the other using employees as respondent instead of HR executives we have tried
to find the actual HR practices being implemented instead of HR policies available in policy
guidelines /Circulars of the company. Following the argument of Hall (2004) we have
measured HR practices through responses from employees thereby we have tried to produce
reliable findings by including employees’ perspective in the research.

Procedure:

We have sent more than 150 questionnaires each in HR practice and Organizational
Commitment area to 10 business unit of a life insurance company in Pakistan. Following
Wright et al (2003) both the questionnaires were completed by different respondent to avoid
common method variance (percept- percept correlation)

We have found ratio of HR practices for each respondent of HR practice questionnaire by

dividing all yes answers by 9. Mean for each business unit was derived by dividing sum of all
ratios by number of respondent for that unit. We have averaged the score for each
Organizational Commitment Questionnaire (OCQ). Mean for each business unit was derived
by dividing sum of all means by number of respondent for that unit As we have to find
relationship between HR practices bundle and organizational commitment, we have used
correlation to test our data.

Findings:

The means, standard deviations and Correlation are presented in the table given below. A
correlation of 0.6074 between the measures of HR practices and organizational commitment
proves our hypothesis, that HR practices have a positive relationship with organizational
commitment. This was consistent with the findings (r = 0.55) of Wright et al (2003).
Table showing the result is given below.

Correlation Table

Mean ST. DEV HR OC

HR 0.4521 0.0519 1
OC 3.2305 0.1632 0.6074 1
Discussion

Although Wright et al (2003) based their results on sample size of approx 5300 while our
results are based on a sample of 192 responses, the results are consistent with their findings (r
=0.55). The number of questionnaires sent to different business units were decided keeping in
view the size of each unit, the size of business units differed from each other by wide margins
(Some units were having more than 300 regular employees while others had less than 60

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employees). In comparison the size of business units researched by Wright et al (2003) were
almost the same. Although the under study company’s HR policies were devised by Head
Office, the practices differed from one unit to other. The findings are indicator of the fact that
the HR practice bundles implemented by developed nations can be replicated to produce
positive results even in south Asian cultural settings.

It is emphasized that using employees as the source of HR practice measures ensures that the
measure represent actual HR practices and not the HR Policies which are not implemented in
the organization. As argued by Wright et al (2003, 2005) impact of HR Practices on
Organizational Commitment begins with selection and is augmented by training. It is the
selection process which will bring in the talent required to match with each role created by the
organization to help it achieve its objectives (Buckingham and Coffman, 1999). Wright et al
(2003, 2005) argued that When employees find their co-workers skill full an effectively
positive environment is created, allowing them to serve the organization in best possible
manner. They further argued that a proper performance management system attached with
monetary awards for better performance gives employees a clear sense of the linkage between
performance and personal outcomes. It also gives them a feel of fairness and equity. Having
open communication and participatory system allow employees to participate in the decision
making process. The decisions which they own, feel responsible for and the sense of trust and
respect created from such open and participatory system compel employees to go an extra mile
to achieve organizational objectives. The environment created by all of the above HR practices
will keep the employees attached to the organization. They will want to see it succeed and will
not want to leave it (Wright et al, 2003). On the other hand research conducted by Collins and
Porras for almost six years (1994) has proved that visionary companies like 3M, GE, Citicorp,
Motorola by using innovative HR practices in Selection, Training, Performance Pay
Participation and other HR areas have ensured to fill their top slots from home grown
management. This policy of internal promotion was one of the major reasons of success of
these companies. Internal promotion has ensured continued success for these companies. Their
management being promoted from within was better able to strategically steer forward the
organizations on the road to greater success.

It can not however be said that the HR practice bundle is cause of success of any successful
and visionary company. Instead it seems that innovative HR practices are a reflection of overall
vision of the leaders whose only source of motivation is not the bottom line. Those visionary
companies simultaneously work for enduring success and the bottom line. In word of Collins
and Porras (1994), these companies successfully “embraces the genius of AND” instead of
falling a prey of “the tyranny of OR”. They don’t see these HR practices as an expense eating
up the bottom line but it is used to tap the potential of trained workforce to foresee the future,
set big goals, innovate and share the rewards of success with all the stakeholders. therefore the
strongly positive relationship between the HR practice bundle and the construct of
Organizational Commitment found by this research provides a base to safely conclude that the
positive environment created by HR practices, will definitely enhance chances that employees
will exhibit in-role behavior, reduce dysfunctional behavior and will motivate many of them to
exhibit extra-role behavior to help make an organization enduringly successful.

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Limitations and future direction

The sample was drawn on the basis of convenience. Not all business units were included in the
sample. We feel that the results would have been more reliable if all business units were
included in the sample. This research will be incomplete unless we follow the studied units for
performance measures, showing the impact of the construct of Organizational Commitment on
the firm’s performance at business unit levels.

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References

Becker B & Huselid M (1998). ‘High Performance Work Systems and firm performance: A synthesis of
research and managerial implications’. Research in Personnel and Human Resource Management. 16:
53-101

Buckingham M & Coffman C. “First break all the rules” 2005 edition ISBN 1-4165-0266-1 Simon and
Schuster UK Ltd.
Collins J & Porras J (2004). “ Built to Last” 3rd edition, ISBN 0-7126-6968-X Random House Business
Books

Dockel A (2003). ‘The effect of Retention Factors on Organizational Commitment: An investigation of

High Technology Employees’. Faculty of Economics and Management Sciences, University of Pretoria,
176 pp

Gautam T, Dick R, Wagner U, Upadhyay N, Davis A (2005). ‘Organizational citizenship behavior and
organizational commitment in Nepal’. Asian Journal of Social Psychology 8: 305-314

Guest D (2002). ‘Human Resource Management, Corporate Performance and Employee wellbeing:
Building the worker into HRM’. The Journal of Industrial Relations 44:3 335-358

Huselid M (1995). ‘The Impact of human resource management practices on turnover, productivity, and
corporate financial performance’. Academy of Management journal 38: 3 635-670

Ichniowski C, Shaw K, Prennushi G (1995). ‘The effects of Human Resource Management Practices on
Productivity’. National Bureau of Economic Research Working Paper no 5333.

