IMPACT OF HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES ON

EMPLOYEES PERFORMANCE

A CASE OF PAKISTANI TELECOM SECTOR

by

Zubair Aslam Marwat 1

Tahir Masood Qureshi 2

&
Muhammad I Ramay3

1
Zubair Aslam Marwat
PhD Scholar
Faculty of Business Administration and Social Sciences
Muhammad Ali Jinnah University, Islamabad
2
Tahir Masood Qureshi
Faculty Member/ PhD Scholar
Faculty of Business Administration and Social Sciences
Muhammad Ali Jinnah University, Islamabad
3
Muhammad I Ramay
Associate Professor
Department of Business Administration and Social Sciences
Muhammad Ali Jinnah University, Islamabad
 IMPACT OF HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES ON

EMPLOYEES PERFORMANCE

A CASE OF PAKISTANI TELECOM SECTOR

Abstract

In the fast growing telecom sector there are 6 big players offering services with
stratagem and always looking for faster growth through employees’ performance by all
the means. Through this research study we explored contribution of human resource
management practices including selection, training, career planning, compensation,
performance appraisal, job definition and employee participation on perceived employee
performance. Results highlighted that all the tested variables are positively correlated but
correlation of compensation (0.67) and training (0.66) are highest respectively.
Key Words: (Pakistan, Telecom sector, Selection, Training, Career Planning,
Compensation, Performance appraisal, job definition, participation, effectiveness,
efficiency)

Introduction
Telecom sector of Pakistan has experienced tremendous growth in recent years. To
benefit from growing market, telecom companies require right people for the right Job.
To attract, retain and add to share holder value innovative Human Resource
Management practices are required to be implemented.

We are living in an era where the business world has become a village and the business
organizations are facing cutthroat competition from around the globe. One of a source of
competitive advantage for any business is its human resources (Becker & Huselid,
1998). When it comes to developing nations like Pakistan the role of human resources is
visible only in those organizations which are either knowledge organizations or are
technology intensive organizations. One sector which has shown tremendous
performance can be attributed to its use of technology made possible by its competitive
and innovative Human Resource practices is the telecom sector.

In today’s knowledge organizations (telecom service provider are good example of such
organizations), where value is locked in the heads of the work force, best HR practices
only can ensure continued success of business organizations. In developing economies
like ours, best Human Resource practices are a recent phenomenon. Most of the firms
follow Human Resource practices to the level of compliance of the law of the land.

After deregulation of the sector, it has attracted FDI of US $ 1905.1 which was 54.11 %
of total FDI for the financial year 2005-06 as compared to US $ 6.1 million in 2001-02
which was 1.26% of total FDI for the whole financial year. The growth of the telecom
sector in Human Resource context can be seen from the fact that in 1998 only 19
licensed telecom service providers were doing business while in 2004 no of licensed
operators have increased to 126. The share of the sector in GDP was 1.5 % in 1999-2000
which has increased to 1.9 % in financial year 2004-05. Pakistan’s telecom sector is
providing direct employment opportunity to 20000 individuals in different telecom
related services. Indirectly another 350,000 individuals are employed in the sector.
Keeping in view the tremendous growth in the sector, it is natural that the telecom
companies are facing shortage of highly skilled telecom engineers and technician and
other non technical employees. Employee retention is a serious issue for telecom
companies. Companies are innovatively attracting highly skilled employee. Use of best
HRM system is used as tool to attract and retain employees. In backdrop of above
situation, this study will attempt to find effect of certain HR practice on perceived
employee performance of Pakistan’s telecom sector.

Literature Review

Guest (2002) has argued that the Impact of HRM on performance depends upon
worker’s response to HRM practices, so the impact will move in direction of the
perception of HRM practices by the employee. Wood (1999) and Guest (2002) has
stressed that a competent, committed and highly involved work force is the one required
for best implementation of business strategy. Huselid (1995) have found that the
effectiveness of employees will depend on impact of HRM on behavior of the
employees. Patterson et al (1997) while discussing impact of people management
practices on business performance has argued that HR practices in selection and training
influence performance by providing appropriate skills. Their research has found that HR
practices have powerful impact on performance even if measured as productivity.

