The impact of HRM practices on organisational performance in the

Indian hotel industry

Mohinder Chand
Department of Tourism and Hotel Management, Kurukshetra University,
Kurukshetra, India, and
Anastasia A. Katou
Department of Marketing and Operations Management,
University of Macedonia, Thessaloniki, Greece
Abstract
Purpose – The study has a two-fold purpose: to investigate whether some specific characteristics
of hotels affect organisational performance in the hotel industry in India; and to investigate
whether some HRM systems affect organisational performance in the hotel industry in India.
Design/methodology/approach – A total of 439 hotels, ranging from three-star to five-star
deluxe,responded to a self-administered questionnaire that measured 27 HRM practices, five
organizational performance variables, and ten demographic variables. Factor analysis was
performed to identify HRM systems, one-way ANOVA was employed to test the association of
the demographic variables with organisational performance, and correlation analysis was used to
test the relation between HRM
systems and organisational performance.
Findings – The results indicate that hotel performance is positively associated with hotel
category and type of hotel (chain or individual). Furthermore, hotel performance is positively
related to the HRM systems of recruitment and selection, manpower planning, job design,
training and development, quality circle, and pay systems.
Research limitations/implications – Single respondent bias may have occurred because a single
respondent from each organisation provided information on HRM practices and perceived
measures of organisational performance. The sample was drawn from the population of best
performing hotels in India, so is not representative of the hotel industry in India.
Practical implications – If hotels are to achieve higher performance levels, they should
preferably belong to a chain and increase their category, and management should focus on “best”
HRM practices indicated in the study.
Originality/value – The study makes a modest attempt to add information to the very little
empirical knowledge available referring to the link between HRM and performance in the hotel
industry.
Keywords Human resource management, Organizational performance, Hotel and catering
industry,India
Paper type Research paper

