AN ANALYSIS OF THE EFFECTS OF SELECTED HUMAN RESOURCE MANAGEMENT PRACTICES ON THE CORPORATE PERFORMANCE OF GLAXOSMITHKLINE, AGBARA,

AN ANALYSIS OF THE EFFECTS OF SELECTED HUMAN RESOURCE MANAGEMENT PRACTICES ON THE CORPORATE PERFORMANCE OF GLAXOSMITHKLINE, AGBARA, OGUN STATE, NIGERIA BY FADUGBA OLUMUYIWA AKINROLE CU021040009 OCTOBER, 2008

AN ANALYSIS OF THE EFFECTS OF SELECTED HUMAN RESOURCE MANAGEMENT PRACTICES ON THE CORPORATE PERFORMANCE OF GLAXOSMITHKLINE, AGBARA, OGUN STATE, NIGERIA BY FADUGBA OLUMUYIWA AKINROLE CU021040009 Being a research project submitted in partial fulfilment of the requirements for the award of Master of Science degree in Industrial Relations & Human Resource Management of the Department of Business Studies, College of Business and Social Sciences, Covenant University, Ota, Ogun State, Nigeria OCTOBER 2008

CERTIFICATION It is hereby certified that this research project, written by FADUGBA, OLUMUYIWA A. was supervised by me and submitted to the Department of Business Studies, College of Business and Social Sciences, Covenant University, Ota and has not been submitted in any other institution of learning. Dr. O. U. ASIKHIA Project Supervisor Signature & Date Professor S. O. Otokiti Head, Department of Business Studies Signature & Date

DEDICATION This work is dedicated to the director of the affairs of my life, my light and inspiration, my reason for living.

ACKNOWLEDGEMENTS This work is no mean feat attainable by one man. I could have dared to go the lonely road in this research but I chose not to for in the multitude of counselors there is safety. My gratitude goes to my parents, Mr. & Mrs. S. O. Fadugba for believing in the path I have chosen in life. Dr. David Oyedepo; your obedience to the voice of change has given my assignment a platform for expression. The entire management of Covenant University, Ota led by the Vice-chancellor, for encouraging me all the way to confront my challenge and emerge a role model for my world to follow. My deep appreciation also goes to the Father of the Business Studies Department, Professor J. A. Bello, your commitment to quality output is well acknowledged. Words cannot express how effective your leadership style contributed to my success, my Head of Department, Professor S. O. Otokiti; you are one in a million. Inexplicable thanks go to my supervisor, Dr. O. U. Asikhia, thanks for the push and the pull; they all contributed to the progress recorded in this work, I thank you for christening me James Bond for this season of our relationship. It has been most rewarding and refreshing. I cannot fail to acknowledge all the helps I received from members of the Business Studies Department, Covenant University, Ota; they were timely and of utmost relevance. Fondest appreciations go to my colleagues with whom we started this programme together, we read, ate, analysed and discussed together, and the proof of it is astounding. I acknowledge members of staff of GSK for the cooperation to be a part of the success of this work. I acknowledge of my friends too numerous to mention, please pardon me for not mentioning your names, I tried not to leave anyone out, hence, the reason for the exclusion of names. However, I cannot but speak graciously of all the members of Principles, your inspirations always waded off stress giving room for freshness of strength and insight. Worthy of great applause are my PEARLS and BEADS, what a people you are, simply amazing. I could not have prayed for better covenant partners. Thank you so much ouch. The journey to the peak of my career has just begun and it is amazing that even though you are not in the knowledge industry with me, you have chosen to be a lover of all I choose to do. I salute your courage and tenacity to stand with a friend who has chosen an unpopular path for contribution towards humanity. FOTO, you are loved and admired. When I am celebrating the success of my Ph.D, I am sure, we will be wearing the title together in the name OBADUGBA.

CHAPTER ONE GENERAL INTRODUCTION 1.1. BACKGROUND OF THE STUDY Contemporary organizations are constantly confronting pressures to improve service and productivity. The precariousness of the external working environment and the rapid rate of technological change increasingly demand innovative means of improving business performance and securing competitive advantage. People are the recognized prime determinants of competitive advantage and the need for effective manpower management has become more important than ever before. The task of effective human resource management in 21 st century organizations has gone beyond just the HR unit of the organization alone. The responsibility for exploring the potentials of the people in an organization for maximum performance is now shared between senior managers, HR professionals and line managers. However, the challenges facing today s organization provides an ideal occasion for the diverse HR practices to prove its ability to contribute towards corporate performance. HR in organizations of the 21 st century is viewed as been a critical component in the maintenance and improvement of corporate performance (Bowen & Ostroff, 2004; Ostroff & Bowen, 2000). HR is assumed to affect knowledge, skills, abilities (Schuler & Jackson, 1995), attitudes and behaviour of employees (Guest, 1997), and may affect the performance of an organisation (Den Hartog, Boselie, & Paauwe, 2004). Research shows that the human element in organisations is an indispensable variable as organizations try to stay ahead of competition. Research further reveals that HR can play a decisive role in organisational performance (Arthur, 1994; Becker & Gerhart, 1996; Boselie, Dietz, & Boon, 2005; Guest, Michie, Conway, & Sheehan, 2003; Wood, 1999; Youndt, Snell, James, & Lepak, 1996). Two factors have been assumed to be important factors in explaining the link between HR and corporate performance. Baron and Kreps (1999) identified these two factors as: 1. The alignment of HR with the organisation strategy (strategic fit) and 1

