Researching about impact of human resources management practices on organization performance

There are recruitment and selection, training and development, career planning system, participation and involvement, compensation and benefits, performance appraisal.. Human resources m

ACKNOWLEDGEMENT

It is with greatest respect and veneration; I express my sincere thanks to my professor Dr Nguyen Phan who has been a source of personal encouragement, moral support, and invaluable guidance throughout the preparation of this thesis

I express my deepest gratitude to managers, assistants, supervisors and employees who are working in different departments of different hotels in Sea Dragon Hotel Group for providing me the necessary data and assistance to carry out this research successfully

I take this opportunity to wish my heartfelt thanks to Lecturers of International Training Institute in HCMC University of Technology for providing constant assistance

to reach my academic goals

This thesis would never have seen the sun without the full support of my mother She is my greatest supporters She provides me with love, guidance and endless support These are things I will never be able to repay

As well as, I wish to thank my friends who encouraged and supported me to complete this thesis successfully

Ho Chi Minh City, December 12th, 2015

Vu Hoang Gia Linh

ADVISOR‟S ASSESMENT

Advisor’s signature

ABSTRACT

Given the strategic relevance of Human Resources Management (HRM) in organizations and the lack of scientific instruments to measure employees‟ perceptions about policies and practices of HRM, this study aimed to validate the Human Resources Management Practices through exploratory and confirmatory factor analysis HRM practices affect service performance that is one of major organizational outcomes

of hotels The hypothesized model has been considered as a mediator between employee perceptions of HRM practices and service performance A six-factor model was generated showing high-reliability and good fit There are recruitment and selection, training and development, career planning system, participation and involvement, compensation and benefits, performance appraisal

Hospitality managers do not seem to know how to answer questions about the future, especially in what concerns the best strategies for human resources retention

On the bases of these findings, this study also concludes that human resource managers have a valuable role to play in the executive management teams of hotels This role needs to be further developed and encouraged The current and emerging challenges facing the hospitality industry demand an approach to HRM which is far more strategic than the traditional focus of personnel administration; instead, HRM has a key role to play in creating and sustaining competitive advantage in organizations This study contributes in the area of Human Resources Management since Human Resources Management Practices can be used not only in relational studies but also as an evaluation instrument by managers who wish to improve their employees‟ well – being

as well as organizational outcomes

Table of Contents

ACKNOWLEDGEMENT 2

ABSTRACT 4

LIST OF TABLES 8

LIST OF CHARTS 10

CHAPTER 1: INTRODUCTION 11

1.1 Introduction 11

1.2 Problem Statement 13

1.3 Research Objective 14

1.4 Research Question 14

1.5 Significance of the study 15

1.6 Scope and limitation 15

1.7 Definition of terms 15

CHAPTER 2: LITERATURE REVIEW 17

2.1 Hospitality industry in Vietnam 17

2.2 Human Resources Management Practices 18

2.3 Impact of human resources management practices on firm performance 18

2.4 Recruitment and Selection 26

2.5 Training and Development 27

2.6 Career Planning System 28

2.7 Participation and Involvement 30

2.8 Performance Appraisal 32

2.9 Compensation and Benefits 33

2.10 Hypotheses 34

CHAPTER 3: METHODOLOGY 36

3.1 Research Approach 36

3.2 Population 36

3.3 Sample 36

3.4 Data analysis 37

3.5 Data gathering procedure 37

CHAPTER 4: DATA PRESENTATION AND ANALYSIS 39

4.1 Presentation of general information 39

4.1.1 Gender distribution 39

4.1.2 Age distribution 40

4.1.3 Education qualification 41

4.1.4 Working experience 42

4.1.5 Distribution of type of hotel 43

4.1.6 Distribution of working time in this hotel 44

4.1.7 Distribution of position 45

4.2 Reliability 46

4.3 The assessment of respondents in HRM practice 47

4.3.1 Recruitment and Selection 47

4.3.2 Training and Development 48

4.3.3 Career Planning System 49

4.3.4 Participation and Involvement 51

4.3.5 Compensation and Benefits 52

4.3.6 Performance Appraisal 53

4.3.7 Organization performance 54

4.4 Factor analysis 55

4.5 Correlation 58

4.6 Regression Analysis 61

4.7 Results 65

CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATION 68

5.1 Summary 68

5.2 Conclusion 68

5.3 Recommendation 69

REFERENCES 71

APPENDIX 1 80

APPENDIX 2 83

LIST OF TABLES

Table 4.1.1: Gender distribution of respondents 38

Table 4.1.2: Age distribution of respondents 39

Table 4.1.3: Education qualification of respondents 40

Table 4.1.4: Working experience of respondents 41

Table 4.1.5: Type of hotel distribution of respondents 42

Table 4.1.6: Working time distribution of respondents 43

Table 4.1.7: Position distribution of respondents 44

Table 4.2: Reliability Statistics for six HRM practices 46

Table 4.3.1: The Assessment of Respondents on HRM in Terms of Recruitment and Selection 46

Table 4.3.2: The Assessment of Respondents on HRM in Terms of Training and Development 47

Table 4.3.3: The Assessment of Respondents on HRM in Terms of Career Planning System 48

Table 4.3.4: The Assessment of Respondents on HRM in Terms of Participation and Involvement 50

Table 4.3.5: The Assessment of Respondents on HRM in Terms of Compensation and Benefits 51

Table 4.3.6: The Assessment of Respondent on HRM in Terms of Performance Appraisal 52