Introduction
Since the concept of human resource management (HRM) emerged in the early 1980s,
two basic paths of research have been developed in investigating the relationship
between human resource management practices and organisational performance. The
first was based on the assumption that there is a “direct” relationship between
individual HRM practices and/or internally consistent HRM systems of HRM practices,
and organisational performance (e.g. Schuler and Jackson, 1999). The second was
based on the assumption that there is an “indirect” relationship between individual
HRM practices and/or HRM systems, and organisational performance (e.g. Ferris et al.,
1998; Edwards and Wright, 2001).
In relation to the first research path, three major perspectives emerge from the
existing literature:
(1) universalistic;
(2) contingency; and
(3) configuration (Katou and Budhwar, 2007).
The universalistic or “internal fit” perspective posits the “best practice bundle” of HRM
practices, implying that business strategies and HRM practices are mutually
independent in determining business performance (Arthur, 1994; Pfeffer, 1994; Huselid,
1995; Ichniowski et al., 1997; Brewster, 1999; Claus, 2003). The contingency or “external fit”
perspective emphasises the fit between business strategy and HRM practices, implying that
business strategies are followed by HRM practices in determining business performance (Schuler
and Jackson, 1987; Gomez-Mejia and Baklin, 1992; Huselid, 1995; Youndt et al., 1996). The
configurational perspective posits a simultaneous internal and external fit between a firm’s
external environment, business
strategy, and HRM strategy, implying that business strategies and HRM practices
interact according to organisational context in determining business performance
(Arthur, 1994; Guest and Hoque, 1994; Delery and Doty, 1996; Huselid and Becker,
1996; Ichniowski et al., 1997).
In relation to the second research path, although most studies speak of HRM
practices leading to performance, such a one-way line of “causation” is unsatisfactory
(Edwards and Wright, 2001). Thus, the general consensus developed among
researchers is that HRM practices and/or HRM systems do not lead directly to business
performance (Katou and Budhwar, 2006). Rather, they influence firm resources, such as
human capital, or employee behaviours, and it is these resources and behaviours that
ultimately lead to performance (Delery, 1998; Wright et al., 1994). This implicit model
assumes that there are variables that mediate a link between HRM practices and
business performance, although only a few researchers (Huselid, 1995; MacDuffie,
1995; Fey et al., 2000; Boselie et al., 2001; Park et al., 2003; Paul and Anantharaman,
2003; Katou and Budhwar, 2006) have measured these mediators and addresses their
importance.
Irrespective of the research paths followed, the majority of researchers have focused on
the manufacturing sector. For example, Arthur (1994) focused on steel mini-mills, MacDuffie
(1995) focused on the auto industry, and Katou and Budhwar (2006, 2007) focused on the
industrial sector as a whole. The literature also highlights that most
studies examining the relationship between HRM and a firm’s performance have been
conducted in the USA and the UK. Recently, a few investigations have been initiated in
other parts of the world, especially in emerging markets such as China (e.g. Deng et al.,
2003; Ahlstrom et al., 2005) and transitional economies such as Slovenia (e.g. Zupan
and Kase, 2005). Nevertheless, although it is well accepted that HRM is positively related to
organisational performance, there is a great need for additional empirical evidence to support the
HRM-performance link (Gerhart, 2005) and investigations from different contexts (Ericksen and
Dyer, 2005;Wright et al., 2005). Furthermore, there has The impact of HRM practices 577
generally been a tendency for the services sector to be overlooked in HRM research (Sisson,
1993; Lucas, 1996; Hoque, 1999a). This lack of research relating to services was due to the fact
that the services sector was a very heterogeneous sector comprising financial companies,
retailing operations, transport operation, and hospitality (Hoque, 1999b). Thus, the heterogeneity
of the sector was a serious obstacle to researchers and any attempt to investigate the services
sector as a whole was meaningless unless specific control variables were properly developed and
a representative sample of the organisations belonging to the services sector was selected
(Hoque, 1999a). In contrast, Cappelli and Neumark (2001) argue that there is an advantage in
investigating HRM in a single industry.
Considering the above, i.e. “it seems unlikely that one set of HR practices will work
equally well no matter what context” (Gerhart, 2005, p. 178), more research is needed in the
services sector and in different contexts. To fill this gap and to further examine the existence of
the relationship between HRM and organisational performance, it is important to conduct
research in non-US/European contexts and in non-manufacturing sectors. This article
investigates the association between HRM and organizational performance within the Indian
hotel industry context.
The hotel industry is the largest and rapidly growing industry in India, employing
over 12 million people, accounting for 8.5 per cent of the total workforce, and
generating over 4 per cent of GNP. Although there is visible evidence towards growing
consolidation and franchising within the industry, the dominant business model
remains that of the small, independent family firm, except for some big international
chains. However, the Indian hotel industry is confronted with considerable challenges
imposed by the turbulent and rapidly changing external environment that it operates
in. Thus, in order for the success to continue, the industry requires a professional
approach to the management of operations, particularly in the area of human resource
development (HRD). Such an approach is crucial, considering the staffing problems the
industry is currently experiencing. Significant difficulties in attracting and retaining
staff result in employers being confronted with acute skill shortages, a tightening
labour market and high levels of staff turnover.