2. The alignment of the various HR practices, such as career opportunities, training and appraisal, within the organisation (internal fit) Baron and Kreps hypothesize that when HR within an organisation is well aligned, and employees know what is expected of them, they will invariably act similarly and have uniform expectations about work and behaviour. For this purpose of this study, I have adapted Som s (2006) definition Innovative HR practices. He defined innovative HR practices as any intentional introduction or change of HR program, policy, practice or system designed to influence or adapt employee skills, behaviours, and interactions of employees and have the potential to provide both the foundation for strategy formulation and the means for strategy implementation that is perceived to be new and creates current capabilities and competencies. Scholars have attempted to recommend designs of various HR systems to achieve organizational goals as well as determine best set of complementing HR practices that will indeed boost performance. However, several limitations spanning from different levels of analysis, size of firm, union status of organizations and business environment has limited the acceptability of several advancements, hence, the need for a contextual study such as this. 1.2. STATEMENT OF RESEARCH PROBLEM With the increasing significance of the human factor in contemporary organizations, HR-issues have become core to organizations that deem people as their most essential advantage in achieving organizational goals. Trend in recent times have shown some considerable level of research concentration on the link between HR and corporate performance. However, a set of issues deeply in need of more consideration is aimed at the identification of strategic HR practices (Wright & Boswell, 2002). Steadiness in the classification or determination of HR practices is rather low. An evaluation of the universalistic perspective of theorizing the HR-performance 2

link reveals that much is still to be learnt about the combination of practices that produces high performance work systems. The impression given by Becker and Gerhart (1996) reveal that studies vary greatly as to the practices identified as best and sometimes even as to whether a HR practice is likely to be positively or negatively related to high performance. Little is known about how and through which processes HR practices influences corporate performance (Guest, 1997; Becker, Huselid, Pickus & Spratt, 1997; Ostroff & Bowen, 2000). Intermediate processes that ultimately affect performance outcomes are referred to as the black box of the HR-outcome link (e.g. Wright & Gardner, 2003). Unlocking the black box means identifying HR-objects that are relevant to corporate performance. This remark is concerned with the explanation of the mechanisms linking HR practices to key aspects of corporate performance i.e. how specific bundles of HR practices influence performance. Several authors identified the lack of theoretical models to demystify this shortcoming (Ferris et al., 1998; Guest, 1997; Peccei and Rosenthal, 2001; Truss, 2001). It is however pertinent to give attention not only to traditional financial outcomes but also to intermediate and process-related criteria that show the path towards achieving the financial results (Becker and Gerhart, 1996; Becker and Huselid, 1998). 1.3. RESEARCH OBJECTIVES This study is aimed at furthering research on the HR-Firm Performance link by providing answers to the identified conceptual flaws. 1. The study examines the contribution of consistency among HR practices to corporate performance. 2. This study seeks to evaluate the combinations of Human Resource Management practices that influence a high performance system in an organization. 3

1.4. SIGNIFICANCE OF THE STUDY Many scholars have asserted that the human resources of the organization are potentially one of the most potent sources of continuous competitive advantage for organizations and have tried to reveal the positive relationship between HR and corporate performance (Ferris, et al, 1999). Nevertheless, there has been imprecision as to which of the many high performance HR practices (Delaney et al., 1989) that have been identified aid better performance (Collins and Smith, 2006; Ferris, et al, 1999). The results derived from the study will enable HR managers understand the impact of the strategies employed on employee productivity. Many a time top management considers a single approach towards achieving corporate goals, they engage practices that they consider best fit to realizing set targets; however, this study shows that the combination of complementing HR practices can best align employee attitudes and behaviours towards achieving corporate agenda. 1.5. RESEARCH QUESTIONS The central inquiry in this study is centered on the linkage between HR Practices and Corporate performance as can be explained by the effect of the internal fit on the supportive activities of employees towards their colleagues and employer. However, further specific inquiries are posed below: 1. What is the relationship between HR practices and corporate performance? 2. What combinations of HR practices determine a high performance work system? 1.6. RESEARCH HYPOTHESES Using longitudinal data from 30 steel plants, Ichniowski et al (1993), found the impact of cooperative and innovative HR practices to have a positive and considerable effect on firm efficiency. Similarly, Arthur (1994) found in 30 steel minimills that those with collaborative HR systems had lower turnover rates and higher productivity than firms with calculative systems whose emphasis is efficiency and the reduction of labour costs. MacDuffie (1995) found that combinations of internally 4

