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Impact of Human Resource Management Practice on employee satisfaction

CHAPTER-1
INTRODUCTION

1.1 Background of the Study


Behind the production of every product or service there are human mind, effort and man
hours (working hours). No product or service can be produced without help of human
being. Human being is the fundamental resource for making or constructing anything.
Today many experts claim that machines and technology are replacing human resource
and minimizing their role or effort. But even machines and technology have been built by
the human aid and besides companies have been continuously in search for talented,
skilled and qualified professionals to further develop latest machines and technology,
which again have to be controlled or used by humans to bring out products.
Human resource management is the process of proper and maximizes utilization of
available limited skilled workforce. The core purpose of the human resource management
is to make efficient use of existing human resource in the organization. The Best example
at present situation is construction industry has been facing serious shortage of skilled
workforce. It is expected to triple in the next decade from the present 30 per cent, will
negatively impact the overall productivity of the sector, warn industry experts.
Every organizations desire is to have skilled and competent people to make their
organization more effective than their competitors. Humans are very important assets for
the organization rather than land and buildings, without employees , no activity in the
organization can be done. Machines are meant to produce more goods with good quality
but they should get operated by the human only.
We must treat your employees with respect and dignity because in the most automated
factory in the world, you need the power of human mind. That is what brings in
innovation. If you want high quality minds to work for you, then you must protect the
respect and dignity.

Human resources are the people who work for the organization. Human resource
management is really employee management with an emphasis on those employees as
assets of the business. In this context, employees are sometimes referred to as human
capital. As with other business assets, the goal is to make effective use of employees,
reducing risk and maximizing return on investment.
HRM Practices impact on the outcomes such as employee satisfaction, commitment,
employee retention, employee presence, social climate between worker and management,
employee involvement, employee trust, employ loyalty, organizational fairness (Tiwari
and Karunesh, 2012). So these outcomes and HRM practices can lead to firm
performance such as profits, market value of the company, market share, increase in
sales, productivity, product service quality, customer satisfaction, development of
products/services and future investment( Delery,1998)
Human Resource Management (HRM) of developing and least developed countries to
that of developed countries is significantly different. So, are the multinational companies
still being able to transfer their HR practices while running a business in the developing
and least developed world? If not, what practices do they tend to localize? If they
hybridize, how would the hybridized individual HR set look like?
In Nepal, HRM In most organization is still managed in a traditional manner. The
financial institution has become more conscious about human capital. They have started
establishing human resource departments to carry out all HRM functions. They have also
started emphasizing on organizing training and development programs for employee, in
addition for providing congenial work environment ( Baniya,2004).
In the organizations or firms, human resource management (HRM) practices as a
mediator between HRM strategy and HRM outcome. Sheppeck and Militello (2000)
focus HRM strategy into four groups: employment skill and work policies, supportive
environment, performance measurement and reinforcement and market organization
whereby Guest (1997) divides into three categories: differentiated on innovation, focus
on quality and cost-reduction. However, there are many definitions in previously
researches on HRM strategy, but all strategies used to achieve the same organizational
goal through HRM practices.. Ruwan (2007) empirically evaluated six human resource

(HR) practices (realistic job, information, job analysis, work family balance, career
development, compensation and supervisor support) and their likely impact on the
Marketing Executive Turnover. A long the same line, Abang, MayChiun and Maw (2009)
two components of human resource (HR) practices namely, training and information
technology have direct impact on organizational performance. In addition, Zaini, Nilufar
and Syed (2009) four HRM practices showed that training and development, team work,
HR planning, and performance appraisal have positive and significant influence on
business performance. Altarawmneh and al-Kilani (2010) examine the impact of human
resource management (HRM) practices on employees turnover intentions.

1.2 Statement of the Problem


Human resources practices have significant impact on employee satisfaction. It has
significant impact on Motivation, pay practice, and training and development. ). In
HRM practice, training is an important factor for productivity, higher productivity
observed in firms that report providing training (e.g. Tan & Batra, 1995; Aw & Tan,
1995). Schaffner (2001) on his study assert the relationship between job training and
productivity, however job training tends to be lose value when the workers change
job, therefore the organization or firm increase the cost of keeping trained position
filled. Notwithstanding, there is in doubtfully of the relationship between job training
and turnover.
Management development is more future oriented and concerned with education,
than is employee training, or assisting a person to become a better performer. By
education, we mean that management development activities attempt to instill sound
reasoning process-to interpret knowledge-rather than teaching a specific set of motor
skills. Development, therefore, focuses more on employee's personnel growth.
Among financial, economic and human resources, the latest are more essential and
have the capability to endow a company with competitive edge as compared to others
(Rizwan et al, 2010). Employee Performance fundamentally depend on many factors
like

performance

appraisals,

employee

motivation,

Employee

satisfaction,

compensation, Training and development, job security, Organizational structure and


other, but the area of study is focused only on training and development, employee
motivation and pay practices as these factor highly influence the performance of
employees.