The structure of the paper is as follows. The next section discusses selected
literature on the HRM-performance link in the hotel industry and the hypotheses to be
tested. The third section discusses the research methodology used. The results are
presented in the fourth section. The paper concludes with practical implications, and
future research directions are also suggested.
HRM research in hotels, and hypotheses development
The hotel industry is undoubtedly a labour-intensive industry. Its success depends “on the
social and technical skills of its personnel, their ingenuity and hard work, their
commitment and attitude” (Gabriel, 1988, p. 7; Anastassova and Purcell, 1995, p. 172).
It is also true that in a labour-intensive industry, the effective utilisation of human
resources can give an organisation its competitive edge (Schneider and Bowen, 1993;
Mohinder, 2004). “By effectively linking HRM with organisational objectives and
needs, human resources can be recruited, developed, motivated and retained towards
gaining a competitive advantage” (Cheng and Brown, 1998). Thus, the success of the
hotel industry depends on the quality of its employees and their effective management
in order to assist the organisation to achieve its objectives (Berger and Ghei, 1995).
However, the usual criticism of the human resource management departments of
hospitality organisations is that they constitute a cost centre. This is because although
the investment on employees is directly measurable, in contrast, the outcomes of this
investment are very difficult to measure. These “outcomes are generally measured
with intangible factors such as employee satisfactions, customer satisfaction, customer
complaints, etc.” (Cho et al., 2006, p. 263). On the other hand, contradictory views exist
about the extent to which the hospitality industry has invested in its human resources
(Alleyne et al., 2006). Some studies are aware of the importance of people to hospitality
organisations (Haynes and Fryer, 2000) and some other studies argue that the
management of people in hospitality organisations has been regarded as being rather
low in priority (Croney, 1988; Price, 1994; Lucas, 1996; Kelliher and Johnson, 1997;
Haynes and Fryer, 2000). For example, McGunnigle and Jameson (2000, p. 403)
concluded that “currently there is little to suggest a shift towards HRM in UK hotels”.
Similarly, Kelliher and Johnson (1997, p. 330) concluded that “there is scant evidence of
any real shift towards a model of HRM”, and Watson (1996, p. 104) concluded that “few
hospitality organisations are taking a strategic approach to management of human
resources”.
Anastassova and Purcell (1995), Watson and D’Annunzio-Green (1996), and Buick and
Muthu (1997) support the view that “best HRM practices” in the hospitality
industry should include appraisal systems, training and development, empowerment,
team working, and a more consultative management style. Moreover, Price (1994)
found that the majority of firms employing more than 30 people follow good personnel
practices, although small firms follow informal HRM practices. However, the priority
in large hotels is to recruit, select and develop staff (Worsfold, 1999). Moreover,
according to the quantitative results of Hoque (1999a), it seems that the extent of HRM
practices was higher in the sample UK hotels in comparison to the sample
manufacturing organisations of the study.
A number of researchers have found that the hospitality industry suffers from
extremely high turnover (e.g. Woods, 1992; Kennedy and Berger, 1994; Cheng and
Brown, 1998). Factors that have an impact on turnover may be induction (Woods, 1992;
Kennedy and Berger, 1994; Cheng and Brown, 1998), discrimination in the workplace
(Antolik, 1993), labour markets (Debrah, 1994; Buick and Muthu, 1997; Jago and Deery,
2004), recruitment and selection (Bonn and Forbringer, 1992; Cheng and Brown, 1998;
Tsaur and Lin, 2004), training and development (Hogan, 1992; Conrade et al., 1994; Jago
and Deery, 2004), management style (Rowden, 1995), organisational commitment
(Denvir and McMahon, 1992; McGunnigle and Jameson, 2000; Jago and Deery, 2004),
organisational culture (Woods and Macaulay, 1989; Mohinder and Vinay, 2001), and
job satisfaction (Hom and Griffeth, 1995; Jago and Deery, 2004).
With respect to overall organisational performance, Harrington and Akehurst
(1996) and Gilbert and Guerrier (1997) argue that there is a positive correlation between
service quality and business performance in the UK hospitality industry. Hoque
(2000a, b) supports the view that UK hotels of the chain type adopt HRM practices as a
cost reducer and put emphasis on service quality in order to improve their performance.
Moreover, Hoque (1999a) found that the relationship between HRM and organisational
performance depends on the business strategy the hotel is following, and hotels that employ
HRM approaches with a focus on quality within their business strategy perform best.
In spite of clear trends towards increased concentration, the Western hospitality
industry is characterised by fragmentation (Harrington and Akehurst, 1996; Ingram,
1999). The Indian hotel industry is no different. The hospitality industry generally
consists of small enterprises, both in India and worldwide. For example, it is estimated
that 87 per cent of all UK hotels and restaurants employ between one and ten people
(Worsfold, 1999), and 98 per cent of all enterprises in Ireland employee less than 50
people (Nolan, 2002). Thus, a number of authors (e.g. Conrade et al., 1994; Jameson,
2000; Barrows, 2000) state that academics have neglected the issue of human resource
management in the hotel industry because they have an endogenous bias towards
researching large organisations (Nolan, 2002). However, considering that small firms
have “an important contribution to the wealth [of] the nation” (Price, 1994, p. 44) there
is no reason to neglect HRM practices within small firms in the hotel industry.
Furthermore, it has been argued that key strategic variables are likely to exert an
influence on hotel performance (Brown and Dev, 1999; Claver-Cortes et al., 2007) such
as category, age, capital, number of employees and type of hotel (chain or individual).
Specifically, the first hypothesis to be tested in this article is:
H1. There is a positive relationship between organisational performance and
specific characteristics of hotels such as category, age, capital, number of
employees and type.