consistent HR practices were linked with greater productivity and quality in 62 automotive plants. Delaney and Huselid (1996) established that the extensive utilization of innovative HR practices have a strong and negative effect on corporate turnover in the manufacturing sector. Each of these studies has focused on the impact of high performance work practices on employee turnover or productivity. Although a growing empirical literature focuses generally on the impact of High performance work practices, prior work has been limited in terms of the range of practices evaluated. It could thus be hypothesized that: H1: Systems of high-performance HR practices will not boost productivity. Baird and Meshoulam (1988) asserted that corporate performance will be improved to the degree that organizations engage HR practices that support one another (the internal fit). Similarly, Osterman (1987) argued that an underlying logic to a firm s system of HR practices be put in place. He holds that certain HR policies and practices should fit together. Osterman (1994) found that organizations that place high value on employee commitment, for example, are not likely to use term employees rather they are likely to invest in innovative work practices such as skills training and incentive compensation. Huselid (1995) posits that the effectiveness of employee participation systems will be improved if employees are aware of their efforts that will be rewarded and has the tendency to ensure their advancement. Based on these arguments a testable proposition is therefore set out thus: H2: Complementing high-performance HR practices will not boost productivity. 1.7. RESEARCH METHODOLOGY Welman & Kruger (1997) describes methodology as the use of diverse methods, techniques and principles to create scientifically based knowledge. It is constrained to objective methods and procedures that are relevant within a particular discipline. The focus of methodology is on exact ways and methods that can be useful to better comprehend the field and scope of study. This study shall engage a nonexperimental research design with the use of survey method. The principal advantage of survey studies 5

is that they provide information on large groups of people, with very little effort, and in a cost effective manner. Surveys allow researchers to assess a wider variety of behaviors and other phenomena than can be studied in a typical naturalistic observation study. This study can also be referred to as a correlation study because it tries to determine the relationship between HR practices and corporate performance. Data will be analysed using descriptive statistics, analysis of variance, multiple regression and Pearson s product-moment correlation coefficient since this study intends to establish a relationship between HR practices and employees performance as well as determine the degree of contribution of independent variables to dependent variables. 1.8. SOURCES OF DATA The data collecting method for this study is the questionnaire. This will present us with the primary data required for the research study. 1.9. SCOPE OF STUDY This study will focus on two indicators of operational performance in the organization voluntary employee turnover and productivity. High performance HR practices that will be adopted for this study have been categorized as either calculative HR practice or collaborative HR practice. Hence, the practices under study will be limited to training, performance appraisal, career planning, employee participation, job definition, compensation and selection. 1.10. OPERATIONALISATION Operationalisation is the distinction between dependent and independent variables in a research study. The independent variable is the factor that is manipulated or controlled by the researcher. The dependent variable is a measure of the effect (if any) of the independent variable. Most researchers are interested in probing the effects of the independent variable on something, and that something is the dependent 6

variable (Isaac & Michael, 1997). The distinction between dependent and independent variables in the research topic Innovative Human Resource Practices and Corporate Performance is mathematically expressed below: y = f (x) Where: y = dependent variable x = independent variable y = Corporate Performance, x = Human Resource Practices Operationalisation of Dependent Variable Corporate Performance This study has been conducted on an organizational level. Therefore in performance measurement indicates the operational efficiency of the organization. Possible measures for operational performance are lead time, fallout ratio, quality level, customer satisfaction, productivity and on-time delivery (Harel and Tzafrir, 1999; Holloway et al., 1995; Rogg et al., 2001; Stone, 1996), but one can also think of more HR-related outcomes such as absenteeism and employee turnover (Huselid, 1995). For the purpose of this study, two measures of operational performance are selected productivity and employee turnover. Hence, mathematically we can operational define our dependent variable as: Y = f (Y 1, Y 2 ) Where - Y 1 = Productivity; Y 2 = Employee turnover Operationalisation of Independent Variable HR Management Practices An examination of previous empirical studies (Arthur, 1994; Delaney and Huselid, 1996; Delery and Doty, 1996; Huselid, 1995; MacDuffie, 1995; Osterman, 1994; Pfeffer, 1994) shows that researchers do not essentially give attention to the same HR practices when studying HR systems or High Performance HR Practices (Becker and Gerhart, 1996; Guest, 1997; Truss, 2001). This examination also reveal that the researchers seldom induce how the selected practices independently might affect the organization s 7

performance and that the selected list of practices rarely evaluate how intensively the relevant HR domains are worked out in a firm. The HR practices (training, performance appraisal, career planning, employee participation, job definition, compensation and, selection) identified by Singh (2004) have been adopted in this study because his observations are more relevant in our cultural context.. Hence, we can state our independent variable thus: X = f (X 1, X 2, X 3, X 4, X 5, X 6, X 7 ) Where X 1 = training X 2 = performance appraisal X 3 = career planning X 4 = employee participation X 5 = job definition X 6 = compensation X 7 = selection Operationalisation of our dependent and independent variables are restated below: y = f (x) Where: y = dependent variable x = independent variable Y = f (Y 1, Y 2 ) Where Y 1 = Productivity Y 2 = Employee turnover X = f (X 1, X 2, X 3, X 4, X 5, X 6, X 7 ) Where X 1 = training X 2 = performance appraisal X 3 = career planning X 4 = employee participation X 5 = job definition X 6 = compensation X 7 = selection 8

