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High Performance Work System at Bank Branches: Exploring the ‘Black Box’ of Strategic Human Resource Management through the Lens of Resource Based View and Organizational Justice Theory By Amir Riaz CIIT/FA12-PMS-011/LHR PhD Thesis In Management Sciences COMSATS University Islamabad Lahore Campus - Pakistan Fall, 2017

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Page 1: High Performance Work System at Bank

High Performance Work System at Bank

Branches: Exploring the ‘Black Box’ of Strategic

Human Resource Management through the Lens of

Resource Based View and Organizational Justice

Theory

By

Amir Riaz

CIIT/FA12-PMS-011/LHR

PhD Thesis

In

Management Sciences

COMSATS University Islamabad

Lahore Campus - Pakistan

Fall, 2017

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COMSATS University Islamabad, Lahore Campus

High Performance Work System at Bank Branches:

Exploring the ‘Black Box’ of Strategic Human

Resource Management through the Lens of Resource

Based View and Organizational Justice Theory

A Thesis Presented to

COMSATS University Islamabad

In partial fulfillment

of the requirement for the degree of

PhD (Management Sciences)

By

Amir Riaz

CIIT/FA12-PMS-011/LHR

Fall, 2017

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DEDICATION

To my parents, family, teachers and friends

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ACKNOWLEDGEMENTS

First of all, from the core of my heart, I am thankful to Almighty ALLAH and Holy

Prophet Muhammad (S.A.W.W.) that I have been succeeded in completing my PhD

thesis.

Moreover, it would not be doing justice in presenting this thesis without mentioning

people around me who have been inextricably related with the completion of my PhD

thesis.

With greatest homage and regards, I am thankful to my supervisor, Dr. Hafiz Zahid

Mahmood, for his dedication and valuable guidance throughout the completion of my

PhD journey. Without his generosity, it would have been impossible for me to

accomplish this task. I also express my sincere thanks to Dr. Muhammad Ibrahim

Abdullah and Dr. Tajammal Hussain, members of my supervisory committee, for their

guidance and support throughout this research project. I would also like to say thanks to

Department of Management Sciences, COMSATS University Islamabad, Lahore Campus

for the support during the journey of my PhD. There are many people around who gave

me support in my research and even more in my daily life during last four years, some of

them are Mr. Kashif Mahmood, Dr. Zafar Uz Zaman and Dr. Basharat Naeem. I also

express thanks to the people who helped and assisted me in data collection for this

research thesis and the managers and employees who participated in this research project.

Finally, I would like to thank my parents, brothers and sisters for their continuous

support, encouragement and unconditional love. Most of all, a big thanks to my beloved

wife, Samina Amir, and my kids, Jannat Fatima and Muhammad Hashir, for using from

their time to complete this study.

Thank you all for your support and trust, without your support and motivation, this study

would just have been a dream.

Amir Riaz

CIIT/FA12-PMS-011/LHR

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ABSTRACT

High Performance Work System at Bank Branches: Exploring the

‗Black Box‘ of Strategic Human Resource Management through

the Lens of Resource Based View and Organizational Justice

Theory

Previous research linking high performance work systems and organizational

performance, mainly done at organizational level of analysis, is declared managerially

biased. Moreover, researchers are exploring the mediating mechanisms linking high

performance work system with performance outcomes and termed this issue as ‗black

box‘ debate in the literature. In addition to this, previous studies have been criticized for

using intended, instead of implemented, high performance work system highlighting that

intended may not be implemented, by the line managers, in same way throughout the

organization.

Keeping in view these gaps in literature, this study attempts to investigate the relationship

of implemented high performance work system with bank branch performance and

employee outcomes, and the mediating processes for explaining these relationships.

Drawing upon mutual gains perspective of HRM, this study, first, hypothesizes that

implemented high performance work system is positively related to both bank branch

performance and employee outcomes (employee engagement, service performance and

service oriented organizational citizenship behavior). Further, based upon resource based

view of the firm, the study hypothesizes that implemented high performance work system

and bank branch performance relationship is mediated by branch level collective human

capital. In the last, using social exchange theory, this study also investigates

organizational justice dimensions (distributive justice, procedural justice and interactional

justice) as mediating mechanisms for explaining the relationship between implemented

high performance work system and employee outcomes.

For this multilevel study, survey technique is used to obtain data from 323 bank branch

managers and 1369 front line employees of 30 commercial banks operating in Punjab,

Pakistan. For data analysis, structural equation modeling is employed to test branch level,

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whereas hierarchal linear modeling is used to test cross-level proposed relationships of

the study. Findings of the study indicate that (i) implemented high performance work

system is positively related with bank branch collective human capital and bank branch

performance; (ii) branch level collective human capital partially mediates the relationship

between implemented high performance work system and branch performance; (iii)

implemented high performance work system is significantly related with three

dimensions of organizational justice and employee outcomes and (iv) distributive justice,

procedural justice and interactional justice perceptions partially mediates the relationship

between implemented high performance work system and employee outcomes.

This study contributes into literature through proposing and empirically examining a

comprehensive integrative framework linking implemented high performance work

system with branch performance and employee outcomes, and the intermediary

mechanisms for explaining these direct relationships. In specific, findings of the study

support the mutual gains perspective of human resource management (i.e. human

resource management is beneficial for organization and employees both) and that human

capital of bank branch emerges as intervening mechanism to explain the relationship

between implemented high performance work system and branch performance. Further,

employees‘ justice perceptions are also emerged as important factor in explaining the

effects of implemented high performance work system on employee outcomes. The

findings of this study also assist organizations and HR practitioners in understanding the

role of line managers in effective implementation of high performance work system and

the focus areas (intermediary mechanisms) for such systems to favorably influence both

bank branches performance and employee outcomes.

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TABLE OF CONTENTS

1. Introduction ...................................................................................................... 2

1.1 Background of the Study ................................................................................ 2

1.2 Statement of the Problem ................................................................................ 8

1.3 Context of the Study ....................................................................................... 9

1.4 Research Questions ....................................................................................... 11

1.5 Research Objectives ...................................................................................... 12

1.6 Significance of the Study .............................................................................. 12

1.7 Thesis Progression ........................................................................................ 14

1.8 Conclusion .................................................................................................... 15

2. Literature Review .......................................................................................... 17

2.1 Introduction ................................................................................................... 17

2.2 Emergence of Human Resource Management and Performance ................. 17

2.2.1 Scientific Management ........................................................................... 18

2.2.2 Human Relations Movement .................................................................. 19

2.2.3 Quality of Working Life ......................................................................... 20

2.2.4 Human Resource Management ............................................................... 21

2.3 High Performance Work Systems (HPWS) .................................................. 26

2.3.1 Debates in HPWS-Performance Research .............................................. 31

2.3.1.1 Debate 01: ―Black Box‖ Issue of SHRM ............................................ 31

2.3.1.2 Debate 02: Inclusion of Employees' perspective in HPWS-

Performance ..................................................................................................... 33

2.3.1.3 Debate 03: Intended Vs Implemented HPWS ..................................... 36

2.3.1.4 Debate 04: Level of Analysis .............................................................. 38

2.3.1.5 Debate 05: Methodological Issues in SHRM Research ...................... 40

2.4 Human Resource Management Research in Pakistan .................................. 42

2.5 Conceptual Framework ................................................................................. 44

2.6 Branch Level Hypotheses ............................................................................. 46

2.6.1 Manager-HPWS and Bank Branch Performance ................................... 46

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2.6.2 Mediating Role of Branch Level Collective Human Capital ................. 49

2.7 Cross-Level Hypotheses ............................................................................... 52

2.7.1 High Performance Work System (HPWS) and Employee Outcomes .... 52

2.7.2 Mediating Role of Organizational Justice .............................................. 59

2.7.2.1 Manager-HPWS, Distributive Justice and Employee Outcomes ........ 62

2.7.2.2 Manager-HPWS, Procedural Justice and Employee Outcomes .......... 64

2.7.2.3 Manager-HPWS, Interactional Justice and Employee Outcomes ....... 69

2.8 Conclusion .................................................................................................... 73

3. Methodology ................................................................................................... 75

3.1 Introduction ................................................................................................... 75

3.2 Research Philosophy ..................................................................................... 75

3.3 Research Design ........................................................................................... 77

3.4 Target Study Area ......................................................................................... 79

3.5 Population and Sample ................................................................................. 79

3.6 Data Collection Technique and Survey Procedure ....................................... 82

3.7 Measures for Common Method Bias ............................................................ 84

3.8 Measurement of Variables ............................................................................ 85

3.8.1 Branch Level Variables .......................................................................... 85

3.8.1.1 Manager HPWS ................................................................................... 85

3.8.1.2 Collective Human Capital ................................................................... 86

3.8.1.3 Bank Branch Performance ................................................................... 86

3.8.2 Employee Level Variables ...................................................................... 87

3.8.2.1 Distributive Justice .............................................................................. 87

3.8.2.2 Procedural Justice ................................................................................ 87

3.8.2.3 Interactional Justice ............................................................................. 88

3.8.2.4 Employee Engagement ........................................................................ 88

3.8.2.5 Employee Service Performance ........................................................... 88

3.8.2.6 Service Oriented OCB ......................................................................... 89

3.8.3 Control Variables .................................................................................... 89

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3.9 Data Analysis Techniques ............................................................................ 90

3.9.1 Descriptive Statistics .............................................................................. 90

3.9.2 Reliability Analysis ................................................................................ 90

3.9.3 Structural Equation Modeling ................................................................ 91

3.9.4 Hierarchical Linear Modeling ................................................................ 92

3.10 Ethical Considerations ................................................................................ 96

3.11 Conclusion .................................................................................................. 97

4. Results of the Study ....................................................................................... 99

4.1 Introduction ................................................................................................... 99

4.2 Characteristics of Participants ...................................................................... 99

4.2.1 Characteristics of Participated Bank Branches ..................................... 100

4.2.2 Characteristics of Participated Employees ........................................... 101

4.3 Data Handling and Preliminary Analysis ................................................... 103

4.3.1 Missing Values and Data Cleaning Up................................................. 103

4.3.2 Normality and Outliers ......................................................................... 104

4.4 Individual Items Descriptive Analysis........................................................ 105

4.4.1 Item Wise Descriptive Analysis: Branch Level ................................... 105

4.4.1.1 Manager-HPWS ................................................................................. 106

4.4.1.2 Collective Human Capital ................................................................. 110

4.4.1.3 Bank Branch Performance ................................................................. 111

4.4.2 Item Wise Descriptive Analysis: Individual Level .............................. 112

4.4.2.1 Distributive Justice ............................................................................ 112

4.4.2.2 Procedural Justice .............................................................................. 113

4.4.2.3 Interactional Justice ........................................................................... 115

4.4.2.4 Employee Engagement ...................................................................... 117

4.4.2.5 Employee Service Performance ......................................................... 118

4.4.2.6 Employee Service Oriented OCB ...................................................... 119

4.5 Confirmatory Factor Analysis (CFA) ......................................................... 121

4.5.1 Branch Level Measurement Model (CFA) ........................................... 123

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4.5.2 Individual Employee Level Measurement Model (CFA) ..................... 125

4.6 Reliability of Variables ............................................................................... 127

4.7 Means, Standard Deviations and Correlation Results ................................ 129

4.8 Hypotheses Testing: Branch Level Relationships ...................................... 133

4.9 Hypotheses Testing: Cross-Level Relationships ........................................ 136

4.9.1 Cross-Level Direct Relationships ......................................................... 138

4.9.2 Cross-Level Mediation Analysis .......................................................... 141

4.9.2.1 Mediation Effects of Distributive Justice .......................................... 142

4.9.2.2 Mediation Effects of Procedural Justice ............................................ 145

4.9.2.3 Mediation Effects of Interactional Justice ......................................... 147

4.10 Summary of Hypotheses Testing Results ................................................. 149

4.11 Conclusion ................................................................................................ 150

5. Discussion of Results, Implications and Conclusion ................................ 152

5.1 Introduction ................................................................................................. 152

5.2 Discussion of Results .................................................................................. 152

5.2.1 Branch Level Relationships .................................................................. 152

5.2.2 Cross-Level Relationships .................................................................... 154

5.3 Implications of the Study ............................................................................ 159

5.3.1 Theoretical Implications ....................................................................... 159

5.3.2 Methodological Implications ................................................................ 161

5.3.3 Practical Implications ........................................................................... 162

5.4 Limitations and Future Research Avenues ................................................. 164

5.5 Conclusions ................................................................................................. 165

6. References ..................................................................................................... 168

Appendices .......................................................................................................... 209

APPENDIX A: Details of Bank Branches........................................................ 209

APPENDIX B: Branch Manager Survey .......................................................... 210

APPENDIX C: Front-Line Employee Survey .................................................. 214

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LIST OF FIGURES

Figure 2.1: Hypothesized Model....................................................................................... 45

Figure 3.1: Model for Structure Equation Modeling (SEM) ............................................ 92

Figure 3.2: Cross-level Proposed Relationships ............................................................... 96

Figure 4.1: Structural Equation Modeling, Direct Effects .............................................. 134

Figure 4.2: Structure Equation Modeling, Indirect Effects............................................. 134

Figure 4.3: Cross-level Relationships ............................................................................. 137

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LIST OF TABLES

Table 4.1: Characteristics of Participated Bank Branches (n = 323) .............................. 100

Table 4.2: Characteristics of Participated Front Line Service Employees (n = 1369) ... 102

Table 4.3: Skewness and Kurtosis Values of Variables ................................................. 105

Table 4.4: Descriptive Statistics for Manager-HPWS Items .......................................... 107

Table 4.5: Descriptive Statistics for Branch Level Collective Human Capital Items .... 110

Table 4.6: Descriptive Statistics for Branch Performance Items .................................... 111

Table 4.7: Descriptive Statistics for Distributive Justice Items ...................................... 113

Table 4.8: Descriptive Statistics for Procedural Justice Items ........................................ 114

Table 4.9: Descriptive Statistics for Interactional Justice Items ..................................... 116

Table 4.10: Descriptive Statistics for Employee Engagement Items .............................. 117

Table 4.11: Descriptive Statistics for Employee Service Performance Items ................ 119

Table 4.12 Descriptive Statistics for Employee Service Related OCB Items ................ 120

Table 4.13: Model Fit Criteria ........................................................................................ 122

Table 4.14: Measurement Models Comparisons (Branch Level) ................................... 124

Table 4.15: Measurement Models Comparisons (Individual Level) .............................. 126

Table 4.16: Reliability Scores of the Variables .............................................................. 128

Table 4.17: Means, Standard Deviations and Correlation Results (Branch Level) ........ 131

Table 4.18: Means, Standard Deviations and Correlation Results (Individual Level) ... 132

Table 4.19: Regression Results for Manager-HPWS, Collective Human Capital and

Branch Performance........................................................................................................ 135

Table 4.20: HLM Results of Manager-HPWS and Employee Outcomes ...................... 140

Table 4.21: HLM Results of Manager-HPWS, Distributive Justice (Mediator) and

Employee Outcomes ....................................................................................................... 144

Table 4.22: HLM Results of Manager-HPWS, Procedural Justice (Mediator) and

Employee Outcomes ....................................................................................................... 146

Table 4.23: HLM Results of Manager-HPWS, Interactional Justice (Mediator) and

Employee Outcomes ....................................................................................................... 148

Table 4.24: Summary of Hypotheses Testing Results .................................................... 149

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LIST OF ABBREVIATIONS

AMO Ability, Motivation and Opportunity to Perform

AMOS Analysis of Moment Structures

CEO Chief Executive Officer

CFA Confirmatory Factor Analysis

CFI Comparative Fit Index

d.f. Degree of Freedom

FDI Foreign Direct Investment

GDP Gross Domestic Product

GLS Generalized Least Square

HCM High Commitment Management

HLM Hierarchical Linear Modeling

HPWS High Performance Work System

HR Human Resource

HRM Human Resource Management

ICC Interclass Correlation

IFI Incremental Fit Index

IRA Industrial Relations Act

KSAs Knowledge, Skills and Abilities

OCB Organizational Citizenship Behavior

OLS Ordinary Least Squares

QWL Quality of Working Life

RBV Resource Based View of the Firm

RMR Root Mean Square Residual

RMSEA Root Mean Square Error of Approximation

ROA Return on Assets

SBP State Bank of Pakistan

SD Standard Deviation

SHRM Strategic Human Resource Management

SEM Structural Equation Modeling

SPSS Statistical Package for the Social Sciences

TLI Tucker-Lewis Index

χ2

Chi Square

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Chapter 01:

Introduction

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1. Introduction

1.1 Background of the Study

Managing human resource is one of the most important concerns for contemporary

organizations because of its potential to generate competitive advantage. Strategic human

resource management (SHRM) is a research area devoted to investigate and understand

the impact of bundle of HR practices (called high performance work system: HPWS) on

organizational performance outcomes (e.g. Combs, Liu, Hall & Ketchen, 2006; Guest,

2011). Theorists and researchers in strategic HRM argued that the influence of HR

practices can be better understood by using the combination of HR practices as system

rather than studying any HR practice individually which they termed as high performance

work system (e.g. Huselid, 1995; Becker & Huselid, 1998; Ostroff & Bowen, 2000;

Wright & Boswell, 2002; Takeuchi, et al., 2007; Liao, Toya, Lepak & Hong, 2009). More

specifically, a set of HR activities which are mutually reinforcing and generate

synergistic impact is called high performance work system (Huselid, 1995). In this

research area, researchers have developed consensus that HPWS is positively related with

various organizational performance outcomes including profitability, productivity,

innovation, customer services and various other organizational performance metrics (e.g.

Arthur, 1994; Huselid, 1995; Delaney & Huselid, 1996; Delery & Doty, 1996; Youndt,

Snell, Dean & Lepak, 1996; Appelbaum, Bailey, Berg & Kalleberg, 2000; Guthrie,

2001; Datta, Guthrie & Wright, 2005; Combs, et al., 2006; Subramony, 2009; Jiang,

Lepak, Hu & Baer, 2012; Katou & Budhwar, 2015; Agarwal & Farndale, 2017).

However, despite the empirical confirmation regarding positive HPWS-performance

relationship, the basic question that ―how (intermediary mechanisms) these systems of

integrative HR practices impact organizational outcomes‖, is still on its way of searching

answers and is one of the most recent debates in the area of SHRM (e.g. Bowen &

Ostroff, 2004; Boselie, Dietz & Boon, 2005; Jiang, Takeuchi & Lepak, 2013; Van De

Voorde & Beijer, 2015). Researchers termed this issue as ―black box‖ of SHRM,

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highlighting the fact that mediating mechanisms through which HPWS affects

performance outcomes have not been established yet, firmly (e.g. Purcell, 2003; Evan &

Davis, 2005; Danford, Richardson, Stewart, Tailby & Upchurch, 2008). In a systematic

review of 104 studies, Boselie, et al. (2005: 77) put this fact as ―plenty of

acknowledgements of the existence of the ‗black box‘ and some speculation on its

possible contents, however, few studies tried to look inside‖. Similarly, Wright and

Gardner (2003) claimed that the ―black box‖ components remain a mystery as not much

is known regarding what goes on in between HPWS and performance. In addition,

Wright and Nishii (2007) argued that analyzing the ―black box‖ requires the researchers

to examine HR causal chain starting from intended to actually implemented HRM

practices, to employee perceptions of HRM practices which further shape employee

responses, followed by organizational performance outcomes. In particular, Guest (2011,

p. 3) recently concluded that ―even after two decades of extensive research, it is not yet

possible to fully understand this linkage‖. Recently, Boxall, Guthrie and Paauwe (2016)

highlighted that researchers have made considerable efforts to decode ―black box‖,

efforts are still required to explore mediating mechanisms for HPWS relationship with

organizational performance and employee outcomes.

Furthermore, previous studies in SHRM have been criticized because of using

management-centric approach while examining HPWS-performance linkage (Boselie, et

al., 2005; Paauwe, 2009; Kaufman, 2010), thus, declared to be managerially biased

(Boxall & Macky, 2014). Researchers further argued that employees‘ perceptions about

HR practices, not intended HR practices, influence their reactions at work and highlight

the need to incorporate employees‘ perspective in order to have a more deeper insight

into HPWS-performance relationship. Following these lines, researchers have

investigated the mediating role of employees‘ perceptions of HPWS for HPWS and

employee outcomes relationship (e.g. Liao et al., 2009; Huang, Ma & Meng, 2017).

Another reason for involving into employees‘ perspective is that this research regarding

HPWS-performance relationship has been developed upon mutual gains perspective of

employment relations, which claims that HRM interventions have favorable outcomes for

both organizations and employees (e.g. Appelbaum, et al., 2000; Guest, 1999). Whereas,

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the critiques argued that improvements in organizational performance are due to the

factors like work intensification, pressures to perform, more formalized structures rather

than autonomy, higher job satisfaction and greater discretions (Ramsey, Scholarios &

Harley, 2000), therefore, enhance organizational performance without increasing

employees‘ well-being (i.e. conflicting interests perspective). This fact also supports the

thought that HPWS is not different from the previous methods of employees‘ control

(Grant & Shields, 2002). Recently, researchers have started examining HPWS and

employee outcomes relationship, however, reported contradictory results (Van De

Voorde, Paauwe & Van Veldhoven, 2012). Moreover, literature is scarce related to

examining impact of same HPWS on organizational performance and employee

outcomes simultaneously (Boxall, et al., 2016).

Extant HPWS-performance literature has also been criticized for using organization-level

data, assuming that intended HPWS is implemented in the same manner throughout the

organization as intended (Wright & Nishii, 2013). Whereas, in reality, the top

management/ HR departments reported HR practices representing their espoused/

intended HR policies, which may not be implemented in the same way across the

organization (Khilji & Wang, 2006; Nishii & Wright, 2007). Studies have also confirmed

this fact by illustrating that HR managers have reported more practices than number of

practices reported by line managers and workers (e.g. Liao, et al., 2009; Guest, et al.,

2010). Line managers are people responsible for the implementation of organizational

intended HR practices within their respective departments and, therefore, are main source

of determining quality of implementation and effectiveness of HR practices. Therefore,

focusing implemented (called manager-HPWS from now onwards), instead of intended,

HR practices with performance outcomes would have more meaningful insights about

HPWS-performance relationship. Consequently, a new stream of research has recently

emerged within SHRM literature, focusing on implemented, instead of intended, HPWS

(e.g. Aryee, Walumbwa, Seidu & Otaye, 2012; Chuang, Jackson & Jiang, 2013; Pak &

Kim, 2016; Jiang, & Messersmith, 2018) while examining HPWS-performance

relationship.

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Moreover, a significant limitation of SHRM literature is its major focus on manufacturing

sector while examining HPWS-performance relationship with increasing coverage to

service sector in recent years (Combs, et al., 2006; Liao, et al., 2009), whereas, financial

sector is largely unexplored (Mansour, Ouerdian & Gaha, 2014). Financial sector is

considered knowledge intensive where competencies and knowledge of its employees are

considered the main source of competitive advantage. This is, therefore, quite consistent

with the call for research by Lengnick-Hall, Lengnick-Hall, Andrade & Drake (2009) in

order to develop better understanding of strategic contribution of HRM in sector having

knowledge intensive employees. Furthermore, extant literature also showed that most of

the research on HPWS-performance relationship have been conducted in manufacturing

sector (Combs, et al., 2006), with more than 51 % research studies conducted in Anglo-

American countries (Posthuma, Campion, Masimova & Campion, 2013). These

researchers highlighted the need to conduct future studies relating HPWS-performance

relationship in service sector and in countries other Anglo-American region.

Keeping in view above mentioned gaps in literature, the main aim of this study is to

investigate the effects of implemented HPWS, by bank branch managers, on bank branch

performance and employee outcomes along with the mediating mechanisms explaining

these relationships. This type of investigation will help in answering the ―black box‖

debate in the literature relating to HPWS-performance linkage. Researchers have made

several attempts by using different theoretical perspectives to explore and answer the

―black box‖ debate in SHRM literature (Jiang, et al., 2013). Moreover, researchers also

argued that the use of multiple theoretical perspectives simultaneously and multi level of

analysis would contribute to a better understanding of the complex HPWS-performance

relationship, thereby, directly contributing to the wider ―black box‖ debate (e.g. Paauwe,

2009; Chuang & Liao, 2010; Jiang, et al., 2013; Shen, Messersmith, & Jiang, 2018).

Further, Liao, et al. (2009) have used individual employees‘ human capital as mediating

process to explain HPWS and employee performance relationship. However, it is argued

that the use of collective human capital of an organization or group rather than individual

human capital would be more appropriate for the reason that an employee may have

required knowledge, skills and abilities but is not using it based upon the perceptions and

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behaviors of other employees in his/ her work unit (employees‘ perceptions influence and

are influenced by others: e.g. Youndt & Snell, 2004; Takeuchi, Lepak, Wang &

Takeuchi, 2007). Human capital refers to the skills, abilities and knowledge of

organizational members that are critical and considered source of competitive advantage

(e.g. Subramaniam & Youndt, 2005). Therefore, this study hypothesized bank branch

level collective human capital as mediating mechanism to connect manager-HPWS with

bank branch performance. According to resource based view of the firm (RBV), HPWS

would influence branch performance through branch collective human capital by

developing valuable, rare, non-substitutable and difficult to inimitable human capital

(Barney, 1991; Barney & Wright, 1998). In other words, properly implemented HPWS

enhances competence (skills, knowledge and abilities) and motivation of the employees

to form high quality pool of human capital (Delery & Shaw, 2001; Huselid, 1995) and,

therefore, organizations will extensively use these HR practices to ensure organizational

success through their employees (MacDuffie, 1995; Guthrie, 2001).

Next, Boxall and Macky (2007) argued that considering employees‘ perspective of and

reactions to organizational HRM is a prerequisite for enhancing understanding about the

contribution of HRM for organizational effectiveness. Moreover, according to Homans

(1961), justice evaluation is important to understand what people feel and how they react.

Organizational justice refers to the perceptions of fairness employees have regarding

workplace related outcomes, process and the interpersonal treatment they received from

their employer (Cropanzano & Greenberg, 1997). Extant researches on the association of

HR practices and organizational justice have demonstrated that employees‘ justice

perceptions are significantly associated with various HR practices like compensation

(McFarlin & Sweeney, 1992), staffing (Gilliland, 1993) and performance appraisal

(Greenberg, 1986). However, there is dearth of literature related to the justice perceptions

of HR system as a whole. Further, organizational justice also explains the effects of

employees‘ judgment regarding fairness and unfairness on their feelings, attitudes and

behaviors such as organizational commitment, turnover intentions, job satisfaction,

employee engagement, performance, OCBs and so on, while working in organizations

(e.g. McFarlin & Sweeney, 1992; Masterson, et al., 2000).

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approach, this study proposed that the ability of HPWS to influence the performance

through enhanced human capital (knowledge skills and abilities) and employee outcomes

through employees‘ fairness perceptions simultaneously will broaden the understanding

related to HPWS impact on performance and employee outcomes through multiple

processes simultaneously.

In addition to this, previous literature has also been criticized for using intended, instead

of implemented, HPWS (Wright & Nishii, 2013; Pak & Kim, 2016). These researchers

have argued that intended HR policies may not be implemented in the same way across

the organization. This study, therefore, considered implemented, instead of intended,

HPWS to contribute into body of knowledge around HPWS-performance relationship.

Moreover, a significant limitation in strategic HRM literature is that its major focus has

been on manufacturing sector with limited coverage of service sector (Liao et al., 2009, p.

371) and financial sector is largely unexplored (Mansour, et al., 2014) with more than 51

% research studies conducted in Anglo-American countries (Posthuma, et al., 2013).

Thus, scientific investigation related to HPWS-performance relationship in banking

sector of developing countries like Pakistan would add significant insights about

aforesaid relationship.

This study, therefore, proposes branch level collective human capital and organizational

justice dimensions (i.e. distributive justice, procedural justice and interactional justice) as

mediating mechanisms to explain the linkage of manager-rated HPWS with bank branch

performance and employee outcomes (employee engagement, service performance and

service-oriented OCB) respectively in banking sector operating in Punjab, Pakistan.

1.3 Context of the Study

From the last two and a half decades, Pakistan has been transformed into a liberal

economy model from a controlled economy with privatization and deregulation of state

corporations along with an increasing number of foreign companies in almost all

important sectors. Pakistan is ranked as 41st largest economy with a total population of

over 200 million people. It is one of the growing developing economies with the label of

semi-industrial economy (Board of Investment, 2016) where the importance of foreign

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direct investment cannot be ignored. Foreign companies not only brought much needed

financial capital into the country but also introduced the country with latest management

trends and practices. Khilji (2002) argued that multinational corporations in Pakistan act

as change agents and set benchmarking standards in the area of HRM. Her study on

management practices in local organizations reported bureaucratic management style

used in these organizations. However, current study argued that latest HR practices have

been increasingly used by multinational and also local companies in last one decade or

so. Reasons for such adoption included increased foreign direct investment (FDI) and

more multinational organizations in the sector, involvement of private sector and the

introduction of revised labor policy, Industrial Relations Act 2010 (IRA 2010), by

Government of Pakistan. This revision in labor related policies was aimed to encourage

better management labor relations and to improve the productivity of workforce in the

country. The main features of IRA (2010) includes (i) the acknowledgement of workers‘

right to form union and develop a framework within organization to ensure close

management workers relationship, (ii) measures to ensure job security, (iii) involvement

of workers in matters of interest, (iv) designing and implementation of effective

grievance mechanism in the organizations and (v) an increased emphasis on employees‘

training and other management practices with the focus to enhance labor productivity.

Therefore, the companies operating in Pakistan are required to understand and implement

modern and innovative management practices (also known as high performance work

practices) to not only enhance the productivity of the workers but also to gain financial

advantages through the route of workers‘ wellbeing. This study, therefore, aimed at

studying the relationship of implemented HPWS with organizational performance and

also with employee outcomes to understand and comprehend the uses and benefits drawn

as result of these implemented high performance work practices in the banking sector,

one of the most prominent sectors, of Pakistan.

Banking sector operating in Pakistan is one of the most vibrant and fastest growing

sectors of the economy. Numerous local and multinational establishments are operating

in this sector with huge amount of FDI in last two decades. According to the Board of

Investment, (2016), banking sector of Pakistan has been the recipient of US $ 5.9 billion

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as FDI during the period from 2001 to 2015. Moreover, this sector holds assets of US $

99 billion with a total equity amounts to US $ 8.4 billion (Board of Investment, 2016).

Banking sector of the country remained strong and resilient during the global financial

crisis around 2008 and faced the challenges because of deteriorating macroeconomic

condition. A number of foreign and private local banks have joined this sector after the

deregulation of banking sector in Pakistan in 1990s. The situation now is that around half

of the assets of the banks operating in Pakistan are owned by the foreign banks. Banking

sector in Pakistan consists of above 50 banking organizations out of which 30 are

commercial banks. In 2010, almost 80 % of the banking assets were owned by private

banks compared to 1990s when around 90% assets were kept with state owned banks.

The huge amount of FDI inflows in the sector, intense global competition, presence of

many foreign and private banks and future growth potential make it worthwhile to study

the management and HRM practices used in this sector. Moreover, banking sector in

Pakistan is one of the major source of employment in the country, therefore, gives good

reasons for the choice of this sector of economy as target population for this study.

1.4 Research Questions

Following the previous discussion, current study focuses on answering the following

research questions:

Does manager-HPWS influence bank branch performance and employee

outcomes (employee engagement, service performance and service oriented-

OCB)?

Does branch level human capital mediate the relationship between manager-

HPWS and bank branch performance?

Do organizational justice dimensions (distributive justice, procedural justice and

interactional justice) mediate the relationship of manager-HPWS and employee

outcomes?

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1.5 Research Objectives

Stated precisely, following research objectives are set for this research:

To study the effects of manager-HPWS on bank branch performance and

employee outcomes (employee engagement, service performance and service-

oriented-OCB).

To examine the mediating role of branch level collective human capital for the

relationship between manager-HPWS and bank branch performance at branch

level of analysis.

To investigate the mediating role of organizational justice dimensions

(distributive justice, procedural justice and interactional justice) for the

relationship between manager-HPWS and employee outcomes, at cross level of

analysis.

1.6 Significance of the Study

Keeping in view the above discussed limitations in literature, this study contributes in the

literature of SHRM in a number of ways. Firstly, this research takes lead by using

predictions of resource based view of the firm (RBV) and organizational justice theory to

investigate the processes which connect manager-HPWS with bank branch performance

and employee outcomes respectively, thus, address the ―black box‖ debate in the

literature (Wright & Gardner, 2003). Second, this study also adds value in the literature

by studying the effects of same HPWS on organizational performance and employees

outcomes simultaneously. Previous studies, based upon mutual gains perspective,

investigated the effects of HPWS on employee outcomes only. However, hardly any

study considered both organizational performance and employee outcomes

simultaneously while studying the impact of HPWS. Therefore, considering both,

organizational performance and employee outcomes, provides clear picture about how

same organizational HPWS is related and beneficial (mutual gains) for both the

organizations and employees. Thirdly, this research incorporates responses of employees

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regarding implemented HR practices, in terms of their fairness perceptions regarding

implemented HPWS, to have a clearer understanding about the process through which

these implemented organizational practices influence employee outcomes (Boxall &

Macky, 2007). Lastly, the inclusion of line managers‘ implemented HPWS provides more

accurate picture of the relationship of HPWS and performance instead of the relationship

of presence of HR practices (intended HR practices reported by top management/ HR

manager) and performance outcomes in previous research because intended HPWS may

not be implemented in same way throughout the organization (Khilji & Wang, 2006;

Nishii & Wright, 2007).

Along with its contribution for theory, this study also provides meaningful insights for

the organizations and practitioners in banking industry. For instance, findings of the study

highlight the role properly implemented HPWS play for generating favorable market

performance and employee outcomes. In other words, effectively implemented HR

practices by branch managers bring more profitability, sale and improved market

performance of the bank branch along with favorable employee outcomes. Second, this

research highlights the critical role of line managers (branch managers in case of this

study) in effectively implementation of organizational intended HPWS. Acknowledging

line managers as front line agents of HR function, HR department would better

coordinate with them to obtain maximum benefit from organizational intended HPWS

(Purcell & Hutchinson, 2007). Along with highlighting the importance of properly

implemented HPWS for bank branch performance, this research also provides insights

about the intermediary mechanisms through which implemented HPWS influence bank

branch performance and employee outcomes. In the last, proposed mediating mechanisms

provide organization with the information of focal areas with respect to implemented

HPWS to impact bank branch performance and employee outcomes in a favorable way.

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1.7 Thesis Progression

This thesis is comprised of five chapters. First chapter presents introduction and

background of this study, highlighting research gaps and discusses the context of the

study. The chapter further presents research questions and research objectives followed

by an overview of the significance of the study for literature and practitioners in the end.

Chapter 02 presents a review of literature related to the topic of research. This chapter

provides detail regarding the emergence of human resource management in organizations

(brief history) and prevailing debates in HPWS-performance literature. Next, this chapter

also presents the current status of SHRM research in Pakistan followed by the discussion

of previous research studies for the development of hypotheses for this study.

Chapter 03 describes employed research methodology in order to achieve objectives of

this study. The chapter starts with a discussion on research philosophy adopted by this

study followed by details of the research design used for the research study. Next, the

chapter discusses about the population and sample along with data collection techniques

and procedures to achieve the objectives of the study. However, chapter ends with a

discussion of measurement instruments and techniques used for data analysis in the

study.

Chapter 04 exhibits empirical findings of the study. The chapter starts with a description

of the characteristics of bank branches and employees participated in this study. Next,

descriptive analysis of key constructs of the study is presented followed by confirmatory

factor analysis and reliability analysis. After this, correlation analysis is presented and

chapter ends up with testing of hypotheses.

Chapter 05 presents the discussion of results in the light of extant literature. Next,

theoretical and practical implications of the study are delineated followed by an overview

of the limitations and future research directions. This chapter is ended with the

conclusion of the whole study.

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1.8 Conclusion

This chapter illustrated introduction of research topic and background to the problem in

order to highlight the rationale and motivation for current study. Based upon the

problems identified in literature, research objectives for this study were articulated

followed by an overview of the significance of this study. Structure and progression of

this thesis document is also presented in the end. Next chapter will provide a review of

literature including brief overview of the emergence of management of human resource

in organizations along with development of hypotheses of this study.

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Chapter 02:

Literature Review

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2. Literature Review

2.1 Introduction

Previous chapter presented introduction and background of the topic, articulation of

research problem, objectives set for research study and contribution of the study. Now,

the focus of this chapter is to present a review of literature in order to discuss what has

been done so far with respect to people management and performance linkage, the

debates and issues of the research area and what needs to be done to carry forward this

research area. More specifically, this chapter provides a brief history of the management

of human resources for organizational performance, review of the HPWS construct and

developments in research area of strategic HRM along with emerging issues/ debates of

this area of research. Research efforts regarding HPWS-performance relationship in

Pakistani context are also discussed followed by conceptual framework and development

of the hypotheses for current study in the end.