Employee motivation is one of the policies of managers to increase effectual job


management amongst employees in organizations (Shadare et al, 2009). A motivated
employee is responsive of the definite goals and objectives he/she must achieve,
therefore he/she directs its efforts in that direction. Rutherford (1990) reported that
motivation formulates an organization more successful because provoked employees
are constantly looking for improved practices to do a work, so it is essential for
organizations to persuade motivation of their employees (Kalimullah et al, 2010).
Pay practice is one of human resources management practice which normally refers
to pay, wage, salary and benefit etc. The pay has an important role in implementation
strategies. First, a high level of pay and/or benefits relative to that of competitors can
ensure that the company attract and retains high quality employee, but this might
have a negative impact on the companys overall labor costs. Second, by tying pay to
performance, the company can elicit specific activities and level of performance
from employee (Noe et al., 2006).
The study deals with the following issues:
a. what are the key factors that can influence the satisfaction level of employees in
their workplace in commercial bank of Nepal.
b. what are the outcomes of HRM practices of commercial bank in
Nepal?
c. How do HRM practices impact on employees motivation, pay practice and
training and development?
d. Do HRM practices influence on performance of employee of commercial banks in
Nepal?
e. Is there any significant relationship between HR practices and employee
satisfaction?

1.3 Purpose of the study


The main purpose of the study is to measure employees satisfaction on the HRM
Practices of commercial bank of Nepal. The purpose of the study is as follows:
1. To identify the effect of training and development of HRM practices.
2. To examine the impact on employee motivation of HRM practices
3. To understand the effect of various pay practices with HRM practices.

4. To know the various prospects of employee of commercial bank in context of


HR practices

1.4 Significance of the study


This study attempted to examine the impact of Human Resource Practice on Nepalese
commercial bank of Nepal. This study asses the prevalence of employee satisfaction in
the work force by comparing and studying the different parameters for the human
resource practices and employee training and development, employee motivation and
various pay practices.
This study aims at the formulation of effective strategy that helps to build the policies for
the organization to enhance employee retention, increases employee productivity, reduce
turn over. It helps to identify the strength and weakness of their human resources
management practices of particular banks and how the employee satisfaction affects the
performance of banks (Ulrich,1987).
In any organization we find that the Human Resource Management is the most important
asset and it is also a source of achieving competitive advantage. According to Khatri
(1999), and quoting from his study, he said that "one of the most important factors
providing flexibility and adaptability to organizations is the people". However Rundle
(1997) argued that it would need further clarification by giving a comparison and quoting
that "that people (managers), not the firm, are the adaptive mechanism in determining
how the firm will respond to the competitive environment". While other scholars have
pointed out on the fact that it is more difficult to manage people than to managing either
technology or capital (Barney, 1991; Lado and Wilson, 1994).For an organization to have
an effective HRM policies and practices that can support business strategies and
contribute to its improved performance of the organization, it can be said that training and
development, pay practices and motivation plays an important role to help for achieving
the long term and as well as long term objective of the organization.

1.5 Formulation of hypothesis


The main research hypothesis dealt by this study is there is positive and significant
relationship between the HR practices and employee satisfaction of the Nepalese

Commercial Banks. Based on the objectives of the study following hypothesis have
been stated :
H1 : There is positive and significant relationship between Training and
Development and HR Practices
H2 : There is positive and significant relationship between pay practices and HR
Practices.
H3 : There is positive and significant relationship employee motivation and HR
Practices

1.6 Limitation of the study :

CHAPTER-II
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
This chapter provides conceptual framework of the study and deals with the review of
empirical studies associated with the impact of HRM practices on employee satisfaction
of Nepalese commercial banks.
2.1 There are several studies on human resource practices on employee satisfaction. The
major studies are shown in table 2.1
Table 2.1: Review of major studies
Studies
Walton(1985)

Major Findings
The relationship between employer and employee and associated
with human relation movement and the concept of high

commitment work practices.


Bradley, Petrescu the impact of human resource management practices and pay
and

Simmons inequality on workers job satisfaction

(2004)
Noe et al( 2006)

Job Training In general, training is refer to a planed effort


facilitate the learning of job-related knowledge, skill, and

Schaffner (2001)

behavior by employee.
the relationship between job training and productivity, however
job training tends to be lose value when the workers change job,
therefore the organization or firm increase the cost of keeping

Batt (2002)

trained position filled.


high-involvement practices

such

as

autonomy,

team

collaboration, and training are related to reduce employee


Entwistle (1987)

turnover and increased productivity


Motivational factors enhanced the employee performance as well
as organizational performance. Organization can only synergize
its performance if its employees are satisfied & well-motivated to

Porter (1982)

work.
Motivated employees are prime factor to attain desired level of
performance as motivated workforce makes all possible efforts to

Oosthuizen (2001)

perform up to the mark.