Although the hospitality industry is labour-intensive, only a few studies have

attempted to investigate the impact of HRM practices on organisational performance,
such as decreased turnover rates, increased labour productivity, and increased
profitability (Cho et al., 2006). These studies were conducted over the past decade in
domestic or multinational hotels with respect to the USA (Conrade et al., 1994; Ingram,
1996; Ingram and Baum, 1997; Woods, 1992; Chung and Kalnins, 2001), New Zealand
(Haynes and Fryer, 2000), Australia (Timo, 1999; Cheng and Brown, 1998; Timo and
Davidson, 2002; Knox, 2002; Nankervis, 2003; Jago and Deery, 2004; Davidson et al.,
2006), the UK (Worsfold, 1999; Price, 1994; Watson, 1996; Harrington and Akehurst,
1996; Lucas, 1996; Kelliher and Johnson, 1997; Hoque, 1999a, 2000a; McGunnigle and
Jameson, 2000; Maxwell et al., 2000; Watson et al., 2007), Singapore (Cheng and Brown,
1998), Bulgaria (Anastassova and Purcell, 1995), Ireland (Nolan, 2002; Garavan et al.,
2002), Slovakia (Lucas et al., 2004), Barbados (Alleyne et al., 2006) and India (Singh,
2003). These studies were mainly conducted with respect to single HRM practices and
not with respect to systems of internally consistent and supporting HRM practices, and
thus their results may be considered biased (Cho et al., 2006). Therefore, this study is
considering the impact of systems of HRM practices on organisational performance.
Specifically, the second hypothesis to be tested in this article is:

H2. There is a positive relationship between HRM systems and organisational

performance.
Methodology
Sample
A questionnaire survey in the Indian hotel industry was carried out between January and
December 2005. A sample of 845 hotel organisations, 405 chain hotels and 440 individual hotels
was used from the FHRAI directory. “Chain hotel” in the present context means any hotel that is
operating in terms of management contract, franchising or any other type of collaboration with
an international hotel group or a domestic hotel group. The sample included hotels ranging from
three stars to five stars deluxe, according to the Indian Ministry of Tourism approved
classification list, and moreover they were the best performing hotels during the last five years.
A total of 439 usable questionnaires were received, 265 chain hotels and 174 non-chain hotels, a
response rate of approximately 52 per cent.
Most of the questions for the survey were drawn from existing international HRM
surveys such as the Price Waterhouse Cranfield Project Survey (Brewster and Hegewisch, 1994),
Hall and Torrington (1998) and Hoque (1999a). The questionnaire was originally piloted in ten
organisations and it was e-mailed to the HR/personnel managers of the sample organisations,
who provided the answers on behalf of the organisation.We acknowledge the problems
associated with such a mechanism of data collection, i.e. of having single informers from each
organisation, and of subjective self-assessment of performance. However, this is usually the case
with large questionnaire surveys that aim to collect an adequate number of responses (Brewster
and Hegewisch, 1994).
Measures
HRM practices. We used 27 existing HRM practices (see first column of Table I) measured on a
Likert-type scale ranging from 1 ¼ very little to 5 ¼ very much. HRM systems. For the
classification of the HRM systems we followed the methodologies of Tsui et al. (1997) and Fey
et al. (2000). However, in creating a HRM system variable in this study we followed a three-step
procedure (Katou and Budhwar, 2006). First, we verified empirically a theoretical grouping of
the HRM practices. Second, we calculated the Cronbach’s alphas to check the interrelatedness
among the relevant items. Third, scores were calculated for each factor as the average of the
scores on the individual HRM practices that loaded most strongly on that factor. Table I presents
the results from exploratory principal components factor analyses with Varimax rotation on the
27 individual HRM practice items categorised into six groups. The HRM practice items were
factored into six factors explaining between 79.87 and 83.50 per cent of the total variation. The
first factor (HRM system) we label as “recruitment and selection” (RS), which comprises
harmonized and term conditions, single status for all staff, internal promotion norm, employment
test criteria, merit element in selection, and multi-skilling and experience. The second factor,
“manpower planning” (MP), comprises formal manpower planning, work culture, career
planning, and involvement of all departments. The third factor, “job design” (JD), comprises
flexible job description, development of learning organisation, cross-cultural job design, and
team working. The fourth factor, “training and development” (TD), comprises need-based
training and development criteria, formal system induction, learning organisation, formal
training and development. The fifth factor, “quality circle” (QC), comprises staff involvement in
objective setting, production/service staff responsible for their service, employee’s involvement
in quality circles, and regular use of attitudes surveys. Finally, the sixth factor, “pay system”,
comprises staff informed about market condition and company performance, merit element in
pay package, formal appraisal for all staff, no-financial incentives, and social appreciation and
recognition.

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6

(RS) (MP) (JD) (TD) (QC) (PS)
Variation explained (per cent) 82.12 83.50 80.16 79.75 80.20 79.87
Eigenvalues 2.78 2.48 2.49 1.79 1.78 2.41

1. Recruitment and selection (RS)

Harmonized terms and
Conditions 0.85
Single status for all staff 0.79
Internal promotion norm 0.70
Employment test criteria 0.65
Merit element in selection 0.80
Multi-skilling and experience 0.86
2. Manpower planning (MP)
Formal manpower planning 0.85
Work culture 0.79
Career planning 0.82
Involvement of all departments 0.77

3. Job design (JD)

Flexible job description 0.85
Development of learning
Organization 0.77
Cross-cultural job design 0.79
Team working 0.64

4. Training and development (TD)

Need-based T&D criteria 0.69
Formal system of induction 0.79
Learning organization 0.65
Formal training and
development 0.62

5. Quality circle (QC)

Staff involvement in objective
Setting 0.45
Production/service staff
responsible for their service 0.92
Employees are involved in
quality circles 0.75
Regular use of attitudes
Surveys 0.78

6. Pay system (PS)

Staff informed about market
condition and company
performance 0.77
Merit element in pay package 0.68
Formal appraisal for all staff 0.55
No financial incentives 0.52
Social appreciation and
Recognition 0.88