2.2 Emergence of Human Resource Management and Performance

Research on ―management of human resources and performance‖ relationship under the

umbrella of SHRM gives an impression that this relationship has been established

recently. However, in actual, interest for management of human resources to improve

organizational performance has a long history (Barley & Kunda, 1992; Cappelli &

Neumark, 2001). For the purpose of understanding some of the historical background and

current debates within the area of HRM and performance, it is necessary to have a look

on the ways organizations have adopted to devise organizational structure and work

design for effectiveness, efficiency and performance. Therefore, some of the main

contributors towards human resources management for organizational performance

including Scientific Management, Human Relations Movement, Quality of Working Life

(QWL) and Human Resource Management (HRM) will be discussed in this section.

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2.2.1 Scientific Management

Efficiency and performance were one of the main focuses of the industrial and social

scientists in early twentieth century. The central feature of management at that time was

greater use of the methods to exercise direct control over labor in response to decline in

workers efforts after increased awareness regarding workers efforts as negotiable feature

of labor force and as skilled labor started organizing (Friedman, 1977). Consequently,

organizations started exploring new incentive programs and ways of organizing work

processes to enhance organizational productivity. The concepts of mass production and

work organization were the fundamental components in the principles of scientific

management presented by F.W. Taylor. In this era of mass production, scientific

management was considered as handmaid of employers (Frenkel, 1999) and work

activities were organized by large bureaucracies featured with clear differentiation

between management and labor on planning and execution of organizational operations.

In this era of scientific management, unskilled or semi-skilled workers got very little

attention in terms of trainings and involvement, and they were seen as just cogs in

production process (Belanger, Giles, & Murray, 2002). Scientific management entirely

neglected the psychological aspects of workers with almost all the emphasis on the

organizational processes and systems. Hence, ―it was to be expected that employers, with

their chief attention absorbed by questions relating to machines and methods, should

neglect the greatest of all their assets …... their employees‖ (Delbridge & Lowe, 1997:

869). Other authors criticized this work organization by stating that it is impossible to

build ―high-trust relationship‖ that is based upon ―low-trust‖ system (Fox, 1974, 1985).

In summary, they view scientific management not as an approach of job design, but as a

tool for controlling alienated labor (Braverman, 1974). Friedman (1977) criticized this

approach by declared Taylorism as a modern approach of directing labor through division

of labor where employee‘s body movements were subdivided and reassigned to many

employees. These employees were seen as machines consisted of numerous motions per

unit of time. With the passage of time, interest in scientific management decreased for the

reasons such as unable to reduce cost, wastage and ―bring about an industrial utopia‖

(Barley & Kunda, 1992) which caused the proponents to re-examine their standpoint.

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Subsequently, a transformed perspective, known as human relations school, for

―industrial betterment‖ evolved where psychological aspects of workforce, especially

motivation and satisfaction turned out to be the important factors in management theory.

2.2.2 Human Relations Movement

Advocates of ―Human Relations Movement‖ argued that workers' productivity could be

enhanced by concentrating on their needs, especially through meaningful and challenging

work and better working environment. Authors paid attention to macro processes like

technology (e.g. Elton Mayo‘s work in 1930s), bureaucratization in organizations

(Gouldner, 1954) and segmentation of organizational social system (Cass, Warner &

Low, 1947). In other words, central idea of human relation perspective was to treat the

workers well and make efforts for building ―a non-authoritarian environment in an

authoritarian setting‖ (Perrow, 1984: 59). Contrary to rationalism and individualism

principles of scientific management, these micro-level studies emphasized on the effects

of group norms and interpersonal relationship on productivity and the workplace informal

social systems and its association with society (Simpson, 1989). This perspective

transformed the organization and the management into an adhesive unit by utilizing the

efficacy of groups for the interest of management. This group perspective surpassed the

early employee relation work through stressing upon redesigning of the jobs and the

effectiveness of small groups as potential sources of employees' motivation (Appelbaum,

et al., 2000). Collectively, they contributed significantly to the idea of organizational

structures assisted in channelizing the discretionary efforts of workers by providing them

opportunities for self-actualization (Bailey, 1993). This approach, thus, focused upon the

satisfaction and job design (to form more challenging and interesting work) as rewards

that would contribute towards improved efficiency and performance.

However, critiques viewed human relation thought as ―benevolent paternalism‖ that has

much emphasis on workers wellbeing but said very little about power sharing. In a

renowned review of these criticisms, Braverman (1974) declared employee relations

approach as a rhetoric for ―the maintenance crew for the human machinery‖ (p. 87).

Despite the criticism, human relation movement contributed significantly by initiating the

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application of behavioral sciences to organizations and examining the ways in which

workers behaviors could be adjusted and modified for organizational effectiveness

(Gunnigle, Heraty & Morley, 2002).

2.2.3 Quality of Working Life

Along with human relation movement, this era also witnessed the evaluation of ―Quality

of Working Life‖ perspective to change work organization and relationships at work.

Writers such as Blauner (1964) and Beynon (1984) were the pioneers who argued that

organizational structures as suggested by scientific management were not viewed as

appropriate place of work by employees. The overarching argument of this approach was

intrinsic motivation which was viewed as an important factor for employees‘ satisfaction

and jobs were characterized by more responsibilities along with opportunities for

decision making (Herzberg, 1966). In this regard, the concept of job enrichment emerged

as an alternative work arrangement with the objective of providing employees

challenging and meaningful work along with some autonomy and feedback over

performance (Buchanan, 1979). So, the ―people management - performance‖ relationship

holds a prominent position within Quality of Working Life (QWL) paradigm with the

focus of enriching the jobs and provides workers autonomy as basis for organizational

effectiveness. However, some critiques have highlighted the point that the principles of

Quality of Working Life (QWL) paradigm such as job enrichment, and modification in

work practices ―are clearly Taylorist in their effect, if not their purpose‖ (Braverman,

1974). Other commentators had pointed out possibilities for more managerial control

inbuilt in numerous employee involvement programs (Braverman, 1974; Ramsay, 1980)

in which ―humanization of work‖ intentions masks the actual objectives of

―rationalization of work‖ and ―managerial control‖. According to them, rather than

offering a human alternative to conventional mass production, employees in teams

―participate mainly in the intensification of their own exploitation, mobilizing their

detailed firsthand knowledge of the labor process to help management speed up

production and eliminate wasteful work practices‖ (Milkman, 1997: 16).

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Numerous Quality of Working Life (QWL) advocates have drawn greatly on the theories

of employee relations discussed already. For instance, socio-technical approach (Trist,

Higgin & Murray, 1963) emphasized on incorporating both social and technical aspects

side by side to optimize the two. Further, arguments by advocates of employee relations

(e.g. Maslow and Herzberg) also highlighted the significance of participation at

workplace and capability of self control would assist in satisfying needs like self-

actualization (Watson, 1995). These scientists argued that, basically, these are the

underlying principles through which managers can improve the performance of

employees at workplace.

2.2.4 Human Resource Management

In general, this term ―human resource management‖ refers to all activities which

organizations use for employment relationship management (Grant & Shields, 2002).

Although, there is no agreed upon definition of human resource management (Boxall &

Purcell, 2003), however, for this research purpose, it is defined as a way of managing

employees at work ―which seeks to achieve competitive advantage through the strategic

deployment of a highly committed and capable workforce, using an integrated array of

cultural, structural and personnel techniques‖ (Storey, 1995: 5). For the purpose of this

research study, it is required to define HRM for the contextual comprehension of the

main variable being studied in current research i.e. high performance work system

(HPWS).

HRM is often described and explained as either Soft HRM or Hard HRM, one of the two

alternative perspectives, emerged as result of studies of US researchers in 1980s (e.g.

Beer, et al., 1984; Walton & Lawrence, 1985). The soft HRM perspective emphasizes on

the ―human resource‖ feature of HRM term (Storey, 1992). This perspective argued and

suggested that strategic orientation of HRM can be understood as some sort of

―developmental humanist‖ program (Grant & Shields, 2002; Legge, 2005). Soft HRM

perspective acknowledges the importance of linking HR function with business

objectives, however, based upon their adaptability, commitment, high quality

competencies and productivity (Guest, 1987), human resource is considered as valuable

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resource rather that treating them like other resources of the organization (Beer, et al.,

1984; Guest, 1999). This approach reflects human relations movement of employees'

management and is (has) been represented frequently by using tag i.e. ―high commitment

work systems‖ (Walton, 1985).

Contrary to soft HRM, the basic argument of hard HRM perspective is to integrate

human resources into strategic decision making in order to serve organization through its

maximum contribution. This perspective emphasizes on ―management‖ aspect of HRM

concept which represents ―a utilitarian instrumentalism model‖ (Legge, 2005). In case of

hard HRM perspective, the focal point is a tight integration of HRM function with

business strategy to ensure that HRM function of the organizations is being utilized to

―drive the strategic objectives of the organization‖ (Fombrun, et al., 1984: 37). According

to this perspective, organizations treat human resources in the same way as other

resources are being treated and therefore, human resource should be acquired and utilized

in a cost effective way to ensure that the core objectives of organizations are achieved.

This hard HRM model focuses on the ―quantitative, calculative and business strategic

aspects of managing the headcount resource in as rational a way as for any other

economic factor‖ (Storey, 1987: 6). Thus, human resource is considered as an ordinary

resource (Legge, 2005) instead of considering it a ―sources of creative energy in any

direction the organization dictates and fosters as emphasized in the soft model‖ (Tyson &

Fell, 1986: 135). This model of HRM, therefore, reflects ―scientific management‖

approach of managing employees.

Similar to these soft / hard approaches of HRM, Peccei (2004) presented two alternative

perspectives of human resource management named as ―optimistic‖ and ―pessimistic‖

perspectives of HRM. Optimistic perspective argues that HRM is beneficial for

employees and it has positive influence on employees' well-being. In other words,

organization's adoption of more HR practices leads towards higher levels of employees'

empowerment, greater job discretion, satisfaction and development of supportive, more

rewarding and interesting work environment. In turn, this results into better quality of

work life and transformed into favorable employees' reactions at workplace.

Consequently, in line with the norm of reciprocity (Gouldner, 1960), social exchange

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theory (Blau, 1964), and behavioral theories of HRM (Wright & MacMahan, 1992;

Guest, 1997; Appelbaum, et al., 2000), employees are expected to reciprocate to their

employer by putting extraordinary efforts and by involving in citizenship behaviors. In

short, optimistic view not only declares HRM function beneficial for both employer and

employees but it indicates employees' wellbeing a key for organizational performance.

Contrary to optimistic perspective of HRM, ―pessimistic view of HRM‖ describes HRM

as harmful for employees having negative effect on their well-being (Peccei, 2004).

Basing upon labor process theory (Godard, 2001; Appelbaum, 2002), this approach

argues that organizational adoption of more HR practices leads towards systematic

exploitation of workforce at workplace (Delbridge & Turnbull, 1992; Ramsay, et al.,

2000; Appelbaum, 2002) through work intensification and increased control and

monitoring of employees' working efforts (Sewell & Wilkinson, 1992; Barker, 1993).

Consequently, employees have greater work pressure, less discretion and reduced well-

being at work. This may benefit organization in form of enhanced productivity but at the

cost of sacrificing employees' well-being. In brief, according to pessimistic view, it is

employers only not employees who are likely to benefit from HRM function. Although,

according to some critiques (e.g. Willmott, 1993; Legge, 1995; Keenoy, 1997), at many

circumstances, employees may be fooled by making them think that they too are better

off through the rhetoric of HRM.

More recently, Van de Voorde (2010) extended the work of Peccei‘s (2004) and

presented two approaches of HRM namely ―mutual gains‖ and the ―conflicting

outcomes‖ perspectives of HRM. Similar to Peccei's (2004) optimistic approach, drawing

upon behavioral perspectives of HRM (Wright & MacMahan, 1992; Guest, 1997; Becker

& Huselid, 1998; Appelbaum, et al., 2000) and social exchange theories (Gouldner, 1960;

Blau, 1964), the mutual gains perspective assumes that HRM has favorable impact on

both employees and organizational performance. She emphasized on employees' well-

being as a means through which HRM could generate productivity and performance.

According to mutual gains perspective, HRM is perceived by employees as source of

organizational care and support for them that then reciprocates in terms of satisfaction,

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commitment and trust (Whitener, 2001) which in turn, contributes towards organizational

performance.

Whereas, drawing upon Paauwe (2009), Peccei (2004) and Boxall and Purcell (2008), as

well as on Quinn and Rohrbaugh‘s (1983) competing values framework, conflicting

returns perspective presented by Van de Voorde (2010) argues that HRM has favorable

impact on organizational performance but at the cost of employees' well-being i.e. HRM

has no or even negative impact on employees‘ well-being. Based upon the arguments of

labor process theory (Ramsay, et al., 2000; Godard, 2001), she argued that HR practices

that enhance employees' well-being may not contribute towards organizational

performance and vice versa. In other words, HRM is transformed into organizational

performance through job intensification, job strain (Ramsay, et al., 2000) and that human

resource management is exploitative in nature (Legge, 1995).

In conclusion, whether, soft HRM, optimistic view of HRM or mutual gains perspective,

the focal point of these perspectives is employees. These approaches point employees'

well-being a way that leads towards organizational performance. In contrast to this, hard

HRM, pessimistic view or conflicting outcomes perspective declares HRM a tool that

employers use to exploit employees to achieve their business objectives.

However, this ―hard/soft‖, ―optimistic/ pessimistic‖ or ―mutual gains/ conflicting returns‖

dichotomy of human resource management is criticized on various levels (Keenoy, 1999;

Legge, 2005). In general, human relations and quality of work life (QWL) approaches of

management of human resources are reflected in soft HRM perspective and hard HRM

echoes scientific management approach of managing employees. Keenoy (1990)

criticized soft HRM variant and argued that even soft HRM can have hard outcomes like

work intensification, strict control and job insecurity. Further, Keenoy and Anthony

(1992) criticized human resource management for being as a ―rhetoric aimed at achieving

employees‘ normative commitment to a politico-economic order, in which the values of

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variety of management styles that exists in contemporary workplaces‖ (p. 184). However,

a main controversy in modern human resource management literature is that whether the

scenario of labor-management relationship has been transformed due to the adoption of

new management techniques in 1980s (e.g. Millward & Stevens, 1986; Edwards &

Heery, 1989; Richardson & Wood, 1989). Based upon surveys data of UK workforce,

Guest (1999) responded to some of the criticism by presenting whether or not HRM

might be considered as manipulative. His research results showed that employees

consistently preferred organizational environment where few HR practices were present.

These debates and ambiguities regarding HRM and its recognition as a source of

competitive advantage are perhaps the reason for emergence of a variety of labels

including high commitment management; high involvement management; best fit, best

practices and so on. For simplicity, these terms and labels are categorized under the

rubric of high performance work system (HPWS) that need more elaboration and critical

investigation to broaden the understanding of HRM-performance relationship debate.

It was in the 1980s, when human resource management was seen and discussed from

strategic perspective by the theorists and the researchers who used the term ―strategic

human resource management‖ for the first time. Strategic human resource management

(SHRM) refers to ―the pattern of planned human resource deployments and activities

intended to enable an organization to achieve its goals‖ (Wright & McMahan, 1992:

298). Fombrun, et al. (1984) and Miles and Snow (1984) started linking organizational

strategy with HRM function of the business. Further, in 1985, Walton highlighted the

importance and need of shifting to commitment based models of managing human

resources from control based approaches. In addition to this, researchers at Harvard

(Beer, et al., 1984) along with Schuler and Jackson (1987) started studying the concepts

of ―external fit‖ and ―internal fit‖ to develop a conceptual framework (Noon, 1992) that

provides the foundations of current HRM. On the other hand, in UK, researchers and

theorists in SHRM started producing research on lines of normative perspective of HRM

(e.g. Guest, 1987; Storey, 1992). On other side, Foulkes (1980) and Peters and Waterman

(1982) had presented some support for the contribution of ―high commitment‖ HRM

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model in organizational success. These early research efforts provided a foundation to the

extensive body of research knowledge that linked HRM with performance.

2.3 High Performance Work Systems (HPWS)

Whether labeled as high commitment management, high involvement management or

soft HRM, the discussion of people management approaches revolve around the

argument that some kind of competitive advantage could be achieved by managing the

ways of doing work, employees and the labor processes. This is the premise that lies at

the center of high performance work system (HPWS) construct.

Strategic HRM is area of study that is devoted to investigate and understand the influence

of bundle of HRM practices on organization-wide performance outcomes (Combs, et al.,

2006; Guest, 2011). It focused on a set of HR activities which are mutually reinforcing

and generate synergistic impact (Huselid, 1995). He further elaborated that such bundles

of HR practices that researchers and theorists in the area consider as performance

enhancing are called high performance work systems (HPWS).

However, even after more than two decades of extensive investigation in SHRM, still no

consensus on ―which‖ practices constitute high performance work system and thus, no

one definition of high performance work system exists (e.g. Wall & Wood, 2005). A

systematic review exploring the components of HPWS by Posthuma, et al. (2013)

reported that researchers have developed different combinations of HR practices ranging

from three to thirteen practices to study the bundle effect on various organization wide

performance outcomes. Although, no agreement established on the components and

number of practices, the existing literature do share some commonalities with respect to

the components of HPWS. For instance, sophisticated selection, performance based pay,

extensive trainings, team working, appraisals, communication/ information sharing,

employee empowerment and employment security are the most common and frequently

used components of high performance work system (Wall & Wood, 2005).

Appelbaum and Batt (1994) categorized HPWS into (i) management methods, (ii) HRM

practices, (iii) work organization, and (iv) industrial relations. Where ―management

methods‖ refers to employees' participation in quality enhancement; ―work organization‖

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refers to organizational structure and autonomy of teams; ―human resource management‖

includes contingent pay, trainings, employment security; and ―industrial relations‖ targets

no conflict of interest between workforce and management i.e. unitary perspective.

Collectively, these work practices mutually reinforce each other and develop synergistic

impact in order to enhance business performance through workers‘ skills, knowledge and

abilities, increasing their motivation level and empowering them (Appelbaum, et al.,

2000).

Other authors have used different terms for these bundles of practices but investigating

the impact of HR practices in the form of bundle have been the focal point of SHRM with

different synonyms like high commitment work systems (Arthur, 1994; Pfeffer, 1998),

high involvement work systems (Batt, 2000; Guthrie, et al., 2002), innovative work

practices (Mkamwa, 2010), high investment HR systems (Lepak, et al., 2007) and people

management (Purcell, 2003). Other researchers conducted studies to investigate the

association of bundles of HR practices with performance without using any specific term

mentioned above (Guest, 1997; Bowen & Ostroff, 2004).

Most recently, ―high commitment management‖ and ―high performance work systems‖

are used as synonyms (Legge, 2005) representing bundle of HR practices having positive

impact on organizational performance. However, some researchers differentiate the

concepts of high commitment management (HCM) and HPWS by using ―soft‖ and

―hard‖ HRM debates discussed earlier. High commitment management (HCM) focuses

on job design, job security, employee development and so on as ways to superior

performance and increased employees' commitment and satisfaction (Legge, 2005).

Sparham and Sung (2006) elaborated HCM as a concept intended to build employee as

resourceful and valued humans to gain superior performance by using ―cultural/

motivational‖ approach. Therefore, employer would be expected to use practices ensuring

high involvement, rewards and staff development (Grant & Shields, 2002). Contrary to

this, they argued that HPWS focuses on superior performance where the workforce is

considered as a costly resource. The practices in this case include result based approaches

for rewards management and performance, instead of autonomy, use of internal labor

markets and job security (Harley, 1999). Moreover, Pil & MacDuffie (1996) also

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suggested to use ―high involvement‖ or ―high commitment‖ instead of ―high performance

work systems‖ and caution that the use of last-mentioned concept ―can be misleading in

the absence of clear empirical tests of their actual link to economic performance in a

given situation‖ (p. 423). Above mentioned debates could be categorized as ―high road‖

and ―low road‖ organizational work systems where low road systems includes activities

such as lack of job security, short-term employment contracts and less employees'

trainings whereas high road practices focus on getting high level of employees'

commitment (Guest, 1997).

However, recent scholars have started using the term ―high performance work systems‖

for the purpose of broadening the emphasis from just commitment or just involvement to

include aspects like skills development, performance management, work structuring and

pay satisfaction. These researchers argued that employment models and work systems are

viewed as supportive for superior performance considering a combination of key

practices like rigorous selection, better and extensive trainings to enhance competency

levels, more use of comprehensive incentives (like commissions, bonuses and career

development) to amplify motivation level and use of participative work structures that

provide employees more opportunities to participate (Appelbaum, et al., 2000). Pfeffer

(1998) included sophisticated hiring, employment security, extensive training, internal

labor markets, learning and development, high and contingent compensation, team

working and reduced status distinctions to form best practices HRM. HPWS refers to the

―system of HR practices designed to enhance employees‘ skills, commitment, and

productivity in such a way that employees become a source of sustainable competitive

advantage‖ (Datta, Guthrie, & Wright, 2005, p. 136).

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The bottom line of HPWS is an organization that enhances employees' discretion (Giles

Murray & Belanger, 2002) that is translated into superior organizational performance. As

Appelbaum, et al. (2000) asserted:

―The core of a HPWS…is that work is organized to permit

front-line workers to participate in decisions that alter

organizational routines…..Workers in an HPWS experience

greater autonomy over their tasks and methods of work and

have higher levels of communication about work matters

with other workers, managers, experts…..Work organization

practices in an HPWS require front-line workers to gather

information, process it and act on it‖ (p. 7-8).

Therefore, researchers have argued that it is basically autonomy/ discretion given to the

employee that results into organizational performance (e.g. Bailey, Berg & Sandy, 2001)

in the form of giving employees opportunity to utilize ―their initiative, creativity, and

knowledge in the interests of the organization‖ (Appelbaum, 2002: 123). According to

these scholars, performance is a product of employees' skills, motivation and opportunity

to perform, a well known ―AMO theory‖ of performance in literature of strategic HRM

(Appelbaum, et al., 2000). In Mathematical expression:

Performance = ƒ (A, M, O)

Means, superior employees‘ performance when:

A: they have the abilities to do their jobs (they possess required skills

knowledge and abilities to perform);

M: they have motivation to do their jobs (they get adequate incentives to

remain motivated);

O: they have enough opportunity to perform from their working environment

(e.g. opportunity to participate or express when face problems).

(Boxall & Purcell, 2003: 20)

While, debates exist regarding the particular combination of HRM practices, one of the

basic arguments throughout the literature is that HR practices operate better in the form

of ―bundle‖ or ―system‖ (MacDuffie, 1995; Ichniowski, et al., 1996). The advocates of

HR bundle argue that although a single HR practice might be useful in itself, bundles of

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work practices, mutually reinforcing each other, will generate greater performance

compared to the summation of the results produced by the HR practices in isolation

(Purcell, 1999). In addition to this, according to Ichniowski, et al. (1997), adding only

one practice may ―have little or no effect on performance‖ (p. 311). In conclusion,

individual HR practices will not help organizations to gain competitive advantage rather

HR practices as component of broader high performance work system (HPWS) to form

system that has positive, synergistic impact on organizational performance.

To date, literature provides substantial evidence for strong relationship between HPWS

and organization wide performance outcomes (e.g. Huselid, 1995; MacDuffie, 1995;

Delery & Doty, 1996; Youndt, et al., 1996; Datta, et al., 2005; Shin & Konrad, 2014;

Katou & Budhwar, 2015). Most of such research studies have conducted in US but

similar results have been found in other parts of the world. For instance, Guest, et al.

(2003) in UK; Guerrero and Baraud-Didier (2004) in France; Den Hartog and Verburg

(2004) in the Netherlands; Boxall, Ang and Bertram (2011) in Australia; Guthrie (2001)

in New Zealand; Bello-Pintado (2015) in Uruguay and Heffernan, et al. (2009) in Ireland.

Recently, a meta-analysis conducted by Subramony (2009) confirmed empirically that

organizational work practices in form of systems are strongly related with organizational

performance compared to individual HR practices. Likewise, another meta-analysis of 92

quantitative studies, investigating HPWS-performance relationship, by Combs, et al.

(2006) established that one standard deviation raise in HPWS caused 4.6 percent

improvement in return on assets (ROA) along with 4.4 percent reduction in employees'

turnover. Therefore, the study concluded that the influence of HPWS ―on organizational

performance is not only statistically significant but managerially relevant‖ (p. 518). On

the other hand, some authors warn that although empirical findings support the

relationship of HPWS and performance, numerous theoretical and methodological issues

still exist while studying this relationship (Wall & Wood, 2005; Paauwe, 2009). A

number of such debates in literature and challenges will be discussed here.

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2.3.1 Debates in HPWS-Performance Research

Much of the research efforts in SHRM have focused on HPWS and organizational

performance relationship and confirmed positive association between these two

constructs. However, authors have highlighted a number of problems or issues around

the relationship of HPWS and performance which require further research efforts to

broaden the understanding about HPWS-performance relationship. For instance, Delery

(1998) suggested that establishment of HPWS and performance relationship was just first

step, now the further focus should be on understanding the processes and mechanisms

that link HPWS with organizational performance outcomes. Previous section has already

highlighted the arguments and debates regarding the components and subject matter of

HPWS. This section will discuss few of the debates currently prevailing in the research

area of HPWS and performance relationship.

2.3.1.1 Debate 01: “Black Box” Issue of SHRM

Majority of the research studies in SHRM have investigated the linkage of HPWS with

some form of organizational performance (e.g. Arthur, 1994; Huselid, 1995; MacDuffie,

1995; Delery & Doty, 1996; Youndt, et al., 1996; Ichniowski, et al., 1997), or on the

context that enhances their impact (e.g. Osterman, 1994; Pil & MacDuffie, 1996).

However, these studies investigated very little about the mechanisms through which

HPWS creates value for the organization (Wright & Gardner, 2003). This issue is well

known as ―black box‖ issue of strategic HRM, highlighting the fact that mediation

mechanisms through which HPWS is related with various performance dimensions has

not established firmly (e.g. Mueller, 1996; Purcell, 2003; Evan & Davis, 2005; Danford,

et al., 2008;). For instance, based upon a review of 104 studies relating to HPWS-

performance relationship, Boselie, et al. (2005: 77) concluded that ―plenty of

acknowledgements of the existence of the ‗black box‘ and some speculation on its

possible contents, few studies tried to look inside‖. Further, Hesketh and Fleetwood

(2006) highlighted that ―empirical evidence for the existence of an HRM-Performance

link is inconclusive…a statistical association in, and of itself, constitutes neither a theory

nor an explanation‖ (p. 678). In the same way, Wright and Gardner (2003) also

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highlighted this issue in these words: ―little is known about what happens in between HR

practices and performance, and hence the contents of the ‗black box‘ remain a mystery‖.

In particular, Guest (2011, p. 3) recently concluded that ―even after two decades of

extensive research, it is not yet possible to fully understand this linkage‖.

The critiques argued that the theory is confused in this regard and researchers (especially

involved in quantitative research) are not consistent at level of theorizing while treating

HRM as a variable (Legge, 2005; Hesketh & Fleetwood, 2006). In their review of studies

related to HPWS-performance relationship, Boselie, et al. (2005) pointed out three

theoretical frameworks used most frequently by researchers. These theories included

resource based view of the firm (RBV), contingency framework, and AMO (ability,

motivation and opportunity to perform) model. Where, RBV and contingency theory are

situated at organizational level of analysis with main focus on their performance boosting

effect from business perspective while, AMO model investigated HPWS at individual

employee's level of analysis and rooted in organizational/ industrial psychology (Paauwe,

2009). More recently, based upon a systematic review of research studies in SHRM,

Jiang, et al. (2013) reported that along with these three theoretical perspectives,

researchers have also used some other theoretical approaches to address ―black box‖

debate in SHRM literature. For instance, researchers have used behavioral perspective of

HRM (Jackson, et al., 1989; Schuler & Jackson, 1987) to link HPWS with organizational

performance through employees' outcomes (attitudes and behaviors). Some other

researchers benefited from organizational climate literature to link HR systems with

organizational performance (e.g. Ostroff & Bowen, 2000; Collins & Smith, 2006; Lepak,

et al., 2006; Chuang & Liao, 2010; Cafferkey & Dundon, 2015). Similarly, researcher

also used social exchange perspective and human capital theory to propose and

empirically tested the HPWS and performance linkage (e.g. Takeuchi, et al., 2007).

One the other hand, some scholars have attempted to explain mediating mechanisms by

using some complex theoretical perspectives. For example, Bowen and Ostroff (2004)

emphasized on the role of climate as well as the ―strength of the HR system‖ for

understanding HPWS and performance outcomes relationship. Similarly, Guthrie, Flood,

Liu, MacCurtain and Armstrong (2011) have proposed social capital as intermediary

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mechanism for HPWS and performance relationship. Furthermore, Gittell, et al. (2009)

proposed relational theory to argue that HPWS foster the relationship of employees

performing different functions and concluded that relationship coordination mediated this

HPWS-performance relationship. Moreover, Nishii, Lepak and Schneider (2008) used

attribution theory to propose ―employees' attributions regarding HR function‖ as

mediator to link HPWS with performance outcomes. In addition to this, using HR causal

chain framework, Liao, et al. (2009) examined perceived HPWS as mediating mechanism

in between organizational intended HPWS and employee outcomes relationship. Boxall,

Hutchison and Wassenaar (2015) concluded that the HPWS and important employee

outcomes relationship is mediated by employees‘ skill utilization and intrinsic

motivation. Further, Fu, et al. (2015) used resource-based and dynamic capability

theories to explain the linkage between HPWS and performance in order to address

―black box‖ debate. Furthermore, Mostafa, et al. 2015 proposed and empirically tested

public service motivation as intermediary mechanism to connect HPWS with employee

outcomes in public sector organizations. Voorde, et al. (2016) proposed and tested job

demands and resources as mediating mechanism to link empowerment-focused HR

practices and productivity and the ―black box‖ debate still continues.

Along with mapping the progress with respect to ―black box‖ debate, researchers have

also recommended ways to further carry forward this research area in this regard. For

instance, researchers suggested that it is required that various theoretical perspectives

simultaneously across multiple levels of analysis should be considered in addition to

organizational level HPWS and top management perspectives significant value addition

to the body of knowledge related to HPWS and performance relationship. (e.g. Paauwe,

2009; Jiang, et al., 2013). Researchers also suggested using multiple pathways to

contribute into the ―black box‖ debate of SHRM literature (Chuang & Liao, 2010).

2.3.1.2 Debate 02: Inclusion of Employees' perspective in HPWS-

Performance

Review of previous research work related to HPWS-performance relationship highlighted

the fact that a major portion of research has been done at organizational level of analysis

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by considering organizational outcomes while neglected the role of employees in this

relationship. Consequently, previous research regarding HPWS-performance relationship

is flawed because it does not consider the role of employees who actually experience

organizational HR practices (Lepak, et al., 2006). Saying it differently, HPWS-

performance linkage research has been criticized for its ―highly management-centric

standpoint‖ and ignoring both employees‘ perceptions and experiences of HPWS (e.g.

Boselie, et al., 2005, p.73; Paauwe, 2009; Delbridge & Keenoy, 2010; Kaufman, 2010;

Farndale, et al., 2011). This viewpoint is evident of the just economic perspective of

HPWS-performance research, considering just improvement in organizational

performance because of HRM (Godard, 2004; Boxall & Macky, 2009), whereas the

impact of organizational work practices in the form of HPWS on employees is less

explored (Sparham & Sung, 2006; Kalmi & Kauhanen, 2008; Kroon, van de Voorde &

van Veldhoven, 2009; Meijerink, Bondarouk & Lepak, 2016). SHRM research either

ignores employee outcomes (Boselie, et al., 2005; Paauwe, 2009; Farndale, et al., 2011),

or consider employee outcomes as intermediary mechanisms only for the relationship of

HPWS with organizational performance (Boselie, et al., 2005; Sparham & Sung, 2006).

Therefore, it can be asserted that even the researchers that consider workers as important

actors in HPWS-performance causal chain, do so for a particular standpoint (called ―win-

win‖ or ―mutual gains‖), not much different from the unitarist approach i.e. with the

assumption that something good for organization must also be beneficial for workers.

This argument is reflected in HPWS-performance research studies conducted in different

industries (e.g. Arthur, 1994; Kochan & Osterman, 1994; Huselid, 1995; Delaney &

Huselid, 1996; Youndt, et al., 1996). For instance, Appelbaum, et al. (2000) identified

that HPWS influence various employee and organizational outcomes including job

satisfaction, trust, intrinsic motivation, commitment and stress.

Keegan and Boselie (2006), perhaps, cynically suggested that majority of academic

journals encourage research findings that support dominant discourse in HRM

(managerialistic, win-win). Previous research work is evident that this type of research is

largely US-based. For instance, Wright and Boswell (2002) emphasized on the

significance of incorporating employees' perspective on HRM within the organization

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and do this by asking the managers about ―how strategic employee alignment is

supported‖. In addition to this, they unconvincingly claimed that this assisted in

―considering the degree to which the actual human resources (i.e. employees) are aligned

with and contributing to the organization‘s strategic goals‖ (p. 265). Along with this,

empirical validation of their argument, epistemological and ontological issues are also

there because this approach is based upon the premise that workers are ―objects‖ which

can be transformed to facilitate organizational strategy to be converted into some stated

organizational objectives without knowing what employees really think or recognizing

them as active agents rather than passive objects of organizational HRM function.

Researchers, however, highlighted the importance of employees‘ responses in HPWS-

performance relationship by arguing that these are not the actual practices but the

perceptions employees made about these practices that determine their attitudes and

behaviors at work. Saying it differently, employee may perceive organizational practices

differently from what top management has intended or reported that may not result into

the same relationship of management reported HPWS and employee's response regarding

HPWS with performance outcomes (Liao, 2009). Recently, based upon an empirical

investigation, Choi (2014) concluded that employees‘ perceived HPWS were more

strongly associated with productivity and financial performance of organizations than

manager reported HPWS.

Therefore, without any doubt, it is clear that during 1990's, consideration given to

investigating the relationship between HPWS and organizational performance was far

ahead compared to the consideration given to understand the impact of HPWS on

workers (Bacon, 2003), thus, evident dearth of research focused on understanding

employees' responses towards HPWS. This is mainly because of the research methods

dominated, predominantly in US literature, which focused mainly on large survey

researches that might ensure high level of reliability but with some questionable validity

(Purcell, 1999). This extensive attention of HPWS on organizational performance,

therefore, caused lack of research efforts to investigate its on employees (Godard &

Delaney, 2000). Consequently, disconnection exists between what organizations and

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managers report about their HPWS and what employees experience actually (Liao, et al.,

2009).

For these reasons, researchers have suggested to conduct more employee-centered studies

to understand the impact of HPWS on employees to have a balanced and meaningful

picture of HPWS-performance linkage (Boselie, et al., 2005; Delbridge & Keenoy, 2010).

Paauwe (2009) asked for ―a more balanced approach that pays equal attention both to the

managerial, functionalist perspective and to the concerns, involvement, and well-being of

employees‖ (p. 130) to avoid just employer perspective on HPWS-performance

relationship that represents just half picture of the whole story. Recently, a systematic

review of literature by Van De Voorde, et al. (2012) identified 36 studies that

incorporated both employee's and employers' outcomes and highlighted the need for more

research on these lines as these studies have reported mixed findings. More recently,

however, Boxall, Guthrie and Paauwe (2016) reported some progress in this regard and

again stressed on the need to investigate business and employee outcomes simultaneously

with same HPWS to have a more comprehensive view of how these work systems effect

the both.

2.3.1.3 Debate 03: Intended Vs Implemented HPWS

Another issue that has been emerged within the HPWS-performance relationship

literature is the importance of understanding and recognizing HR policies and practices

differentiation (Gerhart, et al., 2000) that may be the potential reason for varied findings

in HPWS-performance research. Huselid and Becker (2000) asserted that researchers

should measure HPWS through HRM practices those are actually implemented in the

company instead of intended HRM polices which might not be implemented necessarily.

While differentiating organizational HR policies and practices, HR policies of the firm

represent intention of top management regarding the type of HR interventions which

should be implemented in the company. Besides this, HR practices represent HR

interventions which are actually carried out in the company (Gerhart, et al., 2000; Khilji

& Wang, 2006). Moreover, Guest (1987) had already highlighted this concern and

separated, clearly, espoused HR policy and HR practices by highlighting his concern that

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the discussion of HR policies would suppress its practice in the organizations. According

to him, ―there is a danger of . . . assuming that because human resource management is

being talked about, it is also being practiced. There is a risk that it will be ‗talked‘ or

‗written‘ into existence, independent of practice‖ (p. 505).

