Effects of Hr Practices on Organizational Performance

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Effects of Human Resource Management Practices on
Organizational Performance – An Empirical Study
of Oil and Gas Industry in Pakistan
Muhammad Asif Khan
Assistant Professor, Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST) Islamabad, Pakistan
E-mail: dr.asif@szabist-isb.edu.pk
Tel: 92-51-4863363 / 209
Abstract
The study evaluates the effects of human resource management practices on organizational performance in Oil and Gas Industry in Pakistan. A total of 150 managers of 20 randomly selected firms from Oil and Gas Industry responded to self-reported questionnaire that measured five HRM practices and subjective measures of organizational performance. Factor analysis was performed to identify human resource management practices. Regression analysis indicated a positive and statistically significant association of these practices with organizational performance. The study provides insight to management to use these practices as strategic tool for superior performance, and add to the limited empirical knowledge that exists in Pakistani context.

Keywords: Human resource management, organizational performance, Oil and gas industry, Pakistan.
1. Introduction
Changing business environment in knowledge economy has made adoption of human resource management (HRM) imperative for competitive advantage. The impact of HRM practices on business performance has been extensively studied in the recent past. These studies have found a positive association between HRM practices and firms’ performance (Becker & Huselid, 1998; Chang & Kuo, 2004; Jarventaus, 2007; Rizov & Croucher, 2008; Sang, 2005). Most of these studies have been undertaken in the United States, and Europe (Boseli et al., 2001; Hoque, 1999) and Asia (Bjo¨rkman, I. and Xiucheng, 2002; Kundu & Malhan, 2007; Ngo et al., 1998). Within Pakistan, limited research has been done to examine the relationship of HRM practices and organizational performance. The strategic role of HRM has been well established. In Pakistan, there has been immense realization of the impact of strategic use of HRM practices and visionary companies are setting the pace to leverage this aspect for competitive advantage. HRM practitioners are striving to meet the emerging challenges of new values of knowledge workers who have necessitated a new paradigm of peoples’ management characterized by heavy investment in human capital and innovative use of HRM practices for attraction and retention of talents for organizational sustainability. The Oil and Gas Industry in Pakistan is vital for the economy and considered as an issue of national self reliance, national security, and a major source of government’s revenues. With limited proven reserve of oil and gas in the country, Pakistan meets only 18% of the total domestic demands. The government incurs a colossal amount of scare foreign exchange on the import of oil bill. The 158 European Journal of Economics, Finance and Administrative Sciences - Issue 24 (2010) economic environment in the country and dependence on imported oil has accentuated the problems for the government, people, and organizations. To meet the challenges of shortage of oil and gas, the government of Pakistan announced new Policy in 2009 for this Industry. The policy envisions self sufficiency in oil and gas production and a proactive approach on development of human resource to the international standards, and creating conducive environment for their retention in the country. Organizations operating in Oil and Gas Industry in Pakistan are aligning their strategy to meet the laid down objectives. Doek-Seob (2001) noted that HRM practices become a strategic instrument during economic downturn.

No empirical research has so far been undertaken to investigate the effects of HRM practices on firms’ performance in this industry. Thus a gap exists in the research in this area of strategic importance. The present study is an attempt to address this gap. The present...
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