Huselid (1995) stressed that by adopting best practices in selection, inflow of best
quality of skill set will be inducted adding value to skills inventory of the organization.
He also stressed on importance of training as complement of selection practices through
which the organizational culture and employee behavior can be aligned to produce
positive results. Cooke (2000) has included efficiency and effectiveness as ingredients of
performance apart from competitiveness and productivity. S(he) further argued that
training is the tool to develop knowledge and skills as means of increasing individual’s
performance (efficiency and effectiveness). Singh (2004), whose observations are more
relevant in our cultural context, argues that compensation is a behavior aligning
mechanism of employees with business strategy of the firm.

Career planning is a tool that aligns strategy with future HR needs and encourages
employee to strive for his personal development (William et al, 1996). By increasing
employee participation, the firm will benefit from increase in productivity of the
employee due to increased commitment of the employee. Financial participation
schemes were more beneficial for the organizations than the associated cost (Summers &
Hyman, 2005). Use of best HR practices shows a stronger association with firm’s
productivity in high growth industry (Datta et al, 2003). This finding has significance in
our case as we have shown that the telecom sector of Pakistan is a high growth industry.
Wright et al (2003) have argued that an employee will exert discretionary effort if proper
performance management system is in place and is supported by compensation system
linked with the performance management system. Job definition is combination of job
description and job specification. It clearly outlines duties, responsibilities, working
conditions and expected skills of an individual performing that job (Qureshi M Tahir,
2006). Ichniowski (1995) while observing productivity of steel workers have found that
complementary HR practice System effects workers performance. Majority of previous
research has verified significant relationship between HR practices and Employee
Outcomes (Sels, 2006)

Collins (2005) in a research of similar nature targeting small business have found that
effective HR practices impact employee outcomes significantly (employee outcomes
used by them were different than ours). A research was conducted by Mr. Tahir Masood
Qureshi (2006) regarding Impact of HR practices on organizational performance in
Pakistan. His findings were supportive of our assumption that HR practice system effect
Organizational Performance through employee outcomes.

Rationale

As evident from the introduction, the telecom sector of Pakistan is the fastest growing
sector attracting more than 54 % of FDI (2005-06). Growth in knowledge based
organizations depends on the skills inventory of its human resource. If we can prove the
effects of a system of HR practices on employee outcomes, this sector will be
encouraged to invest more on its employee in an innovative manner. By developing its
employees the organization will be realizing its financial goal through increased
employee performance.

Research Question

How Human Resource Management practices affects Employee Performance.

Hypothesis
Human Resource Management Practices are positively correlated to Employee’s
Performance.
H 1; Selection is positively correlated to Employee’s Performance.
H 2; Training impacts Employee’s Performance positively.
H 3; Performance appraisal is positively correlated to Employee’s Performance.
H 4; Career planning is positively correlated to Employee’s Performance.
H 5; Compensation is positively correlated to Employee’s Performance.
H 6; Employee Participation is positively correlated to Employee’s Performance.
H 7; Job Definition is positively correlated to Employee’s Performance.
Methodology:

Data Collection and Analysis:

Sample of this study is Human Resource executives of telecom Companies. Selected
sample size is 60 and 58 returned out of total distributed questionnaires. Response rate is
96%.

Questionnaires of Singh (2004) and Qureshi M Tahir (2006) is selected for data
collection because already available data is not sufficient for analysis, with the
amendment of dependent variable from perceived organizational performance to
employees performance in organization this questionnaire is used.

Since this study found relationship between human resource management practices and
employee’s performance, Pearson correlation and descriptive statistics are used for
analyzing data numerically.