Likewise, Khilji and Wang (2006) also highlighted the fact that intended practices within

an organization are different from implemented practices and thus, further investigation

should be carried out with the focus on implemented practices and its relationship with

performance outcomes as employees experience implemented rather than intended

practices. Wright and Nishii (2007) further elaborated this phenomenon through their

proposed ―HR causal chain‖ framework represented sub-processes that link HRM with

organizational performance. In their proposed model, they distinguish among intended

HR practices, actually implemented HR practices and perceived HR practices. This

model spotlighted the gap and also the linkage between intended and implemented HRM.

Intended HR practices refer to HR policies designed by top management and represent

the outcomes of HR strategy that is developed to produce favorable employee behaviors.

Whereas, actual or implemented HR refers to HR practices those are actually carried out

in the organization by line managers. Next, employee's perceived HR practices refer to

subjectively interpreted and perceived HR practices by the employees. These subjectively

perceived HR practices further influence workers attitudes and behaviors and finally

impact organizational performance outcomes. Various researchers have reported that all

the top management espoused HR practices are not implemented in a way they were

intended and thus HR practices reported by top management or HR department varied

from the response of line managers and the employees (e.g. Liao, et al., 2009; Guest, et

al., 2010).

While examining HPWS-performance relationship, much of the research efforts have

been done on investigating the said relationship at business level (e.g. Huselid, 1995;

MacDuffie, 1995; Delery & Doty, 1996) where senior HR position or top management

were asked to report their organizations' HPWS. However, researchers have argued that

by doing this, one is only studying the relationship of presence of certain HR practices

with the performance outcomes (Combs, et al., 2006) whereas effectiveness of HRM

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practices required more than just their presence in the company as merely a policy that is

not implemented properly (Wright & Nishii, 2007). Further, line managers implement

HR practices differently based upon their level of motivation and interest for HRM,

competence and opportunity they get (Purcell & Hutchinson, 2007; Wright & Nishii,

2007; Harney & Jordan, 2008). Moreover, employees' perception regarding HR practices

will be dependent upon the level of efforts and effectiveness of line managers in

implementation of organizational intended HR practices within their departments.

Implemented HR practices are therefore more proximal, appropriate and validated

determinant of HR practices experienced by employees and their subsequent reactions,

than intended HR. In other words, effective implementation of HR practices depends

upon the line managers and therefore, studying their responses (in the form of actually

implemented HR) will have more true insights for HPWS-performance relationship (e.g.

Guest & Bos-Nehles, 2013; Piening, et al., 2014; Kim et al., 2018). Consequently, a

separate stream of research emerged recently within SHRM literature where researchers

are focusing on the effects of implemented/ line manager-rated HPWS, instead of

intended HPWS, on performance outcomes (Aryee et al., 2012; Choi, 2014; Kuvaas, et

al., 2014; Pak & Kim, 2016) to have a more meaningful view of HPWS-performance

relationship.

2.3.1.4 Debate 04: Level of Analysis

Another issue emerged within HPWS-performance research area is the level of analysis

while examining the effects of HPWS on performance outcomes. Researchers have

identified that HPWS-performance relationship is too distant and complex where HR

policy is intended at organizational level and then implemented at departmental, group or

team level by line managers, then how employees perceive and experience organizational

HRM further influences their attitudes, behaviors and performance outcomes (Bowen &

Ostroff, 2004; Takeuchi, et al., 2009). Based upon this differentiation among levels of

analysis, Wright and Boswell (2002) recommended breaking down the barriers between

macro HRM (focusing on organizational/ management perspective of HRM) and micro

HRM (emphasizing on studying the effects of HR practices on individual employees).

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Therefore, the researchers are required to use multilevel approach to bridge the gap of

management and employees‘ perspective of HRM (Klein & Kozlowski, 2000; Wright &

Boswell, 2002; Shen, 2015; Renkema, et al., 2017) to have more comprehensive picture

of HPWS-performance relationship. However, despite this recognition for the need of

multilevel approach, majority of research studies, examined HPWS-performance

relationship, have used a single level of analysis. Among these studies used single level

of analysis, main emphasis was on organizational level of analysis (Combs, et al., 2006)

with an increasing number of recent research studies conducted, recently, at individual

level of analysis (e.g. Kuvaas, 2008; Boon, et al., 2011; Alfes, et at., 2013; Lee, et al.,

2015; Baluch, 2016). Although few researches have used multilevel approach to advance

theory on HPWS-performance relationship (e.g. Ostroff & Bowen, 2000; Bowen &

Ostroff, 2004; Arthur & Boyles, 2007; Wright & Nishii, 2007), less empirical research is

done by using multilevel approach in this regard. Wright and Boswell (2002) further

highlighted that practical difficulties of getting data from various respondents across

multiple levels of an organization may restrict researchers from adoption of multilevel

approach.

Based upon multilevel approach, Guest (1999) reported that organizational HPWS

improved employee motivation, job satisfaction and job security and reduced work

pressure of individual employee. Following same reasoning, Wright and Nishii (2007)

proposed framework, called HR causal chain, with clear distinction among organizational

intended HRM (designed at organizational level), implemented HR practices

(implemented by line managers) and perceived HR practices (employees‘ experiences of

HR practices) which influence employee reactions and further performance outcomes.

Extending on their work, Jiang, et al. (2013) drew a framework clearly mentioning

organizational, group and individual perspective of HR practices and their relationship

with each other and with subsequent performance outcomes. Paauwe (2009) suggested

that considering employees into the relationship between organizational HR practices and

various individual and organizational outcomes is a ―conditio sine qua non‖ for carrying

forward this field of research. He further argued that this is also important to effectively

respond to the criticism by Legge (1995), Keenoy (1997) and others for main focus on

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management perspective by majority of HPWS-performance research work. Furthermore,

he suggested that much research efforts are still required for both theorizing and testing

this complex and distant HPWS-performance relationship through more appropriate

multilevel methodologies.

In the last, the studies to-date which used multilevel approach while examining HPWS-

performance relationship have connected intended HPWS (organizational level) with

employees‘ perceptions of HPWS and their subsequent outcomes (e.g. Sun, et al., 2007;

Takeuchi, et al., 2009; Ogbonnaya & Valizade, 2016; Shin, et al., 2016; Shen et al.,

2018). Following HR causal chain framework, literature is scarce in terms of connecting

and testing effects of implemented HPWS by line managers on employees‘ experiences

of HPWS and subsequent outcomes. Furthermore, using multilevel approach to explore

HPWS-performance relationship is entirely missing in the case of Pakistan.

2.3.1.5 Debate 05: Methodological Issues in SHRM Research

Review of the literature on HPWS-performance relationship highlighted numerous

methodological shortcomings faced in this research area. One such issue in SHRM

research area is debate regarding the measurement of organizational HR practices. In this

regard, Legge (2001) reported that researchers have measured organizational HR

practices in different ways including (i) their presence (dichotomous scale: yes/ no or

presence/ absence); (ii) their coverage (a continuous percentage based scale requires the

portion of employees covered by certain practice) and (iii) their magnitude (a continuous

scale to capture the extent of exposure to certain HR practice/ policy by an employee).

Further, majority of research in SHRM relied upon single respondent to achieve large

data set requirements of statistical analysis that leads towards data reliability issues

(Guest, 2001). In this case, according to Huselid and Becker (2000), in most cases, senior

position of organizations HR department were the best respondents for information

regarding HR practices across numerous jobs. However, Purcell (1999) argued that

whether one single manager can know about all the practices used in organizations with

diversified structure. Gerhart, et al. (2000) provided empirical evidence representing

reliability of HR measure may be close to zero when used single respondent and another

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study conducted by Wright, et al. (2001) supported their concern. Several other

researchers have criticized extant studies for their reliance on the responses from HR

senior position or CEO or top management regarding HR practices while neglecting the

significance of implemented HR practices, by line managers, or employees' perceptions

of HR practices (e.g. Lepak, et al., 2006; Liao, et al., 2009).

In addition to this, researchers have identified several other reasons that cause variation in

findings such as sample size and characteristics, low response rate, variation in research

design, composition of HPWS as bundle of HR practices and variation in performance

measures used (Becker & Gerhart, 1996; Wood, 1999). Furthermore, Paauwe (2004)

stressed on the ―context‖ to understand the composition of HPWS and its relationship and

interaction with performance. For these reasons, Hesketh and Fleetwood (2006) argued

that there is a need to go beyond the most prevalent scientific approach being used by

researchers in SHRM research to advance the theory around HPWS-performance

relationship.

Moreover, most of the studies examined HPWS-performance relationship were

conducted in developed countries including U.S., UK, Canada, Netherland, Australia

(Boselie, et al., 2001; Guerrero & Barraud-Didier, 2004) and some other western

countries (Lobel, 1999). However, there are limited research investigations on HPWS-

performance relationship in developing countries like Pakistan. HR practices used in one

country may not result into same results in another country because of the influence of

national culture, industrial and organizational context and characteristics (Paauwe, 2004;

Poelmans & Sahibzada, 2004). Therefore, the appropriateness of such HPWS-

performance models in countries other than U.S and UK are a major concern in SHRM

research area.

Another methodological aspect in HPWS-performance research is to identify

organizational contexts that cause variation in the impact of HPWS on performance

(Delery, 1998; Batt, 2002; Datta, et al., 2005). Majority of research studies in SHRM

have been conducted in manufacturing sector for many reasons such as the use of

complex and potentially dangerous machinery, more need of inculcating competencies

and motivation, heavy reliance on people, processes and technology and better alignment

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of HR systems with manufacturing work (Combs, et al., 2006). They also concluded that

organizational HPWS is more strongly associated with performance in manufacturing

sector than in service organizations. They further suggested that set of HRM practices for

an organization is very much dependent upon the type of operations carried out in that

particular firm and therefore future scientific investigation should be conducted with

HPWS specific to service sector because of the unique characteristics of operations and

the nature of work in service organizations. However, despite the rapid worldwide growth

of service sector in recent years and its contribution to economies, this sector has got less

research attention in terms of studying HPWS-performance relationship. It is hard to

ignore the contribution of service sector for its occupation of workforce i.e. 42%

worldwide as compared to 22.7% in manufacturing and 35.3% in agriculture sector (The

World Factbook, 2008). In addition to this, the behaviors of employees in service sector

are more critical in determining the quality of service for the reason that service sector

involves direct interaction of employees who produce service and the customers (Liao &

Chung, 2004). Although, an increasing number of research studies are focusing service

industry from last four to five years, researches recommended exerting future research

efforts in service sector while investigating HPWS-performance relationship to have

insights from this critical industrial context which is emerging rapidly and also much

different from manufacturing environment (Combs, et al., 2006).

2.4 Human Resource Management Research in Pakistan

Contrary to research efforts made in the area of SHRM by researchers around the world,

not many efforts have been made so far to understand the nature of HPWS-performance

relationship in context of organizational settings operating in Pakistan. Few simple

studies at individual employee level of analysis were conducted to study the effects of

employees‘ perceptions of organizational HPWS on their attitudes and behaviors. For

instance, Bashir, et al. (2011) studied the association between perceived HPWS and

employee commitment along with the moderating role of demographic characteristics

among academic staff of 22 higher education institutes of Pakistan. Moreover, Hassan, et

al. (2013) concluded that the relationship of perceived HPWS with organizational

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performance and employee loyalty is mediated by job satisfaction. Recently, Gulzar et al.

(2014) used labor process theory to study the adverse effects of HPWS on employees.

They examined the mediating role of anxiety, job burnout and role overload in between

employees‘ perceived HPWS and employees‘ counter productive work behavior in 287

different organizations based in Islamabad. All these studies were conducted at employee

level of analysis and therefore, did not capture much of the insights regarding complex

HPWS-performance relationship.

Recently, however, using multi-level modeling approach, Riaz and Mahmood (2017)

investigated the impact of implemented HPWS by managers on employees‘ service

related behaviors (service performance and service oriented-OCB) through the mediating

role of affective commitment in banking sector operating in Punjab, Pakistan. The said

research used the data set of this thesis and is one of the pioneer studies in Pakistan using

multi-level approach to connect bank branch level variable with individual employee

level variables. Next, Riaz (2016) studied mediating role of social exchange, relational

coordination and employee reactions (job satisfaction, commitment and OCB) for the

linkage between employees‘ perceived HPWS and perceived organizational performance,

at employee level of analysis, among 17 service and manufacturing organizations

operating in Pakistan. Along with this, she also investigated the mediating role of human

capital between manager rated HPWS and organizational performance at organizational

level of analysis. Interestingly, she tested both organizational and individual level models

separately as two distinct models and did not connect them. Ahmad and Allen (2015)

conducted a study to gauge diffusion of HR practices in the form of HPWS in Pakistani

industry and found limited empirical support for the applicability and effectiveness of HR

practices in the form of HPWS in organizations operating in Pakistan.

On the other hand, some researchers have studied the impact of individual HR practices,

rather than HR practices in the form of bundle or system (one of the basic assumption of

SHRM research), on various employee related outcomes including employee

performance (Shahzad, et al., 2008; Shaukat, et al, 2015), employee motivation (Naqvi &

Nadeem, 2011) and organizational commitment (Imran & Ahmed, 2012; Ahmad, et al.,

2015). Furthermore, Dar, et al. (2014) investigated the mediating role of employees‘

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commitment for the association of individual HR practices with employee performance

among the employees working in Islamic banks operating in Pakistan. All these

investigations have also been carried out at employee‘s level of analysis with a focus on

employee perceived HPWS and its impact on various subsequent employee outcomes. It

is evident from the above that not much research studies have been conducted to explore

the processes or intermediary variables which explain, this is not so simple, HPWS-

performance relationship. In addition to this, unlike done by researchers in other

countries, no study has used multilevel approach to investigate the complex and distal

HPWS-performance relationship. Therefore, limited insights are available regarding how

and why HPWS is connected with various performance outcomes in the context of

Pakistan.

2.5 Conceptual Framework

Figure 2.1 illustrates a multi-level conceptual framework depicting direct relationship

along with the processes linking implemented HPWS to bank branch performance and

employee outcomes (employee engagement, service performance and service oriented

OCB). First, based upon resource based view of the firm (RBV) and at branch level of

analysis, this study proposed that implemented HPWS by bank branch managers enhance

branch performance through branch level collective human capital. Next, underpinned by

social exchange theory and behavioral perspective of HRM and at cross-level of analysis,

current study also proposed that manager-HPWS has an impact on employee outcomes

including employee engagement, service performance and service oriented OCB. Finally,

based upon social exchange theory and at cross-level of analysis, this study examined

organizational justice dimensions (i.e. distributive fairness, procedural fairness and

interactional fairness) as mediating mechanisms through which manager-HPWS is related

with employee outcomes. The proposed relationships of this study are tested by using

multisource data (i.e. branch managers and front line employees) collected from 323 bank

branch managers and 1369 front line employees of 30 commercial banks operating in

Punjab province of Pakistan.

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H1

H3(a-c) Branch Level

Individual Level

Manager- HPWS

Bank Branch

Performance

Procedural

Justice

H5(a-c)

Distributive

Justice

H4(a-c)

Interactional

Justice

H6(a-c)

Employee Outcomes

Employee Engagement

Service Performance

Service Oriented OCB

Collective

Human Capital

H2

Figure 2.1: Hypothesized Model

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2.6 Branch Level Hypotheses

Previous part of this chapter demonstrated the emergence of people management in

organizational settings with emphasis on the contemporary HRM and its relationship with

organizational performance. The chapter also illustrated the developments in the research

area of SHRM in the context of Pakistan, criticism and the key prevailing debates

regarding HPWS-performance relationship. This section will now present the review of

literature in order to develop the proposed relationships of the study. Review of literature

and hypotheses development for branch level relationships and cross-level relationships

are presented in section 2.6 and 2.7 respectively.

2.6.1 Manager-HPWS and Bank Branch Performance

Theorists and researchers in SHRM have concluded that sets of HR practices in form of

HR bundles or systems have stronger impact than any HR practice individually (e.g.

Huselid, 1995; MacDuffie, 1995; Delery & Doty, 1996; Ichniowski, et al., 1996; Youndt,

et al., 1996; Combs, et al., 2006). Huselid‘s (1995) study of more than 800 US firms

served as a seminal work that investigated the association of HPWS with firm

performance. He used a set of 13 HR practices and proved significant relationship

empirically between these practices with both operational performance (productivity and

turnover) and short as well as long term financial performance of selected corporations.

This study acted as spring board for a significant body of research that empirically

confirmed the relationship of HPWS with firm performance (e.g. MacDuffie, 1995;

Delery & Doty, 1996; Appelbaum, et al., 2000; Guthrie, 2001; Batt, 2002).

Combs, et al. (2006) conducted a meta-analytic study which confirmed positive

association between HPWS and firm performance. They used 92 studies (published

during 1990 and 2005) in their meta-analysis and concluded that (i) HPWS has

significant impact on firm performance, (ii) set of HR practices in form of system has

greater effect on firm performance than individual HR practices and (iii) HPWS has

greater performance enhancing impact in manufacturing firms than service sector. They

further suggested that set of HR practices for an organization is very much depends upon

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the type of operations carried out in that particular organization. Therefore, future

scientific investigations should be conducted with HPWS specific to service sector due to

unique characteristics of operations and nature of work to have meaningful insights

regarding HPWS-performance relationship from this rapidly growing sector.

Based upon, Bowen & Ostroff (2004) argument and suggestion that components of

organizational work systems ―should be largely driven by the strategic goals and values

of the organization‖ and that ―the foci of human resource management practices must be

designed around a particular strategic focus, such as service or innovation‖ (p. 206), this

study used HPWS developed by Liao, et al. (2009) which they proposed for service

organizations in order to improve service quality by increasing employees' competencies,

motivation and performance. They developed HPWS construct consisted of extensive

service training, information sharing, interdepartmental services, compensation based

upon service quality, self managed teams and employee participation, service discretion,

employees‘ performance evaluation based upon service delivery and job design. This

conception of HPWS related to service quality was built by Schneider, et al. (1998) on

the general HRM concerns considered vital for service delivery and included HRM

dimensions studied in previous SHRM researches in service context (Delery & Doty,

1996; Batt, 2002). Due to the characteristics of services such as intangibility,

simultaneous production and utilization, and involvement of client in production process

(Bowen & Schneider, 1988), it is not possible to have controls and checks after it is

produced in order to assure quality as it is common practice in manufacturing context

(Schneider, et al., 1998; Liao, et al., 2009). For this reason, performance of employees

involved in serving customers (front-line employees), in form of behaviors towards

clients, to satisfy their needs (Liao & Chuang, 2004) and in a straight way effects

customer satisfaction through service quality. Therefore, service firms are required to

devise a work system that equips the employees with required competencies, keeps them

motivated and provides them frequent opportunities to contribute in order to meet

customer expectations. For example, extensive training enables employees to provide

high quality services, performance appraisals considers service provision as evaluation

criteria and the use of incentives to links pay with quality of service. These practices

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together in form of HPWS develop in employees the competencies (knowledge, skills

and abilities), information, resources, discretion along with the motivation to deliver high

quality services to fulfill customer demands (Liao, et al., 2009).

In the light of above discussion of literature and the recommendations, this study used

HPWS established by Liao, et al. (2009) because the ―best‖ combination of HRM

practices for a specific organization is very much dependent upon the nature of work

activities and operations of that organization. For instance, in this regard, Bakker,

Demerouti and Euwema (2005) also suggested that organizations need to make efforts for

utilizing their employees‘ abilities for enhanced customer satisfaction in order to have

effective and sustainable customer relations. Thus, it is required to inquire HPWS

specifically designed for service organization to identify its potential impact on

performance outcomes because of the unique nature of work in service settings (Combs,

et al., 2006).

Further, Ostroff and Bowen (2000) pointed that performance in organizational studies is a

multi-dimensional construct. In SHRM research area, Dyer and Reeves (1995) segregated

organizational performance into three categories including (i) financial/ accounting

outcomes (e.g. sales, profit, Tobin's Q, stock price, return on investment, shareholder

return) (ii) organizational/ operational outcomes (e.g. productivity, efficiency) and (iii)

HR outcomes (employee reactions like commitment, job satisfaction, absenteeism and

turnover intentions). This study used subjective measure of market performance adopted

from the study of Delaney and Huselid (1996) to measure bank branch performance. This

measure includes marketing performance, profitability, sales and market share as

dimensions of organizational performance and used by Aryee, et al. (2012) to measure

performance of bank branches in their study. Although subjective measures of

performance are criticized for reasons including chances of common method biases and

increased measurement error, researchers have used subjective measures and provided

convincing reasons (e.g. Delaney & Huselid, 1996; Takeuchi, et al., 2007; Chuang &

Liao, 2010; Aryee, et al., 2012). First, Gupta (1987) and Gupta and Govindarajan (1984;

1986) pointed out that it is not easy, even almost impossible to get objective data of

financial performance of individual units where there are chances of disclosure of their

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organizational identifications. Second, Wall, et al. (2004) suggested that self-reported

responses on performance measures could be the replacement of objective performance

measures where objective measures are not accessible and/ or available. They also

reported an average correlation of 0.52 between actual objective and manager's perceived

performance of the firms. They also compared construct, discriminant and convergent

validities of subjective measures of performance against objective measures in an

investigation related to HPWS-performance relationship. Third, Tomaskovis-Devey,

Leiter and Thompson (1994) suggested that comparative approach is more effective than

directly requiring the respondent to give exact financial figures. Moreover, manager

reported measures of performance have been extensively used in many renowned studies

of the area even (e.g., Delaney & Huselid, 1996; Youndt, et al., 1996; Takeuchi, et al.,

2007; Chuang & Liao, 2010; Aryee, et al., 2012; Darwish, et al., 2016) perhaps because

of difficult or no access to actual performance data.

Therefore, this study has used subjective measure of bank branch performance including

profitability, sales and the marketing performance as branch/ group level dependent

variable because no meaningful slippage across performance outcomes is there in HPWS-

performance research area. Therefore, studies can choose from various valid performance

measures by assuring that the size of the effects should not be affected negatively

(Combs, et al., 2006). In case of this study, the main reason for selecting the subjective

measure of branch performance is non availability and non accessibility of bank branch

objective performance data. On the basis of above discussion, it is hypothesized that:

H1: Manager-HPWS has positive relationship with bank branch performance.

2.6.2 Mediating Role of Branch Level Collective Human Capital

Previous research studies in SHRM have suggested that organizational HR systems may

be considered as sources of establishing employees‘ competency and attitudes

(motivation) in a way that amplifies performance (e.g. Wright & Snell, 1991; Huselid,

1995; Delery & Shaw, 2001). Further, studies have used aggregated/ collective employee

related variables including aggregated employee performance (Aryee, et al., 2012) and

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customer satisfaction (Nishii, et al., 2008) with firm level outcomes. On the basis of these

arguments, it can be inferred that the HPWS and branch performance relationship is

mediated by branch level collective human capital that will impact branch performance

through developing required knowledge, skills and abilities (KSAs) in employees.

Human capital is defined as the skills, knowledge and abilities of the workers that are

critical and considered the main source of competitive advantage for companies (e.g.

Subramaniam & Youndt, 2005). Human capital uplifts productivity through enhanced

knowledge, skills and abilities of the employees (Snell & Dean, 1992). According to

resource based view of the firm (RBV), HPWS would be associated with collective

human capital based upon the competitive advantage organizations gain through HPWS

by developing valuable, rare, non-substitutable and difficult to inimitable human capital

(Barney, 1991; Barney & Wright, 1998). In other words, HR system enhances

knowledge, skills and abilities and motivation of the employees to build pool of high

quality human capital (Delery & Shaw, 2001; Huselid, 1995) and therefore, organizations

will extensively use these HR practices to ensure organizational success through their

employees (MacDuffie, 1995; Guthrie, 2001). Organizations where HPWS are effectively

implemented, there are several practices such as the use of well designed and rigorous

staffing practices and extensive trainings that leads to high quality of organizational

human capital (e.g., Zacharatos, et al., 2005; Takeuchi, et al., 2007). Furthermore,

Delanery and Huselid (1996) emphasized on the importance of HR practices that ensure

high quality workforce hiring, and developing and raising the knowledge, skills and

abilities level of the existing workforce. Additionally, competitive compensation and

employee benefits are some other tools to attract, hire and retain high quality human

resource (e.g. Arthur, 1994; Guthrie, 2001). Finally, job design with flexible job

assignments also provide employees learning opportunities and develop their skills and

abilities (Liao et al., 2009). Moreover, Takeuchi, et al. (2007) concluded that

establishment level human capital was positively affected by HPWS as well as it

mediated the relationship of HPWS with establishment performance.

Moreover, the potential of human capital to impact organizational performance is widely

studied and well recognized in the literature of HRM and strategy (e.g. Barney, 1991;

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Pennings, Lee & van Witteloostuijn, 1998; Coff, 1999; Hatch & Dyer, 2004; Nyberg,

Reilly, Essman & Rodrigues, 2018). Stating simply, an organizational pool of human

capital reflects employees‘ potential role in organizational success (e.g. Wright & Snell,

1991). In this regard, resource-based view of the firm (RBV) argued that competitive

advantage is the result of a firm‘s rare, valuable and difficult to reproduce resources

(Barney, 1991). An organizational resource is rare if it is costly or even impossible for

competitors to replicate or even non-substitutable with any other resource. Furthermore, a

resource is said valuable if it assists firm to take advantage of the opportunities or to

diffuse and neutralize threats arise in the external environment. In this way, these

valuable, rare and difficult to duplicate resource contribute towards achieving sustainable

competitive advantage through superior performance (Amit & Schoemaker, 1993).

Resource based view of the firm (RBV) suggests that HPWSs have the capability to

achieve sustainable competitive advantage by developing firm specific human capital and

complex social relationships among its members that would generate tacit knowledge

(Takeuchi, et al., 2007). Putting it together, branch level collective human capital should

mediate manager-HPWS and branch performance relationship. This argument is in line

with the work of Delery and Shaw, (2001) that identified employees‘ knowledge, skills,

abilities (KSAs) and motivation level as mediating mechanisms for the relationship

between HR system and labor productivity.

In addition to this, although much emphasis has been made on theoretical underpinning

of the concept of human capital (Jackson & Schuler, 1995), few studies have examined

this concept as a mediator linking HPWS with performance outcomes. For instance, Liao,

et al. (2009) concluded that the relationship between perceived HPWS and employee

service performance is mediated by individual employee's human capital. Yet, barely any

study has conceptualized bank branch level collective human capital as an intermediary

mechanism between manager-HPWS and bank branch performance. Therefore,

arguments based upon resource based view of the firm (RBV) suggest that branch level

collective human capital acts as mediator between implemented HPWS and branch

performance. Thus, on the basis of the above discussion, following relationship among

manager-HPWS, collective human capital and bank branch performance is hypothesized:

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H2: Branch level collective human capital mediates the relationship between manager-

HPWS and bank branch performance.

2.7 Cross-Level Hypotheses

2.7.1 High Performance Work System (HPWS) and Employee Outcomes

Researchers have identified that HPWS impacts firm performance through employees‘

attitudes and behaviors (Boselie, et al., 2005). Theorists and researchers in HRM also

argued that attitudes and behaviors of employees are shaped, controlled and directed by

―the communicative nature of everyday HR practices‖ (Guzzo, et al., 1994: 453). Review

of extant literature highlighted lack of research on employees‘ response to HRM practices

with both positive and negative relationship of HPWS with individual outcomes (Van De

Voorde, et al., 2012). Moreover, these research studies demonstrated HPWS from mutual

gains perspective i.e. HRM is beneficial for both employer and employees through norm

of reciprocity and social exchange (Tsui, et al., 1997). Social exchange theory (Blau,

1964) and literature on psychological contract (Guest, 2004) argued that it‘s not just

monetary rewards but also non monetary aspects like future advancement opportunities,

recognition and participation which have significant impact on employees at workplace.

For instance, HPWS encourages employees through opportunities for participation,

enhance their competencies and recognitions (Lepak, et al., 2006) and in return

employees respond in more favorable ways such as work harder, demonstrate more

loyalty, job performance, commitment and even discretionary efforts towards their

employers (e.g. Appelbaum, et al., 2000; Sun, et al., 2007; Snape & Redman, 2010; ).

In SHRM research, researchers have mainly focused on management perspective while

examining HPWS-performance relationship and employee related factors were less in

consideration in this regard. Recently, however, researchers have started taking into

account employees outcomes into HPWS-performance debate. For instance, Kehoe and

Wright, (2013) reported that affective commitment fully mediated perceived HPWS and

turnover intentions relationship, whereas in case of perceived HPWS and OCB

relationship, affective commitment partially mediated the relationship. Zhang and Morris,

(2014) also tested relationship of HPWS with employee outcomes and firm performance

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and concluded that employee outcomes mediated HPWS and organizational performance

relationship. Similarly, Ko and Smith-Walter (2013) reported that employees‘ work

related outcomes (i.e. organizational commitment, organizational citizenship behavior,

and job involvement) mediated the linkage between HPWS and organizational

performance in public sector organizations. On similar lines, Boxall and Macky (2014)

also found that HPWS was significantly related with employee well being. For the

purpose of this research, based upon the review and suggestions from extant literature,

three employee outcomes including employee engagement, employee service

performance and service-oriented OCB have been identified to investigate their

relationship with manager-HPWS.

Employee engagement construct was established and introduced by Kahn, (1990) to

represent one‘s self in-role expression, and involve cognitive, emotional and physical

dimensions (e.g. Schaufeli, et al., 2002; Schaufeli & Bakker, 2004; Salanova &

Schaufeli, 2008; Rich, et al., 2010). Employee engagement refers to a positive, affective

and psychological state of mind that compels an employee to express actively and invest

himself/ herself cognitively, emotionally and physically in their job performance (Catlette

& Hadden, 2001; Schaufeli, et al., 2002; Rurkkhum, 2010). Although researchers have

adopted a bit different views to define the concept of employee engagement (e.g., Kahn,

1990; Maslach, et al., 2001; Harter, et al., 2002; Schaufeli, et al., 2002; May, et al., 2004;

Sirota, et al., 2005), but in literature of human resource management, researchers agreed

that employee engagement is a psychological attribute that include high level of energy,

enthusiasm and efforts (Macey & Schneider, 2008; Gruman & Saks, 2011). In general,

engaged employees are described as individuals who have high level of energy and

resilience in performing their job, involve in their work by heart with persistence and

always willing to make efforts, demonstrate deep involvement in their work along with a

strong sense of meaningfulness, significance, passion, enthusiasm, inspiration,

excitement, pride, take their work as challenge, concentrate and involve themselves in

their work without having any sense of passing time (Schaufeli & Bakker, 2004; Bakker

& Demerouti, 2008).

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Employee engagement research is drawn on social exchange theory which advocates that

employees will be more engaged with their job by feeling more positive emotions at

workplace, through intellectual efforts, and experiencing meaningful relations at work

(Alfes, Truss, Soane, Rees & Gatenby, 2010). The antecedents of employee engagement

are once in place, pass signals that employees are valued and trusted (Rich, et al., 2010).

Organizational work practices in the form of HPWS are one such antecedent that

broadcast signals for employees regarding their employer‘s willingness to support and

invest in them and, therefore, these systems of HR practices may have positive

association with employee engagement.

Despite the fact that understanding employee engagement is one of the major areas of

interest for organizational scientists, it is less studied in the context of HPWS as

compared to other employee attitudinal outcomes like commitment and satisfaction

(Alfes, et al., 2013). Recently, however, theorists of HRM argued and suggested that it is

required to study cognitive and activated impact of HR system for the reason that HR

systems are developed to enhance employees‘ empowerment at their workplaces

(Vandenberg, Richardson & Eastman, 1999; Boxall & Macky, 2009). Thus, this study

argued that HRM and employees‘ outcomes relationship could be better understood and

explained by using an attitudinal outcome that has a more comprehensive view of

employee‘s individual self and also contains activated components. A concept that

includes emotional, cognitive and physical activation all together, ―employee

engagement‖ and, hence, covers a more comprehensive view of an individual‘s self

(Rich, et al., 2010). Therefore, this study considered this comprehensive employee

outcome as one of its dependent employee level variable to have a much wider view of

this HPWS-employee outcome relationship.

Job demands-resource model provides another platform to link HR practices with

employee engagement. For example, job demands-resources model argues that job

demands like emotional strain and extensive workload (work overload) are linked with

exhaustion and lack of job resources like job control or social support predicts employee

disengagement (Demerouti, Nachreiner, Bakker & Schaufeli, 2001). Scientific evidences

generated from job demands-resources model have showed that HR practices in the form

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of job related resources such as training opportunities (Salanova, Agut & Peiro, 2005),

performance or interpersonal feedback from immediate supervisors (Schaufeli & Bakker,

2004) or task variety (Salanova & Schaufeli, 2008) had significant positive association

with employee engagement. Recently, Alfes, et al. (2013) studied mediating role of

employee engagement for the relationship of employees perceived HPWS with OCB and

turnover intentions. Therefore, on the basis of this discussion, this research proposed a

positive linkage between manager-HPWS and employee engagement and established

following relationship for empirical testing.

H3(a): Manager-HPWS is positively related with employee engagement.

Further, in general, employee performance refers to physical reactions of employees that

are essential and relevant for achievement of organizational goals and those behaviors are

under employees' control (Campbell, McCloy, Oppler & Sager, 1993). In service

context, clients are one of the most important factors considered when defining employee

performance (Bowen & Waldman, 1999). Employee service performance refers to their

behaviors related to serving and helping customers (Liao & Chuang, 2004). Further, the

concept of employee service performance is different from that of service effectiveness,

which includes the consequences of employee service performance like customer

satisfaction, commitment, loyalty and retention. Factors that (which) are not in control of

employees may cause variance in service effectiveness and, therefore, behavioral factor

in control of employees has been used in this study that is less contaminated (Campbell,

et al., 1993).

The environment and nature of service industry is quite different from production setup

and, therefore, requires different types of employees as compared to manufacturing

industry. Service industry is characterized by factors like service intangibility, production

and consumption of services at the same time, and involvement of customer in service

process (Bowen & Schneider, 1988) which makes it almost impossible to have quality

control checks to ensure quality like in manufacturing context (Schneider, et al., 1998).

Due to these reasons, front-line employees‘ performance and their behaviors (helping,

assisting or serving) towards clients are of paramount importance to address the needs of

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customers (Liao & Chuang, 2004) which directly affect customers‘ outcomes, such as

customer satisfaction, customer loyalty, with service quality. For these reasons,

organizations design work systems that include practices to ensure required level of

employee KSAs and motivation to match customer needs through superior service

performance.

Adding to this, Bowen and Ostroff (2004) suggested that organizational work practices

―should be largely driven by the strategic goals and values of the organization‖ and that

―the foci of the human resource management practices must be designed around a

particular strategic focus, such as service or innovation‖ (p. 206). To be an effective work

system, it should echo that how the employees can contribute towards organizational

success. To achieve this, work practices within the system must be aligned with some

strategic objective, without which, work system lacks its capability of showing

employees the clear direction.

Review of extant literature revealed that majority of the studies have used general

measures of individual performance like in-role performance behaviors (e.g. Uen, Chien

& Yen, 2009; Snape & Redman, 2010), and job performance (e.g. Kim & Wright, 2011).

However, researchers have argued and suggested to use organization-specific

performance measures while investigating HPWS and employee performance

relationship because of the reasons discussed in last paragraph. For example, some

researchers have recently used organization specific employee performance measures

such as service performance (Liao, et al., 2009), quality and efficiency of patient care in

health-care sector (Gittell, et al., 2010), teacher‘s performance (Shen, et al., 2014) and

volunteers‘ performance in hospital settings (Rogers, et al., 2016).

This study, therefore, hypothesized a positive relationship between manager-HPWS and

employee service performance, as service sector specific individual performance

measure, and established following hypothesis for empirical testing.

H3(b): Manager-HPWS is positively related with employee service performance.

Further, Katz and Kahn (1966) highlighted that employees‘ discretionary (also called

spontaneous) behaviors are vital for organizational effectiveness. Researchers suggested

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that these are employees‘ discretionary efforts that differentiate average and outstanding

firms through influencing service quality perceptions of the customers (e.g. Morrison,

1997; Berry, 1999; Bowen, et al., 2000).