1.11. OUTLINE OF CHAPTERS This study is structured into five chapters. Chapter one is centered on general introduction. Here, the research problems are discussed, the objectives of the study are itemized, and the significance of the study is clearly elucidated. Other elements of the introductory chapter include the research questions, research hypotheses, research methodology, sources of data collection, scope of study and operational definition of terms used in the study. Chapter two is focused on review of relevant literature. It is organized into four parts the general introduction into the chapter, theoretical framework a discussion of relevant theories to the variables, research questions and hypotheses, conceptual framework an insightful discussion of the concepts of innovative human resource management strategies, empirical framework a review of past findings in the Human Resources Performance research area. Chapter three shows the details of the research methodology. It discusses the nature of research method, research design and methods of data presentation and analysis. Chapter four of this study centers around the presentation of data gathered from the field, its analysis, testing of hypotheses and discussion of results. Chapter five is the conclusive chapter of this study. It shows a summary of the work done, a presentation of theoretical and empirical findings. The research study concludes with recommendations and managerial implications of the study conducted. 1.12. LIMITATIONS TO THE STUDY The line of this research work will have been advanced but for certain gaps that could not be filled in the course of the study. A more in-depth analysis of high-performance HR practices will be better analysed if carried out in more than one manufacturing company. Another limitation to this study is the likely biasness of the respondents. This presents a significant limitation for a line of research that attempts to estimate firm-level impact of an organization s entire HR function. 9

1.13. OPERATIONAL DEFINITION OF TERMS The following terms are used in this study based on the operational definitions given to them here. a. Career Planning: Career planning is a tool that aligns strategy with future HR needs and encourages employee to strive for his personal development (William et al, 1996). b. Compensation: Salaries, and incentives that accrue to an employee for the tasks he executes. c. Employee Participation: Organizational programs that encourage joint decision making by employees and their superiors. (Marwat et al, 2006) d. Innovative Human Resource Practices: Any intentional introduction or change of HR program, practice or system designed to influence employee skills, and behaviours, and have the potential to provide both the foundation for strategy formulation and the means for strategy implementation that is perceived to be new and creates current capabilities and competencies. (Som, 2006) e. Job Definition: It is combination of job description and job specification. It outlines responsibilities, work environment and expected skills of an individual performing that job (Tahir, 2006). f. Operational Performance: Measures for increased organizational efficiency. Some of the indicators are customer satisfaction, productivity and on-time delivery (Harel and Tzafrir, 1999; Holloway et al., 1995; Rogg et al., 2001; Stone, 1996). g. Performance Appraisal: Measurement of employee s performance on the basis of objective quantifiable results. The goal is often growth and development oriented. h. Productivity: This refers to the output of employees on assigned tasks. Employee s experiences determine the rate at which they accomplish more work. i. Selection: Inflow of chosen skill set aimed at adding value to firm s skills inventory. Huselid (1995) j. Training: The tool to develop knowledge and skills as means of increasing individual s performance. k. Turnover: This includes both voluntary employee departures (quitting) and involuntary ones (firing). (Huselid, 1995) 10

CHAPTER TWO LITERATURE REVIEW 2.1. INTRODUCTION Researchers into human resource management have accentuated that HR practices may lead to higher organization performance and be the essence of sustained competitive advantages (Wright, Dunford, & Snell, 2001). Huselid (1995) opines that there is an increasing accord that HR policies can, if properly organized, offer a significant contribution to corporate performance. The use of High Performance Work Practices can improve the knowledge, skills and abilities of an organization s current and prospective employees. These practices can increase employee motivation, decrease absenteeism, and boost retention of value-driven employees while giving room to redundant workers to leave the organization (Jones & Wright, 1992; U.S. Department of Labour, 1993). However put, an organization s choice of employment practices, policies and strategies will determine the productivity of its workers. The purpose of this chapter is to explore leading theories in human resource management performance linkage research. The HR literature holds that theories whose focus are on the productivity effects of work practices often center on modes in which compensation policies, such as profit sharing, efficiency wage payments, or other forms of incentive pay, can affect workers productivity. Other theories imply that bringing individual but related HR practices together in a HR system may be vital determinants of productivity than individual work practices. This chapter also explores diverse human resource management practices as evaluated in literature. Guest (2002) argued that the effect of HR on corporate performance is contingent upon individual employee s response to constituted HR practices. Therefore, the impact will move in direction of the perception of HR practices by the employee. Patterson et al (1997) while discussing impact of HR practices on performance asserted that HR practices covering selection and training greatly influence performance by providing appropriate skills. Their research 11