Table 4.3.7: Organization performance 53

Table 4.4a: KMO and Bartlett's Test 54

Table 4.4b: Rotated Component Matrix 55

Table 4.5a: Descriptive Statistics 58

Table 4.5b: Correlations Among Variables 59

Table 4.6.1: Model Summary 61

Table 4.6.2: ANOVA 61

Table 4.6.3: Coefficients 62

LIST OF CHARTS

Chart 4.1.1: Gender distribution of respondents 39

Chart 4.1.2: Age distribution of respondents 40

Chart 4.1.3: Education qualification of respondents 41

Chart 4.1.4: Working experience of respondents 42

Chart 4.1.5: Type of hotel distribution of respondents 43

Chart 4.1.6: Working time distribution of respondents 44

Chart 4.1.7: Position distribution of respondents 45

CHAPTER 1: INTRODUCTION

Human Resource Management is the process of developing, applying and evaluating policies, procedures, methods and programs relating to the employment, motivation, maintenance, and management of people in the organization Human resources management include activities like strategic HRM, human capital management, corporate social responsibility, human resource planning, recruitment, selection, training and development, reward management, performance management, employee relations, health safety and employee well-being as well as provision of employee services It comprises a set of practices and policies designed to maximize organizational integration, employee commitment, flexibility and quality of work (Armstrong, 2009)

Effective human resource practices relate to company performance by contributing to employee and customer satisfaction, innovation, productivity, and development of a favorable reputation of the firm in the industry A number of researchers have reported that HR practices are positively linked with organizational and employee performance

Researchers have argued that human resources may be seen as a source of sustained competitive advantage for organizations (Barney, 1991; Becker &Gerhart, 1996) The underlying assumption is that human resources are unique to the extent that competitors cannot imitate them Research has led to the identification of a number of human resource management practices that contribute to company performance across different organizations (Huselid, 1995) In a literature review, Delery & Doty (1996) identified seven such practices that have been consistently considered HRM practices

They defined HRM practices as those that are theoretically or empirically related to overall organizational performance These practices include internal career opportunities, formal training systems, results-oriented appraisals, employment

security, participation, job descriptions, and profit sharing This approach has come to

be known as the “best practices” or universalistic approach Within the best practices approach to strategic HRM, the first practice, internal career opportunities, refers to the organizational preference for hiring primarily from within Second, training systems refers to whether organizations provide extensive training opportunities for their employees or whether they depend on selection and socialization processes to obtain required skills Third, appraisals are conceptualized in terms of outcome-based performance ratings and the extent to which subordinate views are taken into account

in these ratings Fourth, employment security reflects the degree to which employees feel secure about continued employment in their jobs Although formalized employment security is generally on the decline, organizations may have either an implicit or an explicit policy Fifth, employee participation, both in terms of taking part

in decision making and having opportunities to communicate suggestions for improvement, has emerged as a strategic HRM practice Sixth, job description refers to the extent jobs are tightly and clearly defined so that employees know what is expected

of them Finally, profit sharing reflects the concern for overall organizational performance on a sustainable basis (Delery & Doty, 1996)

Over the years, researchers have suggested many HRM practices that have the potential to improve and sustain organizational performance These practices include emphasis on employee selection based on fit with the company‟s culture, emphasis on behavior, attitude, and necessary technical skills required by the job, compensation contingent on performance, and employee empowerment to foster team work, among others Purcell et al., (2003) pointed out that the most successful companies had 'the big idea‟; they had a clear vision and a set of integrated values They were concerned with sustaining performance and flexibility which reveals a clear evidence of positive attitudes towards HR policies and practices, level of satisfaction, motivation and commitment, as well as overall operational performance

1.2 Problem Statement

Hospitality industry is considered a sub category within the services industry and has experienced significant growth with expanding global economy and positive changes pertaining to travel and hospitality industry in global environment Further, services industry is widely accepted to be driven by customer satisfaction and therefore human resources are essential component of service delivery Human resources are the most important resource hotels have since when we talk of hospitality we talk of a service, where the person who delivers it, is a vital part Both the client and supplier affect service and human resources development is the starting point for success in hospitality organizations Thus, the tourism industry and specially the hotel sector, considering its main characteristics, more than any other sector, faces the need to put in practice the human resources management practices

Employees‟ service performance plays an important role in shaping the customer‟s perception of service quality Based on a hotel‟s service performance relative to its competitors to constantly strengthen its market position is critical Min, et

al (2002) considered that customer satisfaction is one of the most important strategic weapons of best practice hotel organizations Hotel organizations can use some mechanism to lead and educate their employees as to how the organization value excellent service and to get policies and procedures implemented (Liao and Chuang, 2004)

Wood (in Baum, Amoah e Spivack, 1997) refer that mainly because of the personal service nature of the work involved, in most developed countries, both industry employees and wider society view hotel and catering labor as a relatively low status Besides, the hotel sector has some important features that need specific strategies namely, a high proportion of unskilled labor; a set of competencies that are easily transferable between hotel units; high turnover rates; low wages (unskilled nature of the work creates an excess of supply that keep wages down)

Studies also conducted by Hoque (1999), Alleyne et al (2006) and Chand and Katou (2007) have examined HRM practices in hotel industry in UK, Barbados and India respectively Although the studies have been conducted in different years and there is a significant gap between the studies, comparison of HRM practices in these studies provide significant insights on the adoption of HR practices in three countries

Based on the findings of the above studies it can be stated that HRM in the hotel industry is widely adopted and researches are emerging from developed and emerging markets examining HRM practices Therefore, this study focuses on identifying HRM practices in the Hotel industry The present study aims to approach the importance of

HR in hospitality organizations and giving the working conditions in the hotel sector, to emphasize the vital role of HRM Therefore, this research will allow us to study the reality of hotels in Sea Dragon Hotel Group, in what concerns the current practices of HRM, as well as changes industry leaders expect to make in the organizations in the near future

This study aimed to analyze the “Impact of human resource management practices on organization performance in the hotels” Specifically, the following listed objectives are identified in addition to the main objective to achieve through this research:

- To identify the human resources management practices those are used in hotels

in Sea Dragon Hotel Group

- To examine the relationship between human resources management practices and performance of hotels

- To suggest some measures in order to enhance the human resources management practices of the hotels

Two specific research questions are posited in the thesis:

- What are the HR practices?