Theoretical Framework

Selection
+

Training
H +
R
M Performance +
Appraisal
Employee
P Career + Performance
r Planning
a +
ct Compensation

ic +
e Employee +
s Participation) +
Job Definition
Findings and recommendations

There is strong positive correlation between compensation and training (0.78) with mean
of (3.46) indicating that, most of people are idealizing compensation as an important
factor which is directly correlated with Employees’ performance. All the variables are
having positive correlation with Employees performance. Like Training (0.66),
Performance appraisal (0.47), Career planning (0.29), Employee participation (0.56), Job
definition (0.34), compensation (0.67) and selection (0.62). In nutshell all tested HR
practices are having positive correlation with employees’ performance.

Table 1- Descriptive Statistics

EPP Training PA CP EP JD Compen Selection
Mean 3.82 3.74 3.58 3.62 3.61 3.73 3.46 3.85
Median 4.00 3.83 3.79 3.64 3.67 3.75 3.60 4.00
Mode 4.00 4.00 3.86 3.57 3.67 4.00 3.40 4.00
Standard Deviation 0.83 0.81 0.81 0.65 0.80 0.65 1.18 0.85
Range 3.00 3.67 3.57 3.00 3.00 2.75 4.00 4.00
Minimum 2.00 1.33 1.29 1.86 2.00 2.00 1.00 1.00
Maximum 5.00 5.00 4.86 4.86 5.00 4.75 5.00 5.00
Sum 221.50 216.83 207.36 209.71 209.33 216.25 200.60 223.25
Count 58 58 58 58 58 58 58 58

Table 2- Correlations

EPP Training PA CP EP JD Compen Selection

EPP 1.00
Training 0.66 1.00
PA 0.47 0.73 1.00
CP 0.29 0.49 0.63 1.00
EP 0.56 0.56 0.54 0.57 1.00
JD 0.34 0.51 0.57 0.27 0.39 1.00
Compen 0.67 0.78 0.74 0.55 0.68 0.58 1.00
Selection 0.62 0.59 0.58 0.57 0.58 0.30 0.74 1.00

These results are matching with the findings of Qureshi M. Tahir (2006) where he
concluded that all these practices are positively correlated but correlation and effect of
selection, training and employee participation in decision making is highest respectively.
These results are also matching with the findings of Singh K (2004), he concluded that
Training and compensation are having positive effects on organization and employee’s
performance.

All those organizations who are interested for High growth through increasing employee
participation must pay attention on Training, Selection, Compensation and employee
participation for policy development.
References
Becker B & Huselid M (1998). ‘High Performance Work Systems and firm performance: A
synthesis of research and managerial implications’. Research in Personnel and Human Resource
Management. 16: 53-101

Collins C, Ericksen J, Allen M (2005). ‘Human Resource Management Practices asnd firm
performance in small business’. Pp 10 Cornell University/gevity Institute.

Cooke F L (2000). ‘Human Resource Strategy to improve Organizational Performance: A reoute

for british firms’. Working Paper No 9 EWERC, Manchester School of Management.

Datta K, Guthrie J, Wright P (2003). ‘HRM and Firm productivity: Does industry matter’.
Presented in National Academy of Management Meetings, WA.

Guest D (2002). ‘Human Resource Management, Corporate Performance and Employee

wellbeing: Building the worker into HRM’. The Journal of Industrial Relations 44:3 335-358

Huselid M (1995). ‘The Impact of human resource management practices on turnover,

productivity, and corporate financial performance’. Academy of Management journal 38: 3 635-
670

Ichniowski C, Shaw K, Prennushi G (1995). ‘The effects of Human Resource Management

Practices on Productivity’. National Bureau of Economic Research Working Paper no 5333.

Industrial Analysis report published by Pakistan’s telecom authority and its website
‘www.pta.gov.pk.