revealed that HR practices have prevailing impact on corporate performance even if measured as productivity. The crux of the discourse in this chapter will be the discussion of the selected HR practices under the categories of calculative or collaborative HR practices. The chapter closes with reviews of empirical results in HR-Performance research endeavours. 2.2 THEORETICAL FRAMEWORK The idea that individual corporate performance has implications for corporate-level results has been commonplace in literature. Keen interest has been displayed in this field of study; however, there is a running debate that, collectively, an organization s employees have the wherewithal to position the organization in a uniquely stated competitive advantage status that is complicated for competitors to reproduce. Several theories have been advanced in the HRM-Performance research. An analysis carried out by Boselie, Dietz & Boon (2005) reveal 26 theories that try to establish a link between the engagement of HR practices and corporate performance. The theories range from Strategic contingency approaches, AMO theory Ability, Motivation and Opportunity, Resource based view, Systems theory, Human resources theory, New institutionalism/institutional theory, Stakeholder theory, Control theories, Commitment theory, Labour process theory, Social exchange theory, Job characteristics model, Resource dependence theory, Signaling theory, Behavioral theory, Cognitive theory, Critical theory, Ethical theory, Evolutionary economics, Information theory, Innovation theory, Job performance theory, Learning theory, Population ecology, Social network theory, and Upper echelons theory. Boselie et al (2005) reviewed 104 empirical papers to arrive at this list of theories that have filled the vast HR- Performance literature. The focus of this review is on the 3 leading theories as determined by Boselie. Out of the 104 empirical papers listed, strategic contingency approaches were analysed by 43 papers, indicating 41.3% of total papers reviewed. The AMO (Ability, Motivation and Opportunity) theory was analysed by 42 papers, showing a 40.3% presence in the literature reviewed. The Resource based view was evaluated by 31 empirical papers, an estimated percentage of 30% appearance in the number if 12

literature sampled. Our selection was based on theories that have no less than 30% references in the reviewed literature, hence our selection of the contingency approach, AMO theory and the resource base view. 2.2.1. CONTINGENCY THEORY AND HRM The contingency approach to HR management is premised on the basis of no one best way to manage employees for high performance. The theory holds that HR practices must be tailored to the particular circumstances been confronted by an organization. The contingency perspective (also called the situational approach) assumes that there is no universally acceptable response to issues bothering on HR systems that ensure increased performance of employees because organizations, people, and situations are dynamic and do change over time. Thus, the appropriate approach towards increasing the corporate performance rating is dependent on a complex variety of critical environmental and internal contingencies. Contingency theory begins with the assertion of "it depends," stating that the way out to any one managerial impasse is dependent on the factors that impinge on the situation. For instance, where slight distinction in materials exists in the production process, it becomes pertinent to assign work into highly routine tasks. However, where distinction is high, requiring many judgments concerning which material is suitable and which is not, managers will want to avoid making tasks routine. Another illustration that supports this assertion focuses on training. Human relations training might be more effective under what Porter (1980) terms a differentiator, as opposed to a cost-leadership strategy. The differentiator relies heavily on innovation and teamwork, so that the returns to human relations training could be imagined to be greater under new circumstances. The Contingency approach is organizationally rooted on the postulation that the choice of a blend of HR practices is influenced by the strategy engaged in the organization. This assertion further holds that the choice of strategy is influenced by business oriented environmental factors and those organizations 13

which achieve vertical fit between HR practices, strategic choices and environmental features will achieve better results than other organizations (Baird & Meshoulam, 1988; Youndt et al., 1996). The effectiveness of an organization s HR policies according to the argument of the contingency approach demands a consistency with other aspects of the organization. The primal contingency factor is considered to be the organization s strategy; hence, HR practices are expected to be consistent with the organization s strategy. Corporate performance will be enhanced when the right fit between corporate strategy and HR practice is achieved (Van de Ven and Drazin 1985; Schuler 1989). This perspective negates the existence of the best practices in managing human resources. The contingency view has a sizeable theoretical appeal premised in the western literature dealing with organizational design and management (Thompson, 1967). In the case of HR systems, Schuler (1988) identifies a set of behavioural patterns which he proposes to be determined by corporate strategic needs (e.g., risk taking versus risk avoidance, cooperation versus independent action, rule adherence versus innovation); these in turn are achieved by the selection of appropriate HRM practices in such areas as staffing, assessment, training and development, and compensation. This suggests that no one practice can match an organizational strategy to achieve an identified corporate goal. Begin (1991) offers a comparable framework, one poised to comprehend corporate HR systems across the nation. He identified a multi-tiered set of system expectations, these expectations range from employee proficiency to system incorporation and financial elasticity all of which ultimately inform corporate performance driving the choice of HRM system components. The situational perspective of the contingency theory has been a major attraction among researchers. They have argued that the productivity of a organization and its HR practice must of necessity conform to other facets and strategies of the organization (Arthur, 1994; Sanz-Valle, Sabater-Sanchez, & Aragon- Sanchez, 1999; Schuler & Jackson, 1987a; Sparrow, Schuler, & Jackson, 1994; Youndt, Snell, Dean, & Lepak, 1996). Schuler & Jackson (1987a) having adopted the concept of synergy, suggest that if HR practices are not consistent with corporate strategies, then they can be more competitively 14