Organ (1997) demarcates employees‘ organization citizenship behaviors as employees‘

discretionary efforts that contribute ―to the maintenance and enhancement of the social

and psychological context that supports task performance‖ (p. 91). The concept of

organizational citizenship behavior has been conceptualized in different ways by various

researchers during last three decades (e.g. Bateman & Organ, 1983; Organ, 1988;

Williams & Anderson, 1991). Among these, Organ (1988) developed one of the most

known conceptualization where he initially conceptualized a five-dimensional OCB

framework including altruism (i.e. helping and assisting other employees in their job

tasks and problems); courtesy (i.e. discussion and consultation with others before an

action); civic virtue (i.e. showing interest in the matters and affairs that influence the

organization); conscientiousness (i.e. employees‘ behavior showing that they accept and

follow organizational rules, procedures and regulations); and sportsmanship (i.e.

employees‘ willingness to bear and tolerate less ideal circumstances and giving greater

consideration to even smaller organizational problems). He further extended this model

by including peacekeeping and cheerleading as two other OCB dimensions (Organ,

1990). However, empirical researches indicated that managers often feel it difficult to

differentiate these two dimensions from others (Bachrach, Bendoly & Podsakoff, 2001;

Podsakoff & Mackenzie, 1994) and thus, they viewed peacekeeping, cheerleading,

altruism and courtesy as component of overall helping aspect of OCB (Podsakoff,

Whiting, Podsakoff & Blume, 2009).

Adding to workers‘ discretionary behaviors debates, Borman and Motowidlo (1993)

added by arguing that ―some types of OCB are probably more appropriate for certain

types of organizations than others. Service companies have special requirements on

dimensions related to dealing with customers and representing the organization to

outsiders‖ (p. 90). Consequently, Bettencourt and Brown (1997: 41) presented the

concept of ―service oriented OCB‖ to represent ―discretionary behaviors of customer

contact employees in servicing customers that extend beyond formal role requirements‖.

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Bettencourt, Gwinner and Meuter (2001) further identified dimensions of service oriented

OCB including participation, loyalty and service delivery. Where loyalty focuses on

employees‘ actions that not only promote and advocate the products and services to

outsiders but also image of the company. Through participative service oriented OCB,

employees take initiatives, particularly in information sharing (communication) in order

to improve not only their own service behavior but that of their coworkers as well. This

concept is the basis for organizations‘ ability to respond to their customers‘ changing

needs in more effective and efficient way. Finally, service delivery service-oriented OCB

focuses on employees‘ conscientious behavior during service delivery activities.

Organizational efforts through HR practices are argued to be very useful in producing

and encouraging more OCB among employees (Morrison, 1996) and therefore,

combination of HR practices in form of HPWS has been identified as a source to produce

workplace environment that encourages employees‘ discretionary behaviors (Sun, et al.,

2007). Employees‘ OCBs have also been recognized as the behavioral outcomes of the

psychological climate (Wayne, Shore & Liden, 1997; Rhoades & Eisenberger, 2002;

Spreitzer, 2008; Seibert, et al., 2011).

Researchers claimed that an organization's way of managing its human resource is

instrumental in determining the level of citizenship behaviors of its employees (e.g.

Rousseau, & Greller, 1994; Morrison, 1996). Sun, et al. (2007) reported that HPWS

develops and promotes employees' perceptions of organizational support that encourages

employees to exhibit discretionary behaviors essential for organizational success. In this

regard, practices like extensive training and development and promotions from within

organization establish employees‘ perceptions of supportive workplace atmosphere that

reciprocate in form of more frequent discretionary behaviors. Numerous researchers have

conceptualized and tested the relationship between HPWS and general form of OCB (e.g.

GONG & CHANG, 2008; Snape & Redman, 2010; Messersmith, Patel, Lepak & Gould-

Williams, 2011; Zhang & Morris, 2014). Further, Sun, et al. (2007) identified positive

relationship between intended HPWS and OCB in service sector employees. However,

service oriented OCB, rather than general OCBs, while investigating its relationship with

HPWS is rarely been considered. Therefore, in this study, service context specific OCB

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has been considered to investigate the relationship of HPWS with discretionary or extra-

role behaviors that assist in serving organizational customers and established following

hypothesis for empirical testing.

H3(c): Manager-HPWS is positively related with employee service-oriented OCB.

2.7.2 Mediating Role of Organizational Justice

Along with direct relationship between manager-HPWS and employee outcomes, this

study also hypothesized that this relationship is mediated by employees‘ perceptions of

organizational fairness (i.e. distributive fairness, procedural fairness, interactional

fairness). The concept of justice has been found in numerous philosophical works

focused on the characteristics of model social setup and serves as ―the origin from which

the whole of Western political theory begins‖ (Runciman, 1966: 254). ―Justice‖ has a

long and rich history as a philosophical concern and as a social construct and the work of

Aristotle and Plato had significant historical value in philosophy. In comparison to this,

the study of justice or fairness in social sciences is a recent phenomenon and Greenberg,

(1987) was the one who coined the term ―organizational justice‖. According to

Greenberg (1987), ―organizational justice‖ refers to the application of interpersonal and

social fairness theories in organizations to understand the behaviors of employees in the

workplace. First form of justices that captured the attention of researchers in

organizational studies was the concern regarding fairness of outcomes (Greenberg, 1987).

People's perception regarding fairness of outcomes is known as distributive fairness

(Leventhal, 1976). Individuals' opinion about procedures used for the allocation of

resources is known as procedural fairness (Thibaut & Walker, 1975). Further, last

dimension of organizational justice refers to the evaluation of interpersonal treatment

individuals receive from the decision makers (usually their supervisors or employers) is

called interactional fairness (Bies & Moag, 1986). Initially, the research on justice was

mainly concerned with the fairness of outcomes (i.e. distributive justice) only. In this

regard, Adams‘ Equity Theory is considered as a breakthrough work in justice research.

According to Adam (1965), people fairness evaluations of the outcomes were a relative

term where they calculate a ratio of inputs (competence, education and experience) and

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outputs (rewards) and then make a comparison of their own ration with that of others.

This theory suggested by Adam was based on the rule of equity and subjective in nature,

later on, however, some other researchers have used other allocation principles such as

need and equality (e.g. Leventhal, 1976) which are being discussed in greater detail

following section.

Organizational justice perceptions of employees and its dimensions attempt to investigate

and explain the effects of people's judgment regarding fairness and unfairness on their

feelings, attitudes and behaviors while working in organizations. In other words, these

dimensions focus on the extent to which employees' attitudes and feelings are influenced

and shaped by their fairness perceptions. Tyler, et al. (1997) also explained the concept of

organizational justice through identifying criteria that individuals use while evaluating

fairness of procedures and outcomes. According to them, evaluation of organizational

justice phenomena can be seen in four waves. They further described that the first wave

was the rise of research related to distributive justice (1940s to 1970s), the second wave

was dominated by the rise of procedural justice (1970s to late 1990s) and the third wave

emphasized on interactional justice (1980s to 2010). Moreover, Colquitt, et al. (2005)

added another wave named as ―integrative wave‖ where researchers attempt to study

different combinations of these three dimensions of organizational justice. This research

has used Tyler's metaphor of organizational justice to link HPWS with employee

outcomes. Each of these dimensions is discussed in greater detail in their respective

sections below.

Based upon organizational justice theory, this study addresses the ―black box‖ debate of

strategic HRM by explaining three dimensions of organizational fairness (distributive,

procedural and interactional) as mediating mechanisms that link manager-HPWS with

employee outcomes. Previous research studies have shown that HPWS has positive

association with various employees‘ attitudinal and behavioral outcomes as it develops

employees‘ competencies and provide them the incentives and participation opportunities

(Appelbaum, et al., 2000). Further, the organizational justice perceptions are widely

studied with individual HR practices in the extant literature (e.g. Greenberg, 1986;

McFarlin & Sweeney, 1992; Gilliland, 1994; Greenberg, 2003). Moreover, organizational

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justice acts as one of the most important antecedents of various employee attitudes and

behaviors (Dailey & Kirk, 1992; McFarlin & Sweeney, 1992; Masterson, et al., 2000).

Despite its importance in HRM, organizational justice construct has got less attention in

SHRM research to incorporate the psychological processes that explain the effects of a

system of organizational work practices on worker‘ reactions. Although studies have

investigated the relationship of fairness perceptions with HR practices individually, like

with compensation (McFarlin & Sweeney, 1992) or performance appraisals (Cheng,

2014), fairness of the HR ―system‖ has been rarely studied (Farndale, et al., 2011).

Therefore, this study proposed organizational justice a process to explain the linkage

between manager-HPWS and employee outcomes. According to Bowen, Gilliland and

Folger (1999):

―Although HRM practices are often guided by technical,

financial, legal and strategic concerns, most employees do

not have the information or expertise to evaluate practices

from these perspectives. Employees evaluate HRM

practices from the users‘ perspective that is largely driven

by desires for fair and equitable treatment‖ (pp. 3).

HR systems in the form of bundle of practices have many components and features that

are expected to affect fairness perceptions of employees. As discussed earlier, in general,

HPWS includes several components such as selective hiring and rigorous selection,

active employees' participation in work processes, extensive trainings, information

sharing, learning and development, validated performance appraisals and performance

based equitable compensations (Arthur, 1994; Huselid, 1995). These elements not only

impact employees‘ skills and motivation but can also influence employees' justice

perceptions which further impact their attitudes and behaviors.

This relationship of HPWS, organizational justice and various employee outcomes could

be explained through social exchange theory where employees reciprocate the actions of

employer with their own actions accordingly (Blau, 1964). In other words, employees

more willingly accept decisions, cooperate and even ready for assistance when they get a

fair treatment from their employers (Tyler & Smith, 1998). Opposite to this, if employees

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have a feeling that their employer is not treating them fairly, they are more likely to show

counterproductive behaviors and emotional exhaustion (Cole, et al., 2010), seek revenge

(Bies & Tripp, 2005), stealing (Greenberg, 1993) and take legal actions (Lind, et al.,

2000). Three meta-analytic studies summarized much of this research and reported high

level of correlation between organizational justice and employees reactions (e.g. Cohen-

Charash & Spector, 2001; Colquitt, et al., 2001; Viswesvaran & Ones, 2002) including

confidence on management, job performance, OCBs and counterproductive behaviors.

Next sections will discuss each dimension of organizational fairness (distributive

fairness, procedural fairness and interactional fairness) separately as psychological

mechanisms through which manager-HPWS is related with employee outcomes

(employee engagement, service performance and service oriented OCB).

2.7.2.1 Manager-HPWS, Distributive Justice and Employee Outcomes

Distributive justice is referred to as employees‘ perceptions of fairness concerning the

outcomes received in response of organizational allocation decisions. Employees usually

establish their evaluation opinion by comparing it with some referent standard

(Greenberg, 1990). Three rules are particularly important to establish and understand the

association of HPWS and distributive justice are (i) equality; (ii) equity and (iii) need.

Extant literature showed that individual HR practices like selection, compensation,

promotions and downsizing have been studied with employees‘ distributive justice

perceptions.

For instance, in the context of selection decision, distributive fairness refers to the

perceptions of evaluation accuracy and appropriateness of final selection decision.

Gilliland (1993) concluded that in selection decisions, equity-based selection rules were

crucial because candidates give more value to fairness of outcomes by comparing them

with some referent standard and were not concerned much regarding absolute level of

outcome (Colquitt, et al., 2001). Whereas hiring situation with these equality-based rules

argues that through unbiased evaluation, all the job applicants should treat equally and

have equal chances of being hired on job (Anderson, et al., 2001). On similar lines of

scientific investigation, Singer (1990) reported that equality of opportunities and avoiding

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nepotism were rated as the most important determinants of fairness perceptions of

distributive justice.

In performance appraisal settings, distributive fairness could be understood as

employees‘ responses to their performance evaluation based upon principles including:

(i) evaluation scores should meet worker‘s expectations; (ii) post-evaluation decisions

should be determined on the basis of evaluation scores and (iii) these decisions should

meet workers‘ expectations (Bowen, Gilliland & Folger, 1999). In simple words,

employees evaluate the outcomes they receive as a result of their performance evaluation

ratings. Further, Gabris and Ihrke (2001) found that employees became more doubtful

about the fairness of organizational compensation system when they did not get the

rewards on the basis of their performance evaluation scores (i.e. distributional equity).

Negative distributive justice perceptions regarding the performance appraisal system of

an organization can enhance the burnout level of the employees (Gabris & Ihrke, 2001).

They further reported that in response to such poorly perceived distributive justice

context, some employees decrease their efforts level while others start working harder

that cause increased exhaustion and burnout.

According to Miceli and Lane (1991), the concept of distributive justice applies to

employee compensation and benefits as ―employees‘ evaluation of the perceived inputs

and outcomes of referent others and through this process identify benefit types and levels

they consider appropriate or desirable‖ (p. 20). Sweeney (1990) studied employees‘

perceptions of distributive justice regarding their pay on the basis of equity rule and

reported that fairness perceptions regarding performance rating and pay satisfaction had a

curvilinear relationship. He also reported that fairness perceptions of compensation were

highly associated with their pay satisfaction. In other words, employees who perceived

their compensation as more fair were more satisfied with their pay compared to those

who perceive their pay level lesser than what they actually deserve who were dissatisfied

with their pays. Finally, employees with the perceptions of getting more than what they

deserve were also less satisfied with their pay but this relationship was not statistically

significant. Furthermore, employees establish distributive fairness evaluations on the

basis of internally and externally equitable remuneration and incentives (Applebaum, et

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al., 2000). Similarly, extensive and formal trainings enhance employees‘ perceptions of

distributive justice as these trainings help employees in improving their knowledge, skills

and abilities and assist them in superior performance execution (Applebaum, et al., 2000).

On the other hand, extant research highlights that employees‘ perceptions of distributive

justice have significant association with their attitudes and behaviors at work (e.g.

McFarlin & Sweeney, 1992; Blancero, et al., 1996; Masterson, et al., 2000) Therefore,

these positive perceptions should assist organizations in developing favorable attitude of

employees like enhancing their engagement, commitment and job related satisfaction

along with their performance and discretionary behaviors. In addition to this, previous

researches showed that pay equity perceptions are related to some of the most desired

HPWS consequences in form of employees‘ attitudinal and behavioral outcomes such as

job satisfaction, (e.g. Agho, et al., 1993; Tekleab, et al., 2005), employee engagement

(e.g. Saks, 2006) organizational commitment (Alexander & Ruderman, 1987; Chang,

2002) and increased workload (e.g. Brockner, et al., 1994). Thus, on the basis of the

above discussion, this study has proposed that distributive justice dimension of

organizational justice acts as mediating mechanism that links manager-HPWS with

employee outcomes and established following hypotheses for empirical testing:

H4(a): Distributive justice mediates the relationship of manager-HPWS with employee

engagement.

H4(b): Distributive justice mediates the relationship of manager-HPWS with employee

service performance.

H4(c): Distributive justice mediates the relationship of manager-HPWS with employee

service oriented OCB.

2.7.2.2 Manager-HPWS, Procedural Justice and Employee Outcomes

Greenberg and Tyler (1987) defined procedural fairness as ―the perceived fairness of the

means used to make decisions‖ (p. 129). Procedural justice indicates a decision making

process that is incorporating opinions and suggestions of individuals and felt more

transparent and fair by employees. Leventhal (1980) described six factors for fair

procedure including consistent, correct, unbiased, representative, accurate and ethical.

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Previous empirical evidences showed that there are many components of organizational

HRM function that are significantly associated with the perceptions of procedural justice

including (i) selection decisions (Gilliland, 1993, 1994); (ii) employee evaluation

(Greenberg, 1986); (iii) promotion decisions (Bagdadli, et al., 2006); (iv) employee

compensation (McFarlin & Sweeney, 1992); (v) career related decisions (Crawshaw,

2006); and (vi) layoffs (Brockner, et al., 1994).

In case of using job-based selection techniques on job applicants, the participating

employees consider the fact that firm has used consistent and valid measure(s) for hiring

(Gilliand, 1993). In the same manner, Korsgaard and Roberson (1995) have noted that

providing employees a ―voice in decision procedures provides an indirect way to control

or ensure a fair decision‖ (p. 660). In the presence of HR practices, employees are more

engaged in decision making processes and have more trust on other parties, therefore,

they have higher level of procedural fairness perceptions (Konovsky & Pugh, 1994).

Further to a certain degree, ―procedural justice can be enhanced by giving employees a

voice in determining the methods by which outcome decisions are made—for example,

involving employees in designing behavior or outcome-based performance appraisals‖

(Bowen & Ostroff, 2004: 213). Researchers have also argued that employees are more

motivated in sharing information when their point of view got consideration by the

decision makers (Miller & Lee, 2001). When workers are more comfortable in expressing

their views by using communication channels inbuilt in organizational HPWS, they feel

higher level of procedural justice in such situation. As a result of these feelings of

procedural justice due to HPWS context, employees will reciprocate with higher

engagement, commitment, job satisfaction and job related and discretionary performance

behaviors.

In the context of employee appraisal, for example, many procedural justice rules are

having stronger impact on outcomes of HPWS. Employee voice was reported as the most

significant procedural fairness rule. Providing employees with the opportunity for voice

in performance appraisal refers to asking the subordinate to comment on his/ her

performance during evaluation period and vice versa (Holbrook, 2002). A meta-analysis

concluded that employees were more motivated, satisfied and considered the decision

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making process more fairly conducted when they had more opportunities for voice

(Cawley, Keeping & Levy, 1998). This was the case even when employee participation

did not affect the results of their performance ratings. Moreover, extant research studies

have concluded that employee voice can result into positive procedural justice

perceptions regardless of the final outcomes (Folger & Greenberg, 1985; Korsgaard &

Roberson, 1995). Similar results had also found where employee voice procedures were

considered more fair in employee evaluation and pay packages (Folger & Greenberg,

1985), participatory decision-making (Greenberg & Folger, 1983), and conflict

management (Sheppard, 1985). Studies also concluded that involving employees in

decision making (participative decision making) caused enhancing their beliefs regarding

the procedural justices from their employers (e.g. Bies & Shapiro, 1988; Greenberg,

1990; Avery & Quiñones, 2002).

In context of employee compensation, the role of procedural justice is another important

perspective in understanding HPWS and justice relationship. Cloutier and Vilhuber

(2008) categorized the effect of pay determinants on procedural justice into four

dimensions. These dimensions includes: (i) perceptions of allocation procedures

characteristics (including accurate information of the contents of job, relevant employee

appraisal criterion and persistence of application); (ii) perception of decision makers‘

characteristics (perceived competence and impartiality); (iii) perceptions regarding

system transparency (procedures and outcomes information access) and (iv) procedure

for appeal (information availability about the procedure of filing a complaint and security

from fear of adverse action on it and correctability). Previous studies have reported that

procedural fairness perceptions explain huge variation in pay satisfaction in the area of

compensation (e.g. Dyer & Theriault, 1976; Tremblay, et al., 2000). Research studies

supported the idea of minimizing dissatisfaction with compensation outcomes if

employees perceived the decision making procedure fair and just (Greenberg & Folger,

1983; McFarlin & Sweeney, 1992). Additionally, Welbourne (1998) reported that

perceptions of procedural fairness and gainsharing satisfaction had positive relationship.

In the context of team working, Naumann and Bennett (2000) reported that supervisor‘s

visibility and perceived cohesiveness were positively related with perceptions of

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procedural fairness in teams. In addition to this, Price, et al. (2006) also stated that

employees‘ perceptions of fairness were more stronger when they were given opportunity

of voice in team and further team was allowed voice at organizational level by

management. Colquitt and Jackson (2006) recommended that team environment might

impact its members‘ choices of justice norms that they apply to evaluate further for

procedural justice and identified consistency, equality and decision making control as the

most important rules. Research studies have reported that organizational practices with

perceptions of procedurally unfair are related with poorer employees‘ attitudes at work

explaining that the association of justice and HR practices is not always positively biased

(McEnrue, 1989; Ambrose & Cropanzano, 2003). This perspective supports the

pessimistic view of human resource management (e.g. Ramsey, et al., 2000) that

considers it beneficial for the organization only and reducing employees‘ wellbeing at

workplace through work intensification, lowering job security and work pressures.

Similarly, Bagdadli, et al. (2006) studied procedural justices perceptions in employee

promotion process and identified inverse impact on commitment for reason that how

employee perceive personal advancement opportunities and perceptions of the criteria

being used in the promotion process. This showed that workers were concerned about the

fairness of both the procedure and results in a promotion system. Similar relationship has

been identified between perceptions of procedural fairness and employee outcomes for

individual high performance work practices including career management (Crawshaw,

2006); grievance procedures (Shapiro & Brett, 1993); teamworking (Shapiro & Kirkman,

1999); and layoffs (Brockner, et al., 1994).

On the other hand, extant literature has also demonstrated that employees‘ perceptions of

procedural justice have positive association with their attitudes and behaviors at work

(Folger & Konovsky, 1989; Mossholder, et al., 1998; Colquitt, et al., 2001). As

Konovsky and Cropanzano (1991) reported that ―procedural justice is associated with

employee loyalty because the use of fair procedures generates expectations of fair

treatment in the long run‖ (p. 699). Moreover, employees‘ perceptions of procedural

justice regarding HRM practices are strongly related to the job satisfaction, employee‘s

organizational commitment and trust in management (Folger & Konovsky, 1989;

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McFarlin & Sweeney, 1992). Moorman, Niehoff and Organ (1993) concluded that

procedural justice perceptions of employees were positively related with their

organizational citizenship behavior. In their study of 475 hospital employees, Konovsky

and Pugh (1994) empirically tested the association of procedural justice perception and

OCB and found that the perceptions of procedural justice are strong predictor of

employees OCB. Recently, Chen and Jin (2014) also reported that employees‘

perceptions of distributive and procedural fairness were more positively related with their

OCB than interactional justice perceptions. They conducted this study in Chinese context

for the first time to study justice and OCB relationship in Eastern culture where most of

the previous research work has been done in Western context. In return, organizational

citizenship behavior (OCB) has been identified as potential antecedent of numerous

individual and group outcomes (Podsakoff, et al., 2009).

Furthermore, Wu and Chaturvedi (2009) studied the mediating role of procedural fairness

perceptions for the relationship of intended HPWS with affective commitment and job

satisfaction. Therefore, it can be argued that these positive perceptions caused by

implemented HPWS should assist organizations in developing favorable attitude of

employees like enhancing their engagement, commitment and job related satisfaction

along with their performance and discretionary behaviors. Therefore, on the basis of the

above discussion, this study proposed that procedural justice dimension of organizational

justice acts as mediating mechanism that links manager-HPWS with employee outcomes

and established following hypotheses for empirical testing:

H5(a): Procedural justice mediates the relationship of manager-HPWS with employee

engagement.

H5(b): Procedural justice mediates the relationship of manager-HPWS with employee

service performance.

H5(c): Procedural justice mediates the relationship of manager-HPWS with employee

service oriented OCB.

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2.7.2.3 Manager-HPWS, Interactional Justice and Employee Outcomes

Third type of organizational justice used in this study is interactional justice also ensured

through the components of implemented HR system of an organization. Interactional

fairness refers to employees‘ perceptions of fairness regarding the interpersonal treatment

they receive from their supervisors (Chang, 2005). Employees usually seek this fair

treatment from their supervisors on the behalf of their employer. Bies and Moag (1986)

argued that the literature around procedural fairness had not covered the breadth of

employees‘ perceptions of fairness of processes and procedures. Although procedural

fairness has critical role as how employees perceive fairness of formal processes or

procedures used in making decisions, social aspect is also important and missing as how

these procedures work in practice. Bies and Moag (1986) listed: (i) interpersonal fairness

and (ii) informational fairness as two such social dimensions of fairness. These two

dimensions collectively form interactional justice which is used in this study.

Interpersonal justice refers to the interpersonal treatment that employees receive while

enacting organizational procedures. In the context of employee selection, interpersonal

effectiveness during, recruitment, screening and selection decisions are important

determinants of employees‘ perceptions of procedural and outcome fairness. Numerous

research studies have found that organizational recruiters with better interpersonal skills

and warmth behavior are one of the main reasons of accepting job offers by the job

successful applicants (Barber, 1998; Taylor & Collins, 2000).

In contexts related to performance management, the ways in which organizational

procedures are enacted have more influence on fairness perceptions than the procedures

themselves (Cobb, Vest & Hills, 1997). Erdogan, et al. (2001) identified that punctuality,

voice tone of the rater and attentiveness, kindness and respectful attitude for the ratee are

the important factors they consider for making their judgments of fairness. Moreover,

Aryee, et al. (2007) reported that employees‘ perceptions of justice or injustice are

strongly based upon the interpersonal treatments they receive from their supervisors.

They further found that supervisor‘s perceptions of interactional justice i.e. how well he/

she was treated by the supervisor was linked with the interactional justice perceptions of

their own staff and declared it trickledown effect. In other words, according to Aryee, et

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al. (2007), ―supervisors who experience interactional injustice at the hands of their

immediate bosses may take out their frustration on subordinates‖ (p. 192).

In the context of compensation decision processes, interactional justice refers to

communication between supervisors and their subordinates for deciding about

compensation. Andersson-Straberg, et al. (2007) found that greater respect shown by the

manager during performance reviews and day to day performance feedback was strongly

related to interactional justice perceptions of employees. With respect to the scenarios

relating to organizational change process, taking care of the employees who are

influenced by the reorganization by providing them support through activities like career

counseling and outplacements enhance their interactional justice perceptions as they see

this treatment as respect and sensitivity shown by their employer towards the employees

(Kernan & Hanges, 2002). They found employers‘ input, communication and support for

employees as the strongest predictors of employees‘ interactional justice perceptions in

their study conducted on one major pharmaceutical company that had gone through

organizational change process. As a result, trust in management improved through these

interactional justice perceptions. Research studies reported similar findings for the

association of interactional justice perceptions and variable pay (Cox, 2003), work team

settings (Byrne, 2001), employee grievance mechanisms (Nabatchi, Blomgren, Bingham

& Good, 2007), employee dismissals (Darcy, 2005) and layoffs (Brockner, et al., 1994).

Further, informational justice is a concept related to truthfulness and provision of

adequate information and justification for the decisions taken by managers (Cropanzano,

et al., 2007). In the context of employee selection, timeliness and honestly providing the

selection information are important determinants of informational justice perceptions of

employees (Gilliland, 1993, 1994). Likewise, researchers have identified that not

knowing the procedures increase the uncertainty level for the candidates during

recruitment phase and they attribute themselves as poor performers rather than not

knowing the expectations and the situation (Arvey & Sackett, 1993; Bauer, et al., 1998).

During the selection phase, dishonesty in providing the information to the job applicants

reduces trust level and perceptions of fairness (Gilliland & Hale, 2005; Lind & Tyler,

1988). Bauer, et al. (1998) and Gilliland, et al. (2001) argued that providing job

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applicants with the information about the use of particular selection method and

evaluation criteria along with the justification for some specific selection decision

positively influence fairness perceptions of the applicants. Cropanzano and Wright

(2001) further argued that job applicants‘ perceptions regarding lack of necessary

information regarding selection decision enhance their perceptions of injustice.

In the settings of performance appraisal, studies have shown the importance of

informational justice (e.g. Bies & Shapiro, 1988) and highlighted the importance of

information sharing in shape of performance feedback and justifications to the

subordinates along with their appraisal ratings (Bies & Shapiro, 1988; Holbrook, 1999).

Bies and Shapiro (1988) further identified that unfavorable incidences were perceived

fair by employees if they had acceptable justifications and explanations along with their

performance ratings. However, Holbrook (1999) proposed that not all information

sharing and explanations are effective and may cause adverse impact and further

distinguished between external and internal explanation. Internal explanation focus on

personal traits or characteristics of the employee, where the decision recipient (the

subordinate) believes that he/ she can potentially influence the rater‘s scores through their

performance and actions. Whereas, external explanation or justification (or excuses)

refers to other factors than employee‘s personal characteristics and employee believes

that the decision maker (rater) has not enough control over the rating decision (e.g.

organizational directive, historical precedent). Furthermore, favorable outcomes in term

of rating decisions are linked with internal explanations of the decisions. However, the

second preposition of his study i.e. the explanation whether external or internal would

result into positive employees‘ reactions was not substantiated.

Kernan and Hanges (2002) conducted a research study on the surviving employees‘

reaction towards reorganization indicated that informational justice has significant

predictive potential for trust in management. Their study concluded that employees‘

perceptions of informational fairness were positively associated with information quality

(employee voice opportunities and communication) and implementation (management

actions consistency) during reorganization phase. Lind, et al. (1998) highlighted that

employees did not blame their employers who understand and accepted the economic

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rational as reason for their job loss and even after they lose their job, they perceived this

treatment as fair and in respectable and dignified way. Factors included timely layoff

notices, assisting them in search of new jobs and dealing them with ultimate respect and

dignity. Folger and Skarlicki (1998) identified that when managers have bad news

regarding their subordinates, they often distance themselves from the victims of layoff

decision through decreasing their interpersonal contact instead of providing them

adequate information and explanation in a more sensitive manner.

In terms of employee compensation, employers who regularly explain the criteria for

compensation decision were perceived as more fair by their employees (Holbrook, 1999).

Schaubroeck, et al. (1994) identified that in case of continuous pay freeze, presence of

adequate justifications significantly reduce employee‘s turnover intentions, maintain their

procedural justice perceptions and enhance their satisfaction with their job and

commitment with their employers. Moreover, previous research studies showed that

employees perceive negative pay outcomes like merit pay freeze, pay cuts as fair,

appropriate and just when they have been provided adequate justifications and

explanations (Greenberg, 1990; Schaubroeck, et al., 1994).

On the other hand, numerous research studies have been conducted in laboratories and

fields that demonstrate the association of interactional justice perceptions with expected

employee outcomes of HPWS like affective commitment, job satisfaction and employee

performance (e.g. Cropanzano, et al., 2001). For instance, Pate, Martin and McGoldrick

(2003) studied the association of employees‘ perception of interactional justice with

employee attitudes including job satisfaction and organizational commitment. In addition

to this, Blancero, et al. (1996) investigated the relationship of interactional justice and

employees‘ discretionary behavior in services industry. Results of various research

studies have also demonstrated that employees' perceptions of interactional fairness were

positively linked with trust (e.g. Barling & Phillips, 1993; Ambrose & Schminke, 2003;

Saunders & Thornhill, 2003). Therefore, on the basis of the above discussion, this study

proposed that interactional justice dimension of organizational justice acts as mediating

mechanism that links manager-HPWS with employee outcomes and established

following hypotheses for empirical testing:

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H6(a): Interactional justice mediates the relationship of HPWS with employee

engagement.

H6(b): Interactional justice mediates the relationship of HPWS with employee service

performance.

H6(c): Interactional justice mediates the relationship of HPWS with employee service

oriented OCB.

2.8 Conclusion

This chapter is written with the aim of providing review of literature on HPWS-

performance relationship. The chapter started with the discussion of history and

emergence of people management in organizations. This chapter then discussed in detail

the concept of high performance work system, its relationship with performance

outcomes along with current debates prevailing in this research area. Further, based upon

review of literature, this study indentified and proposed mediating mechanisms

connecting HPWS with bank branch performance and employee outcomes (employee

engagement, service performance and service related OCB). First, based upon resource

based view of firm (RBV), this study proposed bank branch level collective human

capital as mediating variable between manager-HPWS and bank branch performance.

Further, based upon social exchange theory, organizational fairness dimensions

(distributive fairness, procedural fairness and interactional fairness) are proposed as

intermediary mechanisms for the relationship between manager-HPWS and employee

outcomes. In total, six main hypotheses along with a number of sub-hypotheses were

developed for empirical testing. Next chapter will present research methodology

employed to test proposed relationships of this study.

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Chapter 03:

Methodology

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3. Methodology

3.1 Introduction

This chapter discusses in detail the methodological considerations employed while

carrying out this research. Chapter starts with the discussion of research paradigm

adopted in this study followed by the description of research design. Further, details on

sampling design including target population, sampling technique, sample size, and data

collection tools and procedure are also presented in this chapter. Finally, discussion of

measurement instruments used for the variables of the study is presented and the chapter

ends with the discussion of data analysis techniques used in this study followed by ethical

considerations while conducting this study.

3.2 Research Philosophy

―All research is based on assumptions about how the world is perceived and how we can

best come to understand it‖ (Uddin & Hamiduzzaman, 2009: 658). Thus, understanding

of research philosophy is critical for at least two reasons (Hughes & Sharrock, 1997).

One, research paradigm directs ―in-depth thinking, and generates further questions in

relation to the topic under consideration‖ (Crossan, 2003: 47). Next, research philosophy

considerations enable scholars to select, improve and assess research methods to be

employed (Easterby-Smith, et al., 2002).

In organizational research, four research paradigms are used including positivism,

constructivism, realism and critical theory (Sobh & Perry, 2006). In positivist paradigm,

knowledge is generalized for a larger population based upon the empirical analysis of

data. In constructivism, findings of research are related to researcher‘s perspectives about

the reality and their manifold constructed realities. In case of realism, knowledge is

generated through analytically demonstrating empirical findings enclosed within theories.

In case of critical theory, the generalization of knowledge is done through its

appropriateness to the judgments in the society.

Of these four research approaches, positivism is a main research philosophy used in

organizational research. Aguinis, et al. (2009) presented a review of research methods in

organizational studies indicating that majority of the empirical studies in organizational

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sciences adopted positivist paradigm. This concept of ―positivism‖ was first introduced

by August Comte (1798-1857), a French philosopher, in nineteenth century. According to

him, ―society could be analyzed empirically just like other subjects of scientific enquiry

and social laws and theories could be on the basis of psychology and biology‖

(Walliman, 2005: 203). Stating simply, knowledge could be gathered through how people

see reality (Comte, 1853). Thus, research studies based upon positivism generally adopts

quantitative approach to examine the reality which has several advantages. First,

quantitative approach enables researchers to make comparisons between locations,

groups and time which can be gauged for difference. Second, positivism paradigm

enables researchers to predict phenomena by attempting to examine the causal

relationships. Therefore, scientific investigation through a small group (sample) can

provide reliable reflection of a larger population. Third main advantage is the control of

researcher over research process (e.g. controlling factors such as variables and survey

instrument standardization). There are numerous other advantages of this research

approach such as clear theoretical focus, economical data collection from large number of

respondents and easy data comparisons (Saunders, et al., 2007). Despite several

advantages, positivist approach has also been criticized for not ―providing the means to

examine human beings and their behaviors in an in-depth way‖ (Crossan, 2003: 51).

Consequently, post-positivism emerged as an amendment to positivist approach and

accounts for the criticism on positivism (Popper, 1959) which believe that ―reality is

multiple, subjective and mentally constructed by individuals‖ (Crossan, 2003: 54). Thus,

positivism approach is refined and not rejected by post-positivism.

Positivist approach has been widely used in social sciences and also in organizational

research because of several advantages, discussed above, over other research paradigms.

Like other organizational researches, survey is the approach mostly used while

investigating HPWS-performance relationship (e.g. Arthur, 1994; Huselid, 1995; Becker

& Gerhart, 1996; Delery & Doty, 1996; Guthrie, 2001; Datta, et al., 2005; Takeuchi, et

al., 2007; Guthrie, et al., 2009; Liao, et al., 2009; Aryee, et al., 2012). This study also

used positivist approach like all main stream empirical studies in the area of SHRM. The

main goal of current research was to investigate the influence of implemented HPWS on

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bank branch performance and employee outcomes and the intermediary mechanisms

explaining these relationships. Therefore, positivist approach is best suitable as it uses

surveys for gathering observations and employs statistical analysis for testing proposed

relationships among variables to explain their relationships in order to reach a conclusion

generalizable to entire population (Malhotra, et al., 2000). In addition to this, as

positivism paradigm uses a structured research process, the findings from such process

can provide suggestion for future strategies which are reliable empirically because of

objective procedures and criteria (Wright & Crimp, 2000). Reliability of findings is also

ensured through a large sample size used representing the population under study.

Positivist approach also allows comparing the findings of current study with that of

previous ones. Finally, this approach also allows testing the intermediary variables which

explain the HPWS-performance relationship.

3.3 Research Design

In any scientific study, decision regarding research design is based upon the purpose and

type of research study. According to the purpose of the study, there are three types of

research design including descriptive, exploratory and causal research (Zikmund, Babin,

Carr & Griffin, 2010). A descriptive research design is employed to illustrate the

characteristics of objects under study such as percentage, mean and so on. The main

purpose of descriptive research is to provide accurate and reliable data (Neuman, 2007).

Next, exploratory research is required to define and clarify a problem (Malhotra, et al.,

2006). Contrary to this, causal research is employed to test cause-and-effect relationship

between variables based upon clearly defined research problem (Sarantakos, 2005;

Zikmund, et al., 2010). Causal design is suitable where the purpose of the study is to

establish the nature of relationship among variables.

Based upon the objectives set for this study i.e. to examine direct and mediation effects of

implemented HPWS with bank branch performance and employee outcomes, this study

has mainly employed causal research design (also called hypotheses testing) along with

the descriptive one. Descriptive research was first used to illustrate the profiles of the

participants and characteristics of all the variables used in this study. Causal research

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design was then employed to test the proposed relationships among the constructs of the

study. For this multilevel quantitative study, survey method was used to collect cross-

sectional data from two sources. First, bank branch managers were requested to give

responses on bank branch level constructs including implemented HPWS (manager-

HPWS), branch collective human capital and bank branch performance. Second, front

line employees were asked to give information regarding the individual level variables

including distributive fairness perceptions, procedural fairness perceptions, interactional

fairness perceptions, employee engagement, service performance and service oriented

OCB. Details on how the survey was administered for this research study are given in

section 3.6 of this chapter.

