A Moderated Model for the Effect of Human Resource Management Strategy on Organizational Outcomes

From: Management and Labour Studies

 

Human resource management (HRM) strategy is considered a process by which organizations design ways to effectively manage their employees in order to achieve their objectives. From the management perspective, HRM has gained significant attention. During the 1980s, HRM strategy developed as a sub-field of HRM and its typologies have been presented by various scholars. Human resources play an important role in the success of every organization. Therefore, organizations need to give significant attention towards utilizing them effectively, and for that purpose, they need to focus on the establishment of an effective HRM strategy. Since the role of HRM is important in retaining workers and ensuring organizational success, thus, by efficiently developing an HR strategy an organization will not only improve its performance but will also be able to adequately address various employee issues such as high employee turnover. According to Barney, resource-based theory considers employees to be an important resource for the organization, as they help in gaining a competitive advantage. Therefore, companies need to focus on the development of their employees to achieve operational efficiency. 

Further, companies can achieve a competitive advantage by developing resources which are unique, scarce, difficult to copy and generate value for the customers. The performance and efficiency of a company are significantly affected by HRM strategies. Hence, we propose that an HRM strategy characterized by good training programs, competitive incentives, all-around development, broader career path and high pay scale etc. could have a positive influence on organizational outcomes in terms of strong competitive advantage, high performance and lower employee turnover. HRM strategy is an organization’s philosophy about managing its employees. It represents an organization’s future intentions in managing employees and achieving organizational goals. Whereas HR practices are those activities or actions that complement one another to achieve specific HRM objectives. In fact, HR practices would flow from HR strategies and organizational success might be dependent upon the alignment of HR policies and practices with an organization’s strategic standing. Much of the research in past has focused on HR practices and policies. Regarding HR practices, several past studies have confirmed a positive impact on organizational outcomes, but the studies regarding the effect of HRM strategies (accumulation, facilitation and utilization strategy) on competitive advantage, organization performance and employee turnover are scarce and very limited.

Globally, the hospitality sector is one of the most critical and fastest-growing sectors. In the case of Pakistan, the tourism sector is not well established and is unfortunately under-prioritized. But it still pitches to the growth and development of Pakistan’s economy in terms of making a significant contribution to GDP and employment generation. For instance, in 2017, the total contribution of tourism and travel towards the national GDP has been 7.4% and the employment generation has been 6.5% of total employment. These contributions include those by hotels, travel agents, leisure industries, restaurants and other tourist-related enterprises. However, due to the Covid-19 pandemic and lockdowns imposed on this sector, the contribution of hotels and restaurants towards GDP for 2021–2022 has been 1.4% with a growth rate of 4.07%. Pakistan’s hospitality sector holds a lot of growth potential in terms of more investment and increased tourism activity in the scenic areas of Gilgit Baltistan and other northern areas. According to the sources of the World Travel and Tourism Council, the market has a potential of around US$39.8 billion in the next 10 years.

Employee turnover and performance are some of the most relevant issues in this industry. Scholars report that although employee turnover is a worldwide issue, in the hospitality industry it is increasing and achieving a 72% rate. Researchers comment that currently in Pakistan, employee turnover in hospitality is a big challenge. This industry is also facing challenges in the wake of Covid-19 lockdowns. Researchers argue that an immense need exists to study employee mental health, job performance and turnover intentions in this industry as well as there is a need to develop crisis management strategies for the hospitality sector of Pakistan. There have been several studies regarding HR practices, service quality and their effects on the performance of hotels, but the studies regarding the influence of HRM strategy (accumulation, facilitation and utilization strategy) on the performance of hotels are limited. Therefore, this research focuses on the hotel industry of Pakistan.

Notably, with respect to three HR strategies, namely accumulation strategy, utilization strategy and facilitation strategy, the research is not in abundance and scholars consider it as a growing research area. Although, certain scholars have focused on determining the strategic fit or linkage between these HR strategies and business strategies. Others studied the effect of this linkage on company performance or HRM effectiveness and reported positive effects. The study of Lo et al. has found a positive association between core competency and the HR strategy of an organization. Historically, the study of Bird and Beechler examined the impact of HR strategies (accumulation, utilization and facilitation) on performance and established their link with business strategies. Following this, the research has been limited to the effect of these strategies on organizational outcomes.

Furthermore, past studies reported that organizational age and size had a role to play in such investigations. Hence, we suggest that other than HR Strategy, organizational outcomes in the hospitality industry could be based on how old and how large a particular hotel is. Now, particularly, in the context of Pakistan, research in this area is scarce and more knowledge is required. Consequently, the basic purpose of this study is to determine how organizational outcomes are influenced by HRM strategy and how the age and size of an organization moderate the relationship between HRM strategy and organizational outcomes in Pakistan’s hotel Industry. This research provides some significant contributions towards the literature on strategic human resource management. First, this study contributes to resource-based theory and contingency theory. Second, for practising managers, it suggests the importance of implementing an HR strategy by which hotels can reduce employee turnover, grow faster, increase productivity and enhance their performance.