disadvantageous than advantageous by restraining both individual and corporate performance. Indeed, one objective of research within the contingency framework is to specify those dimensions and conditions that do affect a situation and those that do not. Irrespective of the success that has been recorded in the utilisation of this approach towards increased corporate performance, there have been numerous criticisms. The contingency approach was useful in recognizing that the complication attendant to comprehending human and corporate systems has made it challenging to develop a universally acceptable system of management principle. A major criticism beckons on the question of whether management can be practiced by intuition given that the contingency approach points to every situation as a unique one, thereby negating the value of prior knowledge and wisdom. From a research perspective, it has been found lacking in the requirement for postulating a theory whose validity of assumptions is expected to be steady and unchanging even when differing assumptions are postulated. In a contingency framework, if differing results are obtained, the contingency response would be that the situation is unique or that essential dimensions affecting the situation were not tested. Thus, showing that contradictory assumptions disprove the theory would be difficult at best. 2.2.2. ABILITY, MOTIVATION, OPPORTUNITY THEORY AND HR PRACTICES Research reviews more often than not refer to the AMO model (Appelbaum et al, 2000; Boxall and Purcell, 2003) as one of the most widely used theoretical frameworks when determining a set of HR practices for the purposes of research design. Going by the work of Appelbaum et al (2000), performance is considered as a function of employee ability (A), motivation (M) and opportunity to participate or contribute (O). When HR practices that promote these variables are improved, the corresponding effect will be a better engagement of employee potential and discretionary decision. In a corporate setting where this kind of work reform is practiced, the expected outcome will be superior performances for both individual employees and the organization as a whole. 15

We can classify the independent variables of this research work under the AMO dimension. Each of the three dimensions of HR practices can be expected to have unique effects on commitment. While analyzing under the ability framework of the AMO theory, a review of literature reveals that skill enhancing practices have positive impact on commitment, particularly on the consistency of positive results been generated. Training is one of the HR practices identified to have a positive correlation on corporate performance. While investment in training employees may increase employees perceptions that the organization values their current and future contributions and thus their level of commitment (Meyer and Allen, 1997; Tannenbaum et al., 1991), they also tend to increase the marketability of those employees. Human resources theory and the March and Simon (1958) ease-of-movement framework suggest that HR practices that improve the knowledge, skills, and abilities of the employees flowing into and within the organization would result in increased aggregate voluntary turnover (Benson, et al. 2004; Oatey 1970; Williamson, et al. 1975). Further examples of such HR practices include recruitment, selection and deployment practices, staffing and job definition, just to mention a few. It is expected that motivation enhancing practices should positively influence commitment, and result in motivational outcomes. Consistent with the perceived organizational support arguments, HR practices such as compensation, rewards generating performance appraisal, incentives and other rewards-forperformance signal a positive estimation of employee efforts thus increasing reciprocal obligation (Meyer and Allen, 1997; Rhoades et al., 2001). Additionally, Klein s (1987) extrinsic satisfaction model suggests that financial rewards calculated to boost dedication to performance align employee interests with the organizations culminating in greater commitment to the organization. However, these practices may not guarantee continuity of high performance unless the pay is at a level that would require employees to take a pay cut if they left the organization. The opportunity component in the AMO model combines a set empowerment enhancing practices. In this work, two of our variables align with this model employee participation and career planning. They are expected to have a positive impact on organizational commitment, and probably impact the affect, 16

motivation, and continuity of results been generated in the organization. Organizations that encourage employee involvement in decision making, share information, and treat employees with esteem reinforce shared perceptions of congruence between employee and organizational values; integrate employees into the life of the organization, and increases employees identification with the organization thus enhancing commitment (Arthur, 1994; Long, 1980; Meyer and Herscovitch, 2001). In addition, the teamwork and social interactions inherent in empowering HR practices creates a sense of community that intensifies the forces of social unity among group members and thus the loyalty to the organization (Morrison, 2002; Osterman, 1995). The AMO theory has not been devoid of criticisms; its treatment of HR practices that allows for enhanced employee productivity seems both theoretically defensible and empirically successful. Gardner, Moynihan, and Wright (2007) found that the motivation and opportunity oriented bundles of HR practices are positively related to commitment and negatively related to turnover. However, skill oriented practices were unrelated to commitment and positively related to turnover. Adding complexity to the measurement of HR practice provides a deeper understanding of their impact. While the HR practices identified as independent variables in this research work can be subcategorized within the AMO framework, Lepak et al., (2005) states that the framework does not exclude overlap among the practices. For instance, training programs principally may be targeted at developing the requisite skill base, but may also communicate a commitment to the employee that elicits motivation as well. Similarly, participation programs provide opportunity, but may also help build the knowledge and motivation of employees. Having reviewed selected HR practices under the AMO framework of Ability, Motivation and Opportunity, an assertion can be made to the extent that it is the prime building block of HR architecture. For employees to engage in the sort of discretionary behaviour that is advantageous to the organization the three conditions of AMO must apply. 17