- How do HR practices affect organization performance?

The impact of HRM practices on organizational performance has emerged as the dominant research issue in the HRM field

This study is significant for HRM practices in hospitality industry Results will indicate relationships between HRM practices and hotels performance Findings of this research will be helpful to managers to examine the success of HR practices which are currently implemented by them and to identify HRM outcomes of them It will assist owner manager and HR managers to improve performance and profitability of their businesses by managing human resource matters efficiently and effectively

The study was conducted to assess impact of human resource management practices on the organizational performance of the hotels in Sea Dragon Hotel Group

A total of 100 people, include managers of departments, assistants, supervisors and employees of the hotels in Sea Dragon Hotel Group were selected to be the respondents

of the study The study was limited to determine the perception of the respondents on the human resource practices of the hotels in Sea Dragon Group which are classified in aspects namely: Recruitment and Selection; Training and development; Career planning System; Participation and Involvement; Compensation and Benefit; and Performance appraisal

The 340 selected respondents were given a questionnaire designed by the researcher and they complete the questionnaires after being explained and instructed

HRM Policies: Policy is a course of principle of action adopted or proposed by

an organization or individual HRM Policies are principle of action related to human resources management Studies examining the extent to which all employees are valued

by the organization are exemplified by the research into equal employment opportunity and affirmative action policies

HRM Practices: Practice is the actual application or use of a plan or method As demonstrated in Baron and Kreps (1999) and Poole and Jenkins (1996) effective strategic HRM relies on choosing the right practices to achieve alignment with business strategic Therefore, we have operational strategic HRM by focusing on the HR practices used to meet business needs in terms of staffing, appraising, training, developing, compensating and organizing

Recruitment and Selection: Looking for employees, encourage them to apply, and select them, aiming to harmonize people‟s values, interests, expectations and competences with the characteristics and demands of the position and the organization

Training, Development & Education: Based on training need assessment, the official and ongoing educational activities within an organization designed to enhance the fulfillment and performance of employees

Involvement: Creating an affective bond with its employees, contributing to their well-being at work, in terms of acknowledgement, relationship, participation and communication

Career Planning System: Based on clear career ladder, aligned goals with organizational vision, used for succession planning, transparent internal hiring, and equal unambiguous employment opportunity

Competency-Based Performance Appraisal: Evaluating employee‟s performance and competence, supporting decisions about promotions, career planning and development

Compensation and Rewards: Based on expectancy of employees, comparable with market packages, competency based, performance based, profit sharing based mechanism, covering both financial and non-financial dimensions, reward employees‟ performance and competence via remuneration and incentives

CHAPTER 2: LITERATURE REVIEW

Vietnam continues to emerge as a prominent destination for international travelers within Southeast Asia With the presence of diverse tourism attractions, Vietnam appeals to a range of visitors Foreign direct investment into Vietnam continues to grow, stimulating developments in infrastructure, enhancing domestic connectivity The government continues to be a key driver of the tourism industry providing incentives for investors and promoting Vietnam as a destination overseas Growth in tourism and visitation has spurred investment into the country especially in the hospitality, real estate and industrial sectors

According to Global Report (Elly Earls, 2015), Vietnam is growing into a much larger blip on the radar that‟s drawing hotel investors and developers from around the world In the past three years, hotel occupancy across Vietnam has been strengthening, according to global real estate company CBRE Occupancy rates in the country‟s main hubs, Ho Chi Minh City and Hanoi, now are inching closer to major Asian cities like Jakarta and Kuala Lumpur

Hotel supply in Ho Chi Minh City and Hanoi is forecast to grow over the next three years by approximately 8% The extra rooms will be needed to satisfy increasing tourist arrivals Though growth rates have slowed from 19.1% in 2011 to 11% in 2013, the first five months of 2014 showed an increase in arrivals of more than 26%, according to CBRE

It‟s not just tourists that are increasingly opting to visit Vietnam “Business demand for hotels is driven by Vietnam‟s position as a low-cost manufacturing base, as industrial business seeks alternatives to China,” said Adam Bury, VP of investment sales for Jones Lang LaSalle Asia Pacific

Add to this the fact that Vietnam is, according to CBRE Hotels executive managing director Art Buser, one of the world‟s “high frontier growth markets”, with

an average gross-domestic-product increase of 6.8% from 2003 through 2013, as well

as a more affordable option than nearby countries like Hong Kong, Singapore and Tokyo, and it‟s little wonder that there has been growing investor interest in the country

Human resource management (HRM) refers to the policies and practices involved in carrying out the human resource(HR) aspects of a management position including human resource planning, job analysis, recruitment, selection, orientation, compensation, performance appraisal, training and development, and labor relations (Dessler, 2007) The Human Resource Management (HRM) activities can be summarized briefly under five major domains: (i) organizational design; (ii) staffing; (iii) performance management appraisal; (iv) employment training and organization development; and (v) reward systems, benefits and compliance (Beardwell, et al., 2004) The overall purpose of human resource management is to ensure that the organization is able to achieve success through people (Armstrong, 2006) However, as obtained in the literature, HRM is said to be concerned with achieving the following: organizational effectiveness; human capital management; knowledge management; reward management; employee relations and meeting various needs (Armstrong, 2006) HRM is composed of the policies, practices, and systems that influence employees‟ behavior, attitude, and performance (Noe, Hollenbeck, Gerhart, and Wright, 2007)