This study considered the commercial banks operating in Pakistan because of their huge

size and operations across Pakistan. According to State Bank of Pakistan, (2015), 30

commercial banks with over 11,000 branches are operating in the country. Of 30

commercial banks, five are public banks, 16 are privately owned banks, five are Islamic

banks and remaining four are specialized banks. In terms of number of branches, state

owned banks had a total of 2,100 branches, private banks had 8,119 branches, Islamic

banks had 1,021 branches and specialized banks had a total of 603 branches across

Pakistan. The website of each of these banking organizations was consulted to estimate

number of branches across country in October 2014. For the purpose of this study, bank

branches of all the commercial banks operating in Punjab were targeted because of many

reasons. First, Punjab represents the largest proportion of population i.e. over 100 million

(55.6%) with the largest share in the GDP of the country. Second, approximately 56%

(over 6500 branches) of the bank branches are operating in Punjab which constitutes the

largest proportion of banking industry operating in any area of Pakistan. Further, all 30

commercial banks operating in the country also have their branches operational in

Punjab. Appendix A presents details on the breakdown of the branches of commercial

banks operating in Pakistan and Punjab. Sufficient number of bank branches provided the

opportunity to cast a broad net for this research.

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3.4 Target Study Area

This study has targeted the Punjab province of Pakistan for being the largest province

of the country in terms of population and share towards national GDP. Moreover, it has

the largest and fastest growing economy as compared to other provinces and

administrative units (ESP, 2014). The population of Punjab is more than 100 million that

is approximately 55.6 % of total population of the country occupying just 26 % land area

of the country with largest number of developed civic centers as compared to any other

province of Pakistan. Further, approximately 55.6% of the banking sector is located in the

Punjab province of Pakistan that is reasonably higher ratio than any other province and

administrative units of Pakistan including Sindh, Balochistan, Khyber Pakhtunkhwa,

Gilgit Bultistan and Azad Jamu & Kashmir.

3.5 Population and Sample

This section illustrates the detail of the population targeted for this study along with the

issues related to sampling including sampling technique used and sample size selected for

this study. Defining the target population for research study is the first step of sampling

design. Targeted population, for the purpose of current study, consisted of all the bank

branches of commercial banks operating in the Punjab province of Pakistan and front line

employees working in these bank branches.

Currently, according to State Bank of Pakistan (2015), 30 commercial banks are

operating in Pakistan with a total of 11,843 branches all over the country. Further, all 30

commercial banks operating in Pakistan are also present and doing their business

activities in Punjab. It was estimated that 6,581 bank branches of these banks (consist of

about 55.6 % of the total banking industry of the Pakistan) are operating in Punjab. SBP

has categorized these commercial banks into four categories: (i) public sector banks, (ii)

private banks, (iii) Islamic banks and (iv) specialized banks. Appendix A presents detail

of this categorization of banks by SBP in terms of number of branches operating in

Pakistan and in Punjab.

In any survey or experiment, it is not possible to include each and every unit of

population and therefore, researchers draw samples from a large population (Strati, 2000;

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Babbie, 2011). Mainly two methods are available for drawing samples from a large

population for any research study i.e. probability and non-probability sampling. In the

case of probability sampling design, simple random sampling, stratified sampling,

systematic sampling and cluster sampling are the approaches used by the researchers. On

the other hand, convenience sampling, quota sampling, snow ball sampling and purposive

sampling are the options available with non-probability sampling design (Zikmund, et al.,

2010; Saunders, 2011). Probability sampling design is considered more reliable than that

of non-probability methods of drawing sample from the population (Babbie, 2011). This

study used probability sampling technique to select a sample from targeted population

which means that every element of the targeted population has equal and known chances

to be selected as sample (Zikmund, et al., 2010; Saunders, 2011).

Moreover, multistage area sampling technique was used to identify the sample for the

purpose of the current study. In this regard, Punjab was selected first as target province

due to its largest proportion (i.e. more than 55%) of banking industry and was further

divided into 36 districts. Following the division of Punjab province into districts,

systematic random sampling was employed to select the target bank branches operating

in each district located in Punjab. Because all the districts and also all the banking

organizations had not equal number of bank branches, therefore, a list of all bank

branches was first developed carefully with its district wise categorization (first level

categorization) in alphabetic order. Next, the sub categorization within each district was

also done on the basis of bank names following once again in alphabetic order. Purpose

of this two level categorization was to maintain the proportion of bank branches from

each district and from each banking organization. After successful compilation of the said

list of bank branches, desired numbers of bank branches were selected through systematic

random sampling. Systematic random sampling was used to ensure the right proportions

of bank branches from each district and from each banking organization to keep the

sample representative of the targeted population as suggested by Saunders, (2011).

For this study purpose, 450 bank branches were selected as a sample for collection of

data. Sample size requirements for a research study are determined by many factors

including the proportion of the population size, data requirements of data analysis

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techniques employed along with access, time and financial resources available for that

particular research project (Sekaran, 2006; Zikmund, et al., 2010; Saunders, 2011).

According to the estimation given by Saunders (2011) and Sekaran (2006), in fact, a

sample size of 370 is required from a population with 10,000 units and 357 for a

population size of 5,000 units. Therefore, approximately, a size of 360-365 bank branches

was appropriate for current study having around 6,500 elements in the population.

Further, according to Tabachnick and Fidell (2007) and Hair, et al. (2010), data size of

250 observations is appropriate for testing hypotheses by using structural equation

modeling. Because there is often a low response rate from a survey (Zikmund, et al.,

2010), therefore, it was decided to select 450 bank branches as a sample for this study to

had a reasonable response rate which fulfill the requirements of similar to population

characteristics as well as observations required for data analysis.

Secondly, being the key employees, the front-line employees of 450 selected bank

branches who were directly involved in customer services and had atleast one year of

experience were considered for individual level data in this research. The reason for

including ―one year experience‖ as criteria was that new employees require some time to

understand organizational personnel policies and to make judgments about organizational

policies and procedures. Therefore, it was deemed reasonable to collect data from only

those employees who had spent some good amount of time with the bank to experience

and then express their feelings about organizational policies. A total of 2,500 front-line of

450 selected branches were contacted for responses on individual level variables for this

research study purpose.

Researchers identified and agreed that HR practices are not applied in the same manner

across all employee groups within same organization (Lepak, et al., 2007; Wright &

Boswell, 2002). Moreover, Boxall, et al. (2011) highlighted that in an organization, not

all the employees are managed in the same way with the main focus on key employees of

the organization. Researches also showed that an organization is a common place for

different employee groups including managers, production workers, professionals,

supporting staff, clerical employees and technical specialists that have different levels of

importance for employer and therefore are managed in different ways in terms of level of

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compensation, retention efforts, security of job, work pressure, autonomy and the

development and growth opportunities they have (e.g. Herzenberg, et al., 1998; Lorenz &

Valeyre, 2005; Kalleberg, et al., 2006; Gallie, 2007). Therefore, it is necessary to begin

with identification of the employee category in question when conducting any research

study on organizational systems (Lepak, et al., 2006). Extant studies also suggested that

organizations are always more concerned about their key workers (Lepak & Snell, 2002;

Lepak, et al., 2007) and organizational HR activities for these employee groups are more

sophisticated than other employee groups (Melian-Gonzalez & Verano-Tacoronte, 2006).

Therefore, for this study, front-line employees from selected branches were considered

for being the key contributors towards strategic objectives of service organizations. They

were requested to provide data related to employee level variables.

Bank branch managers provided data for variables conceptualized at branch level of

analysis including ―high performance work system‖, ―branch level collective human

capital‖ and ―bank branch performance‖. Whereas, front-line employees working in these

bank branches were requested to give their responses regarding variables conceptualized

at individual level of analysis including ―distributive justice‖, ―procedural justice‖,

―interactional justice‖ and ―employee outcomes (employee engagement, employee

service performance and service oriented OCB)‖.

3.6 Data Collection Technique and Survey Procedure

This cross-sectional quantitative study used self-administered survey questionnaires for

obtaining data from the respondents. Due to multilevel nature of the study, this study

required data for two different levels of analysis i.e. branch level and employee level.

Therefore, two separate self-administered questionnaires were developed to collect data

for this study. The respondents of branch level data were branch managers and they

provided their responses related to the variables including implemented HPWS, branch

level collective human capital and bank branch performance. In addition to this, front-line

service employees gave their responses for individual level variables including

distributive fairness, procedural fairness and interactional fairness, employee

engagement, employee service performance and service-oriented OCB. These

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questionnaires contained Likert scale statements, respondents profile information and a

cover letter. Cover letter presented information on the objectives of this research,

instructions to fill questionnaires along with the assurance of data privacy and anonymity.

Both the questionnaires were structured clearly and they were designed professionally to

ensure all participants would clearly understand and fill them. Most importantly,

instruments were pilot studied (tested) with the aim to eliminate the issues of misreading

and misinterpretation of survey statements and to improve the validity of the

measurement scales used for data collection. For the purpose of pilot testing, 10 bank

branch managers and 30 front line employees were contacted for responses relating

branch level and individual employee level constructs, respectively. Responses from six

branch managers and 18 front line employees were received and majority of the

participants have not reported any difficulty in understanding and filling the survey.

Further, only minor changes (replacement of original words with easy synonyms at four

places) were made in final questionnaire to increase its usefulness and understanding in

actual survey process. Both branch manager‘s and front line employee‘s surveys are

given in Appendix B and Appendix C respectively.

Self-administered surveys were either distributed in person or mailed to the branch

managers of 450 selected bank branches. Prior to the distribution of survey

questionnaires, branch managers were contacted to brief them about the purpose of

research project, procedure of the survey and requested their support in data collection

process. Each packet sent to branch manager contained one branch manager related

survey questionnaire and many front-line employee related survey questionnaires (7-25,

depending upon the size of the bank branch) with necessary information to carry out the

survey. Each questionnaire consisted of a cover letter stating the information regarding

the objective of this research, assurance of the privacy of data and the instructions for

―how to fill‖ the questionnaire. Researcher‘s contact number and email was also given on

the cover letter so that the participants could contact him in case of any query.

A total of 450 branch manager and 2500 front-line employee survey questionnaires were

distributed for data collection purpose. A total of eight months had spent for data

collection which included the pilot testing of the measurement instruments and the actual

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survey for the study. The survey started in October, 2015, after piloting the measurement

instruments, and took five to six months to complete the whole data collection activity

which was ended in March, 2016. Continuous reminders and follow-ups started after 10

days of distribution of surveys and continued for a period of almost five months to ensure

maximum response rate. These efforts yielded 347 branch manager and 1763 front line

employee surveys received back to the researcher. Data of 323 bank branches along with

their 1369 front line employees were finally used for data analysis after dropping some

with missing information and inappropriately filled questionnaires.

3.7 Measures for Common Method Bias

Researchers have showed concerns about the cross-sectional research design by raising

questions about common method bias and stressed upon taking appropriate measures to

control and minimize its effects (Ostroff et al. 2002; Podsakoff, et al., 2003;). This issue

arises when data on all the constructs of the study are collected from one source

(Podsakoff et al. 2012). First of all, this study collected data from multiple sources (i.e.

bank branch managers and front line employees) which, at first hand, reduced the

chances of the adverse effects of common method bias issue. Further, this study has also

taken several measures as suggested by Podsakoff et al. (2003) to control the possible

common method bias effects. First, to ensure respondents motivation and active

participation in the study, a detailed cover letter was attached with survey to explain the

objectives of the study along with the use of information collected for this study. Second,

the survey was designed in such a way so that the task difficulty should be minimized and

used concise and clear language to ensure that the responses from the participants are

more accurate. Next, to avoid social desirability bias, it was assured to the participants

that their responses would be kept confidential and anonymous. Further, they were

encouraged to give their honest opinion in terms of what exactly they feel about each of

the survey statement instead of considering some right or wrong answers. In the last,

possibility of common method bias issue was further reduced by ensuring good

psychometric properties of the scales used for the measurement of the constructs in this

study through confirmatory factor analysis (in Section 4.5). Even though, several

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measures have been taken to address the issue of common method bias, interpretation of

results of this study should be done by keeping in mind this caveat.

3.8 Measurement of Variables

This section illustrates the instruments used to gauge the constructs used in this research

study. As this study adopted a multilevel approach, therefore, data were collected from

two different sources (i.e. branch manager and front-line employees). Section 3.5.1 and

section 3.5.2 demonstrate the measures used for bank branch level and individual

employee level variables respectively. To ensure validity of survey, all the instruments

employed in current study were either adopted or adapted from previous researches.

Moreover, multiple-item scales were used in this study for all variables.

3.8.1 Branch Level Variables

This section presents details on the measures used to gauge branch level variables of this

study. Manager-HPWS, branch level collective human capital and bank branch

performance were the variables conceptualized at branch level analysis. Branch

manager‘s survey questionnaire is given in Appendix B.

3.8.1.1 Manager HPWS

Manager-HPWS was assessed through a 37-item measurement adopted from Liao, et al.

(2009) which they established to ensure service quality in banking organizations. They

established this scale based upon the HPWS measures developed by Zacharatos, et al.

(2005) with the focus of service quality outcomes. Manager-HPWS measure has eight

dimensions or eight high performance work practices which were measured through 37

items. These eight dimensions included extensive service training (06 items), information

sharing (08 items), inter-departmental services (02 items), team working and employee

participation (05 items), service discretion (05 items), performance appraisal (04 items),

performance based pay (03 items) and job design for quality work (04 items). Sample

items include ―The formal orientation programs to new employees are helpful for them to

perform their jobs‖ for extensive service training and ―Departments of this branch

cooperate well with each other‖ for interdepartmental services.

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Further, this study considered manager-HPWS as unitary index which has been widely

recommended and used in the research area of SHRM (e.g. Huselid, 1995; Becker &

Huselid, 1998; Liao, et al., 2009). This approach is in line with one of the basic

supposition of Strategic HRM suggests that the influence of HR practices can be better

understood by using the combination of HR practices as system rather than studying any

HR practice individually (e.g. Huselid, 1995; Becker & Huselid, 1998; Ostroff & Bowen,

2000; Wright & Boswell, 2002; Takeuchi, et al., 2007; Liao, et al., 2009). Responses on

all the items of manager-HPWS were recorded on five-point Likert scale ranging from ―1

= strongly disagree‖ to ―5 = strongly agree‖. Bank branch managers were requested to

indicate the extent to which each of the high performance practice was implemented in

their respective bank branch.

3.8.1.2 Collective Human Capital

Branch level collective human capital was measured through 5-item scale designed by

Subramaniam and Youndt (2005). These items focused service-related knowledge, skills

and abilities as the main focus of this study was front-line employees directly involved in

serving customers. Sample items include ―Our employees working in the branch are

highly skilled in serving customers‖ and ―Our employees working in the branch are

widely considered to be the best in our industry‖. Responses on all the items of branch

collective human capital were recorded on five-point Likert scale ranging from ―1 =

strongly disagree‖ to ―5 = strongly agree‖. Bank branch managers were requested to

report their agreement or disagreement with each statement related to human capital of

their respective bank branch.

3.8.1.3 Bank Branch Performance

Bank branch performance was measured by using 4-item scale from the study of Aryee,

et al. (2012), originally developed by Delaney & Huselid (1996) to measure the

establishment‘s market performance relative to its competitors operating in nearby area.

This 4-item branch performance scale covered the profitability, marketing, market share

and sales growth aspects of the bank branch performance. Although, the subjective

measure of branch performance may raise concerns like common method biases and

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some measurement error. It was not possible to get the objective data for branch

performance and there are also evidences regarding the use of subjective measures of

performance in literature (e.g. Delaney & Huselid, 1996; Sun, et al., 2007; Takeuchi, et

al., 2007; Chuang & Liao, 2010; Aryee, et al., 2012). Moreover, Wall, et al., (2004)

provided empirical evidences for discriminant, convergent and construct validity of both

the objective as well as the subjective measures of organizational performance. Bank

branch managers were asked to indicate last three years performance of their bank branch

in comparison to the nearby competitor bank branches on five-point Likert scale ranging

from ―1 = much worst‖ to ―5 = much better‖.

3.8.2 Employee Level Variables

This section presents details on the measurement instruments used to gauge individual

employee level variables used in this study. Distributive justice perceptions, procedural

justice perceptions, interactional justice perceptions, employee engagement, employee

service performance and service oriented OCB were the variables conceptualized at

individual employee level of analysis. Front-line employee survey questionnaire used in

this study is given in Appendix C.

3.8.2.1 Distributive Justice

Distributive justice perceptions of front-line employees were measured using 5-item scale

developed by Nieoff & Moorman (1993). Sample items include ―My work schedule is

fair‖ and ―I think that my level of pay is fair‖. Responses on all the items of distributive

justice perceptions were recorded on five-point Likert scale ranging from ―1 = strongly

disagree‖ to ―5 = strongly agree‖. Front-line employees were required to give their

opinion against each statement of distributive fairness.

3.8.2.2 Procedural Justice

Procedural justice perceptions of front-line employees were measured using 6-item scale

from the study of Nieoff & Moorman (1993). Sample items include ―Job decisions are

made by the branch manager in an unbiased manner‖ and ―My branch manager makes

sure that all employee concerns are heard before job decisions are made‖. Responses on

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all the items of procedural justice were recorded on five-point Likert scale ranging from

―1 = strongly disagree‖ to ―5 = strongly agree‖. Front-line employees were asked to give

their opinion against each statement relating to procedural justice.

3.8.2.3 Interactional Justice

Interactional justice perceptions of front-line employees were gauged using 9-item scale

developed by Nieoff & Moorman (1993). Sample items include ―When decisions are

made about my job, the branch manager treats me with kindness and consideration‖ and

―When decisions are made about my job, the branch manager is sensitive to my personal

needs‖. Responses on all the items of interactional justice were recorded on five-point

Likert scale ranging from ―1 = strongly disagree‖ to ―5 = strongly agree‖.

3.8.2.4 Employee Engagement

Front-line employees‘ level of engagement was assessed through 17-item measurement

scale adopted from Schaufeli, et al. (2002). Sample items include ―At my work, I feel that

I am full of energy‖ and ―I find the work that I do full of meaning and purpose‖.

Responses on all the items of employee engagement were recorded on five-point Likert

scale ranging from ―1 = strongly disagree‖ to ―5 = strongly agree‖. Front-line employees

were required to report their level of agreement or disagreement with each statement

relating to employee engagement.

3.8.2.5 Employee Service Performance

Service performance of front-line employee was measured through 7-item scale adopted

from Liao & Chuang (2004). Sample items include ―I am friendly and helpful to

customers‖ and ―I always try to approach customers quickly‖. Responses on all the items

of employee service performance were recorded on five-point Likert scale ranging from

―1 = strongly disagree‖ to ―5 = strongly agree‖. Front-line employees were required to

report their level of agreement or disagreement with each statement of service

performance.

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3.8.2.6 Service Oriented OCB

Service oriented OCB was assessed through 16-item scale developed by Bettencourt, et

al. (2001) to gauge discretionary behavior of front-line employees when serving

customers. Sample items include ―I often tell outsiders this is a good place to work‖ and

―I encourage my co-workers to contribute ideas and suggestions for service

improvement‖. Responses on all the items of employee‘s service oriented OCB were

recorded on five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5 = strongly

agree‖. Front-line employees were required to report their level of agreement or

disagreement with each statement.

3.8.3 Control Variables

Due to multilevel nature of this research, control variables at both branch and individual

level of analysis are used. The study used branch size, branch age and type of ownership

as control variables at branch level of analysis. Branch size represented total employees

working in bank branch and was controlled because it might be related with the

sophistication of HPWS (e.g. Sun, et al., 2007; Aryee, et al., 2012) and also with

performance (Datta, et al., 2005; Shepherd, 1975). Further, branch age in terms of

number of years since its establishment was controlled to capture ―advantages associated

with increased time for the evolution or adoption of HPWS or differences in our outcome

measures‖ (Guthrie, et al., 2009: 118). Furthermore, effect of ownership type (public or

private bank) was also controlled as it has been reported as a factor with significant

influence on both organizational HPWS and performance (Wei & Lau, 2008; Su, Wright

& Ulrich, 2015).

In addition, this study used employee‘s gender, age and employment tenure with current

banking organization as control variables at individual level of analysis. Previous

research studies have shown that demographic variables of employees were found to be

associated with employees‘ workplace related attitudes and behaviors (e.g. Mathieu &

Zajac, 1990). Additionally, Boselie, et al. (2005) also reported that HPWS research

studies used employees‘ personal characteristics as control variables at individual level of

analysis. Therefore, in this study, demographic characteristics including age, gender and

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length of service at current organization, were taken as control variables at individual

level of analysis.

3.9 Data Analysis Techniques

This section presents details on techniques used to analyze data in this study. Based upon

the objectives set for this study, various data analysis techniques including descriptive

statistics, reliability and validity analysis of the measures, structural equation modeling

(SEM) and hierarchical linear modeling (HLM) were employed. Following section gives

details on each of the data analytical technique used in this research.

3.9.1 Descriptive Statistics

First and foremost statistical analysis conducted in this research study was descriptive

analysis. Descriptive statistics was used to describe and summarize the characteristics of

participants and variables of the study. This analysis includes averages, percentages,

frequencies and the spread of data (Zikmund, et al., 2010). In specific, the demographic

characteristics of bank branches and front line employees were described first by using

descriptive statistics. Next, the descriptions of study variables were made and presented

in terms of their mean scores, standard deviation; moreover, item wise descriptive

analysis of the study variables was also conducted and presented in next chapter.

3.9.2 Reliability Analysis

Reliability of a construct reflects the extent to which a measurement instrument generates

steady results when used repeatedly (Hair, et al., 1995; Zikmund, 2000). This analysis is

essential before going for hypothesis testing in order to ensure reasonable level of

reliability of measurement instruments used in any research study. Cronbach alpha test is

the most popular test used for reliability analysis and, therefore, was used for measuring

the reliability of the measurement instruments used in this study. According to Spector

(1992), the Cronbach‘s alpha score should be above 0.70 for a measurement scale to be

reliable. However, according to Moss, et al. (1998), the value of 0.60 for reliability alpha

(Cronbach‘s alpha) is generally acceptable. This criterion was used in this study to test

and ensure the reliability of the measures.

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3.9.3 Structural Equation Modeling

Structural equation modeling (SEM) was used to examine branch level proposed

relationships of this study. SEM is a statistical technique for hypothesis testing to

investigate the association among observed and latent variables (Hoyle, 1995). SEM

starts with model specification (i.e. statistical statement about the association of

variables) to be tested. According to Kaplan (2000), structural equation modeling is

defined as a class of analytical methodologies which represents hypotheses regarding the

means, variances and covariance of observations in the form of fewer structural

parameters suggested by a proposed model.

Structural equation modeling starts with a model (i.e. statistical statement regarding

relationships among variables) to be specified by researcher. Model specification refers to

the process of stating the relationships among variables which is fundamental to SEM

technique. In fact, no statistical analysis can be conducted in SEM until a model has been

specified by the researcher (Hoyle, 1995). Model specification refers to the formulation

of an equation regarding a set of either fixed or free parameters. Values are normally

fixed at zero for fixed parameters and these parameters have not measured from

observations collected. On the other hand, free parameters are estimated from data as

their values are believed to be non-zero by the researcher (Hoyle, 1995).

General structure equation model has two components: (i) measurement model i.e. that

section of model where latent constructs are defined and (ii) structural model i.e. the

other component of general model that stipulates the relationships among latent and

observed variables that are not latent variable indicators (Hoyle, 1995; Kaplan, 2000).

Although SEM has some commonalities with other approaches including correlation,

regression, however, it is different from aforesaid conventional methods and has a

number of advantages over these traditional approaches. For example, SEM provides

more flexibility and is more comprehensive data analytical technique than any other

traditional statistical model used in quantitative organizational and social sciences

research studies. Although, the standard approaches have the capacity of testing

hypotheses, SEM is capable of testing more complex and specified hypotheses than these

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traditional approaches (Hoyle, 1995; Kaplan, 2000). Therefore, this study used SEM for

analysis of branch-level proposed relationships.

In addition, SEM was also employed to run a number of confirmatory factor analysis

(CFA) for branch and individual level observations to estimate the validity (convergent

and discriminant) of the constructs used in this research. At branch level analysis, this

study tested three-factor hypothesized model including manager-HPWS, branch level

collective human capital and bank branch performance. Whereas, at individual-level of

analysis, a six-factor model was tested including distributive fairness, procedural fairness,

interactional fairness, employee engagement, employee service performance and service-

oriented OCB. Secondly, this study also required testing direct and indirect (mediation)

proposed relationships at branch level. SEM not only gives opportunity of controlling

confounding or extraneous variables but also for measurement error (Hoyle, 1995).

Therefore, in this study, first two hypotheses (H1 and H2) related to branch level

variables relationships were tested by using SEM. In specific, the following structural

model was investigated empirically by using SEM (in AMOS 20).

Figure 3.1: Model for Structure Equation Modeling (SEM)

3.9.4 Hierarchical Linear Modeling

Hierarchical linear modeling (HLM) was employed to investigate cross-level proposed

relationships of this study as this technique is increasingly used by researchers for

analysis of multilevel data (Raudenbush & Bryk, 2000). HLM has also application in

SHRM research area (Ostroff & Bowen, 2000) where individual-level data nested within

organizations, units or groups are frequently used. In such cases, the individual data are

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nested within groups or organizations and therefore are not independent and also contrary

to the assumptions of traditional regression or OLS model. In order to study individuals

nested in organizations, it is required not only to investigate the characteristics of

individuals but also needed to assess characteristics of the group or organizational context

within which individuals are working. As a result of such investigations, the data results

into variables at different levels of analysis including individual, group/ team and/ or

organizational (Hofmann, 1997). In such cases, three options are available for data

analysis (Hofmann, 1997).

First approach to test multilevel relationships could be to aggregate lower-level

observations to higher-level group/ team or organizational variables. For instance, the

relationship between organizational factors and individual outcomes could be

investigated through aggregating individual outcomes to organizational level (Hofmann,

1997). However, the meaningful variance at lower-level could not be accounted for in

both dependent variable and predictors while using aggregation of data approach

(Hofmann, et al., 2000; Klein, et al., 1994).

Second option available to test cross-level relationships is disaggregation of data i.e. all

the individual level units are given values according to their value on group or

organizational level variable. According to Bryk & Raudenbush (1992), in such cases,

data will be totally based upon the number of lower level units i.e. OLS regression. For

example, all individual within same group might give same value representing their

group characteristics when investigating a relationship between group characteristics and

some individual level outcome(s). Issue with this method is that several lower-level units

are working in same organization or group and experiencing similar stimuli. Therefore, it

is impossible to satisfy the assumption of independence of observations while using

traditional approaches of data analysis (Bryk & Raudenbush, 1992; Hofmann, 1997).

Along with this, while using disaggregation approach, the scores assigned to higher level

variable are based on units at lower level that can impact the measures of standard errors

and related empirical interpretations (Bryk & Raudenbush, 1992). Consequently, neither

of these two approaches is appropriate for satisfactorily testing of study‘s cross-level

hypotheses (from H3 to H6) as ignoring potentially meaningful variance at individual

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level which might result in questionable construct validity in case of branch level

variables.

Hierarchical linear modeling (HLM) is the third approach for analyzing multilevel data

with notable advantages over aggregation and disaggregation approaches of multilevel

data analysis. First, HLM clearly recognizes that individuals within one group are more

similar than the individuals of other group and hence may not give independent

observations (Hofmann, 1997; Hofmann, et al., 2000). Saying it differently, HLM

explicitly model random error components at lower and higher level, thus, recognizes that

individuals within same group are interdependent. Whereas in OLS models as compared

to HLM, lower and upper level random errors are not estimated independently. Contrary

to previously discussed approaches (data aggregation and data disaggregation), HLM

allows for investigating the variance in the dependent variable at both individual and

group level while retaining suitable levels of analysis for predictors (Hofmann, et al.,

2000).

HLM approach estimates variance at both levels of analysis. Conceptually, HLM works

at two stages which analyze variables conceptualized at different levels of analysis.

Level-1 estimates regression separately for each group considering lower level predictors

and outcome. Further, level-2 estimates the variance in the intercept and slope of level-1

using organizational or group (upper level) level variables (Hofmann, 1997; Hofmann, et

al., 2000). Moreover, both lower and upper level models are investigated concurrently.

In case of estimation of multilevel models, three key terms are important to understand.

First, fixed effects that are parameters which remains same across upper level (i.e.

groups, teams or organizations) in multilevel models. In HLM, generalized least square

(GLS) regression is used to calculate fixed effects (Hofmann, et al., 2000). Even though

these can also be estimated through OLS regression, but this may affect the precision in

lower level (i.e. level-1) parameters across groups and this precision in variation is

eventually estimated in analysis of Level-2 (Hofmann, et al., 2000). Generalized least

square (GLS) measure provides a weighted regression due to which groups with more

precise estimates are given more weightage, thus, have more influence in level-2

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regression. In case of fixed parameters, t-test statistics are provided in HLM (Hofmann,

1997; Hofmann, et al, 2000).

Second, random coefficients, refer to the coefficients with not fixed values across groups.

For example, intercepts and slopes at lower level (level 1) are random coefficients (i.e.

these change across groups). Although HLM does not explicitly measure random

coefficient parameters, it can be assessed by viewing mean and variance of random

coefficients which should be significantly departed from zero (Hofmann, et al., 2000).

Further, variance components refer to the variance and variance-covariance of residuals.

Expectation–maximization (EM) algorithm is used in HLM to measure maximum-

likelihood estimates for these variance components. HLM reports the results of chi-

square test for residual variances at upper level (level-2) to assess variance component‘s

significant departure from zero (Griffin, 1997; Hofmann, 1997).

Furthermore, talking about sample requirements, Kreft (1996) suggested that large

numbers of groups are required for multilevel data analysis. Hofmann, et al. (2000)

indicated that a sample size of 30 upper level units with each of these containing 30 lower

level units is appropriate to test cross-level relationships with sufficient power of 0.90.

They further indicated that there are trade-offs between number of upper level units and

lower level units within each group i.e. either more number of level-2 units with fewer

level-1 units in each group or few groups but having large number of individuals in each

group.

HLM has edge of incorporating interclass correlation (ICC) and measuring standard

errors that are corrected for observations dependence nested within group or organization.

Prior to HLM, researchers have the choice to investigate cross-level data through

disaggregation approach resulting into downward biased standard errors or through data

aggregation causing smaller sample size and larger standard errors. HLM eliminates this

trade-off and it forces the researcher to explicitly tackle the issue of level of analysis.

In sum, HLM has many advantages over other approaches of cross-level data analysis.

First, HLM specifically estimates both group/ organizational and individual level

residuals. In this way, HLM recognizes the partial interdependence of individual

members in same group or organization. Next, HLM approach provides researcher the

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opportunity to identify and differentiate between different sources of variation in

dependent variable. Based upon these advantages, HLM was employed to analyze cross-

level proposed relationships of this study i.e. hypothesis 3 to hypothesis 6 were examined

by using HLM. Saying specifically, the following model showing cross-level

relationships, direct and indirect (mediating), were tested by using hierarchical linear

modeling (HLM).

Branch Level

H3(a-c)

Individual Level

3.10 Ethical Considerations

A number of ethical considerations are applied when conducting scientific investigations

in social sciences (McDaniel & Gates, 2002; Neuman, 2007). According to them, such

ethical issues include (i) ensure the respect and privacy right of individuals participated in

research (ii) voluntary participation and no forceful data collection, (iv) no deception is to

be used while collected data, (v) the right of respondents to know the objectives of the

research and (vi) report data in an unbiased and objective manner.

The researcher, by all means, ensured the above mentioned ethical considerations while

conducting this research study. The participants have briefed regarding the aim of the

Manager

HPWS

Distributive

Justice

H4 (a-c)

Interactional

Justice

H6 (a-c)

Procedural

Justice

H5(a-c)

Employee Engagement

Service Performance

Service Oriented OCB

Figure 3.2: Cross-level Proposed Relationships

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study and the privacy of their data was promised along with the assurance of not using

this data other than academic purpose or to share it with any other. Other ethical issues

which had also been given careful consideration included sharing of summary of the

findings with the participants upon the completion of research project, if anyone want to,

no forceful participation and report the results in an unbiased manner.

3.11 Conclusion

This chapter first presented the importance of research philosophy and illustrated the

discussion of positivism paradigm used in this study. This quantitative multilevel study

adopted survey method to collect cross-sectional data from two sources (i.e. bank branch

managers and front-line employees) to test the proposed relationships of this research.

Further, this chapter also illustrated the targeted area, population sample design, sample

size and data collection tools and procedures employed in this study. The chapter ended

with a discussion of measures used for study variables and the techniques used for data

analysis. Next chapter will present details regarding analysis of data and the results will

be reported accordingly.

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Chapter 04:

Results of the Study

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4. Results of the Study

4.1 Introduction

This study aimed at investigating the direct relationship of manager-HPWS with bank

branch performance and individual employee outcomes, simultaneously. Further, based

upon resource based view of the firms (RBV), this study proposed branch level collective

human capital as intermediary mechanism between manager-HPWS and bank branch

performance relationship at branch level of analysis. In addition, based upon social

exchange theory, the study also proposed that employees' justice perceptions

(distributive, procedural and interactional) mediates the cross-level relationship between

manager-HPWS and employee outcomes. In light of these objectives, current chapter

starts with presenting the characteristics of participated bank branches and front line

employees followed by item wise descriptive statistics of all the measures used in this

study. Further, preliminary analyses including missing values, data cleaning issues,

normality and outlier issues are illustrated. After this, reliability of the measures,

confirmatory factor analysis (CFA), and correlation analysis results are also presented.

Finally, the results of hypotheses testing are delineated for which structural equation

modeling (SEM) is used to test branch level relationships and hierarchical linear

modeling (HLM) is used to examine cross-level relationships proposed in the study.

4.2 Characteristics of Participants

This section portrays an overview of the participants (i.e. bank branches and the front-

line service employees) across a number of demographic variables. Overall, 323 bank

branches of commercial banks operating in Punjab and their 1369 front line employees

participated in this research. Table 4.1 demonstrates the profile of participated bank

branches across a number of demographic variables. Whereas, Table 4.2 illustrates the

demographic characteristics of front-line employees participated in this study.

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4.2.1 Characteristics of Participated Bank Branches

Organizational size is considered critical aspect while understanding the human resource

and employee relations management related activities (e.g. Sun, et al., 2007). In this

research, organizational size refers to total employees working in the bank branch. Table

4.1 indicates that, of 323 bank branches, 133 (41.2 %) bank branches employed 10 or less

employees. Moreover, bank branches with 11-19 employees represented the largest

category with a total number of 151 (46.7 %) bank branches. Remaining 39 (12.1 %)

branches were those which had a total of 20 or more employee. As far as age of bank

branches is concerned, 124 (28.4 %) branches were seven or less years old. While, 99

(30.7 %) bank branches belonged to an age category of 08-15 years. Next, 38 (11.8 %)

bank branches had been established within a time duration of 16-24 years and rest 62

(19.2 %) were an age of 25 years or more.

Table 4.1: Characteristics of Participated Bank Branches (n = 323)

Characteristics Frequency Percentage

Branch Size (No of Employees)

Upto 10

11-19

20 and Above

133

151

39

41.2 %

46.7 %

12.1 %

Branch Age (In Years)

Upto 07

08-15

16-24

25 and Above

124

99

38

62

28.4 %

30.7 %

11.8 %

19.2 %

Ownership Type

Public

Private

54

269

16.7 %

86.3 %

Bank Category (as per SBP)

Private Bank

Public Bank

Islamic Bank

Specialized Bank

236

49

31

07

73.1 %

15.2 %

9.6 %

2.2 %

Notes. SBP = State Bank of Pakistan

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Table 4.1 highlights that majority of the bank branches, 269 (86.3 %), belonged to

privately owned banks and the remaining 54 (16.7 %) were of state owned banks.

Moreover, as mentioned in the Table 4.1, State Bank of Pakistan (SBP) categorized all

the commercial banks operating in Pakistan into four categories including private banks,

public banks, Islamic banks and specialized banks. As per the categorization of banks by

SBP, mentioned in Table 4.1, 236 (73.1 %) bank branches were of private banks.

Moreover, 49 (15.2 %) bank branches belonged to state owned banks followed by 31 (9.6

%) bank branches of Islamic banks and the remaining seven (2.2 %) bank branches were

of specialized banks.