Cronbach’s a 0.83 0.90 0.79 0.81 0.82 0.77

Table I.
Factor analysis results for the HRM practices items

All items pass the eigenvalue (more than 1.00), the cut-off points (factor loading not less
than 0.40), and the cross-loading (not less than 0.10) requirements (for details regarding
these requirements, see Youndt et al., 1996; Huselid et al., 1997; Ngo et al., 1998). The
Cronbach’s alphas of the six factors are very high (ranging from 0.77 to 0.90), and are
above the generally acceptable level of 0.70 (see Nunnally, 1978). The six factors
derived based on our data coincide with the conceptually derived HRM systems (e.g.
Huselid, 1995; Delaney and Huselid, 1996; Youndt et al., 1996; Huselid et al., 1997; Ngo
et al., 1998).
Organisational performance. We used multiple organisational performance
variables (sales growth, productivity, profitability, goal achievement, good services)
that were measured under the philosophy of a perceived rating of the organisation’s
performance on a Likert-type scale ranging from 1 ¼ very bad to 5 ¼ very good.
Controls
Size. Size is used to capture size and scale effects, since large organisations may be
more likely than small ones to have well-developed HRH practices (Huselid, 1995;
Youndt et al., 1996). It has been argued that the larger the size of hotels, the higher the
performance (Pine and Phillips, 2005; Claver-Cortes et al., 2007). In contrast, other
researchers have argued that there is no relationship between hotel size and
performance (Brown and Dev, 1999).
Age. Age is used to capture any founding values of the organisation (Delaney and
Huselid, 1996).
Capital. Capital is used to capture the variations in the amount of capital on
performance (Hayes et al., 1988; Huselid, 1995; Richard and Johnson, 2001).
Category. Category is used to capture how category affects hotel performance. It is
argued that the higher the category, the higher the hotel’s performance (Brown and
Dev, 1999; Pine and Phillips, 2005; Claver-Cortes et al., 2007).
Hotel type. Hotel type is used to capture specific effects with respect to chain hotels
and independent hotels. It is argued that chain hotels have more chances of surviving
(Ingram, 1996; Ingram and Baum, 1997; Chung and Kalnins, 2001; Claver-Cortes et al.,
2007).
Table II presents the distribution of the sample organisations according to the
controls used in the study. The vast majority (84 per cent) of the sample hotels were at
most four stars, and 52 per cent of the sample hotels were established in the last ten
years. With respect to the size of the organisations, 86 per cent of the sample hotels
were rather small organisations with less than Rs50 million in operating capital, and 59
per cent of the sample hotels were also small organisations with less than 100
employees. Finally, nearly 40 per cent of the sample hotels were individual enterprises.
Results and discussion
In order to assess the relationship between some of the controls (or demographic
variables) and organisational performance, or in other words to be able to test H1,
one-way ANOVAS were performed. The results of this analysis are summarised in
Table III, which presents the corresponding F-values. The findings in Table III are
informative. In the column headed “Mean scores” the average scores of the
corresponding performance variables are reported. It is seen that all means are much
above level 4 in the five-level Likert scale. This should be of no surprise because all
The impact of
HRM practices
583
hotels included in the sample were the “best performing hotels” according to the
FHRAI directory.
The dimensions “hotel category” and “type of enterprise” were found to be
statistically significant on all performance variables, except “good service quality” for
the “type of enterprise” dimension. Post hoc examination revealed that the higher the
star category of the hotel, the higher the hotel’s performance levels. This result is
similar to the results of Brown and Dev (1999), Pine and Phillips (2005) and
Claver-Cortes et al. (2007). Moreover, it is found that hotels performed better when they
belonged to a chain, a result that is similar to the results of Ingram (1996), Ingram and
Baum (1997), Chung and Kalnins (2001), and Claver-Cortes et al. (2007). In contrast, the
dimensions “hotel age”, “size in capital” and “size in employees” did not produce
statistically significant results with respect to the performance variables. This result is
similar to the results of Brown and Dev (1999).
In the light of these results, we can say that regarding H1, there is a positive
relationship between organisational performance and hotel category and type, and
there is no relationship between organisational performance and hotel age and size
Number Percentage
Category of hotel
Three-star 163 37.13
Four-star 206 46.92
Five-star 55 12.53
Five-star deluxe 15 3.42
Age of hotel (in years)
#5 75 17.08
6-10 154 35.08
