chapter 2 (3 april)

8/2/2019 Chapter 2 (3 April)

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Chapter 2

Literature Review

2.1 Introduction


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2.2 Human Resource Management (HRM) Practices

Many successful organizations agreed and realized that even there is number of factorsthat can affect individual performance, human resource has shown the most critical(Daud, 2006) factors especially in the modern era with high competitive environment.

That is why they are persistently improved (Bowra, 2012) in the area of HRM practices.Moreover, HRM practices have been proven have a significant and positive relationshipwith employee performance which directly improve the performance of organization andlead to higher profits (Baloch et al., 2010).

Daud (2006) has defined Human Resource Management (HRM) as a system, aphilosophy, policy and practices which can influence employee in an organization in termof motivation, to reduce and eliminate attitude of loitering on job and to enhanceretention among them.

According to Armstrong (Raigama et al, 2010; Nik Ab, Rahman & Shah Alam,2011), HRM is a strategic and coherent approach to the management of one

organizations most value assets where the individual employee or team of employeecontribute to the success by achieving organizations goals or objectives. In order toachieve the goals, all decision of management and practices that has direct impact tothe employee (human resource) who work for organization should be involved in HRM.

The activities or practices of HRM involve staffing, training and development,performance appraisal, compensation management, safety and health, industrialrelations, career planning, compensation and employee participation. (Marwat, Quershi& Ramay; Ahmad & Shahzad, 2011).

There are many more variables which may be considered under the practices ofHuman Resource Management but this study included three HRM practices which are

training, performance appraisal and compensation.

2.2.1 Training

The main factors why employee goes for training is to acquire new skill, abilities andattitude towards their present job which means that, it involves designing and supportinglearning activities to achieved desired level of performance (Kennedy, 2009) .Forexample when there is a changing of technology (Laing, 2009) where they need to copewith new processes and production technique used in the organization.

We should realize that not every employee in an organization is equipped withsome sort of expertise and able to carry out every task assigned to them unless they

already have experience on that specific assignment (Farooq and Khan, 2001).

2.2.1.1 Types and Methods of Training

There are many type of training can organization provides to their employee. Inthe study of Brum (2007), training has been divided into two dimensions of related costwhich are training related to direct cost and training related to indirect cost. The directcost related training may include instructor salary, materials and follow up supervision


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Pools of qualified replacements for employees who may leave or be promoted topositions of greater responsibility can be created;

Organization will have the human resources needed to support business growthand expansion;

Business can easily adapt to the rapidly change of competitive environmentespecially to make use of advanced technology;

Employee efficiency and motivation can be improved and can lead to gains inboth productivity and job satisfaction.

while the indirect cost related to the worker output and productivity during and after thetraining they has undergone.

In addition, below are the summary of various types of training that taken fromstudy of Liang (2009). Organization can adopt those training depend on their objectivesof training and what they expect after the employee undergone the training.

Types of Training ObjectivesRefresher Exposed the employee to modern trends in field of

business; involves updating skills to meet the jobrequirement of employees.

Orientation Ensure all new entrants familiarize with the organizationsgoals, structure, culture, work standard and other conditionsof employment.

Career or Development Aims at preparing employees for the future. This enablesemployees to take up higher responsibilities.

Job Teach present employee to perform the job for which he or she was hired or employed for; help employees to acquire

the necessary skills and experience for specific jobs.

In study of Liang (2010) already spelled out clearly methods of training can be use bythe organization. Example methods of training can be used are (1) on-the-job trainingwhich consists of learning by doing, mentoring and shadowing and job rotation, (2)Vestibule training, (3) Behavior Modeling, (4) Understudy Training, (5) Case study, (6)Business exercise and lastly (7) Group training. This study will not mentioned againabout it but what is important are methods selected must based on identified trainingneeds, training objectives, an understanding on the part of the trainees, the resourcesavailable and an awareness of learning principles.

2.2.1.2 Benefits of Training

In the study of Kennedy (2009), he has pointed out some potential advantages oftraining to the employee and also organization which are:-

To succeed in achieving the objectives of its training program, the design andimplementation must be planned and systematic, tailored towards enhancingperformance and productivity.