1. There must be an adequate amount of employees with the required ability (skills, experience, knowledge, etc) to do current and perhaps future jobs. 2. There must be satisfactory motivation for them to engage their abilities. These motivation factors may be financial or non-financial but will almost certainly include social rewards (and sanctions) and recognition of input as applied by co-workers and immediate bosses. 3. There must be an opportunity to engage in discretionary behaviour (thus the importance of job definition). Opportunity is the invitation to participate and get involved. This occurs both within the job itself in terms of how the job can best be done (known as on-line participation ) and outside the job as a member of a team or work area, and a citizen of the organisation (off line-participation). This is where opportunities may exist, and certainly can be created, which provide space for wider participation and involvement so employees contribute knowledge and ideas on how things should be done and how to respond to the change. The AMO theory is at the heart of strategic human resource management in the sense that all organizations intending to optimise individual employee contribution must situate workable policies in the three broad areas and these are designed to influence the achievement of corporate strategies. 2.2.3. RESOURCE-BASED VIEW (RBV) AND HR PRACTICES The RBV provides a reasonable basis upon which HRM scholars argue that the manpower of an organization is capable of contributing to corporate performance. Theoretical work on the resourcebased view of the organization by Barney (1991) holds that resources lead to sustainable competitive advantages when they are valuable, rare, inimitable, and non-substitutable. This view upholds the thought that human resources are a fundamental cause of an organization s competitive advantage. Boxall and Purcell (2003) provide further explanation to the basic features of resources that give organisations sustained competitive advantage; they said resources that are valuable and scarce are somewhat competitive and not easy to obtain; inimitable resources are very hard to imitate or copy; non- 18

substitutable resources are very hard to counteract with other resources which will meet the same ends; resources that are considered appropriable are capable of providing a superior return to the organisation s shareholders. Barney (1991) stressed that these resources will perform better in clusters, echoing the belief of the bundling of human resource management practices for maximum effect. Barney argues that resources that enable an organisation enjoy sustained competitive advantage must be intricate for competitors to obtain or reproduce. Wright and McMahan (1992) stated that since individual corporate performance is normally distributed, human resources meet the first two of Barney s (1991) criteria of being valuable and rare. Following this therefore, a bundle of HR practices that successfully builds up and engage employees to unite in organizational activities are expected to enhance the value and rareness of an organization s individual assets (Arthur, 1994; Snell et al., 1996). Corporate organizations that can successfully build up a cluster of resources that meets these RBV criteria are at a vantage point to competitive favourably over her rivals. It is however easy to see the strong link between HRM and RBV. Whilst certain key organizational resources such as financial, technological and physical can all be accessed or reproduced by competitors, the uniqueness of her human resources cannot be copied. It is the organization s basis on which a sustained competitive advantage is built. The specialised skills and knowledge of groups of key people in an organization can become the essence of her competitive distinction. Similarly, the loss of such people can lead to a devastating decline in the earlier secured corporate competitive advantage. Boxall and Purcell (2003) made reference to an example from Shockley semiconductor Laboratory. The laboratory lost eight key scientists in 1957: their mass departure cut the productive heart out of the laboratory, leaving behind a carcass of men working., on the four layer diode project plus a bunch of aimless technicians and secretaries. The group left to form Fairchild Semiconductor. The rest, as they say, is history. 19

Majority of work in Strategic Human Resource Management (Paauwe and Boselie, 2002; Barney, 1991; Delery, 1998) has chosen the resource-based view (RBV). This perspective accentuates the attaining of competitive advantage by means of utilization of the resources of the organization through the involvement of employees. The RBV theory is particularly applied to human resource management bearing in mind that people are the ones that encompass the assumptions of value, rareness, inimitability, and non-substitution, which are the pre-conditions for organizational success (Barney, 1991); for example RBV enables HR planning to concentrate on the development, maintenance and the utilization of resources. Competitive advantage therefore derives from unique resources and the capabilities to develop products and services which provide a unique selling proposition as an outcome of these resources. From this concept of the inimitable resources, Hamel and Prahalad (1994) developed the notion of core competence. A core competence in Hamel and Prahalad s view had certain characteristics: a. A bundle of skills and technologies that enables a organization to provide particular benefits to its customers b. Not product specific c. Represents the sum of learning across individual skill sets and individual organisational units d. Must be competitively unique e. Is not an asset in the accounting sense of the word f. Represents a broad opportunity area or gateway to the future. Leonard (1998) expounded on Hamel and Prahalad's notion of core competence into the broader notion of capability. For Leonard a core capability for an organisation has four dimensions: a. Employee knowledge and skill b. Physical technical systems. The technological competence accrues not only in the people; but also in the physical systems they build over time databases, machinery and software programs 20