Recent academic research has attempted to demonstrate the impact of HRM on firm performance and the relationship between the practices and firm outcomes is discussed best in the strategic human resource management literature (Pfeffer, 1998; Rogers & White, 1998) Early studies linked individual HR practices such as training, selection, performance appraisal and compensation to firm financial performance

(Huselid, 1995; Guest, 1997) Traditional HRM factors alone are no longer sufficient in maintaining firm strategy Even though HR departments have historically been bureaucratic within organizations, its role has been focused on pursuing more flexible and creative means to deliver services in constantly changing environments (Lepak& Snell, 1999) HR professionals are increasingly expected to become much more responsive, efficient, and ultimately make a strategic contribution to their company Designing and integrating human resources systems is one of the ways to ensure the creation of value for customers and sustain organizational effectiveness The notion of best practices in human resource management has received a lot of attention in recent years It has been suggested that there is a universal set of human resource best practices that can maintain a firm's performance (Lau & Ngo, 2004)

There is growing evidence that corporate HRM practices are associated with high financial performance, and can encourage employee behavior and attitudes

towards strengthening the competitive strategy of an organization (Hiltrop, 1996)

Successful firms create a bundle of employee practices to reinforce the organizations‟ strategic position (Enz & Signaw, 2000) Hiltrop (1999), in his research asked the HR managers and personnel officers in 319 companies in Western Europe about HR policies and practices of their firm and found out that employment security, opportunities for training and development, recruitment and selection from within, career development and teamwork, participation and proactive personnel planning are the most important practices In fact the role of HR is to acquire, develop, manage, motivate and gain the commitment of the employees The focal point is how to determine the best practice in various HR-related decisions (Baruch, 1998) In a comprehensive study on best practices in the lodging industry, Enz&Signaw (2000) examined five categories of HR best practices; (i) Leader development, (ii) Training and knowledge building, (iii) Employee empowerment, (iv) Employee recognition and

(v) Cost management Similarly, Jayaram et al.,(1999) stated that the broad range of human resource management practices affecting performance can be classified into five major topics: (i) Top management commitment; (ii) Communication of goals; (iii) Employee training; (iv) Cross functional teams; and (v) General HRM practices This classification implies that human resources management practices can be analyzed using the five broad groupings of practices (Jayaram et al., 1999) On the other hand, Pfeffer (1998) has proposed seven HRM practices that are expected to enhance organizational performance The practices he proposed are: (i) Employment security (ii) Selective hiring of new personnel (iii) Self-managed teams and decentralization of decision making as the basic principles of organizational design (iv) Comparatively high compensation contingent on organizational performance (v) Extensive training to provide skilled and motivated workforce (vi) Reduced status differentials and barriers, including dress, language, office arrangements, and wage differences across levels (vii) Extensive sharing of financial and performance information throughout the organization (Pfeffer, 1998)

In knowledge - based competitive economy, the adoption of appropriate HRM practices is important to ensure effective strategy implementation HRM practices create procedures that constitute the building of employees‟ knowledge and skills throughout the organization to promote valued and unique organizational competencies which support competitive advantage (Werbel & DeMarie, 2005) Strategic human resource management has become a more central issue to management literature from empirical research view linking HRM practices with firm performance and profitability (Delaney & Huselid, 1996; Becker & Gerhart, 1996) To a very large extent, the philosophy and approaches to HRM practices are underpinned by the resource-based view, which states that it is the range of resources in an organization, including its human resources, that produces its unique character and creates competitive advantage According to Barney (1995), competitive advantage arises first when firms within an

industry are heterogeneous with respect to the strategic resources they control, and second, when these resources are not perfectly mobile across firms and thus heterogeneity can be long lasting Creating sustained competitive advantage therefore depends on the unique resources and capabilities that a firm brings to competition in its environment These resources include all the experience, knowledge, judgment, risk-taking and wisdom of individuals associated with the firm

For a firm resource to have the potential for creating sustained competitive advantage it should have four attributes: it must be valuable, rare, imperfectly imitable and non-substitutable To discover these resources and capabilities, managers must look inside their firm for valuable, rare and costly-to-imitate resources, and then exploit these resources through their organization Wright et al., (2001) noted that there are three important components of HRM that constitute a resource for the firm and are influenced by HR practices: (i) the human capital pool - the stock of employee knowledge, skills, motivation and behaviors (ii) The flow of human capital through the firm - the movement of people and of knowledge (iii) The dynamic processes through which organizations change and renew themselves They suggested that HR practices are the primary levers through which the firm can change the pool of human capital as well as attempt to change the employee behaviors that lead to organizational success Resource – based HRM can produce what Boxall & Purcell (2003) referred to as human resource advantage The aim is to develop strategic capability This means strategic fit between resources and opportunities, obtaining added value from the effective deployment of resources, and developing people who can think and plan strategically in the sense that they understand the key strategic issues and ensure that what they do supports the achievement of the business‟s strategic goals In line with human capital theory, the resource-based view emphasizes that investment in people increases their value to the firm

As Ulrich (1998) commented: “Knowledge has become a direct competitive advantage for companies selling ideas and relationships The challenge to organizations

is to ensure that they have the capability to find, assimilate, compensate and retain the talented individuals they need” The significance of the resource – based view of the firm is that it highlights the importance of human capital management approach to HRM and provides the justification for investing in people through resourcing, talent management, and learning and development programs as a means of enhancing organizational capability