11-15 105 23.92
16-20 85 19.36
$21 20 4.56
Capital (million Rs)
#10 164 37.36
11-30 125 28.47
31-50 90 20.50
51-100 45 10.25
$101 15 3.42
Employees (numbers)
#50 125 28.47
51-100 135 30.75
101-200 95 21.64
201-300 70 15.95
$301 14 3.19
Type of enterprise
Individual 174 39.64
Chain 265 60.36
Table II.
Distribution of sample
according to hotel
characteristics
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Performance variables Control variables
Measures Mean scores Hotel category Hotel age Size in capital Size in employees Type of
enterprise
Sales growth 4.20 5.435 * * 1.237 1.891 1.584 5.435 * *
Productivity 4.73 4.563 * * 1.785 1.237 0.768 5.751 * * *
Profitability 4.71 4.491 * * 1.542 0.327 1.084 4.920 * *
Goal achievement 5.42 4.082 * * 0.725 0.739 0.781 3.720 *
Good service quality 4.09 4.862 * * 1.262 0.531 0.735 2.352
Notes: *p # 0:05; * *p # 0:01; * * *p # 0:001
Table III.
F-values from the
one-way ANOVA on
organisation performance
variables
The impact of
HRM practices
585
(capital or employees). In other words, if hotels are to achieve higher performance
levels, they should preferably increase their category and belong to a chain.
Correlations were calculated between the factors representing the six HRM systems
of HRM practices derived in Table I, and the organisational performance variables.
These six factors were made up by a number of conceptually consistent HRM practices
in the questionnaire, determined by factor analysis. This approach is acceptable when
testing hypotheses about a number of factors to be extracted (Hair et al., 1998; Jago and
Deery, 2004). The resultant correlation coefficients are presented in Table IV, where it
can be seen that all correlations are positive, highly significant and in most cases their
values are rather high. In light of these results we may accept H2, supporting that there
is a positive relationship between HRM systems and organisational performance.
Specifically, the HRM system of “recruitment and selection” (RS) proved to
demonstrate the strongest correlation (0.448) with “profitability”. Considering that this
system includes the HRM practices of “multi-skilling and experience” and “harmonised
terms and conditions” (which have the highest loading values of 0.86 and 0.85,
respectively), thus suggests that management focus on these HRM practices will do
more to improve organisational profitability. It should be expected that “multi-skilling
and experience” are the first priority in the recruitment and selection process in the
hotel industry.
Furthermore, the HRM system of “manpower planning” (MP) proved to have the
highest correlation (0.542) with “productivity”. Considering that this system includes
the HRM practices of “formal manpower planning” and “career planning” (which have
the highest loading values of 0.85 and 0.82, respectively), this suggests that
management focus on these HRM practices will do more to improve organisational
productivity. This result verifies the fact that best performing hotels in India follow
“formal manpower planning” to ensure smooth running of their operations.
Similarly, the HRM system of “job design” (JD) proved to have the highest
correlation (0.382) with “productivity”. Considering that this system includes the HRM
practices of “flexible job rotation” and “cross-cultural job design” (which have the
highest loading values of 0.85 and 0.79, respectively), this suggests that management
focus on these HRM practices will do more to improve organisational productivity. The
reasoning behind this is that “flexible job rotation” and “cross-cultural job design” go
hand-in-hand with respect to the hotel industry’s needs.
Moreover, the HRM system of “training and development” (TD) showed the highest
correlation (0.410) with “good service quality”. Considering that this system includes
the HRM practices of “formal system of induction” and “need based training and
development criteria” (which have the highest loading values of 0.79 and 0.69,
respectively), this suggests that management focus on these HRM practices will do
more to improve good service quality in the organisation. We were expecting this
result because a “formal system of induction” may constitute the beginning of human
resource development in the hotel industry.
Similarly, the HRM system of “quality circle” (QC) proved to demonstrate the
strongest correlation (0.424) with “profitability”. Considering that this system includes
the HRM practices of “production/service staff responsible for their service” and
“regular use of attitude surveys” (which have the highest loading values of 0.92 and
0.78, respectively), this suggests that management focus on these HRM practices will
do more to improve organisational profitability. This result is not surprising, especially
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HRM systems (factors)
Performance variables
Recruitment and selection
(RS)