4.2.2 Characteristics of Participated Employees

This research obtained data from two sources (i.e. bank branch managers and individual

employees) because of the multilevel nature of the study. Table 4.1 showed demographic

overview of the bank branches participated in this research. Next, Table 4.2 demonstrates

an overview of the characteristics of individual employees participated in this study. As

mentioned in Table 4.2, of 1369 front line employees participated in this study, 1067

(77.9 %) were male and remaining 302 (22.1 %) were female. In terms of the age of

individual employees, 159 (11.6 %) employees had an age of 24 years or less. While, 986

(72 %), the most, employees belonged to the age category of 25-34 years. Next, 170 (12.4

%) employees belonged to the age group of 35-44 years followed by remaining 54 (3.9

%) employees with an age of 45 years or above.

Moreover, Table 4.2 also reports the academic qualification of individual employees

participated in this study. Of 1369 front-line employees, only three (0.2 %) employees

had an academic qualification of intermediate or below. While 484 (35.4 %) respondents

were bachelor degree holders (14 years of education). Further, 799 (58.4 %) of them had

a master degree (16 years education) followed by 81 (5.9 %) employees with 18 years of

education. However, only two (0.1 %) employees held a doctoral degree.

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Table 4.2: Characteristics of Participated Front Line Service Employees (n = 1369)

Characteristics Frequency Percentage

Gender

Male

Female

1067

302

77.9 %

22.1 %

Employee Age (In Years)

Upto 24 Years

25 - 34 Years

35 - 44

45 Years and Above

159

986

170

54

11.6 %

72.0 %

12.4 %

3.9 %

Highest Qualification

Intermediate and Below

Bachelors Degree (14 Years Education)

Masters Degree (16 Years Education)

M.S/ M.Phil Degree (18 Years Education)

Doctoral Degree

03

484

799

81

02

0.2 %

35.4 %

58.4 %

5.9 %

0.1 %

Salary

Below 20,000 Rupees

20,001 - 40,000 Rupees

40,001 - 60,000 Rupees

60,001 - 80,000 Rupees

80,001 - 100,000 Rupees

Above 100,000 Rupees

177

778

292

84

32

06

12.9 %

56.8 %

21.3 %

6.1 %

2.3 %

0.4 %

Employment Status

Permanent

Contractual

1120

249

81.8 %

18.2 %

Employment Tenure (Current Bank)

Upto 02 Years

03 - 07 Years

08 - 15 Years

16 Years and Above

899

427

38

05

65.7 %

31.2 %

2.8 %

0.4 %

Total Professional Experience

Upto 02 Years

03 - 07 Years

08 - 15 Years

16 Years and Above

347

685

276

61

25.3 %

50.0 %

20.2 %

4.5 %

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In terms of the salary of individual employees, 177 (12.9 %) employees had a salary of

PKR 20,000 or below. Next, 788 (56.8%) employees belonged to the salary group of

PKR 20,001 – 40,000 and 292 (21.3 %) were those who had a salary range of PKR

40,001 – 60,000. Further, 84 (6.1 %) employees belonged to a salary range of PKR

60,001 – 80,000, followed by 32 (2.3 %) employees with a salary range from PKR

80,001 – 100,000 and the rest six (0.4 %) had a salary of PKR 100,001 or above.

In addition to this, as can be seen in Table 4.2, of 1369 front-line employees, 1120 (81.8

%) were permanent employees and rest 249 (18.2 %) had contractual employment.

Furthermore, talking about the tenure of employees with their current employer, 899

(65.7 %) employees had employed with their current bank from last two years or less.

Next, 427 (31.2 %) employees were those who had a tenure of 3–7 years followed by 38

(2.8 %) employees with a tenure of 08–15 years and remaining five (0.4 %) employees

had a tenure of 16 years or above with their current employer bank.

4.3 Data Handling and Preliminary Analysis

This section presents the details on the statistical analyses and treatments to be done

before actual data analysis. These preliminary analyses included treatment of missing

data and data cleanup, testing normality of the data collected for this research and any

issues of outliers in the data. Section 4.3.1 discusses various steps taken to deal with the

issue of missing data and cleaning up. Further, section 4.3.2 presents the details on the

normality and the issues of outliers in the data.

4.3.1 Missing Values and Data Cleaning Up

Missing data is the most widespread and frequent problem faced by researchers in data

analysis (Tabachnick & Fidell, 2007). According to Hair, et al., (2010), if upto 10 % of

missing data is there in case of an individual item or observation, it can be ignored. In

current research, no variables had more than 2 % missing values highlighting that missing

values was not an issue in this study. Moreover, Tabachnick and Fidell, (2007) suggested

that mean scores could be used to substitute the missing values in the data if the

proportion of these values is very small. Therefore, mean scores were put in only for

missing information. This mean imputation for missing value was done in SPSS by using

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―Replace with mean‖ option which filled the missing value cell with the average score of

the variable (Hair, et al., 2010; Pallant, 2011).

On next stage, data were also examined for having any odd pattern of responses. There

are chances of response set bias if participants do not read the statements properly and

therefore, answer every question on a same pattern. Nunnally and Bernstein, (1994)

suggested including few reverse coded or negatively worded questions in the survey to

ensure that the respondents have filled the survey by reading the items in order to

eliminate response set bias. While entering data for analysis, two such branch managers‘

and 23 front line employee filled questionnaires were eliminated where they responded

on the same score for almost all the responses including the reverse coded items. Further,

two more cases were deleted from data because both the surveys were filled by

respondents who were internee and have not spent even two months in the branches.

However, 323 branch level and 1369 employee level responses were taken up for data

analysis finally.

4.3.2 Normality and Outliers

Normality of continuous variables is another critical issue in multivariate data analysis.

Statistical inferences turn out to be less robust if the distributions are away from normal

(Mellahi & Budhwar, 2010). Skewness and kurtosis of each variable were assessed to

check the normality of the variables of this study. The scores on skewness and kurtosis

for all the variables are given in Table 4.3. According to Kline (2005), a value outside the

range of -2.0 and +2.0 for skewness and a value greater than 10.0 for kurtosis reflect a

violation of normal distribution. As can be seen in Table 4.3, no value for skewness is

greater than the cutoff value of 3.0 and no kurtosis value is greater than the benchmark

value of 10.0. Further, histograms were also observed for assessing normal distribution

and no non-normal distribution was found. These findings showed that normality of data

was not an issue in this study. Moreover, data was also examined for the possibilities of

outliers and no outliers were found.

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Table 4.3: Skewness and Kurtosis Values of Variables

Variables Skewness Kurtosis

Statistics Std Error Statistics Std Error

Manager-HPWS -.75 .14 .49 .27

Collective Human Capital -.93 .14 1.95 .27

Branch Performance -.75 .14 1.57 .27

Distributive Justice -.63 .07 .14 .13

Procedural Justice -.70 .07 .89 .13

Interactional Justice -.77 .07 .79 .13

Employee Engagement -.62 .07 .93 .13

Service Performance -.71 .07 .97 .13

Service Oriented OCB -.65 .07 .76 .13

4.4 Individual Items Descriptive Analysis

This section presents a description of the responses on various items of the variables used

in this study. In case of branch level variables including manager-HPWS, collective

human capital and branch performance, a summary of 323 responses given by branch

managers is presented in section 4.4.1. Further, in case of individual employee level

variables (distributive justice, procedural justice, interactional justice, employee

engagement, service performance and service oriented OCB), a description of 1369

responses by front line employees is also presented in section 4.4.2.

4.4.1 Item Wise Descriptive Analysis: Branch Level

This section presents a descriptive analysis of branch level variables and their individual

measurement items. Branch level variables include manager-HPWS, collective human

capital and branch performance. A summary of 323 responses by branch managers on

branch level variables is presented in this section.

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4.4.1.1 Manager-HPWS

Table 4.4 illustrates the breakdown of responses by branch managers on each item for all

eight dimensions of HPWS implemented in their respective bank branch. These

dimensions of manager-HPWS included extensive service training, information sharing,

interdepartmental services, teamworking and participation, service discretion, pay

contingent with service quality, job design and service quality based performance

appraisals respectively. Branch managers were requested to report the extent to which

each of the high performance practice was implemented in their respective bank branches

on a five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5 = strongly agree‖.

The descriptive statistics for manager-HPWS variable items provided evidence for the

implementation of HPWS in the bank branches under study. Branch managers tended to

report a score above the mid-point on a five-point scale for the indicators of HPWS. On

average, the overall score for HPWS reported by branch manager was 3.92. Further,

average scores for the eight dimensions of manager-HPWS were: 4.16 for extensive

service training, 3.99 for information sharing, 4.10 for interdepartmental services, 4.00

for teamworking and participation, 3.74 for service discretion, 3.49 for pay contingent

with service quality, 3.73 for job design and 3.92 for service quality based performance

appraisals. A higher mean score for an item indicated strong agreement of the branch

managers with the statement and vice versa.

As given in Table 4.4, most of the manager-HPWS statements averaged above 3.5 on a

scale ranging from 1 to 5 indicating a high level of HPWS implementation in bank

branches. For example, ―The formal orientation programs to new employees are helpful

for them to perform their jobs‖ (EST_1) showed the highest mean score (4.43) of all the

items used to measure HPWS implemented in the bank branches. The second highest

mean score (4.20) was found for ―Employees have the manuals and individual computers

they need for the network systems they work with‖ (IS_7), an indicator of information

sharing dimension of HPWS. The lowest mean score were found for two items including

―This branch pays above market wages to employees‖ (PSP_1) and ―Employees‘ pay is

tied to the quality of service they provide‖ (PSP_3). The scores for these two indicators

were 3.38 and 3.46, respectively. Both of these were the indicators of pay based upon

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service quality. These findings indicated that employees‘ compensation relative to other

banks and its link with employee‘s service performance were less evident than other 35

HPWS measurement items. In addition, only these two indicators had a mean score

below 3.5. All other indicators of manager-HPWS except these two had a mean score

above 3.5.

Table 4.4: Descriptive Statistics for Manager-HPWS Items

Sr. No. HPWS Measurement Mean Standard

Deviation

Manager-HPWS 3.92 .50

Extensive Service Training 4.16 .55

EST_1 ―The formal orientation programs to new employees are

helpful for them to perform their jobs‖ 4.43 .67

EST_2

―Training programs other than corporate-wide orientation

program are effective in teaching employees the skills

they need in serving customers‖

4.18 .81

EST_3 ―Our training programs effectively prepare employees to

provide high quality customer service‖ 4.17 .80

EST_4 ―Employees will normally go through training programs

to improve their customer service skills every few years‖ 4.10 .76

EST_5 ―Employees are adequately trained to handle the

introduction of new products and services‖ 3.99 .87

EST_6 ―This branch assists employees to join the customer

service training program provided by the headquarters‖ 4.09 .83

Information Sharing 3.99 .60

IS_1 ―The findings from employee surveys are communicated

to employees of this branch‖ 3.67 1.03

IS_2 ―The findings from customer surveys are communicated

to employees of this branch‖ 3.80 1.03

IS_3 ―All business memos of this branch are shared with

employees‖ 3.78 .98

IS_4 ―Customers‘ suggestions for how to improve service

quality are shared with employees‖ 4.09 .87

IS_5 ―Information about how well the branch is performing

financially is shared with employees‖ 4.07 .91

IS_6

―Complaints or negative comments about this branch‘s

service from external customers are shared with

employees‖

4.18 .85

IS_7 ―Employees have the manuals and individual computers

they need for the network systems they work with‖ 4.20 .89

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Sr. No. HPWS Measurement Mean Standard

Deviation

IS_8 ―Employees have, or have access to, the product and

policy information they need to do their work‖ 4.15 .91

Interdepartmental Services 4.10 .70

IDS_1 ―Departments of this branch cooperate well with each

other‖ 4.17 .79

IDS_2

―In this branch, employees in one department get the

needed materials from other departments in a timely

fashion‖

4.02 .82

Service Teams and Participation 4.00 .59

STP_1 ―The development of work teams among employees is an

important element of this branch‘s strategy‖ 4.18 .75

STP_2 ―This branch supports team development and training for

employees‖ 4.11 .82

STP_3 ―This branch asks employees for their suggestions on

how to improve customer service‖ 4.08 .82

STP_4 ―Employees‘ suggestions on customer service are

implemented in full or in part within this branch‖ 3.83 .81

STP_5 ―Decision-making by employees is encouraged in this

branch‖ 3.81 .92

Service Discretion 3.74 .67

SD_1 ―Employees have the authority to resolve customer

complaints on their own‖ 3.68 .99

SD_2 ―Employees have the discretion to customize the service

offering to meet customer needs‖ 3.64 .96

SD_3 ―Employees may decide how to personalize the service

for the customer‖ 3.61 .96

SD_4 ―Employees may use a wide variety of strategies to

satisfy the customer‖ 3.78 .91

SD_5 ―Employees are encouraged to adapt their behaviors to

the needs of the customer‖ 4.00 .85

Compensation Contingent to Service Performance 3.49 .86

PSP_1 ―This branch pays above market wages to employees‖ 3.38 1.11

PSP_2

―The way in which employees in this branch are

compensated encourages them to adopt a long-term

focus‖

3.62 .96

PSP_3 ―Employees‘ pay is tied to the quality of service they

provide‖ 3.46 1.10

Job Design for Quality Work 3.73 .74

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Sr. No. HPWS Measurement Mean Standard

Deviation

JDQ_1 ―Fostering involvement in decision-making of employees

is an important element of the corporate strategy‖ 3.70 .95

JDQ_2 ―Many employees in this branch perform simple and

repetitive tasks as part of their work‖ 3.74 .94

JDQ_3

―Providing employees with high quality jobs (i.e., jobs

that are challenging, fulfilling, etc.) is a priority in this

branch‖

3.78 .92

JDQ_4 ―Employees of this branch are given lots of opportunity

to decide how to do their work‖ 3.69 1.01

Service Performance Based Performance Appraisals 3.92 .70

SPA_1

―Employees‘ courteous (well-mannered) service to

customers is considered for employee‘s performance

appraisal in this branch‖

3.98 .91

SPA_2

―The ability of the employees to resolve customer

complaints or service problems in an efficient manner is

considered for their performance appraisal in this

branch‖

3.94 .87

SPA_3

―The ability of the employees to innovatively deal with

unique situations and/or meet customer needs is

considered for their performance appraisal in this

branch‖

3.84 .85

SPA_4 ―Employees‘ commitment to customers is considered for

their performance appraisal in this branch‖ 3.92 .81

Further, the dispersions of branch managers‘ ratings from the average scores for

manager-HPWS were quite similar. For instance, the lowest standard deviation was

found in EST_1 i.e. ―formal orientation programs to new employees are helpful for them

to perform their jobs‖ of extensive trainings dimension. Therefore, branch managers were

mostly in agreement about the usefulness of orientation programs for new comers in the

bank branches to start their work. Contrary to this, the highest score of dispersion were

found in PSP_1 i.e. ―branch pays above market rate to employees‖ and PSP_3

―employees‘ pay is tied to service quality‖ (SD = 1.10). These finding indicated a higher

level of disagreement amongst branch manager‘s responses on these items compared to

the other indicators of manager-HPWS.

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4.4.1.2 Collective Human Capital

The descriptive statistics results for individual items of branch level collective human

capital can be seen in Table 4.5. Branch managers were asked to report overall human

capital level of their respective bank branches on a five-point Likert scale ranging from

―1 = strongly disagree‖ to ―5 = strongly agree‖. On average, the overall score of branch

level collective human capital reported by the branch managers was 3.89. Further, the

average score of all the indicators of collective human capital was above 3.75 indicating

agreement amongst branch managers regarding collective human capital indicators. A

higher mean score for an item of collective human capital indicated strong agreement of

the branch manager with the statement and vice versa.

As shown in Table 4.5, ―Our employees working in this branch are experts in their

particular jobs and functions‖ (HC_4) showed the highest mean score (4.00) of all the

items used to measure collective human capital of bank branches. The lowest mean score

(3.79) was found for ―Our employees working in this branch develop new ideas and

knowledge‖ (HC_5). These findings indicated that employees‘ contribution through new

ideas and knowledge was less evident than other indicators of collective human capital.

Moreover, all indicators of branch level collective human capital had a mean score above

3.75.

Table 4.5: Descriptive Statistics for Branch Level Collective Human Capital Items

Sr. No. Variables and Items Mean Standard

Deviation

Branch Level Collective Human Capital 3.89 .67

HC_1 ―Our employees working in this branch are highly

skilled in serving customers‖ 3.94 .85

HC_2 ―Our employees working in this branch are widely

considered to be the best in our industry‖ 3.83 .86

HC_3 ―Our employees working in this branch are creative

and bright‖ 3.89 .86

HC_4 ―Our employees working in this branch are experts in

their particular jobs and functions‖ 4.00 .84

HC_5 ―Our employees working in this branch develop new

ideas and knowledge‖ 3.79 .90

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Branch managers‘ ratings dispersions from the average scores for branch level collective

human capital were quite similar too. For instance, the lowest standard deviation was

found for indicator HC_4 i.e. ―employees working in this branch are experts in their

particular jobs and functions‖. Thus, branch managers were mostly in agreement about

the ―expertise of employees in their jobs and functions/ area‖. Contrary to this, the

highest score of dispersion was found in HC_5: ―employees working in this branch

develop new ideas and knowledge‖ revealing a higher level of disagreement amongst

branch managers‘ responses compared to the other indicators of collective human capital.

4.4.1.3 Bank Branch Performance

The descriptive statistics for individual items of branch performance is presented in Table

4.6. Branch managers were requested to report relative performance of their bank

branches in comparison with the nearby bank branches on a relative five-point Likert

scale ranging from ―1 = much worst‖ to ―5 = much better‖. This comparison was based

upon four performance dimensions including ―marketing performance‖, ―growth in

sales‖, ―profitability‖ and ―market share‖. On average, the overall score of branch

performance reported by the branch managers was 4.06. Further, the average score of all

the indicators of branch performance was above 3.90 indicating better performance rated

by branch managers while comparing their branch performance with other competing

bank branches in the area.

Table 4.6: Descriptive Statistics for Branch Performance Items

Sr. No. Variables and Items Mean Standard

Deviation

Branch Performance 4.06 .59

BP_1 ―Marketing performance‖ 4.16 .73

BP_2 ―Growth in sales‖ 4.04 .77

BP_3 ―Profitability‖ 4.10 .78

BP_4 ―Market share‖ 3.94 .76

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As can be seen in Table 4.6, ―Marketing performance‖ (BP_1) showed the highest mean

score (4.16) of all the items used to measure bank branch performance. The lowest mean

score (3.94) was found for ―Market share‖ (BP_4). Moreover, all indicators of branch

performance had a mean score above 3.90. Branch manager‘s ratings dispersions from

the average scores for bank branch performance were quite similar. For instance, the

lowest standard deviation was in indicator BP_1 i.e. ―Market performance‖. On the other

hand, the highest score of dispersion were in BP_3 i.e. ―profitability‖ of bank branch.

4.4.2 Item Wise Descriptive Analysis: Individual Level

This section presents a descriptive analysis of employee level variables and their

individual measurement items. Employee level variables include distributive justice,

procedural justice, interactional justice and employee outcomes (i.e. employee

engagement, employee service performance and service oriented OCB). A summary of

these employee level variables based upon the responses by 1369 front-line employees is

presented in this section.

4.4.2.1 Distributive Justice

Table 4.7 illustrates the breakdown of responses by front-line employees on each item of

distributive justice. These perceptions of front-line employees were measured by using

items given in Table 4.7. They were required to give their response for each indicator on

a five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5 = strongly agree‖.

The descriptive statistics for distributive justice perceptions indicated a higher agreement

regarding the existence of distributive justice perceptions among the front-line employees

participated in this study. Front-line employees tended to report a score above the mid-

point on a five-point scale for the indicators of distributive justice. On average, the

overall score of distributive justice reported by front-line employees was 3.65. Further,

the average of all the items of distributive justice perceptions was above 3.45 indicating

agreement amongst front line employees regarding distributive justice indicators. A

higher mean score for an item of distributive justice indicated strong agreement of front-

line employee with the statement and vice versa.

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As shown in Table 4.7, ―My work schedule is fair‖ (DJ_1) showed the highest mean

score (3.87) of all the items used to measure distributive justice perceptions of front line

employees. Two indicators of distributive justice have a mean score slightly less than 3.5.

The mean score for both indicators of distributive justice i.e. ―I think that my level of pay

is fair‖ (DJ_2) and ―Overall, the rewards I receive here are quite fair‖ (DJ_4) were 3.49.

These findings indicated that employees‘ agreement on these indicators of distributive

justices was low compared to other indicators of this construct.

Table 4.7: Descriptive Statistics for Distributive Justice Items

Sr. No. Variables and Items Mean Standard

Deviation

Distributive Justice 3.65 .85

DJ_1 ―My work schedule is fair‖ 3.87 1.09

DJ_2 ―I think that my level of pay is fair‖ 3.49 1.13

DJ_3 ―I consider my work load to be quite fair‖ 3.59 1.08

DJ_4 ―Overall, the rewards I receive here are quite fair‖ 3.49 1.11

DJ_5 ―I feel that my job responsibilities are fair‖ 3.82 .94

Front-line employees‘ ratings dispersions from the average scores for distributive justice

perceptions were a bit different. For instance, the lowest standard deviation was found in

indicator DJ_5 i.e. ―I feel that my job responsibilities are fair‖. Thus, front-line

employees were mostly in agreement about the ―fairness in job responsibilities‖. Contrary

to this, the highest score of dispersion was found in DJ_2: ―I think that my level of pay is

fair‖ indicating a higher level of disagreement amongst employees‘ responses compared

to the other indicators of distributive justice.

4.4.2.2 Procedural Justice

Table 4.8 illustrates the breakdown of responses by front-line employees on each item of

procedural justice. Procedural justice perceptions of front-line employees were gauged by

using the items given in Table 4.8. They were asked to give their response for each

indicator of procedural justice on a five-point Likert scale ranging from ―1 = strongly

disagree‖ to ―5 = strongly agree‖.

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The descriptive statistics for procedural justice measures indicated a higher level of

agreement regarding the existence of procedural justice perceptions among front-line

employees participated in this study. Front-line employees tended to report a score above

the mid-point on a five-point scale for the indicators of procedural justice. On average,

the overall score of procedural justice rated by front-line employees was 3.76. Further,

the mean score of all the items of procedural justice was above 3.50 indicating agreement

amongst front line employees regarding procedural justice indicators. Mean score of

procedural justice (3.76) was greater compared to the mean score of distributive justice

(3.65) indicating that employees‘ agreement about procedural justice perceptions was

stronger than their perceptions regarding distributive justice. A higher mean score for an

item of procedural justice indicated strong agreement of front-line employee with the

statement and vice versa.

Table 4.8: Descriptive Statistics for Procedural Justice Items

Sr. No. Variables and Items Mean Standard

Deviation

Procedural Justice 3.76 .71

PJ_1 ―Job decisions are made by the branch manager in an

unbiased manner‖ 3.64 1.09

PJ_2 ―My branch manager makes sure that all employee

concerns are heard before job decisions are made‖ 3.79 .95

PJ_3 ―To make job decisions, my branch manager collects

accurate and complete information‖ 3.86 .97

PJ_4 ―My branch manager clarifies decisions and provides

additional information when requested by employees‖ 3.91 .94

PJ_5 ―All job decisions are applied consistently across all

affected employees‖ 3.79 .90

PJ_6 ―Employees are allowed to challenge or appeal job

decisions made by the branch manager‖ 3.58 1.06

As shown in Table 4.8, ―My branch manager clarifies decisions and provides additional

information when requested by employees‖ (PJ_4) showed the highest mean score (3.91)

of all the items used to measure procedural justice perceptions of front-line employees.

The lowest mean score (3.58) was found for ―Employees are allowed to challenge or

appeal job decisions made by the branch manager‖ (PJ_6). These findings indicated that

employees‘ perceptions about the ―right to challenge or appeal job decisions made by

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branch manager‖ were least evident than other indicators of procedural justice. Moreover,

all indicators of procedural justice perceptions had a mean score above 3.50.

Moreover, front-line employees‘ ratings dispersions from the average scores for

procedural justice perceptions were not much different. For instance, the lowest standard

deviation was found in PJ_4 i.e. ―Branch manager clarifies decisions and provides

additional information when requested by employees‖, thus, front-line employees were

mostly in agreement about this indicator of procedural justice. Furthermore, the highest

score of dispersion was found in PJ_1: ―job decisions are made by branch manager in an

unbiased manner‖ indicating a higher level of disagreement amongst employees‘

responses for this indicator compared to the other indicators of procedural justice.

4.4.2.3 Interactional Justice

Table 4.9 presents the breakdown of responses by front-line employees on each item of

interactional justice. Interactional justice perceptions of front-line employees were

measured by using the items given in Table 4.9. They were asked to give their response

for each indicator on a five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5

= strongly agree‖.

The descriptive statistics for interactional justice measures indicated a higher degree of

agreement regarding the interactional justice perceptions prevailing among front-line

employees under study. Front line employees tended to report a score above the mid-

point on a five-point scale for the indicators of interactional justice. On average, the

overall score of interactional justice reported by front-line employees was 3.82. Further,

the average score of all the indicators was above 3.70 indicating agreement amongst front

line employees regarding interactional justice indicators. Mean score of interactional

justice (3.82) was greater than procedural justice score (3.76) and also than the mean

score of distributive justice (3.65) indicating that employees‘ agreement about existence

of interactional justice was stronger than their perceptions regarding distributive justice

or procedural justice. A higher mean score for an item of interactional justice indicated

strong agreement of front-line employee with the statement and vice versa.

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As can be seen in Table 4.9, ―When decisions are made about my job, branch manager

treats me with respect and dignity‖ (IJ_2) showed the highest mean score (3.91) of all the

items used to measure interactional justice perceptions. The lowest mean score (3.72) was

found for ―When decisions are made about my job, the branch manager is sensitive to my

personal needs‖ (IJ_3). These findings indicated that employees‘ perceptions about the

―branch managers‘ sensitivity for employees‘ personal needs when making decisions

about their jobs‖ was less evident than other indicators of interactional justice. Moreover,

all indicators of interactional justice perceptions had a mean score above 3.70.

Table 4.9: Descriptive Statistics for Interactional Justice Items

Sr. No. Variables and Items Mean Standard

Deviation

Interactional Justice 3.82 .71

IJ_1 ―When decisions are made about my job. The branch

manager treats me with kindness and consideration‖ 3.87 .93

IJ_2 ―When decisions are made about my job. The branch

manager treats me with respect and dignity‖ 3.91 .93

IJ_3 ―When decisions are made about my job, the branch

manager is sensitive to my personal needs‖ 3.72 .99

IJ_4 ―When decisions are made about my job, the branch

manager deals with me in a truthful manner‖ 3.87 .96

IJ_5

―When decisions are made about my job, the branch

manager shows concern for my rights as an

employee‖

3.81 .97

IJ_6

―Concerning decisions made about my job. The

branch manager discusses the implications of the

decisions with me‖

3.77 .96

IJ_7 ―The branch manager offers adequate justification for

decisions made about my job‖ 3.79 .93

IJ_8 ―When making decisions about my job. The branch

manager offers explanations that make sense to me‖ 3.76 .94

IJ_9 ―My branch manager explains very clearly any

decision made about my job‖ 3.85 .97

Moreover, front-line employees‘ ratings dispersions from the average scores for

interactional justice indicators were not much different. Standard deviation scores for all

nine indicators of interactional justice ranged within .93 to .99 indicating a similar level

of agreement amongst employees‘ responses for all the indicators of interactional justice

perceptions.

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4.4.2.4 Employee Engagement

Table 4.10 illustrates the breakdown of responses by front-line employees on each item

of employee engagement used in this study. Engagement level of front-line employees

was accessed through the items given in Table 4.10. They were asked to give their

response for each indicator on a five-point Likert scale ranging from ―1 = strongly

disagree‖ to ―5 = strongly agree‖.

Table 4.10: Descriptive Statistics for Employee Engagement Items

Sr. No. Variables and Items Mean Standard

Deviation

Employee Engagement 3.87 .58

EE_1 ―At my work, I feel that I am full of energy‖ 4.08 .89

EE_2 ―I find the work that I do full of meaning and purpose‖ 3.96 .86

EE_3 ―Time flies when I am working‖ 3.99 .87

EE_4 ―At my job, I feel strong and energetic‖ 3.95 .91

EE_5 ―I am passionate about my job‖ 3.93 .93

EE_6 ―When I am working, I forget everything else around

me‖ 3.76 1.04

EE_7 ―My job inspires me‖ 3.77 .97

EE_8 ―When I get up in the morning, I feel like going to work‖ 3.79 .99

EE_9 ―I feel happy when I am working intensely‖ 3.88 .93

EE_10 ―I am proud of the work that I do‖ 3.88 .95

EE_11 ―At my work, I feel deeply involved in my work‖ 3.94 .88

EE_12 ―I can continue working for very long periods at a time‖ 3.84 .95

EE_13 ―To me, my job is challenging‖ 3.87 .94

EE_14 ―I get carried away (forget everything else) when I am

working‖ 3.78 .95

EE_15 ―At my job, I am very resilient (ability to come back in

crisis), mentally‖ 3.81 .91

EE_16 ―It is difficult to detach (disconnect) myself from my

job‖ 3.71 .95

EE_17 ―At my work, I am always consistent, even when things

do not go well‖ 3.84 .88

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The descriptive statistics for employee engagement measures indicated a higher level of

agreement regarding employee engagement among the employees participated in the

study. Front-line employees tended to report a score above the mid-point on a five-point

scale for the indicators of employee engagement. On average, the overall score of

employee engagement by front-line employees was found 3.87. Further, the average

score of all the indicators was above 3.70 indicating agreement amongst front-line

employees regarding employee engagement indicators. As shown in Table 4.10, ―At my

work, I feel that I am full of energy‖ (EE_1) showed highest mean score (4.08) of all the

items used to measure engagement level of front-line employees. The lowest mean score

(3.71) was found for ―It is difficult to detach (disconnect) myself from my job‖ (EE_16).

Front-line employees‘ ratings dispersions from the average scores for employee outcomes

were not much similar. For instance, in case of employee engagement, the lowest

standard deviation was found in indicator EE_2 i.e. ―I find the work that I do full of

meaning and purpose.‖, thus, front line employees were mostly in agreement about this

indicator of employee engagement. Contrary to this, the highest score of dispersion was

found in EE_6: ―When I am working, I forget everything else around me‖ indicating a

higher level of disagreement amongst employees‘ responses for this indicator compared

to the other indicators of employee engagement.

4.4.2.5 Employee Service Performance

Table 4.11 exhibits the breakdown of responses by front-line employees on each item of

service performance behavior. Service performance of front-line employees was

measured by using the items given in Table 4.11. They were asked to give their response

for each indicator on a five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5

= strongly agree‖.

In case of employee service performance, descriptive statistics for measures indicated a

higher level of agreement regarding service performance among the employees

participated in this study. Front-line employees tended to choose a score above the mid-

point on a five-point scale for the indicators of service performance. On average, the

overall score of service performance reported by front-line employees was 4.00. Further,

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the average score of all the indicators of service performance was above 3.85 indicating a

high level of agreement amongst front-line employees regarding service performance

indicators. Further, ―I am friendly and helpful to customers‖ (ESP_1) showed the highest

mean score (4.07) of all the items used to measure service performance of front-line

employees. In addition to this, the lowest mean score (3.87) was found for two indicators

of service performance including ―I suggest items customers might like but did not think

of‖ (ESP_6) and ―I explain an item‘s features and benefits to overcome a customer‘s

objections‖ (ESP_7).

Table 4.11: Descriptive Statistics for Employee Service Performance Items

Sr. No. Variables and Items Mean Standard

Deviation

Employee Service Performance 4.00 .65

ESP_1 ―I am friendly and helpful to customers‖ 4.07 .86

ESP_2 ―I always try to approach customers quickly‖ 4.03 .86

ESP_3 ―I ask good questions and listening to find out what a

customer wants‖ 4.02 .86

ESP_4 ―I am always willing to help customers when needed‖ 4.05 .86

ESP_5 ―I point out and relating item features to a customer‘s

needs‖ 4.00 .86

ESP_6 ―I suggest items customers might like but did not think

of‖ 3.87 .88

ESP_7 ―I explain an item‘s features and benefits to overcome a

customer‘s objections‖ 3.87 .83

Further, in case of service performance, the dispersions of employees‘ responses from

mean score for all seven indicators of the construct were not much different. All values of

standard deviation for service performance indicators were within the range of .83 and

.86 with five indicators had a standard deviation value of .86.

4.4.2.6 Employee Service Oriented OCB

Table 4.12 portrays the breakdown of responses by front-line employees on each item of

service related discretionary behavior. Service related OCB of front-line employees was

measured by using the items given in Table 4.12. They were asked to give their response

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for each indicator on a five-point Likert scale ranging from ―1 = strongly disagree‖ to ―5

= strongly agree‖.

Table 4.12 Descriptive Statistics for Employee Service Related OCB Items

Sr. No. Variables and Items Mean Standard

Deviation

Employee Service Oriented OCB 3.98 .59

SOCB_1 ―I often tell outsiders this is a good place to work‖ 3.84 .95

SOCB_2 ―I say good things about the branch to others‖ 3.92 .91

SOCB_3 ―I Generate favorable goodwill for the branch‖ 3.99 .86

SOCB_4 ―I encourage friends and family to use the branch‘s

products and services‖ 3.99 .90

SOCB_5 ―I actively promote the branch‘s products and

services‖ 4.02 .86

SOCB_6 ―I Follow customer service guidelines with extreme

care‖ 4.03 .86

SOCB_7 ―I conscientiously follow guidelines for customer

promotion‖ 3.99 .86

SOCB_8 ―I follow up in a timely manner to customer requests

and problems‖ 4.02 .81

SOCB_9 ―I perform duties with unusually few mistakes‖ 3.76 .96

SOCB_10 ―I always have a positive attitude at work‖ 4.09 .81

SOCB_11 ―Regardless of circumstances, I am exceptionally

courteous and respectful to customers‖ 4.03 .81

SOCB_12 ―I encourage my co-workers to contribute ideas and

suggestions for service improvement‖ 3.99 .88

SOCB_13 ―I contribute many ideas for customer promotions and

communications‖ 3.95 .89

SOCB_14 ―I make constructive suggestions for service

improvement‖ 3.94 .85

SOCB_15 ―I frequently present others creative solutions to

customer problems‖ 3.91 .84

SOCB_16 ―I usually take home brochures to read up on products

and services‖ 3.64 1.04

In case of employees‘ service oriented OCB, descriptive statistics for 16 items of the

construct indicated a higher level of agreement regarding service oriented OCB indicators

among front-line employees participated in this study. Front-line employees reported a

score above the mid-point on a five-point scale for the indicators of service oriented

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OCB. On average, the overall score of service related OCB reported by front-line

employees was 3.98. Further, the average score of all the indicators of service oriented

OCB was found above 3.60 indicating a high level of agreement amongst front line

employees regarding service oriented OCB indicators.

Last, in case of service oriented OCB, ―I always have a positive attitude at work‖

(SOCB_10) showed the highest mean (4.09) and the lowest mean (3.64) was found for ―I

usually take home brochures to read up on products and services‖ (SOCB_16). In the last,

three indicators of service oriented OCB (SOCB_8, SOCB_10, SOCB_11) showed the

lowest dispersion value i.e. .81. Whereas, ―I usually take home brochures to read up on

products and services‖ (SOCB_16) reflected the highest value of dispersion amongst all

the indicators of service oriented OCB.

4.5 Confirmatory Factor Analysis (CFA)

This section illustrates confirmatory factor analysis (CFA) conducted to ensure the

validity of instruments used to measure the variables of the study. Due to multilevel

nature of the study, branch level measurement model (Section 4.5.1) and individual

employee level measurement model (Section 4.5.2) were separately analyzed.

Construct validity refers to the process by which a researcher infer the hypotheses from a

theory that is relevant to the concept. The construct validity of the measures is required to

be gauged by its convergent and discriminant validity (Hair, et al., 2010) before

hypotheses testing. Researchers have used CFA to assess convergent and discriminant

validity of already established measures (e.g. Alfes, et al., 2013; Pak & Kim, 2016). In

other words, the CFA was carried out to measure convergent and discriminant validity of

the variable used in the study to establish their construct validity. Convergent validity

refers to the degree to which the elements of a variable show convergence or agreement.

Second, discriminant validity refers to whether the elements representing different

concepts actually captured the constructs distinct from each other as proposed in the

theory.