To respond to their customers‟ needs and move forward in their business, companies should manage their employees‟ special skills as they are viewed as an important source of competitive advantage Succeeding to attract, retain and motivate a skilled workforce helps companies to improve their results Companies are admitted to effectively manage their different HR activities such as recruiting, selecting, hiring, safety, wellness, training, organization development, communication and rewarding personnel to ensure they help positively in their financial growth and meet their challenges in a fast-changing business environment A highly committed and competent workforce helps companies succeeding these strategies and gain competitive advantage as long as these strategies are communicated and the workforce is involved

in both the formulation and implementation phases

Companies should consider people as assets and they are valuable and constitute

a source of competitive advantage As stated by Armstrong and Baron (2002) that

“people and their collective skills, abilities and experience, coupled with their ability to deploy these in the interests of the employing organization, are now recognized as making a significant contribution to organizational success and as constituting a significant source of competitive advantage.”

According to Bratton and Gold (2007), strategic human resource management is

“the process of linking the human resource function with the strategic objectives of the organization in order to improve performance” They added that SHRM is a managerial process requiring human resource policies and practices to be linked with the strategic objectives of the organization

There is a considerable debate in the literature related to whether the SHRM and related HR strategies is an outcome or a process For some academics such as Snell et

al (1996) the SHRM is an “outcome” where they view the SHRM as an organizational systems designed to achieve sustainable competitive advantage through people While for others, it is a process of linking HR practices to business strategy (Ulrich, 1997) Similarly, Bamberger and Meshoulam (2000) describe SHRM as the process by which organizations seek to link the human, social, and intellectual capital of their members

to the strategic needs of the firm‟ Many researchers (Arthur, 1994; Huselid, 1995; Delaney and Huselid, 1996; Huselid et al., 1997; McMahan et al., 1999; Fey et al., 2000; Huang, 2001; Stavrou and Brewster, 2005; Christiansen and Higgs, 2008) have suggested that company‟s HRM practices contribute to increase its performance and thus help it to grow and gain sustainable competitive advantage These studies attempted to answer the question of whether or not human resource management practices have a crucial role in the creating a high financial performance and sustaining

a competitive advantage in a fast changing environment Traditionally, human resources have been viewed as a cost to be minimized (Becker and Gerhart,1996) and subject to be downsized in order to reduce these costs, rather than a source of value creation and a strategic lever that can have economically significant effects on the firm‟s performance (Becker and Gerhart, 1996) As mentioned by Becker and Huselid (1998), a skilled and motivated workforce can have a very important role to provide the necessary speed and flexibility to the organization to gain competitive advantage in a dynamic market environment where traditional sources of competitive advantage

(quality, technology, economies of scale, etc.) have become easier to be imitated by the organization‟s rivals

Huselid (1995) studied the impact of HRM policies and practices on firm performance He found that these practices have a significant impact on employee outcomes (turnover and productivity) and on the overall corporate performance Huselid et al (1997) evaluated the impact of HR managers‟ capabilities on HR effectiveness and the impact of the latter on the corporate financial performance using a sample of 293 U.S firms They found that effectiveness was associated with capabilities and attributes of HR staff and that there exists a relationship between HR management effectiveness and productivity, cash flow, and market value

Wright et al (1999) examined the impact of HR practices (selection, training, compensation and appraisal) and participation of the financial performance of190 US petro-chemical refineries Their results confirmed the existence of a direct relationship between training and compensation with workforce motivation However, they found that only under highly participative systems, HR practices (selection, compensation and appraisal) are positively related to firm performance

Wan et al (2002) tested six strategic HR variables‟ (training, staffing, empowerment, performance appraisal, job design, and performance-based pay) impact

on firm performance and then examined how the combination or the bundle of such variables together affect this performance Using a sample of 191 Singaporean companies, they found that effective implementation of the different strategic HR variables have a positive effect on organizational outcomes (especially to the firm HR performance – employee productivity, job satisfaction and commitment) They also found that performance appraisal and empowerment and training were very important issue to tackle by top management if they are interested to enhance their HR performance and hence the organization performance

Bae and Lawler (2000) examined the effects of organizational strategic variables regarding HRM and the source of competitive advantage of 138 Korean firms They found that firms with high – involvement HR strategies had better performance

Batt (2002) examined the relationship between human resource practices, employee quit rates, and organizational performance in the service sector His findings confirm that, firms emphasizing high skills, employee participation in decision making and in teams, and human resource incentives such as high relative pay and employment security, have lower quit rates and higher performance (sales growth)

Using a sample of 52 Japanese multinational corporation subsidiaries in the U.S and Russia, Park et al (2003) examined the impact of HR practices on firm performance Their result confirmed the hypotheses that employee skills, attitudes and behaviors play a mediating role between HR systems and firm outcomes

Paul and Anantharaman (2003) tested the causal model linking HRM with organizational performance They found that practices like training, job design, compensation and incentives had a direct effect on the operational performance parameters Sing‟s study (2003) tested and showed that there exists a significant relationship between strategic HR orientation of Indian firms and their performance

HR orientation was conceptualized as the alignment of HR planning, selection, evaluating, compensating, developing and staffing practices with the business strategies

of the firm In his study of 194 Singaporean companies from different industries, Khatri (2000) found that there‟s a strong direct influence of HR practices on firm profitability Although their findings suggest that the role of HR function in Singapore companies still remains secondary, they stated that encouraging signs suggest that HR activities are increasingly being aligned and integrated with the organization‟s overall strategy

Wattanasupachoke (2009) had explored the relationship between HR strategies and the performance of 124 Thai companies and found that the extra pay and profit

sharing is the only factor group that has a statistically important correlation with the companies‟ financial performances such as sales, profits and liquidities