Manpower planning
(MP)
Job design
(JD)
Training and development
(TD)
Quality circle
(QC)
Pay system
(PS)
Sales growth 0.223 * * 0.261 * * 0.210 * * 0.310 * * 0.342 * * 0.291 * *
Productivity 0.374 * * 0.542 * * 0.382 * * * 0.378 * * 0.361 * * * 0.540 * * *
Profitability 0.448 * * * 0.328 * * * 0.289 * * 0.327 * * 0.424 * * 0.351 * * *
Goal achievement 0.375 * * * 0.291 * * 0.247 * * 0.261 * * 0.394 * * * 0.285 * *
Good service quality 0.430 * * * 0.246 * * 0.294 * * 0.410 * * * 0.382 * * 0.215 * *
Notes: *p # 0:05; * *p # 0:01; * * *p # 0:001
Table IV.
Correlation coefficients
between HRM systems
and organisation
performance variables
The impact of
HRM practices
587
in the hospitality industry where the delivery of products/services is the main criterion
for guest satisfaction.
Finally, the HRM system of “pay system” (PS) proved to have the highest
correlation (0.540) with “productivity”. Considering that this system includes the HRM
practices of “social appreciation and recognition” and “staff informed about market
condition and company performance” (which have the highest loading values of 0.88
and 0.77, respectively), this suggests that management focus on these HRM practices
will do more to improve organisational productivity. This result is rather surprising,
because in India one would expect “financial incentives” to be rated first, followed by
“social appreciation and recognition”.
Conclusions
The scope of this paper was two-fold:
(1) to investigate whether some specific characteristics of hotels such as category,
age of organisation, size of organisation (in capital and in number of employees
terms), and type (chain or individual) affect organisational performance in the
hotel industry in India; and
(2) to investigate whether HRM systems such as recruitment and selection,
manpower planning, job design, training and development, quality circles, and
pay system also affect organisational performance in the hotel industry in India.
Organisational performance was measured with sales growth, productivity,
profitability, goal achievement, and good service quality, in the form of perceived
opinions of the survey respondents.
The major finding with respect to the first objective may be summarised as follows:
hotel performance is positively associated with category and type. Regarding the
category, it would be advisable for the hotel to increase its category, because it would
be more convenient to position a higher category hotel in the hotel industry, thus
attracting prospective guests (Claver-Cortes et al., 2007). Considering the type of hotel,
it would be advisable for the hotel to belong to a chain, “since performance levels in
that situation are always above those achieved by independent establishments”
(Claver-Cortes et al., 2007, p. 16).
The major finding with respect to the second objective may be summarised as
follows: hotel performance is positively related with HRM systems. Regarding these
systems, it would be advisable for the hotel management to focus on the “best” HRM
practices for the hotel industry in India, those being multi-skilling and experience,
harmonised terms and conditions, formal manpower planning, career planning,
flexible job description, cross-cultural job design, formal system of induction,
need-based training and development criteria, production/service staff responsible for
their service, regular use of attitudes surveys, social appreciation and recognition, and
staff informed about market condition and company performance. Improvement of
these HRM practices may develop competitive advantages for the hotels that adopt
these practices.
There are two basic limitations of the study. The first refers to the fact that a single
respondent from each organisation provided information on HRM practices and
perceived measures of organisational performance. Thus, respondent bias may have
occurred in the form of upward or downward reporting of measures (Paul and
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29,6
588
Anantharaman, 2003). The second refers to the sample itself. By including in the
sample only the best performing hotels in India the sample is not representative of the
hotel industry in India.
Considering the limitations of the study, we propose paths for future research. In
this study we concentrated only on the two endpoints of evaluation, i.e. “HRM
systems” and “organisational performance”. However, we believe that more research is
needed to investigate the intervening steps, analysing variables that mediate or
moderate the two endpoint variables (Becker and Gerhart, 1996). Furthermore,
research is also needed on “how” something is done and not just “what” has been done
(Paul and Anantharaman, 2003).
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Corresponding author
Mohinder Chand can be contacted at: mohinderchand@rediffmail.com
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