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2.2.2 Compensation

Nathani, Sandhar & Chakraborty (2010) defined compensation as the totalremuneration whether in cash or in kind, payable by an enterprise or organization toemployee in return of work done by latter during the accounting period. Caruth andHandlogten had emphasized that (Bowra et al., 2012) Employees are encouraged when

they are financially rewarded directly fasten to their performance.

Compensation can be divided into few types. Direct compensation includesemployee wages and salaries, incentive payments, bonuses and also commissions.While indirect compensation encompasses many benefits that provided by theiremployers which is non-financial compensation include the fringe benefits like freeinsurance, subsidized lunch and others. Another type of indirect compensation is moreon intrinsic rewarding jobs like comfortable and nice work environment of flexible workhour in order to accommodate employees needs.

Principle of Effective Compensation

Taken from previous study, Pasetya and Kato (2011) have highlighted Cascios Principleof Effective Compensation (1995) in granting effective compensation to the employeewho works for one organization. There are as table below:

2.2.3 Performance Appraisal

In the study of Islam & Rasad (2005) and Dargham (2008), definition of performanceappraisal has been taken from the study of Lansbury in 1988. It is the process ofidentifying, evaluating and developing the work performance of the employee in theorganization, so that organizational goals and objectives are effectively achieved while,at the same time, benefiting employees in terms of recognition, receiving feedback, andoffering career guidance.

Principle

FairnessTake into account the ratio between the highest and lowest salaries,cost of living, and so forth.

JusticeThere should be a good element of justice in connection with the

element of working time and job performance. The employees whoperform similar tasks get the same compensation as well.

SecurityWith attention to things that are not directly related to the job orposition, such as illness, layoffs, accidents at work, epidemics, natural

disasters, or the like.

Clarity In terms of easily calculated, or easily understood by employees.

Cost control Should be controlled in the sense that any element of extravagance.

BalanceMust be considers to the balance between compensation as it relatesto employment or occupation, with which is not related to job orposition.

StimulatingCapable of inducing employees to give the maximum contribution tothe company

AgreementCompensation should be an agreed outcome or the result ofnegotiations between the employees with management.


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Meanwhile, Jefferson (2010) has defined performance appraisal as a process ofmeasurement on how well an individual is doing their job. Normally appraisal is beingdone annually in order to boost job performance, to see the present performance, whicharea needs more attention and to inform both parties which are employee andemployers as to expectations.

According to Kumar (2005), McGregors study in 1987 has classifiedperformance appraisal objectives into three which are administration, Informative andmotivational which can conclude all definition mentioned above.

Objectives

Administration Providing an orderly way of determining promotions, transfers andsalary increases.

Informative Supplying data to management on the performance of subordinates and to the individual on his or her performance

Motivational Creating a learning experience that motivates staff to developthemselves and improve their performance.

2.2.3.1.1 Different Methods of Performance Appraisal

Many methods can be used by the organization to evaluate the employeeperformance. Jafari et al. (2010) categorized three existent approaches for measuringperformance appraisal. These are (1) absolute standards (2) relative standards and (3)objectives. While in the study of Marikova on Job Performance Evaluation, shementioned and elaborate on six methods that most important which are Forceddistribution, BARS (behaviorally anchored rating scales, 360- degree feedback, MBO(management by objectives), self evaluation and performance review dialog.

2.2.3 Job Design

The introduction of new technologies, new business processes and new ways of workinghave has create particular initiatives such as call centre operations, e-business working,supplychain partnerships, enterprise ,resource planning systems, dispersed teams,

just-in-time working and the like, involve choices (whether made explicitly or implicitly)about the design of peoples jobs (Clegg & Spencer, 2007).

Job design is the deliberate purposeful planning of the job, including all itsstructural and social aspects and their effect on the employee and in broader concept; itcan refer to any part or combination of parts of the job (Jr, 1981). Moreover, Gabr andMohamed (2012) defined it as the characteristics of jobs, such as the variety of skillsdemanded that will affect the ones satisfaction.