Michie J, Sheehan –Quinn M (2001). ‘Labor Market Flexibility, Human Resource Management and
corporate performance’. British Journal of Management 12 287-306

Sels L, Winne S, Maes J, Delmotte J, Faems D and Forrier A (2006). ‘Unraveling the HRM –
Performance Link: Value –Creating and Cost-Increasing Effects of Small Business HRM’ Journal of
Management Studies 43:2 319-342

Wood S (1999). ‘Human Resource Management and Performance’. International Journal of

Management Reviews 1: 4 367-413

Hall L (2004). ‘HRM Practices and Employee and Organizational Performance: A Critique of the
research and Guest’s Model’. Deptt of Business and Management, Manchester Metropolitan University
Cheshire 15 pp

Wright P, Gardener T, Moynihan L (2003). ‘The Impact of HR practices on the performance of business
units’. Human Resource Management Journal 13:3 21-36

Wright P, Gardener T, Moynihan L, Allen M (2005). ‘The relationship between HR practices and Firm
Performance: Examining Causal Order’. Personnel Psychology 58 409-466

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 Appendix
Questionnaires

HR Practices Questionnaire

In this questionnaire, you are asked to describe Hr Practices of your organization in

which you are working, as you perceive it.

1 Applicants undergo structured interviews (job-related questions, same questions asked

of all applicants) before being hired.

Yes No I don’t know

2 Qualified employees have the opportunity to be promoted to positions of greater pay

and/or responsibility within the company.

Yes No I don’t know

3 Applicants for this job take formal tests (paper and pencil or work sample) before being
hired.

Yes No I don’t know

4 On average, how many hours of formal training do employees in this job receive each
year?

Hours________.

5 Employees in this job regularly (at least once a year) receive a formal evaluation of
their performance (ACR).

Yes No I don’t know

6 Pay raises for employees in this job are based on job performance.

Yes No I don’t know

7 Employees in this job have the opportunity to earn individual bonuses (or commission)
for productivity, performance or other individual performance outcomes (Like persistency, %
increase in business etc.).

Yes No I don’t know

8 Employees in this job are involved in formal participation processes, such as quality
improvement groups, problem-solving groups, roundtable discussions, or suggestion systems.

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Yes No I don’t know

9 Employees in this job have a reasonable and fair complaint process.

Yes No I don’t know

Demographic Information

Age (Please Tick your age Group)

20-25 26-30 31-35 36-40 41-45 46-50 51-55 Above 56

Please Tick applicable gender

Male Female

Education (Please Tick your Education Group)

Matriculation Intermediate Graduation
Masters Diploma with Matric /Inter Other
Total years of Experience (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Total years of Experience with this Organization (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Total years of Experience with your present Boss (Please Tick your Experience Group)
1 2 3 4 5 6 7 or above

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Organizational Commitment Questionnaire

In this questionnaire, you are asked to describe your commitment to the

organization in which you are working with, as you perceive it. If an item is
irrelevant or if you do not know the answer, leave the answer blank.

18 description statements are listed in this section. Judge how frequently each
statement fits you by circling the number 1-5.

1 = Strongly Disagree 2= Disagree 3=Indifferent 4=Agree 5=Strongly Agree

1 This Organization has a great deal of personal 1 2 3 4 5

meaning for me.
2 Right now, staying with my organization is a 1 2 3 4 5
matter of necessity.
3 I owe a great deal to my organization. 1 2 3 4 5

4 It would be very hard for me to leave my 1 2 3 4 5

organization right now, even if I wanted to.
5 I feel that I have too few options to consider 1 2 3 4 5
leaving this organization
6 I do not feel “emotionally” attached to this 1 2 3 4 5
organization.
7 I would feel guilty if I leave my organization now. 1 2 3 4 5
8 I really feel as if this organization’s problems are 1 2 3 4 5
my own.
9 One of the few negative consequences of leaving 1 2 3 4 5
this organization would be the scarcity of other
job opportunities.
10 I do not feel like “like “part of the family” at my 1 2 3 4 5
organization.
11 I would not leave my organization right now 1 2 3 4 5
because I have a sense of obligation to its people.
12 I do no feel a strong sense of “belonging” to my 1 2 3 4 5
organization.
13 Even if it were to my advantage, I do not feel it 1 2 3 4 5
would be right to leave my organization now.
14 I do not feel any obligation to remain with my 1 2 3 4 5
current employer.

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 15 This organization deserves my loyalty. 1 2 3 4 5
16 Too much of my life would be disrupted if I 1 2 3 4 5
decided I wanted to leave my organization now.
17 I would be very happy to spend the rest of my 1 2 3 4 5
career with this organization.
18 If I had not already put so much of myself into 1 2 3 4 5
this organization, I might consider working
elsewhere.

Demographic Information

Age (Please Tick your age Group)

20-25 26-30 31-35 36-40 41-45 46-50 51-55 Above 56

Please Tick applicable gender

Male Female

Education (Please Tick your Education Group)

Matriculation Intermediate Graduation
Masters Diploma with Matric /Inter Other
Total years of Experience (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Total years of Experience with this Organization (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Total years of Experience with your present Boss (Please Tick your Experience Group)
1 2 3 4 5 6 7 or above

Date____________ Designation____________________

Department_____________________________________

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