The objective of CFA was to confirm that the indicators had an appropriate fit within

their respective construct. Various indices of goodness-of-fit were considered to evaluate

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the measurement model fit as recommended by Tabachnick and Fidell (2007). These

indices included normed chi-square (χ2/d.f.) (Wheaton, et al., 1977), root mean square

error of approximation (RMSEA) (Browne et al., 1993) and root mean square residual

(RMR) (Kline, 2005), comparative fit index (CFI) (Bentler, 1990; Hu & Bentler, 1999),

incremental fit index (IFI) (Bollen, 1989), Tucker-Lewis Index (TLI) (Bentler & Bonett,

1980). A brief detail of the acceptable values of these model fit indices generated by CFA

is as follows and also summarized in the Table 4.13. First, the value of normed chi-square

(χ2/d.f.) should be less than 3 to represent good model fit (Browne & Cudeck, 1993; Hall,

Snell & Foust, 1999; Hu & Bentler, 1999; Kline, 2005). Further, a value of 0.90 or above

for incremental fit index (IFI), Tucker-Lewis index (TLI) and comparative fit index (CFI)

indicate a good model fit (Bentler, 1990; Kline, 2005). In the last, a value less than 0.08

for root mean square error of approximation (RMSEA) and standardized root mean

square residual (RMR) represents a good model fit (Browne & Cudeck, 1993; Hu &

Bentler, 1999). Further, factor loading score of individual items on their respective

construct generated by CFA was also considered and evaluated. According to

Schumacker & Lomax (2004) and Hair, et al. (2009), each element of a construct should

load onto its latent variable as proposed with a factor loading score of 0.50 or above.

Therefore, only those items which reflected a factor loading score of 0.50 or above were

considered for further data analysis.

Table 4.13: Model Fit Criteria

Model Fitness Indices Acceptable Values

Normed chi-square (χ2/d.f.) Less than 03

Incremental fit index (IFI) 0.9 and above

Tucker Lewis index (TLI) 0.9 and above

Comparative fit index (CFI) 0.9 and above

Root mean square error of approximation (RMSEA) Less than 0.08

Root mean square residual (RMR) Less than 0.08

Notes.χ2;Chi-square discrepancy, d.f.; Degrees of freedom.

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4.5.1 Branch Level Measurement Model (CFA)

As proposed in the theory, the manager-HPWS was accounted for as second order

construct where all the items were first loaded on their respective high performance work

practice and then these eight practices were further loaded onto the main construct i.e.

manager-HPWS. For instance, the first six items were loaded on the work practice called

extensive service training. Likewise, next eight items were loaded on the construct they

represented i.e. information sharing and so on. After this, all the eight work practices

were further loaded onto the latent variable called manager-HPWS. All other variables at

branch level of analysis (collective human capital and branch performance) were taken as

first order construct as proposed in the theory.

For proposed three-factor branch level measurement model, the values of goodness of fit

are presented in Table 4.14. These results demonstrated a good model fit as all the model

fitness indices scores were above cutoff values criteria as given in Table 4.12. The value

of TLI (.89) was slightly below the required value of 0.90. Overall, the goodness-of-fit

indices of the branch level measurement model showed a good model fit.

Further, the factor loadings for the individual items towards their respective branch level

variable were also assessed as per the criteria of factor loading score of 0.50 or above

(Schumacker & Lomax, 2004; Hair, et al., 2009). In case of manager-HPWS, all the

items, except one (―All business memos of this branch are shared with employees‖ IS_3)

from the information sharing dimension of manager-HPWS, showed a factor loading

score above 0.50. This indicator of information sharing had a factor loading score of 0.47,

slightly below the criteria and therefore discarded and did not used for further data

analysis. Further, in the case of second order construct, all eight high performance work

practices also met factor loading criteria of 0.5 or above with a factor loading score

ranging from 0.67 to 0.90.

Further, all five items used to measure branch level collective human capital

demonstrated a factor loading score well above the cutoff value of 0.50. The lowest factor

loading score by any of the collective human capital item was 0.67. In the last, all four

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indicators of bank branch performance also showed a factor loading score above 0.50

with lowest factor loading score of 0.61.

In the second stage, a series of competing measurement models was conducted to

compare the three-factor hypothesized model with the alternative ones. The CFA results

indicated that the three factor hypothesized measurement model which included manager-

HPWS, branch level collective human capital and bank branch performance showed

better model fit (χ2 = 1521.34, d.f. = 921, χ

2/d.f. = 1.65 p < .05, IFI = .91, TLI = .89, CFI

= .90, RMSEA = .049, RMR = .045) compared to the alternative models where the

elements of different constructs were considered to load together as a single variable. For

instance, compared to proposed three-factor model, another two factor model where

items of collective human capital and branch performance were considered to load as

single variable showed a bad model fit (χ2 = 1791.23, d.f. = 923, χ

2/d.f. = 1.94 p < .05, IFI

= .85, TLI = .84, CFI = .85, RMSEA = .054, RMR = .051). Similarly, a one factor

measurement model in which all the indicators were loaded on single construct fit the

data even worst (χ2 = 1892.73, d.f. = 924, χ

2/d.f. = 2.05 p < .05, IFI = .84, TLI = .82 CFI

= .84, RMSEA = .054, RMR = .057). A summary of the model fitness indices for three-

factor proposed model and the alternative models is presented in Table 4.14. These

findings from CFA provided empirical evidence for the construct validity of the

constructs used to measure manager-HPWS, collective human capital and branch

performance as branch level variables.

Table 4.14: Measurement Models Comparisons (Branch Level)

Models χ2/d.f. IFI TLI CFI RMSEA RMR

Proposed Three-Factor

Model 1.65 .91 .89 .90 .049 .045

Two-Factor Modela 1.94 .85 .84 .85 .054 .051

One-Factor Modelb 2.05 .84 .82 .84 .054 .057

Notes.χ2;Chi-square discrepancy, df; Degrees of freedom, IFI; Incremental fit index, TLI; Tucker–Lewis

index, CFI; Comparative fit index, RMSEA; Root mean square error of approximation. a Collective human capital and branch performance combined into single factor,

b all variables combined into single factor.

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4.5.2 Individual Employee Level Measurement Model (CFA)

For Employee level data, all the variables were taken as first order constructs as proposed

in the study. The results of goodness-of-fit indices for individual level measurement

model as generated by CFA are demonstrated in Table 4.15. These results showed a good

model fit for six factor proposed measurement model where all the fitness indices were

satisfying the model fitness criteria as given in Table 4.13. Overall, the six factor

measurement model showed good psychometric properties of the measures employed to

gauge individual level variables (see Table 4.15).

Further, the factor loadings for the individual items towards their respective variable were

also assessed as per the criteria of factor loading score of 0.50 or above (Schumacker &

Lomax, 2004; Hair, et al., 2009). The findings illustrated that all the items loaded onto

their respective latent variable with a factor loading score of 0.5 or above. Only two items

of service oriented OCB out of 16 did not load onto the latent variable well. First ―I

perform duties with unusually few mistakes‖ (SOCB_9) showed a factor loading score of

0.38. Whereas, the second item of service oriented OCB i.e. ―I usually take home

brochures to read up on products and services‖ (SOCB_16) demonstrated a factor loading

score of 0.40 onto its latent variable and discarded from data and did not consider for

further data analysis. Overall, all six variables at individual level of analysis

demonstrated a good measurement model with factor loading scores above 0.5 except for

two items of service oriented OCB.

Further, a series of CFA was also conducted to generate and compare model fitness

indices of the proposed six factor measurement model with alternative measurement

models. First, a six-factor hypothesized measurement model was tested and compared it

with several alternative models. As can be seen in Table 4.15, model fitness indices for

proposed six-factor model showed that model fit the data well (χ2 = 4455.28, d.f. = 1562,

χ2/d.f. = 2.85 p < .05, IFI = .92, TLI = .92, CFI = .93, RMSEA = .037, RMR = .033)

compared to various alternative measurement models. For example, relative to proposed

model, a five factor measurement model where the items of employee engagement and

service performance were set to load on one construct showed poor model fit (χ2

=6173.74, d.f. =1567, χ2/d.f. = 3.94 p < .05, IFI = .88, TLI = .87, CFI = .86, RMSEA =

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.046, RMR = .042). Further, in case of four factor model in which employee engagement,

service performance and service oriented OCB were considered as one construct, the data

showed a worst model fit (χ2 =6912.14, d.f. =1571, χ

2/d.f. = 4.40 p < .05, IFI = .86, TLI =

.85, CFI = .85, RMSEA = .050, RMR = .047). Next, while testing a three factor model

where the items of interactional justice, employee engagement, service performance and

service oriented OCB were loaded as a single construct, the data demonstrated even worst

model fit (χ2 = 10419.69, d.f. =1576, χ

2/d.f. =6.62 p < .05, IFI = .77, TLI = .75, CFI =

.77, RMSEA = .064, RMR = .066). Further, a two factor model in which the items of all

the variables except distributive justice were loaded on a single factor showed poor

model fit (χ2 =11532.17, d.f. =1576, χ

2/d.f. =7.32 p < .05, IFI = .74, TLI = .72, CFI = .74,

RMSEA = .068, RMR = .068). In the last, when only one factor was considered for CFA,

where all the items of six individual level variables were loaded on a single factor, the

model fitness became the worst (χ2 =12776.48, d.f. =1577, χ

2/d.f. =8.10 p < .05, IFI = .70,

TLI = .69, CFI = .70, RMSEA = .072, RMR = .072).

Table 4.15: Measurement Models Comparisons (Individual Level)

Models χ2/d.f. IFI TLI CFI RMSEA RMR

Proposed Six-Factor Model 2.85 .92 .92 .93 .037 .033

Five-Factor Modela 3.94 .88 .87 .88 .046 .042

Four-Factor Modelb 4.40 .86 .85 .85 .50 .047

Three-Factor Modelc 6.62 .77 .75 .77 .064 .066

Two-Factor Modeld 7.32 .74 .72 .74 .068 .068

One-Factor Modele 8.10 .70 .69 .70 .072 .072

Notes.χ2;Chi-square discrepancy, df; Degrees of freedom, IFI; Incremental fit index, TLI; Tucker–Lewis

index, CFI; Comparative fit index, RMSEA; Root mean square error of approximation. a Employee engagement and service performance combined into single factor,

b Employee engagement, service performance and service oriented OCB combined into single factor,

c Employee engagement, service performance, service oriented OCB and interactional justice combined

into single factor, d Employee engagement, service performance, service oriented OCB, interactional justice and procedural

justice combined into single factor, e all variables combined into single factor.

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A summary of the model fitness indices for six-factor proposed model and the alternative

models is presented in Table 4.15. These findings of CFA empirically confirmed

construct validity of the six constructs used at individual level of analysis.

Overall, the results of CFA reflected good psychometric properties of measures employed

to gauge the constructs used in this study. Only three items demonstrated a factor loading

score below 0.50 and therefore discarded from further analysis. In addition to this, the

hypothesized models demonstrated a good model fit compared to the alternative

measurement models. In sum, these findings confirmed the validity of measures used in

study and warrant the appropriateness of data for hypotheses testing.

4.6 Reliability of Variables

This section presents the reliability results of all the variables used in this study. This

study used Cronbach‘s alpha reliability measure to gauge the reliability of the variables

used in this study. According to Spector (1992), the Cronbach‘s alpha score should be

above 0.70 for a measurement scale to be reliable. However, according to Moss, et al.,

(1998), the value of 0.60 for reliability alpha (Cronbach‘s alpha) is also acceptable.

Reliability values for each construct of this study were calculated and are given in Table

4.16. The reliability alpha score for all the variables of the study ranged from .79 to .92

which well qualified the cutoff value of 0.70. Specifically, the reliability values of

manager-HPWS, collective human capital and bank branch performance were .92, .84

and .79, respectively. Further, Cronbach‘s alpha reliability scores for distributive justice,

procedural justice, interactional justice, employee engagement, service performance and

service oriented OCB were found .86, .81, .90, .90, .87 and .91 respectively.

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Table 4.16: Reliability Scores of the Variables

Sr. No. Variables and Items Cronbach‘s

Alpha

1 High Performance Work System .92

1.1 Employee Service Training .79

1.2 Information Sharing .79

1.3 Interdepartmental Services .66

1.4 Service Teams & Participation .77

1.5 Service Discretion .77

1.6 Compensation Contingent to Service Performance .77

1.7 Job Design for Quality Work .77

1.8 Service Performance Based Appraisals .83

2 Collective Human Capital .84

3 Bank Branch Performance .79

4 Distributive Justice .86

5 Procedural Justice .81

6 Interactional Justice .90

7 Employee Engagement .90

8 Employee Service Performance .87

9 Service Oriented OCB .91

In addition to this, Cronbach‘s alpha scores for each sub dimension of manager-HPWS

were also calculated separately to determine the degree to which the items of each

dimension shared common aspect. In case of sub dimensions of manager-HPWS, the

Cronbach‘s alphas ranged from .66 to .83. In specific, Cronbach‘s alpha value was .79 for

extensive service training, .79 for information sharing, .66 for interdepartmental services,

.77 for service teams and participation, .77 for service discretion, .77 for pay contingent

to service performance, .77 for job design and .83 for service based employee evaluation.

Of eight dimensions of manager-HPWS, only interdepartmental services had a reliability

score 0.66 which was slightly less than the cutoff value of 0.70 (Spector, 1992).

However, this also falls in the generally acceptable range of construct reliability i.e. 0.60

and above (Moss, et al., 1998). Therefore, reliability results showed that the reliability of

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measures is not an issue in current study as all the constructs demonstrated a good

reliability score. Detail of the reliability values for each variable and also the dimensions

of manager-HPWS are illustrated in Table 4.16.

4.7 Means, Standard Deviations and Correlation Results

This section presents mean and standard deviation scores along with the correlation

between the variables of this study. In case of branch level of analysis, branch size

(number of employees), branch age (in years) and ownership type (Public = 0, Private =

1) were taken as control variables along with manager-HPWS, bank branch level human

capital and branch performance. In addition to this, distributive justice, procedural

justice, interactional justice, employee engagement, service performance and service

oriented OCB were the variables used at individual level of analysis. The control

variables used at individual level of analysis included employee gender (Female = 0,

Male = 1), age (in years) and tenure with current employer (in years). Descriptive

statistics (mean and standard deviation) and correlation results of branch level and

individual employee level of analysis are presented in Table 4.17 and Table 4.18,

respectively.

As can be seen in Table 4.17, branch size was significantly related only with bank branch

performance (r = .11, p < .05) indicating that bank branches with more number of

employees had better market performance compared to the branches with few employees.

Further, branch age was negatively related with both manager-HPWS (r = -.18, p < .01)

and branch human capital (r = -.15, p < .01). These findings were interesting as these

indicated that the level of implemented HPWS and human capital decreased as bank

branch became older and older. Moreover, manager-HPWS was related significantly with

bank branch human capital (r = .66, p < .01) and bank branch performance (r = .37, p <

.01). In the last, bank branch level collective human capital was also significantly linked

with bank branch performance (r = .34, p < .01).

Further, Table 4.18 illustrates the means, standard deviations and correlation results for

the variables conceptualized at individual level of analysis. In case of control variables

(employee gender, age and tenure with current bank), no control variable was found to be

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significantly related with the key variables of the study. Further, distributive justice

perceptions of front-line employees were related significantly with procedural justice (r =

.54, p < .01), interactional justice (r = .45, p < .01), employee engagement (r = .45, p <

.01), service performance (r = .24, p < .01) and service oriented OCB (r = .31, p < .01).

Next, procedural justice perceptions of front-line employees were also found to be

significantly related with interactional justice (r = .74, p < .01), employee engagement (r

= .53, p < .01), service performance (r = .38, p < .01) and service oriented OCB (r = .45,

p < .01). Moreover, interactional justice perceptions of front-line employees were also

related significantly with employee engagement (r = .54, p < .01), service performance (r

= .41, p < .01) and service oriented OCB (r = .48, p < .01). Similarly, employee

engagement was also found to be associated significantly with service performance (r =

.59, p < .01) and service oriented OCB (r = .65, p < .01) of front-line employees. In the

last, service performance and service oriented OCB were also related significantly (r =

.76, p < .01). Amongst the three justice perceptions, interactional justice was found to be

strongly related with all three employee outcome variable (employee engagement, service

performance and service oriented OCB.

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Table 4.17: Means, Standard Deviations and Correlation Results (Branch Level)

Variables Mean S.D 1 2 3 4 5

1. Branch Size 12.92 6.07

2. Branch Age 14.03 11.92 .10

3. Ownership

(Public or Private) - - -.11 -.16**

4. Manager-HPWS 3.92 .50 .11 -.18** .10

5. Collective Human

Capital 3.89 .67 -.04 -.15** .11* .66**

6. Branch Performance 4.06 .59 .11* -.04 .07 .37** .34**

Notes. Branch size is in terms of number of employees; Branch age in years; Ownership Type: Public = 0, Private = 1.

*p <0.05. **p <0.01.

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Table 4.18: Means, Standard Deviations and Correlation Results (Individual Level)

Variables Mean S.D 1 2 3 4 5 6 7 8

1. Gender - -

2. Age 29.70 5.82 .18**

3. Tenure 2.50 2.05 .08** .27**

4. Distributive Justice 3.65 .85 .01 .01 .02

5. Procedural Justice 3.76 .71 -.01 -.02 -.03 .54**

6. Interactional

Justice 3.82 .71 .01 -.01 -.06 .45** .75**

7. Employee

Engagement 3.87 .58 .04 -.03 .01 .45** .53** .54**

8. Service

Performance 4.00 .65 -.01 .01 -.02 .24** .38** .41** .59**

9. Service Oriented

OCB 3.98 .59 .02 -.01 -.02 .31** .45** .48** .65** .76**

Notes. Gender: Female = 0, Male = 1; Age in years; Tenure in years.

*p <0.05. **p <0.01.

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4.8 Hypotheses Testing: Branch Level Relationships

This section presents the findings of branch level hypotheses of this study. First two

hypotheses of the study were branch level hypotheses with all the variables from same

level of analysis. First hypothesis of this study stated that manager-HPWS is related

significantly with bank branch performance. Further, hypothesis 2 of the study suggested

that branch level human capital mediates the relationship of manager-HPWS with bank

branch performance. Moreover, at branch level of analysis, bank branch size (number of

employees), branch age and the ownership status (public or private bank) were taken as

control variables. Structural equation modeling (SEM) was used to examine the first two

hypotheses of this study as all the variables in these hypotheses were branch level

variables. To maintain an appropriate item to sample size ratio, all the variables were

taken as single observed variable. Estimation model, as given in Figure 4.1, demonstrated

a good model fit (χ2 = 7.47, df = 3, χ

2/d.f. = 2.49 p > .05, GFI = .99, AGFI = .95, IFI =

.98, TLI = .92, CFI = .98, RMSEA = .068, RMR = .012). The results showed that

manager-HPWS was significantly related (β = .29, p < .01) to bank branch performance,

thereby empirically supported the hypothesis 1 of this study. Further, the path from

manager-HPWS to collective human capital was also found to be significant (β = .89, p <

.01). Similarly, collective human capital and bank branch performance were also related

(β = .16, p < .01).

Now, to further test the hypothesis 2 that whether collective human capital fully or

partially mediated manager-HPWS and bank branch performance relationship, another

estimation model was calculated without assuming the direct effect of manager-HPWS

on bank branch performance (as shown in Figure 4.2). The values of model fitness

indices for this estimation model reduced significantly (χ2 = 19.29, df = 4, χ2/d.f. = 4.82 p

< .05, GFI = .98, AGFI = .90, IFI = .94, TLI = .78, CFI = .94, RMSEA = .11, RMR =

.015) compared to the previous estimation model with direct effects, highlighting that

branch level human capital partially mediated the relationship. These findings revealed

that bank branch level human capital partially mediated the positive linkage of manager-

HPWS and bank branch performance, thus empirically supported H2 of the study.

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Manager

HPWS

Collective

Human Capital

Branch

Performance

Branch

Age

Ownership

Type

Branch

Size

.29** .08

.89** .16**

.02 .06

.11*

.89** .30**

.01 .07

Manager

HPWS

Collective

Human Capital Branch

Performance

Branch

Age

Ownership

Type

Branch

Size

Figure 4.1: Structural Equation Modeling, Direct Effects

Figure 4.2: Structure Equation Modeling, Indirect Effects

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Further, first two hypotheses were also tested by using hierarchical linear regression in

SPSS 20. The results of hierarchical linear regression are illustrated in Table 4.17. Table

4.17, Model 2 elaborates that manager-HPWS was related significantly with bank branch

performance (β = .43, p < .01), thus empirically confirmed the hypothesis 1 of the study.

Further, the mediation effects of collective human capital were tested through the steps

prescribed by Baron and Kenny, (1986). According to them, in order to confirm the

mediation effects, the predictor variable should be related with the dependent variable in

the first step. In second step, the independent variable should also be related significantly

with the mediating variable. In third step, the mediating variable must be significantly

related with the outcome variable. Finally, in the last step, upon entering independent and

mediating variables together in regression equation, the independent variable either

reduce in its effects (partial mediation) or it becomes insignificant (full mediation).

Table 4.19: Regression Results for Manager-HPWS, Collective Human Capital and

Branch Performance

Variables Branch Performance

Model 1 Model 2 Model 3 Model 4 Model 5

Branch Size .11* .07 -.11* .11* .08

Branch Age -.02 .01 -.01 .01 .02

Ownership

(Public or Private) .12 .07 .06 .07 .06

Manager-HPWS .43** .90** .29**

Collective Human

Capital .30** .16**

Adjusted R2 .01 .13 .44 .11 .15

∆ R2 .12 .42 .12 .14

F Value 2.16 13.32** 237.6** 11.96** 12.60**

Notes. Branch size is in terms of number of employees; Branch age in years; Ownership Type: Public =0,

Private =1

*p <0.05. **p <0.01.

As shown in the Model 2 of Table 4.19, manager-HPWS (independent variable) was

related significantly to bank branch performance (dependent variable), thereby, fulfilling

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the first condition of mediation analysis. Next, as shown in Model 3 of Table 4.19,

manager-HPWS was also significantly related to collective human capital, the mediating

variable, (β = .90, p < .01), thus satisfied the second requirement of the mediation

analysis. Further, as illustrated in Model 4 of Table 4.19, collective human capital was

also significantly related with bank branch performance (β = .30, p < .01), thereby

fulfilled third condition of mediation analysis. In the last step (Model 5 of Table 4.19),

upon entering manager-HPWS and collective human capital together in the regression

equation, the effect of manager-HPWS reduced (from β = .43, to β = .29) but remained

significant indicating partial mediation. In sum, all these findings showed that the

relationship between manager-HPWS and bank branch performance is partially mediated

by branch human capital and therefore empirically supported the hypothesis 2 of the

study.

4.9 Hypotheses Testing: Cross-Level Relationships

This section presents the results of hypotheses testing for the cross-level direct and

indirect (mediation effects) relationships of variables in this study. In specific, section

4.9.1 illustrates the findings of cross-level direct relationships between manager-HPWS

and employee outcomes (employee engagement, service performance and service

oriented OCB). Whereas, section 4.9.2 presents the findings of cross-level mediation

effect of distributive, procedural and interactional justice for manager-HPWS and

employee outcomes relationship. According to Mossholder and Bedeian (1983), in cross-

level relationships, constructs at one level of analysis are conceptualized to effect

constructs at other level of analysis. The cross-level relationships of this study are

depicted in Figure 4.3. In this study, branch level variables were proposed to impact the

variables at individual level. All the proposed relationships in the study, except for H1

and H2, were cross level relationships. Therefore, HLM was used which has several

advantages over conventional regression analysis when testing cross-level hypotheses

(Bryk & Raudenbush, 1992), discussed already in last chapter.

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Branch Level

H3 (a-c)

Individual Level

For HLM analysis, null model for each dependent variable is required to be tested before

hypotheses testing in order to identify between-group variance to decide about the

appropriateness of the use of HLM for cross-level relationships (Mathieu & Taylor, 2007;

Hox, 2010). Therefore, separate null models for each of the three outcome variable of the

study including employee engagement, service performance and service oriented OCB

were tested to measure between-group variance (between bank branches in case of this

study). In a null model, a model is tested where there is only outcome variable and no

predictor variable in the equation. The null model is run to measure the intra-class

correlation (ICC) value for each of the outcome variables by using formula given below.

ICC value represents percentage variance in outcome variable (employee engagement,

service performance and service oriented OCB in case of this study) that is between bank

branches.

Manager

HPWS

Distributive

Justice

H4 (a-c)

Interactional

Justice

H6 (a-c)

Procedural

Justice

H5 (a-c)

Employee Engagement

Service Performance

Service Oriented OCB

Figure 4.3: Cross-level Relationships

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ICC = τ00

τ00+ σ2

Where

τ00 = variance between group

σ2

= variance within groups

The results of null models for each of three dependent variables (employee engagement,

service performance and service oriented OCB) are reported in Table 4.20. These results

demonstrated significant chi-squared values for employee engagement (χ2 = 1291.20, p <

.01), employee service performance (χ2 = 1022.17, p < .01) and their service oriented

OCB (χ2 = 1041.91, p < .01). These chi-squared values indicated significant between-

branches variance in the dependent variables and warrant the use of HLM rather than

regression by using aggregation or disaggregation of data. Along with this, the ICC

values for the three outcomes variables were calculated by using formula given above.

The ICC value for employee engagement, employee service performance and employee

service oriented OCB were found .41, .33 and .34, respectively. These ICC values

demonstrated that 41 % variance existed between-branches in case of employee

engagement. Further, in case of employee service performance, 33 % variance existed

between bank branches. Whereas, 34 % between bank branches variance was observed in

case of employee service oriented OCB. In other words, the intercept terms significantly

varied across branches in case of all three outcome variables. Overall, these results

implied that significant between-group variance existed in case of all three dependent

variables which justified the use of HLM instead of simple regression by aggregation or

disaggregation of data.

4.9.1 Cross-Level Direct Relationships

This section presents the findings of hypotheses testing for cross-level direct relationships

between manager-HPWS and employee engagement, service performance and service

oriented OCB. Cross-level direct relationships hypothesized in this study stated that

manager-HPWS would be related with employee engagement (H3a), service performance

(H3b) and service oriented OCB (H3c) respectively. In these cross-level relationships,

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manager-HPWS was conceptualized at branch level of analysis and employee outcomes

including employee engagement, service performance and service oriented OCB were

conceptualized at individual level of analysis. Therefore, for these cross-level hypotheses,

HLM was used for which the preliminary requirement of null model was already tested

which justified the use of HLM for testing these hypotheses.

HLM results for cross-level direct relationships are demonstrated in Table 4.20. In

specific, the HLM results revealed that manager-HPWS significantly impacted employee

engagement (γ = .38, p < .01) after controlling for employee gender, age and tenure at

Level-1 and branch size, branch age and ownership type at Level-2. These results

provided empirical support for H3a of the study which demonstrated that manager-

HPWS is related with employee engagement. Similarly, as can be seen in Model 4 of

Table 4.20, after controlling for individual and branch level variables, manager-HPWS

significantly influenced service performance (γ = .36, p < .01), thus statistically

supported the H3b of the study. In the same way, Model 6 of Table 4.20 showed that after

controlling for control variables at both levels, manager-HPWS significantly related with

service oriented OCB (γ = .37, p < .01), thereby, empirically substantiated H3c of the

study.

Overall, these HLM results presented in Table 4.20 revealed that all three direct cross-

level relationships between manager-HPWS and employee outcomes (H3a, H3b, H3c)

were empirically supported. In other words, HPWS implemented by branch managers in

their respective branches had significant impact on employee engagement, service

performance and service oriented OCB (employee outcomes). Effectively implemented

HPWS by bank branch managers has the potential to improve the engagement level of

front-line employees in their workplaces along with superior service performance and

discretionary behaviors while serving customers.

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Table 4.20: HLM Results of Manager-HPWS and Employee Outcomes

Level &

Variables

Employee Engagement Employee Service Performance Service Oriented-OCB

Null

Model Model 1 Model 2

Null

Model Model 3 Model 4

Null

Model Model 5 Model 6

Intercept 3.87(.02)** 3.73(.10)** 2.29(.2)** 4.00(.03)** 3.98(.10)** 2.59(.2)** 3.98(.02)** 3.93(.09)** 2.53(.2)**

Level 01 (n = 1369)

Gender .05(.03) .05(.03) -.02(.04) -.02(.04) .04(.03) .04(.03)

Age -.03(.02) -.02(.02) .01(.02) .02(.02) -.02(.02) -.01(.02)

Tenure .01(.03) .01(.03) -.01(.03) -.01(.03) -.01(.03) -.01(.03)

Level 02 (n = 323)

Branch Size .09(04)* .05(.03) .08(.04)* .05(.04) .07(.04)* .03(.03)

Branch Age -.05(.02)* -.01(.02) -.06(.02)** -.03(.02) -.07(.02)** -.04(.02)*

Ownership

(Public or

Private)

.10(.07) .06(.06) .01(.07) -.03(.07) .10(.06) .07(.06)

Manager-

HPWS .38(.05)** .36(.06)** .37(.05)**

σ2 .20 .28 .23

τ00 .14 .14 .12

χ2 1291.20** 1225.46** 990.06** 1022.17** 979.26** 826.17** 1041.91** 980.89** 796.64**

Notes. Level-2 = Branch Level; Level-1 = Individual Employee Level; Branch size is in terms of number of employees; Branch age in years; Ownership

Type (Private = 1, Public = 0); Gender (1= male, 0 = female); Age and Tenure of employees in years; Standard errors are reported in parentheses; σ2

represents variance in Level-1 residuals; τ00 represents variance in Level-2 residuals.

*p <0.05. **p <0.01.

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4.9.2 Cross-Level Mediation Analysis

This section illustrates and discusses empirical findings of cross-level mediation

hypotheses of the study. In addition to measure the relationship between manager-HPWS

and employee outcomes, this study also tested for the mediating mechanisms that might

explain these direct relationships. In specific, distributive justice perceptions, procedural

justice perceptions and interactional justice perceptions were proposed as intermediary

mechanisms to explain the direct relationship between manager-HPWS and employee

outcomes.

This study tested multilevel mediations using the process prescribed by Krull and

MacKinnon (2001) and Zhang, Zyphur and Preacher (2009) for investing mediation

involving two levels of analysis. These researchers have developed this procedure for

testing cross-level mediations based upon the process of mediation analysis prescribed by

Baron and Kenny (1986). In case of this study, the predictor (manager-HPWS) was

Level-2 variable, whereas the mediators (distributive justice, procedural justice and

interactional justice) as well as employee outcome variables (employee service

performance and service oriented OCB) were at conceptualized at Level-1. This type of

model is called 2-1-1 model where numbers are representing the level of analysis at

which variables are conceptualized in the model. According to Zhang, et al. (2009), for

cross-level mediation effects, the Level-2 predictor should be significantly linked with

the outcome variable at Level-1 (step 1). In step 2, the Level-2 predictor must be

significantly related with the Level-1 mediating variable. Next, the Level-1 mediator

must be related significantly with the Level-1 outcome variable (step 3). In the last step,

while adding the Level-2 predictor and Level-1 mediator simultaneously in the HLM

equation, either the effect of the independent variable on the outcome variable reduces

(partial mediation) or it becomes insignificant (full mediation).

HLM results for mediation effects of organizational justice dimensions between manager-

HPWS and employee outcomes are reported in Table 4.21, Table 4.22 and Table 4.23,

respectively. In specific, Table 4.21 presents the mediation effects of distributive justice

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between the relationship of manager-HPWS and employee engagement (H4a), service

performance (H4b) and service oriented OCB (H4c). Next, Table 4.22 demonstrates the

mediation effects of procedural justice for manager-HPWS and employee engagement

(H5a), service performance (H5b) and service oriented OCB (H5c) relationships. In the

last, Table 4.23 illustrates the mediation effects of interactional justice for manager-

HPWS and employee engagement (H6a), service performance (H6b) and service oriented

OCB (H6c) relationships.

4.9.2.1 Mediation Effects of Distributive Justice

Table 4.21 illustrates HLM results for manager-HPWS, distributive justice and employee

outcomes (employee engagement: H4a, service performance: H4b and service oriented

OCB: H4c) relationship. First, in case of testing the mediation effects of distributive

justice between manager-HPWS and a) employee engagement, b) service performance

and c) service oriented OCB, the procedure discussed in previous section for conducting

cross-level mediation effects was followed. As can be seen in Table 4.20, manager-

HPWS was significantly related with employee engagement (γ = .38, p < .01), employee

service performance (γ = .36, p < .01) and service oriented OCB (γ = .37, p < .01). These

direct relationships were already tested as H3a, H3b and H3c of this. Therefore, the first

condition of mediation analysis was satisfied that Level-2 predictor should be related

with Level-1 outcome variable. Next, as shown in Model 2 of Table 4.21, manager-

HPWS was also significantly related with the distributive justice perceptions of front line

employees (γ = .34, p < .01). This, therefore, satisfied the second condition of cross-level

mediation analysis i.e. Level-2 predictor must be significantly related to Level-1

mediator. Further, as illustrated in Model 3, Model 5 and Model 7 of Table 4.21,

distributive justice perceptions were found to be significantly related with employee

engagement (γ = .26, p < .01), service performance (γ = .16, p < .01) and service oriented

OCB (γ = .18, p < .01). These findings statistically supported the third condition of cross-

level mediation that Level-1 mediator must be significantly related with Level-1

dependent variable. Distributive fairness perceptions of front-line employees were found

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to be significantly related with all three employee outcome variables. In the last step of

cross-level mediation analysis, manager-HPWS and distributive justice were

simultaneously entered in HLM equation in case of each employee outcome variable

(Model 4, Model 6 and Model 8 of Table 4.21). In case of employee engagement, the

effects of manager-HPWS reduced (from γ = .38 to γ = .29) but remained significant

indicating partial mediation (supported H4a). Further, in employee service performance

case, the effects of manager-HPWS reduced (from γ = .36 to γ = .32) but did not turned to

insignificant revealing partial mediation (supported H4b). Last, similar to previous two

cases, in case of service-oriented OCB also, the effects of manager-HPWS reduced (from

γ = .37 to γ = .31) but remained significant indicating partial mediation (supported H4c).

In summary, these findings revealed that distributive justice partially mediated all the

three relationships between manager-HPWS and employee engagement (H4a), service

performance (H4b) and service oriented OCB (H4c). These empirical findings indicated

that properly implemented HPWS by bank branch managers shape the perceptions of

employees regarding outcomes related fairness (distributive justice) as result of

organizational HR system which further yield into favorable employees‘ reactions at jobs

in form of employee engagement, their service related performance and also discretionary

behaviors while serving customers.

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Table 4.21: HLM Results of Manager-HPWS, Distributive Justice (Mediator) and Employee Outcomes

Level &

Variables

Distributive Justice Employee Engagement Employee Service

Performance Service Oriented-OCB

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

Intercept 3.50(.1)** 2.20(.3)** 3.77(.09)** 2.64(.2)** 4.01(.10)** 2.79(.25)** 3.96(.09)** 2.76(.23)**

Level 01 (n = 1369)

Gender -.02(.05) -.02(.05) .06(.03)* .06(.03)* -.02(.04) -.02(.02) .04(.03) .04(.03)

Age .02(.03) .03(.03) -.03(.02) -.03(.02) .01(.02) .01(.02) -.02(.02) -.01(.02)

Tenure -.01(.04) -.01(.04) .01(.02) .01(.02) -.01(.03) -.01(.03) -.01(.02) -.01(.03)

Distributive

Justice .26(.03)** .24(.03)** .16(.03)** .14(.03)** .18(.03)** .16(.03)**

Level 02 (n = 323)

Branch Size .12(.05)* .09(.05) .06(.03) .03(.03) .06(.04) .03(.04) .05(.03) .02(.03)

Branch Age -.07(.03)* -.04(.03) -.03(.02) -.01(.02) -.05(.02)* -.03(.02) -.06(.02)** -.03(.02)

Ownership

(Public or

Private)

.08(.1) .05(.09) .08(.06) .05(.06) -.01(.07) -.04(.07) .09(.06) .06(.06)

Manager-

HPWS .34(.06)** .29(.05)** .32(.06)** .31(.05)**

χ2 1114.36** 1027.24** 1014.22** 865.39** 946.21** 829.88** 898.54** 767.34**

Notes. Level-2 = Branch Level; Level-1 = Individual Employee Level; Branch size is in terms of number of employees; Branch age in years; Ownership

Type (Private = 1, Public = 0); Gender (1= male, 0 = female); Age and Tenure of employees in years; Standard errors are reported in parentheses; σ2

represents variance in Level-1 residuals; τ00 represents variance in Level-2 residuals.

*p <0.05. **p <0.01.

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4.9.2.2 Mediation Effects of Procedural Justice

Table 4.22 demonstrates HLM results for manager-HPWS, procedural justice and

employee outcomes (employee engagement: H5a, service performance: H5b and service

oriented OCB: H5c) relationship. First, in case of testing the mediation effects of

procedural justice between manager-HPWS and a) employee engagement, b) service

performance and c) service oriented OCB, the procedure discussed in section 4.9.2 was

followed. As given in Table 4.20, manager-HPWS was significantly related with

employee engagement (γ = .38, p < .01), employee service performance (γ = .36, p < .01)

and service oriented OCB (γ = .37, p < .01), already tested as H3a, H3b and H3c.