The prime function of HRM is to keep employees motivated
towards their work and positively affects employee attitude in
way that they work with full zeal and zest for achievement of
organizational goals i.e. output maximization and optimum
productivity.

The human aspect of human resource management is concerned with The relationship
between employer and employee and associated with human relation movement and the
concept of high commitment work practices developed by (Walton, 1985).
Likewise, Bradley, Petrescu and Simmons (2004) observe the impact of human resource
management practices and pay inequality on workers job satisfaction. On their study
employ many HRM practices such as work organization, recruitment and pay practice as
independent variables and job satisfaction as dependent variable. The results show that
the pay practice is positively associated with the job satisfaction.
Job Training In general, training is refer to a planed effort facilitate the learning of jobrelated knowledge, skill, and behavior by employee (Noe et al., 2006).

Schaffner (2001) on his study assert the relationship between job training and
productivity, however job training tends to be lose value when the workers change job,
therefore the organization or firm increase the cost of keeping trained position filled.
Notwithstanding, there is in doubtfully of the relationship between job training and
turnover.
Many studies have been overcome the suspicion such as Batt (2002) finds that highinvolvement practices such as autonomy, team collaboration, and training are related to
reduce employee turnover and increased productivity. Furthermore, Hequent (1993)
clarify the negative correlation between training and turnover in a number of companies
Entwistle (1987) explained that motivational factors enhanced the employee performance
as well as organizational performance. Organization can only synergize its performance if
its employees are satisfied & well-motivated to work.
Jones and George (2008) explained motivation as psychological factor that directs an
individual's behavior in an organization towards positive contribution into organizational
productivity. In contemporary world, organizations are providing monetary and
nonmonetary rewards to its employee in order to keep them motivated which are
precondition for optimum organizational performance (Mitchell, 1973).
According to Porter (1982), motivated employees are prime factor to attain desired level
of performance as motivated workforce makes all possible efforts to perform up to the
mark. Oosthuizen (2001) described that prime function of HRM is to keep employees
motivated towards their work and positively affects employee attitude in way that they
work with full zeal and zest for achievement of organizational goals i.e. output
maximization and optimum productivity.

2.1.1 Review of Nepalese studies


There are various studies that were carried in the context of Nepal. The different
literatures surveyed in Nepal are shown in table 2.2
Table 2.1.1 : Review of Nepalese studies

Shrestha (2009)

It is revealed that the negative consequences of employees' training


and development are: demand for salary increment and promotion
by the trained employees, demonstration of overconfidence and

Pandey(2008

tendency to quit the job.


employees in Nepalese banks still perceive a significant positive
relationship among the components such as, personal benefits,
career benefits and jobrelated benefits of training and components
of commitment (affective commitment, continuous commitment

Pant (1993)

and normative commitment


Nepalese manpower had not been able to take full advantages of the
raw jobs.

Human resource management practices revealed that the negative consequences of


employees' training and development are: demand for salary increment and promotion by
the trained employees, demonstration of overconfidence and tendency to quit the job
(Shrestha 2009).
However, in another study by Pandey (2008) employees in Nepalese banks still perceive
a significant positive relationship among the components such as, personal benefits,
career benefits and jobrelated benefits of training and components of commitment
(affective commitment, continuous commitment and normative commitment).
Pant(1993) revealed that Nepalese manpower had not been able to take full advantages
of the raw jobs created by development activities because they had not sufficient
opportunities to learn the requisite skills.

2.2 Theoretical Framework


Theoretical framework is a basic conceptual structure organized around a theory. It
defines the kinds of variables that are going to be used in the analysis. Theoretical
framework is a type of intermediate theory that attempt to connect all aspects of inquiry
with problem definition, purpose, literature review, methodology, data collection and

analysis. It can act like a map that give coherence to empirical inquiry as the theoretical
framework are potentially so close to empirical inquiry, take different from depending
upon the research questions or problems.
The theoretical framework describes the link between the HR practices and the employee
satisfaction of the Nepalese Commercial banks. In the theoretical framework for the
analysis of the study and for the measurement of the employee satisfaction we have taken
employee satisfaction as the dependent variable and is measured through three
independent variables i.e. employee motivation, pay practice and training and
development

Fig 2.2 Schematic diagram of factors influencing employee satisfaction


The figure shows the theoretical framework of the study. All these human resource
management variables are expected to determine the employee satisfaction.

Indep EmployeeD
e
p
e
s
a
tis
fa
c
tio
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Paypractices
enden
nden
t
t
variab
varia
s
les Paypracticbele

The different theoretical research and empirical studies have been concluded to analysis
the impact of human resource practice on employee satisfaction in banking sector.
Several theories have been proposed to explain the variables for human resource practices
but there has no universal agreement.
A few scholars have studied the impact of human resource management practices on the
banking industry. Very few study have addressed the human resource management
practices has address the outcomes of employee satisfaction in the Nepalese commercial
banks.

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