As a result of the above, an extensive body of literature about the impact of HR practices on firm performance had emerged as a dominant research issue in the HRM field (Fey et al., 2000) The results of these studies confirm the dependency of firm success on the caliber of its employees and how effectively they are managed

According to Bratton and Gold (2007, page 239), recruitment is „the process of generating a pool of capable people to apply to an organization for employment‟ and selection is „the process by which managers and others use specific instruments to choose from a pool of applicants the person(s) most likely to succeed in the job(s), given management goals and legal requirements Companies using a good selectivity in the hiring process ensure getting the right skilled and qualified people for the right job (Pfeffer, 1994; Huselid, 1995) According to Koch and McGrath (1996), there exists a positive relationship between HR recruitment and selection and labor productivity

There are different kinds of recruitment sources like referrals by employees, ads

in newspapers or direct applications and a broad variety of substitutes also exist like rehires, internships, employment agencies, etc (Klaus, 2005) In the initial stage of the recruitment process, companies try to draw job hunters into the applicant pool (Rynes, 1991) This selection process affects the organizational performance The selection process can be different in different firms but the main aim is the same to select the right person for the right job Various studies regarding selection methods exert an early influence on the association between candidates and companies (Gilliland, 1993; Herriot, 1989) Selection procedures may also help a joint search for similarity and fit (Schneider, 1987) White & Doyle's (1997) studied five specialized groups and established a preference for informal, “word of mouth” associates and interviews, with

lack of the conservative concept of severity in selection Different firms use different selection processes

After reviewing the research conducted by (Holzer, 1987; Pfeffer, 1994; Lado & Wilson, 1994; Fernandez, 1992) recruitment and selection has been added as an independent variable in this study To acquire competitiveness at domestic, national and even at an international level, the organizations should use effective recruitment and selection processes, failing which the results could be quite disappointing or disastrous

Companies intending to gain a sustained competitive advantage should help their employees raise their skills by receiving continuous training so that they can learn new things need to ensure quality improvement of the products and services of the company

In organizations the training remains a major activity of Human Resource Development (HRD) practice (Nordhaug, 1989) for employee development and their competencies building (Gritz, 1993) To perform effectively, at a managerial position, employees go through dynamic process of training and development (Baldwin & Padgett, 1994) Training activities are considered as an integral exercise to acquire competitive advantages over the competition (Barney, 1995) In this competitive world, one of the key strategies to attain competitive advantage is, conducting trainings properly which helps to achieve organizational objectives (Dobson & Tosh,1998) by increasing organizational and employees productivity (Ng & Siu, 2004)

A significant amount of theoretical and empirical work is available on how training and development contributes to organizational performance Acquisition of up

to date skills always enhances people‟s performance Gaining a strong competitive position largely depends on employees and organizational aptitude towards innovation,

change and development (Booth & Snower, 1996) Importance of training and team working is increasing because of interdependency and integration of assignments at site For the last few decades, researchers and practitioners are focusing to identify the relationship of training, with organizational performance and have concluded different dimensions in different periods of times

Training is a huge and expensive activity that affects a huge workforce at any point in time (Tobias & Fletcher, 2000) Although few researchers highlighted that there was a negative relationship between training and organizational performance, but based on different findings and theories, an argument could be developed, that training was one of the critical predictors that helped the organizational engine, and its employees, to get equipped with the required modern skills for predicting their performance that could make a significant difference in organizational performance Numerous organizations are moving towards training and development to gain strategic strengths and high level of performance (Brown, 2005) Practitioners and researchers are investing substantial money, effort and time to figure out the essence of employee training from the last 30-plus years (Emadi, et al 2007) In this research study, training and development is considered as an independent variable to test training and development contribution into organizational performance

Career Planning and Development Program, fostering organizational effectiveness, depends on the organization‟s ability to transfer staff from a conventional model of expectation to one of increased responsibility for their own career growth and development (Martin, Romero, Valle & Dolan, 2001) A well-designed career development structure allows organizations to tap into their wealth of in-house talent for staffing and promotion by matching the skills, experiences, and ambitions of individuals to the needs of the companies In addition, it allows them to make informed

choices around compensation and succession planning to attract, keep and inspire the staff, resulting in a more engaged and productive workforce (Thite, 2001; Kapel& Shepherd, 2004; Kaye, 2005) Career development must be an ongoing system connected with the organization‟s Human Resource (HRM) structures and not a one-time event (Leibowitz, et al 1988) These arguments defining and maintaining a sustainable career development process, calls for theorizing and testing the antecedents and outcome of career development practices across the performance of different industries

Career development is a long term composite process Indeed, organizations and individuals understand and appreciate the intrinsic longevity in this complex experience Often, career development is reported as an organizational program whereby organizations set up processes, structures and systems to promote career development initiatives for individuals (McDaniels & Gysbers, 1992; Herr, 2001) In recent years, the views of individuals following their careers and shaping, molding and developing them in order to get utmost benefit have received more extensive concentration For example Hall et al (1986); and Granrose & Portwood (1987) emphasized the significance of Career Planning as the first step towards the career development process Indeed, individuals need to discover career development areas and make decisions about personal objectives and development plans Moreover (Leibowitz, Farren& Kaye, 1986) argue that individuals are responsible for initiating their own Career Planning as well as recognizing their skills, standards, interests and it

is their responsibility to look for their career alternatives in order to set the objectives

of their career plans

To conclude the discussion, it can be said that career planning is viewed as an initiative where individuals apply personal control over their career and connect informed decisions to their occupation, organization, job assignments and self

development (Hall, et al 1986) On the other hand, organizations can assist by offering career planning tools or workshops through vocational counseling, or by using workbooks or career resource centers to guide employees to perform self assessment, examine and assess their career options and preferences, write down their development aims and arrange an implementation plan (Hall, 1986; Leibowitz, et al.1988; Appelbaum, et al 2002) Because of the importance given to the Career Planning System in management literature, Career Planning has been taken as an independent variable in this study