c. Managerial systems; the accumulation of employee knowledge is guided and monitored by the organization s systems of education, rewards and incentives d. Values and norms. These determine what kinds of knowledge are sought and nurtured, what kinds of knowledge-building activities are tolerated and encouraged This notion of the core capability is clearly based on what Boxall (1996) called human resources advantage. In recent years, the resource-based view terminology has been changed by the notion of the knowledge-based view of the organization (Kamoche and Mueller, 1998; Nonaka and Takeuchi, 1995). The knowledge-based view overtly focuses on the human resources advantage of the competencies possessed by employees in the organisation but in other respects is very similar to the resource-based view. The rise of the resource-based view/knowledge-based view way of perceiving human resource management has led back to the notion of best practice and universalistic human resource management. The resource-based view model of human resource management focuses basically on the development and retention of the skills and knowledge of workers rather than trying to fit human resource management practices to the multiple and emergent strategies of organisations. In this sense, there should be a set of universal practices which will allow organisations to develop their human resources. 2.2.4. CALCULATIVE AND COLLABORATIVE HR PRACTICES In expounding the study of the impact of HR practices on corporate performance, Collins et al (2006) suggest a differentiation of two basic categories of HR practices. The first category consists of practices that are referred to as hard or transaction-based practices. The focus is on obvious exchanges between the employer and the organization. In this study, five of our independent variables fall under this category, they are: performance appraisal, performance-based compensation, training and development, job definition and selection practices. On the other hand there are those practices which are tagged as collaborative, soft or commitment-based and for the purpose of this study we have identified employee participation and career planning as such collaborative HR practices that allows for performance to be 21

enhanced. Arthur (1994) put forth an argument that these two approaches will shape employee attitudes towards improved performance. He identified them as control and commitment approaches which are referred to in this study as calculative and collaborative approaches respectively. The calculative approach is depicted in Fombrun et al s (1984) Michigan Model which emphasized that enhanced corporate performance is dependent on having systems in place for the regular assessment of individual employees. HR practices that reinforce the utilisation of this approach include performance-based rewards and performance-related training. The objective of the calculative approach is to achieve enhanced and improved productivity and corporate performance by ensuring that workers comply with basic rules and regulations that guide operations in the workplace. This is often carried out in a manner that allows behaviour to be guided by stipulated criteria. Great importance is placed on improving corporate performance by instituting patterns for the assessment of individual employees at specific intervals. The idea of this HRM model was inspired by Alfred Chandler s concept of structure following strategy. The emphasis of this approach is on the term resource, it implies that employees are considered as any other factor of production to be engaged rationally and deployed in an instrumental way towards profitable gain. Organizations that engage this model, observe investment in employee training to ensure it fits in with the organization s overall corporate strategy. Collective entities are put off with collective bargaining and trade unions taking offstage (Morris, 2002). Hard HRM assumes that the needs of the organization are overriding and that increasing productivity is the management s chief reason for improving the effectiveness of HRM. The model is considered hard HRM because it is hinged on strategic control, organizational structure and systems for managing people. Although it acknowledges the import of motivating and rewarding employees, it concentrates on managing humans to realise strategic goals (Pinnington & Edwards, 2000). Some scholars have discountenanced this model, referring to it as inhuman. Other scholars posit that it is the only route to corporate success (Hendry, 1995; Morris, 2000). Others have argued that hard HRM has been used to reinforce 22

management prerogative and justify worse employee-relations excesses of the venture culture (Legge, 1995a) The collaborative approach to improving corporate performance is clearly apparent in Beer et al s (1984) Harvard Model which emphasized the need for management to recognize employees as significant stakeholders in the enterprise. The collaborative approach which Arthur (1994) refers to as the commitment approach shapes attitudes by building psychological links between organizational and individual employee goals. This model places emphasis on the need for management to perceive employees as major stakeholders in the organization. Vital to this approach are the idea of individual employee influence and the combined sense of purpose it generates for corporate performance. Employee influence becomes possible on the platform of shared influence between management and employees that enables management to understand individual employee concerns without any form of prejudice. Without such processes, inherent motivation in every employee in the workplace becomes endangered leading to employee bitterness and disbelieve which results in unwillingness to take responsibility for corporate performance. Beer et al (1984) propose that several approaches, such as employee briefings and work system design, be used as employee involvement techniques. The model suggests that employee relations can be managed within four human resource categories. These include: employee-influence, which places emphasis on the extent of authority, responsibility and power voluntarily delegated by management, but which should also be attuned with management purpose and interests. Secondly is the factor of human resource flow, which depicts decisions on recruitment, selection, promotion, exit, job security, career development, advancement and fair treatment. The third aspect focuses on reward systems which cover both intrinsic and extrinsic rewards such as the work, sense of purpose, achievement and challenge, pay, bonuses, pensions, holidays, health insurance and flexible working hours. The last category is that of job design which is concerned with the arrangement of employees, information and technology. Such arrangement is targeted at meeting the need for organizational effectiveness and efficiency. The Harvard approach to the inquiry of HR 23