Meanwhile, Alishiri (2012) describes the concept of job characteristics is more ondesigning a job that will motivate employee and by doing that, employer will see thefulfillment of his demands in the successful performance of the jobs and aims assignedto the employee.


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2.3.1 Job Characteristics Model

Behavioral scientists attempted to identify and explain various job dimensions thatwould influence performance of people who perform the jobs (Johari, Mit & Yahya, 2009and the theory that best exemplifies these attempts perhaps is the one put forth byHackman and Oldham (1975) since most work design attention has centered on their job

characteristics model (Perry, Mesch & Paarlberg , 2006).

According to Hackman and Oldham (1975), job characteristic is particularlyconcerned on how the work is done and nature of tasks associated with that work.Furthermore, it has been defined as the job design that results three psychologicalstates which are meaningfulness of the work performed, responsibility for workoutcomes and knowledge of the results of work performed that bring about positive workoutcomes.

Job characteristics Model of Hackman and Oldham comprise five dimensions (Judeh,2012; Birnbaum,Farh & Wong1986) as defined below:

1. Skill variety: Skill variety is the degree to which the job requires incumbents toperform a wide range of activities using various skills and talents. The employeewho is open to change is likely to be motivated when having a job variety.

2. Task identity: Task identity is the degree to which a job requires completion of awhole and identifiable piece of work that is, doing a job from beginning to endwith a visible outcome

3. Task autonomy: Autonomy involves freedom to make decisions and presentsolutions to all problems in relation to the job with limited control fromsupervisors. It is the degree of freedom the job provides to the incumbent inscheduling and conducting the work.

4. Task significance: Task significance is the degree to which the job has asubstantial impact on the lives of other people, whether those people are in theimmediate organization or in the world at large

5. Feedback: Supervisor or others feedback relates to the degree to whichperforming the work activities results in the employee obtaining direct and clearinformation about the performance effectiveness.

2. 4 Career Planning

Definition of career planning by Dessler (2008) is a deliberate process where anemployee becomes aware of his or her personal skills, interests, knowledge,motivations, and other characteristics; acquires information about opportunities andchoices; identifies career-related goals; and establishes action plans to attain specificgoals (Abdulkadir et al., 2012)


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Performance

There are different views on what performance is. In order to achieve theorganizations goals, managing the employee performance is very necessary becauseemployee performance also directly related to organizations productivity and success.

High performance individual also can ensure of organizational competitive advantagebecause enable to meet its goals and deliver products and services they specialized in(Sonnentage and Frese, 2010).

Shahzad et.al (2011) has defined performance as the results or impacts ofactivities of an individual over a given period of time. Moreover, individual successfulcriteria in their work also one of the definition of performance (Jamshidi et.al, ) whereusually calculate based on the sales or production (output rate) or compared thesuccess rate to expectations of the organization. Meanwhile in the view of Ojo (2009),performance is the extent of carrying out assignment or task by an employee with theircapabilities to acts in certain situations.

Employee Performance

According to Pasetya and Kato (2011), the accomplishment of organizationalgoals which resulted from the employee set of behaviors which consist of combination ofeffort, ability and perception of tasks has been defined as employee performance. Whilein the view of Kazmi, Amjad and Khan (2008) the job performance is the outcome ofthree factors working together: skill, effort and nature of work condition. Knowledge,abilities and competencies are the skills employee brings to the jobs; degree ofmotivation to get the job complete is the effort of the employee and lastly is nature ofwork conditions which defined as degree of accommodation of conditions in facilitate theproductivity of employees.

There are number of factors that may be affecting the employees performance.Zahagier and Balasundaram (2011) have pointed out varieties of factors that may affectperformance such as:

IRF (which is the combination of different attributes i.e. value, beliefs,critical thinking, and anticipation of success and work attitude);

JRF (i.e. needs, self-concept, personal impact skills competence,feedback, incentives and rewards);

ORF (i.e. organizational culture, norms and standards used at work,communication, supervisor and colleague support).

Relationship between Employee Performance and HRM Practices


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Theoretical Framework

Compensation

Performance

Appraisal

Training

Employee

Performance

CareerPlanning

Selection

Job Design

HRM

Practices

chapter 2 (3 april)

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