“Coming together is a beginning, Keeping together is progress, Working together is success” Henry Ford Ford & Randolph (1992) said that Management Style, where subordinates contribute extensively in decision making with their leaders is Participatory Management Strauss (2006) said that participation is a process that allows employees to exercise some control over their work and the conditions under which they work It encourages employees to participate in the process of making decisions, which have a direct impact on work environment Substantial employee participation in management is vital for cross-functional integration and efficient working Open communication with the high chain of command, expression of creative

& innovative ideas, result in common vision, mutual respect and trust Employee participation is a method where, a large number of subordinates share a degree of decision-making power with their superiors Participation in management is very significant for cross- functional integration (Nyhan, 2000) Research in employee participation has examined how it effects an employee‟s normative, continuous, and effective commitment Further it motivates employees and gives meanings to concepts like organizational loyalty (VanYperen, et al 1999; Tesluk, et al 1999) consequently leading towards high performance

In the past, employee participation studies examined its process, content and nature Majority of work is currently focused on evaluating impact of participation on organizational performance, which is the primary line of investigation (Cox, et al 2006) Analysis of employee participation impact on organizational performance has been rather less common, but recently a lot of work has been done in this area (Bryson, 1999) Impact and relationship analysis of employee participation with employee and organizational performance was considered by Cox et al (2006) Kessler et al (2004) studied links between employee participation and employee perceptions According to Marchington et al (2001) EP definition is elastic and somewhat problematic; it can be categorized, (i) Direct participation requiring participation of an individuals‟ problem solving or team building (ii) Indirect participation through workplace committees

Different types of participation mean different degrees of influence, known as Participation Intensity (Wilpert, 1998) while Participation Depth is focusing on central dimensions (Strauss, 1998) Heller (2003) pointed that the distribution of power is a necessary action in order to enhance performance and satisfaction through employee involvement Different groups for strengthening their status, influence different situations in an institution (Ng, 1982) Likewise, an individual's status is determined on the basis of influence within the organization (Turner, et al 1987; Tyler & Blader, 2003) but most of the time participation is necessary to get basic rights These concepts emphasized the importance of including employee participation as a dimension in this study to test the relationship between employee participation and organizational performance

Employee participation in conventionally owned and organized institutions can

be task-related (i.e at the work station) or strategic (i.e at corporate level), and participation at either of these levels can be communicative, consultative or negotiable (Heller, et al 1998) On the basis of research work by (Walton, 1985; Pfeffer, 1994;

Wagner, 1994; Verma, 1995; Strauss, 1998; Gallie, et al 2001; Wan, et al 2002; Sels,

et al 2003; Singh, 2004; Kessler, et al 2004; Cox, et al 2006; Strauss, 2006) employee participation has been selected as an important factor for this study

Companies intending to gain a sustained competitive advantage should help their employees participate actively decision-making processes and involve them in the day - to - day problems Putting in place employee involvement program afford employees with opportunities to reflect their own attitudes and work experiences, as well as their own hopes for the future (Bratton and Gold, 2007) Batt (2002) states that high-involvement practices may influence organizational performance and that employees‟ involvement in problem-solving and self-directed teams may increase autonomy and satisfaction

Basically relates to the assessment of the performance of an employee, it is not sufficient just to get the right person for the right job at the right time It is also necessary to motivate them to ensure their performance is consistent with the long term needs of the business According to Noel et al (2003), a performance management system should link employee activities with the organization‟s goals One of the primary ways strategies are implemented is through defining the results, behaviors, and

to some extent, employee characteristics that are necessary for carrying out that strategy, and then developing measurement and feedback systems that will maximize the extent to which employees exhibit the characteristics, engage in the behavior, and produce the results

The measurement of employees‟ performance also allows the company to provide compensation fairly to the deserving individuals according to certain predetermined criteria like employee competency, teamwork ability, initiative, soft skills and ethics

2.9 Compensation and Benefits

Bratton and Gold (2007) state that reward refers to “all of the monetary, monetary and psychological payments that an organization provides for its employees

non-in exchange for the work they perform” Motivatnon-ing employees through a good reward system constitutes a difficult and challenging task for general managers as it can positively affect employees‟ behavior toward their jobs and increase their commitment and thus their performance Armstrong and Murlis (2007) states that reward strategies are an important part of an organization‟s HR strategy and should be bundled with other HR strategies so that they complement and reinforce one another Arthur (1994), Huselid (1995) found that motivation through a good reward system can lead to an increase in employees‟ productivity Kalleberg and Moody (1994) states that some forms of compensation such as profit sharing is used as a strategic variable to improve firm competitiveness because it ties the interests of workers more closely to that of the organization and thus enhance their efforts and lead to better performance

Any monetary or non monetary reward given to employees for their endeavors is called compensation It plays an important role in an employees‟ motivation and thus enhances organizational effectiveness (Lawler, 1971; Milkovich& Newman, 1996) There are different factors that need to be addressed while compensating any employee; i.e work performance, relationship with coworkers, and relationship with managers, and personal needs Compensation may be used to keep competent workers, boost or sustain satisfaction, encourage peak performance, decrease turnover and encourage company loyalty Compensations may be different for different workers depending upon their level and type of formal education, experience and training (Pedro & Vicente, 2007) Many equity based compensation plans are normally used for staff These plans include employee stock option plans, employee stock purchase plans, restricted stock plans, employee stock ownership plans, and various qualified

retirement‟s plans These are extensive plans and can be classified as non-retirement and retirement plans based on when the worker is entitled to get benefits (Melissa, 2004)