Singh K (2004). ‘Impact of HR practices on perceived firm performance in India’. Asia pacific
Journal of Human Resources 42:3 301-317

Sels L, Winne S, Maes J, Delmotte J, Faems D and Forrier A (2006). ‘Unraveling the HRM –
Performance Link: Value –Creating and Cost-Increasing Effects of Small Business HRM’
Journal of Management Studies 43:2 319-342

Summers J, Hyman J (2005). ‘Employee Participation and Company Performance’. Joseph

Rowntree Foundation pp 90 (10)

Qureshi M Tahir&Ramay I.Mohammad (2006). ‘Impact of Human Resource Management

Practices on Organizational Performance in Pakistan’. Muhammad Ali Jinnah University
Islamabad.

Wood S (1999). ‘Human Resource Management and Performance’. International Journal of

Management Reviews 1: 4 367-413

Wright P, Gardener T, Moynihan L (2003). ‘The Impact of HR practices on the performance of

business units’. Human Resource Management Journal 13:3 21-36

William B, Werther Jr, Davis K (1996). ‘Human Resource and Personnel Management’.
Page316-317, 5th ed McGraw-hill Inc.
 Appendix A
QUESTIONNAIRE
To,

SUBJECT: Your Cooperation Required

REFERENCE: Research study Conducted by the MS (HRM) Research Scholars

Dear Sir,

It is to highlight that I am a research scholar at Mohammad Ali Jinnah University, Islamabad. A research study
is being conducted by us on the Impact of HRM Practices on Employee s performance” under the supervision
of Prof. Mohammad I. Ramay. For this research purpose limited number of good-performance companies
have been selected by our research panel and we feel delighted to inform you that your distinguished
organization is one of them.

In this particular context, and to measure the degree of correlation between the employee performance and the
Human Resource Management Practices, we have developed a questionnaire which we would like you to fill-
up because you are the people having an expertise and a practical experience of the business market and we
believe that your fair and expert feedback will make this research a very successful one.

While you fill up this questionnaire, please ensure that you are consulting the under-mentioned point scale {1,
2, 3, 4, 5} to respond to every question. It will help you to select the most realistic option.

1=Strongly 2=Disagree 3=Indifferent 4= Agree 5=Strongly Agree

Disagree

Here, we would like to ensure you, that the information/feedback provided by you will be kept confidential and
will only be utilized for the study/research purpose. A return envelope with an affixed stamp is also attached
along with this letter to avoid delay in this research work.

We highly hope that you would post back this questionnaire within 2-3 days (maximum) of the receiving of
this letter to us. It will enable us to complete our research work within the allocated time.

Lastly it is to request you that in our country, there is a very little research work being carried on in the area of
Human Resource Management at this level. Your cooperation in this regard will open the doors of research and
development in the field of Human Resource Management & without your cooperation it is simply impossible.
I shall feel highly obliged if you kindly cooperate with us to the maximum degree of responsiveness in order to
make this research a very successful one. .

Thank you and Best regards,

Zubair Aslam Marwat

FEED BACK FORM

Organization Name: ______________________________________________

EMPLOYEES PERFORMANCE

1. Employees Performance in our organization has been improved over the past 12 months in relation to
a) Effectiveness 1 2 3 4 5
b) Efficiency 1 2 3 4 5

HUMAN RESOURCE (HR) PRACTICES

I. Training
1 Our organization conducts extensive training programs for its
employees in all aspects of quality. 1 2 3 4 5
2. Employees in each job will normally go through training
programs every year. 1 2 3 4 5
3. Training needs are identified through a formal
performance appraisal mechanism. 1 2 3 4 5
4. There are formal training programs to teach new
employees the skills they need to perform their jobs. 1 2 3 4 5
5. New knowledge and skills are imparted to employees
periodically to work in teams. 1 2 3 4 5
6. Training needs identified are realistic, useful and based
on the business strategy of the organization. 1 2 3 4 5