Therefore, the first condition of mediation analysis was satisfied stated that Level-2

predictor should be related with Level-1 outcome variable. Next, as given in Model 2 of

Table 4.22, manager-HPWS was also related significantly with procedural justice

perceptions (γ = .42, p < .01), thus satisfied the second condition of cross-level mediation

analysis i.e. Level-2 predictor must be significantly related to Level-1 mediator. Further,

as illustrated in Model 3, Model 5 and Model 7 of Table 4.22, procedural justice was

found to be significantly related with employee engagement (γ = .38, p < .01), service

performance (γ = .30, p < .01) and service oriented OCB (γ = .32, p < .01). These

findings statistically supported the third condition of cross-level mediation i.e. Level-1

mediator should be significantly related with Level-1 outcome variable. In the last step,

manager-HPWS and procedural justice were simultaneously entered in HLM in case of

each of the three employee outcome variables (Model 4, Model 6 and Model 8 of Table

4.22). In case of employee engagement, the effects of manager-HPWS reduced (from γ =

.38 to γ = .23) but remained significant indicating partial mediation (supported H5a).

Further, in service performance case, the effects of manager-HPWS reduced (from γ =

.36 to γ = .25) but did not turned to insignificant revealing partial mediation (supported

H5b). Last, in case of service-oriented OCB, the effects of manager-HPWS reduced

(from γ = .37 to γ = .24) but remained significant indicating partial mediation (supported

H5c). In summary, these findings revealed that procedural justice partially mediated all

the three relationships between manager-HPWS and employee engagement (H5a),

service performance (H5b) and service oriented OCB (H5c).

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Table 4.22: HLM Results of Manager-HPWS, Procedural Justice (Mediator) and Employee Outcomes

Level &

Variables

Procedural Justice Employee Engagement Employee Service

Performance Service Oriented-OCB

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

Intercept 3.68(.13)** 2.08(.26)** 3.76(.08)** 2.89(.18)** 4.01(.09)** 3.05(.24)** 3.96(.08)** 3.03(.21)**

Level 01 (n = 1369)

Gender -.02(.04) -.02(.04) .06(.03)* .06(.03)* -.02(.03) -.02(.03) .04(.03) .04(.03)

Age -.01(.03) -.01(.03) -.02(.02) -.02(.02) .02(.02) .02(.02) -.01(.02) -.01(.02)

Tenure -.04(.03) -.04(.03) .02(.02) .02(.02) .01(.03) -.01(.03) .01(.02) -.01(.02)

Procedural

Justice .38(.03)** .36(.03)** .30(.03)** .27(.03)** .32(.03)** .29(.03)**

Level 02 (n = 323)

Branch Size .06(.06) .02(.04) .07(.03)* .05(.03) .06(.03)* .04(.03) .05(.03) .03(.03)

Branch Age -.06(.02)* -.02(.02) -.03(.02) -.01(.02) -.04(.02)* -.03(.02) -.05(.02)** -.03(.02)

Ownership

(Public or

Private)

.11(.09) .07(.08) .06(.05) .04(.05) -.02(.06) -.05(.06) .07(.05) .05(.05)

Manager-

HPWS .42(.06)** .23(.04)** .25(.06)** .24(.05)**

χ2 1216.02** 1011.77** 917.49** 835.52** 836.78** 772.85** 782.22** 710.77**

Notes. Level-2 = Branch Level; Level-1 = Individual Employee Level; Branch size is in terms of number of employees; Branch age in years; Ownership

Type (Private = 1, Public = 0); Gender (1= male, 0 = female); Age and Tenure of employees in years; Standard errors are reported in parentheses; σ2

represents variance in Level-1 residuals, τ00 represents variance in Level-2 residuals.

*p <0.05. **p <0.01.

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4.9.2.3 Mediation Effects of Interactional Justice

Table 4.23 illustrates HLM results for manager-HPWS, interactional justice and

employee outcomes (employee engagement, service performance and service oriented

OCB) relationship. First, in case of testing the mediation effects of interactional justice

between manager-HPWS and a) employee engagement (H6a), b) service performance

(H6b) and c) service oriented OCB (H6c), the procedure discussed in section 4.9.2 was

followed. As can be seen in Table 4.20, manager-HPWS was significantly related with

employee engagement (γ = .38, p < .01), employee service performance (γ = .36, p < .01)

and service oriented OCB (γ = .37, p < .01). These direct relationships were already

tested as H3a, H3b and H3c of current study. Therefore, the first condition of mediation

analysis satisfied stated that Level-2 predictor should be significantly related with Level-

1 outcome variable. Next, as shown in Model 2 of Table 4.23, manager-HPWS was also

related significantly with interactional justice perceptions of the employees (γ = .39, p <

.01). This satisfied the second condition of cross-level mediation analysis i.e. Level-2

predictor must be significantly related to Level-1 mediator. Further, as illustrated in

Model 3, Model 5 and Model 7 of Table 4.23, interactional justice was found to be

significantly related with employee engagement (γ = .39, p < .01), service performance (γ

= .32, p < .01) and service oriented OCB (γ = .33, p < .01). These findings statistically

supported the third condition of cross-level mediation i.e. Level-1 mediator should be

significantly related with Level-1 outcome variable. In the last, manager-HPWS and

interactional justice were simultaneously entered in HLM in case of each employee

outcome variable (Model 4, Model 6 and Model 8 of Table 4.23). In case of employee

engagement, the effects of manager-HPWS reduced (from γ = .38 to γ = .23) but

remained significant indicating partial mediation (supported H6a). Further, in service

performance case, the effects of manager-HPWS reduced (from γ = .36 to γ = .25) but did

not turned to insignificant revealing partial mediation (supported H6b). Last, not different

from previous two cases, in case of service-oriented OCB, the effects of manager-HPWS

reduced (from γ = .37 to γ = .24) but remained significant indicating partial mediation

(supported H6c).

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Table 4.23: HLM Results of Manager-HPWS, Interactional Justice (Mediator) and Employee Outcomes

Level &

Variables

Interactional Justice Employee Engagement Employee Service

Performance Service Oriented-OCB

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

Intercept 3.79(.11)** 2.29(.25)** 3.74(.08)** 2.85 (.08)** 3.99(.09)** 3.05(.23)** 3.94(.08)** 3.01(.20)**

Level 01 (n = 1369)

Gender .01(.04) .01(.04) .05(.03) .05(.03) -.03(.03) -.03(.03) .03(.03) .03(.03)

Age -.01(.03) -.01(.03) -.03(.02) -.02(.02) .01(.02) .02(.02) -.01(.02) -.01(.02)

Tenure -.06(.03) -.06(.03)* .03(.02) .03(.02) .01(.03) .01(.03) .01(.03) .01(.02)

Interactional

Justice .39(.03)** .37(.04)** .32(.04)** .30(.04) .33(.03)** .31(.03)**

Level 02 (n = 323)

Branch Size .04(.04) -.01(.04) .08(.03)** .05(.03)* .07(.03)* .05(.03) .05(.03)* .03(.03)

Branch Age -.06(.02)* -.03(.02) -.02(.02) -.01(.02) -.04(.02)* -.02(.02) -.05(.02)** -.03(.02)

Ownership

(Public or

Private)

.11(.08) .07(.07) .06(.05) .04(.05) -.03(.06) -.05(.06) .06(.05) .04(.05)

Manager-

HPWS .39(.05)** .23(.04)** .25(.05)** .24(.05)**

χ2 1097.51** 929.85** 899.43** 811.48** 780.25** 720.07** 718.23** 649.65**

Notes. Level-2 = Branch Level; Level-1 = Individual Employee Level; Branch size is in terms of number of employees; Branch age in years; Ownership

Type (Private = 1, Public = 0); Gender (1= male, 0 = female); Age and Tenure of employees in years; Standard errors are reported in parentheses; σ2

represents variance in Level-1 residuals, τ00 represents variance in Level-2 residuals.

*p <0.05. **p <0.01.

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In summary, these results revealed that interactional justice partially mediated all the

three relationships between manager-HPWS and employee engagement (H6a), service

performance (H6b) and service oriented OCB (H6c). These findings were not much

different from the findings of mediating role of distributive justice and procedural justice

where these two also partially mediated all the direct relationships between manager-

HPWS and employee engagement, service performance and service oriented OCB.

4.10 Summary of Hypotheses Testing Results

Table 4.24 presents the summary of the results of all the hypotheses proposed and

empirically tested in this study.

Table 4.24: Summary of Hypotheses Testing Results

Sr. No. Hypotheses Results

H1 Manager-HPWS is positively related with bank branch

performance. Accepted

H2 Collective human capital mediates the relationship between

manager-HPWS and bank branch performance.

Accepted

(Partial Mediation)

H3a Manager-HPWS is positively related with employee engagement. Accepted

H3b Manager-HPWS is positively related with service performance. Accepted

H3c Manager-HPWS is positively related with service oriented OCB. Accepted

H4a Distributive justice mediates the relationship of manager-HPWS

with employee engagement.

Accepted

(Partial Mediation)

H4b Distributive justice mediates the relationship of manager-HPWS

with service performance.

Accepted

(Partial Mediation)

H4c Distributive justice mediates the relationship of manager-HPWS

with service oriented OCB.

Accepted

(Partial Mediation)

H5a Procedural justice mediates the relationship of manager-HPWS

with employee engagement.

Accepted

(Partial Mediation)

H5b Procedural justice mediates the relationship of manager-HPWS

with service performance.

Accepted

(Partial Mediation)

H5c Procedural justice mediates the relationship of manager-HPWS

with service oriented OCB.

Accepted

(Partial Mediation)

H6a Interactional justice mediates the relationship of manager-HPWS

with employee engagement.

Accepted

(Partial Mediation)

H6b Interactional justice mediates the relationship of manager-HPWS

with service performance.

Accepted

(Partial Mediation)

H6c Interactional justice mediates the relationship of manager-HPWS

with service oriented OCB.

Accepted

(Partial Mediation)

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4.11 Conclusion

This chapter presented the descriptive statistics, reliability analysis, CFA and correlation

results between the variables of study. Bank branch level proposed relationships were

tested by using structural equation modeling and results were reported. The findings

revealed that manager-HPWS has direct positive relationship with bank branch

performance as well as through bank branch collective human capital (mediator). Further,

the linkage between manager-HPWS and bank branch performance is partially mediated

by bank branch human capital. The findings of cross-level direct relationships suggested

that manager-HPWS was positively related with employee engagement, service

performance and service oriented OCB. Further, the findings of cross-level mediation

analysis revealed that all the three mediators i.e. distributive fairness, procedural fairness

and interactional fairness perceptions partially mediated the relationships between

manager-HPWS and a) employee engagement, b) service performance and c) service

related OCB. In other words, all nine cross-level mediation relationships demonstrated

partial mediation. Thus, all the proposed relationships in this research were empirically

supported. The discussion of results will be presented in next chapter.

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Chapter 05:

Discussion of Results, Implications and Conclusion

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5. Discussion of Results, Implications and Conclusion

5.1 Introduction

In this research study, a conceptual model was developed demonstrating the effects of

implemented HPWS on bank branch performance as well as employee outcomes and the

intermediary mechanisms explaining these relationships. First, bank branch level

collective human capital was conceptualized as mediating mechanism explaining the

relationship between manager-HPWS and bank branch performance. Further, employees‘

perceptions of distributive justice, procedural justice and interactional justice were

proposed as mediating mechanisms for cross-level relationships between manager-HPWS

and employee outcomes. Empirical findings are also reported in last chapter for all the

proposed relationship of the study. Now, this chapter will present the discussion of the

study findings in accordance with the existing literature. Findings of branch level

proposed relationships will be discussed first followed by the discussion of cross-level

hypothesized relationships. Theoretical, methodological and practical implications will

also be presented along with study limitations and future research avenues. The chapter

will end with the conclusion drawn from this research endeavor.

5.2 Discussion of Results

This section presents the interpretations and discussion of the empirical findings reported

in previous chapter. Section 5.2.1 illustrates the discussion on the empirical findings of

branch level relationships. Further, section 5.2.2 presents the discussion of the empirical

results of cross-level direct and indirect relationships.

5.2.1 Branch Level Relationships

First aim of this study was to examine the effects of manager-HPWS, implemented by the

bank branch managers, on bank branch performance in banking industry operating in

Punjab, Pakistan. Empirical results of H1 demonstrated that manager-HPWS is positively

related with bank branch performance (β = .29, p < .01) indicating that one unit increase

in manager-HPWS would cause 0.29 units increase in bank branch performance. These

findings imply that bank branches demonstrated better market performance where HPWS

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was implemented in more extensive way by branch managers. These findings confirm the

preposition of SHRM that HR practices in form of bundle have positive relationship with

organizational performance. These findings are also consistent with the results of

previous studies reported positive effects of HPWS on organizational performance

outcomes (e.g. Huselid, 1995; MacDuffie 1995; Becker & Gerhart, 1996; Guthrie, 2001;

Batt, 2002; Datta, et al., 2005; Guthrie, et al., 2009; Agarwal & Farndale, 2017).

However, this finding of current research is different from previous research studies in a

way that this study tested the relationship between implemented HPWS by branch

manager and bank branch performance at branch level of analysis. Moreover, the

previous research studies, mentioned above, investigated the relationship of intended

HPWS with organizational performance at establishment level. Thus, these findings

provided empirical support for the relationship between implemented, instead of

intended, HPWS and performance. To date, there has been limited focus by researchers

on examining implemented HPWS with performance outcomes.

Next, H2 of this study stated that branch level human capital mediates manager-HPWS

and bank branch performance relationship. This proposed relationship was empirically

supported and the SEM results indicated that branch level collective human capital

transmits the effects of implemented HPWS to bank branch performance in the banking

industry operating in Pakistan. Exactly, empirical findings revealed that branch level

collective human capital partially mediates the relationship between manager-HPWS and

bank branch performance. These findings empirically supported the argument of resource

based view of the firm (Barney, 1991). According to resource based view of the firm,

HPWS would be associated with collective human capital of the bank branch based upon

the competitive advantage organizations gain through HPWS by developing valuable,

rare, non-substitutable and difficult to inimitable human capital (Barney, 1991; Barney, &

Wright, 1998). This human capital, in turn, assists organizations in the achievement of

competitive advantage through superior performance. In other words, properly

implemented HPWS has the potential to impact bank branches performance by arranging,

developing and especially utilizing the human capital of the employees required to

achieving competitive advantage. Previously, Liao, et al. (2009) conceptualized

individual employees‘ human capital as mediating variable between employees‘

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perceived HPWS and their performance at individual level of analysis. Problem with

individual employee-reported human capital is that employees are reporting the KSAs

they have but they may not be using them in their workplaces. This research, therefore,

focused on collective human capital implied that the focus should also be on utilization of

organizational human capital rather than just arranging and developing which may not be

utilizing for organizational purposes. Because, may be employees have the required

KSAs but they may not be using it in their workplace. Therefore, the use of collective

human capital as mediator indicated the utilization of human capital as result of properly

implemented HPWS along with its acquisition and development.

5.2.2 Cross-Level Relationships

Another aim of this research was to study the cross-level direct effects of HPWS

implemented by branch managers on employee outcomes including employee

engagement (H3a), service performance (H3b) and service oriented OCB (H3c). These

cross-level relationships, where manager-HPWS was conceptualized at branch level of

analysis and employee outcomes at individual level of analysis, were tested by using

HLM. Statistical findings showed that manager-HPWS was significantly related with

employee engagement (γ = .38, p < .01), employee service performance (γ = .36, p < .01)

and service oriented OCB (γ = .37, p < .01). These findings indicated that one unit

increase in implemented HPWS causes 0.38 units increase in employee engagement, 0.36

units increase in service performance and 0.37 units increase in service oriented OCB.

The findings from cross-level relationship between manager-HPWS and employee

outcomes also address the issue of potential trade-off between firm performance and

employee outcomes raised and identified by Peccei‘s (2004). This research was based

upon the mutual gains perspective of HRM (i.e. HPWS is beneficial for both the

organization and employees). In other words, HPWS implemented by the organizations

through their line managers has positive relationship with organizational performance

along with favorable impact on employee outcomes. Empirical findings supported the

argument by indicating that manager-HPWS has favorable relationships with both bank

branch performance and employee outcomes in case of banking sector operating in

Pakistan.

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These results imply that bank branches where HPWS was implemented intensively,

employees reported improved engagement in their workplace, service performance and

discretionary behaviors while serving the customers. In specific, HPWS implemented by

branch managers increases the engagement level of the front line employees working in

the banks. Employee engagement is identified as important antecedent for several

workplace attitudes and behaviors of the employees (Saks, 2006). Next, properly

implemented HPWS also increases the service performance of the employees which is

identified as one of the important determinants of service quality (Subramony & Pugh,

2015). Lastly, various authors reported positive relationship between HPWS and

discretionary behaviors of the employees (GONG & CHANG, 2008; Snape & Redman,

2010; Messersmith et al., 2011; Zhang & Morris, 2014). However, Borman & Motowidlo

(1993) reported that ―some types of OCB are probably more appropriate for certain types

of organizations than others. Service companies have special requirements on dimensions

related to dealing with customers and representing the organization to outsiders‖ (1993:

90). Therefore, this study used service related discretionary behavior, instead of general

OCB, to investigate its relationship with implemented HPWS. The results indicated that

HPWS implemented by line managers enhances the discretionary behaviors of

employees, a determinant of superior service quality, while serving customers.

Overall, these results supported the argument of Bowen and Ostroff (2004), pointed that

properly implemented HPWS establishes a social environment in the organization where

employees feel positive about the organization. These results are consistent with the

findings of previous studies reported positive relationship between HPWS and employee

outcomes (e.g. Liao, et al., 2009; Snape & Redman, 2010; Alfes, et al., 2013). However,

these findings of current study are distinct from previous studies in a way that this study

investigated the linkage between implemented HPWS and employee outcomes, a new

stream of research in SHRM where researchers are linking line managers implemented

HRM with organizational and employee outcomes (Aryee, et al., 2012; Pak & Kim,

2016). Whereas previous studies, mentioned above, either examined the effects of

intended HPWS (organizational level) or employees‘ perceived HPWS on employee

outcomes. Furthermore, employee outcomes used in this study (employee engagement,

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service performance and service oriented OCB) are less investigated while examining the

effects of HPWS on employee outcomes.

In the last, one major objective of this study was to investigate the mediating role of

organizational justice dimensions (distributive justice: H4, procedural justice: H5 and

interactional justice: H6) between manager-HPWS and employee outcomes. The

following section will discuss the results of mediating role of distributive fairness

perceptions, procedural fairness perceptions and interactional justice perceptions

separately between manager-HPWS and employee outcomes.

First, H4 of the study posited that distributive justice perceptions of front-line employees

mediate the relationship between manager-HPWS and employee engagement (H4a),

service performance (H4b) and service oriented OCB (H4c). The findings demonstrated

that manager-HPWS was positively linked with distributive justice perceptions of front

line employees (γ = .34, p < .01) indicating that one unit increase in implemented HPWS

caused 0.34 units increase in the perceptions of distributive justice. Further, distributive

justice perceptions were also related significantly with employee engagement (γ = .26, p

< .01), service performance (γ = .16, p < .01) and service oriented OCB (γ = .18, p < .01).

These findings indicated that one unit increase in distributive justice perceptions caused

0.26 units increase in employee engagement, 0.16 units increase in service performance

and 0.18 units increase in service oriented OCB. Of three employee outcomes (employee

engagement, service performance and service oriented OCB), the highest variance was

found for employee engagement due to distributive justice perceptions. Finally, the

results of cross-level mediation analysis revealed that distributive justice perceptions

partially mediated the positive association between manager-HPWS and all three

employee outcomes (employee engagement, service performance and service oriented

OCB). These results of the study indicated that properly implemented HPWS by line

managers shapes employees fairness perceptions regarding the outcomes of

organizational distributive decisions which results into favorable employee reactions in

the workplace. In other words, when employees perceive that distribution decisions are

fair as a result of organizational HR policies, they exhibit more favorable behaviors at

workplace including increased engagement, better service performance and more

frequently involved in OCB while serving customers.

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Further, H5 of the study claimed that procedural justice perceptions of front-line

employees mediate the relationship of manager-HPWS with employee engagement

(H5a), service performance (H5b) and service oriented OCB (H5c). Empirical findings

demonstrated that manager-HPWS was positively linked with procedural justice

perceptions of the front line employees (γ = .42, p < .01) indicating that one unit increase

in implemented HPWS caused 0.42 units increase in the employees‘ perceptions of

procedural justice. Further, procedural justice perceptions were also related significantly

with employee engagement (γ = .38, p < .01), service performance (γ = .30, p < .01) and

service oriented OCB (γ = .32, p < .01). These findings indicated that one unit increase in

procedural justice perceptions caused 0.38 units increase in employee engagement, 0.30

units increase in service performance and 0.32 units increase in service oriented OCB. Of

three employee outcomes, the highest variance was found for employee engagement due

to procedural justice perceptions. Finally, the results of cross-level mediation analysis

revealed that procedural justice perceptions partially mediated the positive linkage

between manager-HPWS and all three employee outcomes (employee engagement,

service performance and service oriented OCB). These findings revealed that effectively

implemented HPWS by line managers spread signals in organizational environment

which effects employees‘ perceptions regarding the fairness or unfairness of

organizational procedures and decision making related to employees upon which

employees exhibit favorable or unfavorable reactions towards their employer.

Lastly, H6 of the study proposed that interactional justice perceptions of front-line

employees mediate the relationship of manager-HPWS with employee engagement

(H6a), service performance (H6b) and service oriented OCB (H6c). Empirical findings

illustrated that manager-HPWS was positively linked with interactional justice

perceptions of front line employees (γ = .39, p < .01) indicating that one unit increase in

implemented HPWS caused 0.39 units increase in the perceptions of interactional justice.

Further, interactional justice perceptions were also related significantly with employee

engagement (γ = .39, p < .01), service performance (γ = .32, p < .01) and service oriented

OCB (γ = .33, p < .01). These findings revealed that one unit increase in perceptions of

interactional justice caused 0.39 units increase in employee engagement, 0.32 units

increase in service performance and 0.33 units increase in service oriented OCB. Of three

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employee outcomes, the highest variance was found for employee engagement due to

interactional justice perceptions. Finally, the results of cross-level mediation analysis

revealed that interactional justice perceptions partially mediated the positive association

between manager-HPWS and all three employee outcomes (employee engagement,

service performance and service oriented OCB).

In sum, results for mediation role of distributive fairness, procedural fairness and

interactional fairness perceptions between manager-HPWS and employee outcomes were

not much different from each other. All three dimensions of justice perceptions partially

mediated the manager-HPWS and employee outcomes relationship. However, of these

three employee outcomes, the strongest effects were found for employee engagement in

case of all three justice dimensions. On the other hand, in case of the variance in justice

perceptions caused by implemented HPWS, procedural justice was found as the strongest

contributor when transmitting the effects of manager-HPWS to employee outcomes. Not

different from these findings, the procedural justice perceptions showed the highest level

of variation in employee outcomes compared to other two forms of justice. Thus, it can

be inferred that all three forms of justice perceptions mediated the relationships between

manager-HPWS and employee outcomes but procedural justice was emerged as the

strongest mediator compared to distributive justice and interactional justice perceptions

of front-line employees. In other words, employees give importance to all three justice

perceptions when evaluate HR system implemented by their employer which further

determine their reactions in their workplaces in case of banking sector operating in

Punjab, Pakistan.

These results of cross-level mediation analysis provided support for the claims of various

researchers i.e. organizational HPWS influence employee attitudes and behaviors through

their psychological processes. For instance, researchers concluded that employees‘

perceptions of HPWS mediate the relationship between organizational HPWS and

employee outcomes (Liao, et al., 2009; Aryee, et al., 2012). Similarly, Nishii, et al.,

(2008) concluded that employees‘ attributions regarding organizational HPWS

determined their reactions towards employer. Study results imply that employee

engagement, service performance and service related discretionary behaviors will

increase when they feel that the practices of HPWS implemented are procedurally fair,

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distribution of rewards and resources is justified and their supervisor treats them with

dignity and respect. Overall, these findings also support social exchange theory (Blau,

1964) argued that employees reciprocate in form of favorable workplace attitudes and

behaviors when organizational work practices are perceived fair by the employees.

5.3 Implications of the Study

This section presents the implications drawn from empirical results of this study. In

specific, section 5.3.1, 5.3.2 and 5.3.3 discuss theoretical, methodological and practical

implications of this study respectively.

5.3.1 Theoretical Implications

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the impact of HPWS. Therefore, considering both, organizational performance and

employee outcomes, provides clear picture about how same organizational HPWS is

related and beneficial (mutual gains) for both the organization and employees.

Third, this study contributed to the literature by incorporating employees‘ perspective, in

form of their fairness evaluation of HRM, while studying HPWS-performance

relationship (Boxall & Macky, 2014). Extant SHRM research has been criticized for

being managerially biased because of using management-centric approach while

examining HPWS-performance linkage (Paauwe, 2009; Kaufman, 2010; Boxall &

Macky, 2014). These authors stressed upon including employees‘ perspective while

investigating HPWS-performance relationship to have more meaningful insights about

this relationship. Appelbaum (2002) argued and suggested to study and understand

employees‘ verdict of HRM in order to understand how and why HPWS influence

employee outcomes. Moreover, some HPWS-performance studies, which have included

employees, treated employees as objects (like other organizational resources) rather than

as active subjects (who think and evaluate), thus, provide inadequate information about

their reactions towards organizational HRM. Therefore, examining employees‘

perspective of HRM added meaningful insights about how and why employees react to

certain organizational HR systems. This investigation also provided support to the claim

of Bowen and Ostroff (2004) that employees can have different verdict about

organizational HRM because they experience and interpret same HR practices

differently.

Fourth, this study added to SHRM literature by using implemented, instead of intended,

HPWS as the former is argued to be a more proximal and appropriate antecedent for

employee outcomes in HPWS-performance causal chain (e.g. Wright & Nishii, 2007;

Chuang, et al., 2013; Pak & Kim, 2016; Jiang, & Messersmith, 2018). These findings

have added to the SHRM literature by linking implemented, instead of intended, HPWS

with employee outcomes (Nishii & Wright, 2007). Extant HPWS-performance literature

has also been criticized for using organization-level data, assuming that intended HPWS

is implemented in the same manner throughout the organization as intended (Wright &

Nishii, 2013). Whereas, in reality, these top management/ HR departments reported HR

practices representing their espoused/ intended HR policies, which may not be

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implemented in the same way across the organization (Khilji & Wang, 2006; Nishii &

Wright, 2007). Line managers are people responsible for implementation of

organizational intended HR practices within their respective departments and, therefore,

are main source of determining quality of implementation and effectiveness of HR

practices. Therefore, it is argued that focusing on implemented, instead of intended,

HPWS with performance outcomes would have more meaningful insights about HPWS-

performance relationship.

5.3.2 Methodological Implications

This study also has some methodological contributions for HPWS-performance research

area. Literature has highlighted several methodological shortcomings in HPWS-

performance research (Paauwe, 2009). For instance, over emphasis on management

perspective while investigating HPWS-performance relationship, single respondent

surveys and level of analysis. This study also tried to address these methodological issues

by including multiple respondents and using multilevel modeling approach while

investigating complex HPWS-performance relationship.

Previous studies, mainly, relied on one source for data while investigating HPWS-

performance relationship. They either investigated management reported HPWS

(intended HPWS) and its relationship with the management reported performance data.

Or, they tried to connect employees‘ perceived HPWS with their attitudes and behaviors

(employee self-reported). This study, however, considered multiple stake holders

involved in HPWS-performance relationship. This study collected data from branch

managers for being real implementers of organizational HPWS and front line employees

in order to overcome the methodological issues because of the reliance on single

respondent (Gerhart, et al., 2000). Further, according to Wright and Boswell (2002), the

ideal approach of understanding organizational HR system is to consider multiple

respondents for information rather than relying on single source. Therefore, this research

involved branch managers for information on implemented HPWS whereas fairness

perceptions about organizational HPWS and attitudes and behaviors were recorded from

employees.

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Second contribution made by this study is the use of multilevel approach to investigate

complex and distant HPWS-performance relationship (Shen et al., 2017). In their HR

causal chain framework, Wright and Nishii (2007) pointed that HR policy is intended at

organizational level and then implemented at departmental, group or team level by line

managers, then how employees perceive and experience organizational HRM further

influences their attitudes, behaviors (individual level of analysis) and performance

outcomes. Paauwe and Boselie (2005) argued that the use of multilevel frameworks while

examining this distant and complex HPWS-performance relationship is unavoidable.

Thus, this study successfully used multilevel approach to gauge the impact of

implemented HPWS by bank branch managers (bank branch level of analysis) on

employees‘ fairness perceptions along with their attitudes and behaviors (individual level

of analysis). Although, some researchers have used multilevel approach to investigated

HPWS-performance relationship (e.g. Liao, et al., 2009; Aryee, et al., 2012; Pak & Kim,

2016), hardly any study in Pakistan has applied this approach. In sum, involving multiple

respondents, multiple stakeholders and the use of multi-level approach assisted in

discovering the deep insights about HPWS-performance relationship and explained the

processes by which HPWS influences organizational performance and employee

outcomes.

5.3.3 Practical Implications

Along with theoretical and methodological contributions of current study, findings of this

study also have several important implications for practitioners and organizations. For

instance, study findings revealed that HPWS implemented through branch managers is

critical aspect for organizational success as it has positive impact on bank branch

performance as well as employee outcomes (attitudes and behaviors). Organizations can

use the learning and insights from this research to design and implement HR systems and

policies of organizations that will be capable of enhancing and utilizing the human capital

and viewed as fair in order to get benefited from them. Moreover, the role of line

managers (branch managers in case of this study) is also highlighted in the administration

of more effective HR system. In specific, following are some of the implications for

practitioners drawn from the findings of this study.

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One important implication is the highlighted role of line managers in the effectiveness of

organizational HPWS. According to Purcell and Hutchinson (2007), understanding that

line managers have a role as real implementers of HR practices within their respective

departments, HR professionals should work closely with them in order to ensure effective

implementation of organizational intended HPWS to obtain the maximum benefit for

their organization. Therefore, the key challenge for organizations is to enhance the

interest, motivation and participation of bank branch managers to implement

organizational intended HR systems in ways that enhance the utilization of human capital

and also regarded as fair. This can be done through trainings of line managers to have

knowledge about organizational HR practices and how these practices could be used to

utilize human capital of the organization and to influence the justice perceptions of the

employees. Along with this, motivation and involvement of line managers into HRM

could be increased by making it part of their formal job descriptions, gauge their abilities

and interest for managing people during hiring process, give it appropriate weightage in

their performance evaluations and incentivize them for good people management.

Another implication for organizations emerges from empirical findings of this study

regarding the importance of organizational investments and efforts for HPWS. These

findings revealed that bank branches experienced increase in market performance where

organizational intended HPWS was more effectively implemented by branch managers.

In other words, effectively implemented HR practices by branch managers bring more

profitability, sale and improved market performance for the bank branches.

In addition to highlighting the importance of properly implemented HPWS for bank

branch performance, this study also provides insights about the processes through which

implemented HPWS influence bank branch performance and employee outcomes. Study

findings imply that implemented HPWS by branch managers improves the utilization of

human capital which in turns boosts the market performance of the bank branches. This

study also highlighted employees‘ perspective in HPWS-performance relationship which

was an ignored area previously (Boxall & Macky, 2014). The findings showed that

employees‘ fairness perceptions act as intermediary mechanisms through which

implemented HPWS influence engagement level of the employees, their service

performance and also service related discretionary behavior (service oriented OCB).

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These findings imply that branch managers, being implementers of HR practices, should

consider employees‘ fairness perspective of organizational HPWS in order to enhance

their level of engagement, service performance and service related discretionary

behaviors. These employee outcomes are identified as important determinants of service

quality in service organizations (Subramony & Pugh, 2015).

5.4 Limitations and Future Research Avenues

Even though it is believed that this study has made several contributions to the field of

SHRM, like all other research studies, it also has few limitations, which may, however,

provide avenues for future researchers.

First, this study used cross-sectional research design to test the proposed relationships

among variables. Therefore, causal inference could be drawn with caution from the

relationships among study variables because of its cross-sectional nature. Future research

studies with a longitudinal design would authenticate the causal relationships proposed

and tested in this study. Second, this study used a sample from bank branches located in

the Punjab province of Pakistan. So, the findings of this study may not be generalized to

other organizations and sectors. Similar research studies in future should, therefore, be

conducted in different organizations, industries and cultures to verify the scope of the

findings of this study in other settings.

Third, although this study has proposed and empirically tested mediators for both the

relationships: between manager-HPWS and bank branch performance and between

manager-HPWS and employee outcomes. There might be a number of other mediating

mechanisms which could explain these relationships. Thus, future studies would be

needed to use different theoretical perspectives to hypothesize and empirically test other

potential mediators for explaining HPWS-performance relationship. Fourth, basing their

investigations on cross-level methodology, future researchers would have the opportunity

to advance the literature on HPWS-performance linkage by proposing and testing the

relationships among variables which were ignored previously because of being limited to

a single level of analysis, especially in the case of Pakistan. Therefore, future researchers,

especially in Pakistan, have the opportunity to advance the theory on HPWS-performance

relationship by using multilevel modeling approach.

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Last of all, this study has used subjective measures of branch performance because of the

difficulties in obtaining objective performance data (Gupta, 1987). Even though Wall, et

al. (2004) reported the construct, convergent and discriminant validity of relative

performance, these performance measures do not permit momentous conversions like the

dollar change associated with the degree of change in HPWS, and therefore they limit the

practical significance of HPWS (Huselid, 1995). Future researchers are, therefore,

recommended to bring into play objective parameters for performance.

Despite aforementioned limitations, this study has made several important contributions

for the literature around HPWS-performance relationship. For instance, this study

contributed into literature by providing an integrative model linking implemented HPWS

with organizational performance and employee outcomes along with the mediating

mechanisms to explain these relationships. Next, this contributed by incorporating the

perspective of management and employees, simultaneously, regarding organizational

HPWS to better understand HPWS-performance relationship. Moreover, this study also

highlighted the role of line managers in effective implementation of organizational

HPWS. Further, based upon a large data set from banking sector operating in Punjab, the

results of this study have significant implications (mentioned in practical implications of

the study section) not only for the targeted population but the findings of the study may

also be generalize to other similar industrial settings and to the banking sector of

developing countries having context similar to the banking sector of Pakistan.

5.5 Conclusions

The aim of current study was to examine the effects of implemented HPWS on bank

branch performance and employee outcomes along with the processes explaining these

relationships. First, based upon resource based view of firm (RBV), bank branch

collective human capital was hypothesized as mediating variable between manager-

HPWS and bank branch performance. Further, organizational fairness perceptions

(distributive fairness, procedural fairness and interactional fairness) were posited as

mediating mechanism between implemented HPWS and employee outcomes at cross-

level of analysis. To test the proposed relationships of this study, data were obtained from

323 branch managers and 1369 front-line employees of 30 commercial banks operating in

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Punjab, Pakistan. Study findings showed that HPWS implemented by branch managers

has impact on bank branch performance as well as employee outcomes. These findings

supported the arguments of mutual gains i.e. HPWS is favorable for both the employer

and employees. Study results also revealed that the linkage between manager-HPWS and

bank branch performance is partially mediated by branch level collective human capital.

Further, empirical findings also demonstrated that distributive justice, procedural justice

and interactional justice perceptions of front-line employees partially mediated the

relationships between manager-HPWS and employee outcomes. Implemented and

perceived HPWS differentiation, role of line manager as being implementer of

organizational HPWS and the intermediary mechanisms to link HPWS with

organizational performance and employee outcomes emerged as the main issues from the

findings of this study. These themes are reflected as the key challenges for future

research investigations and practitioners in the area of SHRM. This study advanced the

theory on SHRM and its application in banking sector. The findings also shed light on the

processes through which implemented HPWS influence bank branch performance and

employee. In the end, this study also bridged the gap between management (macro) and

employees‘ (micro) perspectives of HRM.

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Chapter 06:

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Appendices

APPENDIX A: Details of Bank Branches

Sr.

No. Categories of Banks Total Banks

Total Branches

in Pakistan

Branches in Punjab

Province

1 Public Sector Banks 05 2100 1147

2 Private Banks 16 8119 4566

3 Islamic Banks 05 1021 497

4 Specialized Banks 04 603 371

Grand Total 30 11843 6581

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APPENDIX B: Branch Manager Survey

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APPENDIX C: Front-Line Employee Survey

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