Lawler (2005) reported that organizational performance and effectiveness, organizational design and change management is the outcome of an outstanding HRM system Commenting on the same, Hewitt (2004) and Saratoga Institute (2006) concluded that for the improvement of the various HRM tasks, HRM indicators were required to be empirically measured and reported by HRM systems Resultantly, the approach would shift the HR systems and functions from traditional personnel administration towards Strategic HRM, having wide growth opportunities for an organization It is therefore obvious that reward and performance are closely linked with each other to increase organizational effectiveness

A firm's Compensation System reflects the firm's values and cultures Employees are more likely to look at what a company pays rather than what it says In many aspects, people behave as they are rewarded The Compensation Scheme also indicates to the employees what the firm expects from them Therefore, for example, if quality is an important value, it should be reinforced through some element of the total Compensation System Managing a firm's Compensation System is a complex task as it involves providing systematically administered and equitable salaries, reconciling employees' career aspirations in terms of earnings, aligning employees' personal objectives with those of the organization and keeping the firm's costs under control On the basis of literature review, the Compensation System has been considered as one of the independent variables in this study

2.10 Hypotheses

 Hypothesis 1 (H1): Recruitment and Selection effect hotel‟s performance

 Hypothesis 2 (H2): Training and Development effect hotel‟s performance

 Hypothesis 3 (H3): Career Planning System effect hotel‟s performance

 Hypothesis 4 (H4): Participation and Involvement effect hotel‟s performance

 Hypothesis 5 (H5): Compensation and Benefit effect hotel‟s performance

 Hypothesis 6 (H6): Performance Appraisal effect hotel‟s performance

CHAPTER 3: METHODOLOGY

The purpose of this study is to describe the methodological procedures utilized

to test the research hypothesis and the research model It explains the research design used to exam the HRM practices and service performance in the hotel industry This research includes a detailed analysis of the HR – related data obtained from both

primary and secondary sources

3.1 Research Approach

The study was compiled with the help of primary data and secondary data Primary data was collected through a questionnaire checklist was designed by the researcher to gather data from the respondents It involved collection of data to test the hypotheses and answer questions concerning the current status of the subject A five points rating scales of questionnaire from strongly disagree (1) to strongly agree (5) were adopted to measure the variables of HR Practices Organization performance was measured by a one-item questionnaire on five-point Likert scale [where disagree (1) to strongly agree (5)], this is the single global rating approach (Davidson,1979) as it is believed to be an easier approach to collect data (Haque and Taher,2008; Yu and Egri, 2005)

3.2 Population

The population of this study is managers of departments, assistants, supervisors,

and staff of one three-star hotels and one four-star hotel in Sea Dragon Hotel Group

3.3 Sample

In this particular research, two hotels: one three-star hotel and one four-star hotel in Sea Dragon Hotel Group are taken into consideration Among them, 340 people were selected randomly; include managers of departments, assistants, supervisors and staff There were no restrictions about the level of education, and the

age of participants The questionnaires were distributed randomly among participants

to ensure objectivity for this research

3.4 Data analysis

In the present study, we analyze our data by enter wise method in a multiple regression analysis In this context, a multiple regression was performed, by making use of all the discrete variables (dependent and independent variables) For this purpose, we consider the following model specifications, by taking as dependent variable, organization performance by making HR practices as independent variables

The equation of the form:

Y = β 0 + β 1 X 1 + β 2 X 2 + β 3 X 3 + β 4 X 4 + β 5 X 5 + β 6 X 6 +E

 Y : Firm Performance

 X1: Recruitment and Selection

 X2: Training and Development

 X3: Career Planning System

 X4: Participation and Involvement

 X5: Compensation and benefits

 X6: Performance Appraisal

3.5 Data gathering procedure

- To preparing for the research, the researcher will spent time to review literatures and related studies

- Preparing research instrument such as checklist and questionnaire for information collection The checklist and questionnaire based on the research topic and the objective of the survey

- Checking of the instrument, validating and final revise the instrument to make sure all information can be collected by using the instrument The pretest phase is useful for validating the questionnaire

- Sampling design and taking the sample

- Data gathering by using developed instrument, the researcher send the questionnaire to the managers, who were selected as sample for asking support, enclosed with the questionnaire is a requested letter

- Encoding of data: data will clean (hand with outline and missing value) before entering into computer using Excel

- Data analysis and evaluation by using excel and SPSS program

CHAPTER 4: DATA PRESENTATION AND ANALYSIS

This chapter presents information obtained for this research study from the data collected through primary and secondary sources It includes the findings in respect of profile of respondents, recruitment and selection, training and development, career planning system, participation and involvement, compensation and benefit, performance appraisal and firm performance Analysis is done in two parts; the first part pertains to profile of the respondents while second part contains analysis of respondents‟ answers to the questions Excel 2007 and Statistical Package for Social Sciences (SPSS 20.0) were used to calculate descriptive statistics, correlation and

of female respondents and 37.1% of male respondents

Table 4.1.1: Gender distribution of respondent

Chart 4.1.1: Gender distribution of respondent 4.1.2 Age distribution

Age distribution of respondents is presented in table 4.1.2 It shows that most of respondents are in age category of 18-25 and 26-35 That is, 37.1 % of respondents for age 18-25 and 52.4% of respondents for age 26-35 It is just 1.8% in age category of 45