II. Performance Appraisal

1. Performance of the employees is measured on the
basis of objective quantifiable results. 1 2 3 4 5
2. Appraisal system in our organization is growth and
development oriented. 1 2 3 4 5
3. Employees are provided performance based
feedback and counseling. 1 2 3 4 5
4. Employees have faith in the performance appraisal
system. 1 2 3 4 5
5. Appraisal system has a strong influence on individual
and team behavior. 1 2 3 4 5
6. The appraisal data is used for making decisions like
job rotation, training and compensation. 1 2 3 4 5
7. The objectives of the appraisal system are clear to
all employees. 1 2 3 4 5

III. Career Planning

1. Individuals in this organization have clear career paths. 1 2 3 4 5
2. Employee’s career aspirations within the organization
are known by his/ her immediate superior. 1 2 3 4 5
3. Employees in our organization have more than one
potential position for promotion. 1 2 3 4 5
4. Individual and organization growth needs are matched
in this organization. 1 2 3 4 5
5. Our organization plans for the career and development
of employees. 1 2 3 4 5
6. Our organization prefers an internal employee whenever
a vacancy exists. 1 2 3 4 5
7. Each employee is aware of his/her career path in
the organization. 1 2 3 4 5

IV. Employee Participation

1. Employees in this organization are allowed to make
decisions related to cost and quality matters. 1 2 3 4 5
2. Employees in this organization are asked by their
superiors to participate in operations related decisions. 1 2 3 4 5
3. Employees are provided opportunity to suggest
improvements in the way things are done here. 1 2 3 4 5

V. Job Definition
1. The duties of every job are clearly defined in our
organization. 1 2 3 4 5
2. Each job in our organization has an up to date job
description. 1 2 3 4 5
3. The job description for each job contains all the
duties performed by individual employee. 1 2 3 4 5
4. The actual job duties are shaped more by the
employee than by the formal job description. 1 2 3 4 5
VI. Compensation
1. Job performance is an important factor in determining
the incentive compensation of employees. 1 2 3 4 5
2. In our organization, salary and other benefits are
comparable to the market. 1 2 3 4 5
3. In our organization, compensation is decided on the
basis of competence or ability of the employee. 1 2 3 4 5
4. The compensation for all employees is directly linked
to his/her performance. 1 2 3 4 5
5. In our organization, profit sharing is used as a
mechanism to reward higher performance. 1 2 3 4 5
VII. Selection
1. The selection systems followed in our organization
are highly scientific and rigorous. 1 2 3 4 5
2. In our organization, line managers and HR managers
participate in selection. 1 2 3 4 5
3. Valid and standardized tests are used when required
in the selection process. 1 2 3 4 5
4. Selection system in our organization selects those
having the desired knowledge, skills and attitudes. 1 2 3 4 5

Demographic Information

Age (Please Tick your age Group)

20-25 26-30 31-35 36-40 41-45 46-50 51-55 Above 56

Please Tick applicable gender

Male Female

Education (Please Tick your Education Group)

Matriculation Intermediate Graduation
Masters Diploma with Matric /Inter Other
Total years of Experience (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Total years of Experience with this Organization (Please Tick your Experience Group)
1-3 4-6 7-9 10-12 13-15 16-19 20 or above

Date____________ Designation_____________________

Department_____________________________________
 Appendix B

Telecom Sector share in GDP (%)

Years %age share of GDP

2000-01 1.6
2001-02 1.6
2002-03 1.7
2003-04 1.7
2004-05 1.9

Foreign Direct Investment in Telecom Sector

(US $ million)

FDI in Telecom Contribution in

Years Total FDI
Sector Total FDI (%)

2001-02 484.7 6.1 1.26

2002-03 798 13.5 1.69
2003-04 979.9 207.1 21.13
2004-05 1524 494.4 32.44
2005-06 3521.0 1905.1 54.11
Jul-06 133.2 12.4 9.31
Aug-06 242.6 68.5 28.24