Chapter 1

CHAPTER 1

1.         Introduction

In the current fast changing environment affecting the competence of large corporations, organizations have developed corporate strategies and have aligned strategic human resource practices to achieve a company’s goals and objectives through human resources. Environmental factors such as uncertainty (Ellis, 1982), technological innovation (Maiter, 1982) and demographic changes (Fombrun, 1982) affect these human resource strategy. Many environmental characteristics have been investigated concerning how they constrain strategy formulation. Competitive advantage encompasses those capabilities, resources relationships, and the decisions that permit a organization to capitalize on opportunities and avoid threats within its industry (Holfer and Schendel, 1978).

1.1      Human Resources Management or Human Capital in Perspective

Organizations today face many conflicting problems that they must strategically manage in order to operate successfully in the world of economic non-stability. They must continually improve performance by reducing costs, innovating processes and products, and improving quality and productivity (Becker and Gerhart, 1996). At the same time, there is great concern about recruiting, retaining, managing, and motivating the workforce because of the changing relationships between employers and employees and a labor market that has been tight. Over the past ten to fifteen years, various arguments have been made that the organization’s human resources may be its sole source of sustainable competitive advantage (Ferris, Hochwarter, Buckley, Harrell-Cook and Frink, 1999). These arguments are drawn from the resource-based view of the organization (Barney, 1991, 1995). According to this point of view, human resources create value in a way that is rare, cannot be imitated, and cannot be substituted (Ferris, Hochwarter, Buckley, Harrell-Cook and Frink, 1999). These arguments lay the foundation for the study of strategic human resource management (SHRM).

However, due to the rising uncertain ability of organization to sustain their competition in the current environment, organizations have established broader strategic human resource practice for strategy fit along with contingency plans, and employees feel about career development, earnings, benefits and employment due to fact that human resource practices are aimed at work outcome, financial performance and contribution from employees while the organizations’ support, in the view of employees is ambiguous in terms of perception of their well-being.

Many empirical human resource studies have suggested that strategic human resource impact employee attitudes and behavior towards organizational support, which results in employee outcomes such as performance and, withdrawal behavior. The model generally argues that SHRM in the form of HR practices directly impacts employees, either by increasing human capital or motivation. This also has led an impact on operational outcomes such as quality, customer service, withdrawal behavior and other operational-level outcomes. According to Delaney and Huselid (1996), the implementation of human resource practices affecting motivation, skill and behavior can create a strategic advantage for the organization. However, the implementation of human resource practice has a relationship with the perception of employees in terms of how they feel that the organization can support or care about them in terms of well-being. According to social exchange theory (Blau, 1964) and organizational support theory (Eisenberger, Huntington, Hutchinson and Sowa, 1986), the roles of perceived organizational support (POS) and the employees’ perceptions of HR practices and work outcomes are correlated. The perception of organizational support leads to the employee in return feeling an obligation to perform his or her duties through affective commitment accordingly.

Empirical studies suggest that set of human resource practices, including comprehensive recruitment and selection, compensation and performance management systems, training and extensive employee involvement, can improve acquisition and retention of a talented and motivated workforce. These HR practice are usually referred to as a High Performance Work System (HPWS) or in terms of high involvement or high commitment. The analysis of the HPWS stems from the study of strategic human resource management (SHRM). The HPWS will explore how a broad set of management practices include how SHRM and workplace partnerships relate to employee outcome through organizational support or have a direct impact on an outcome. It is increasingly apparent that one of keys to successful organizational performance is the people within organizations, and management systems that develop their talent and capabilities. A model of the High Performance Work Systems (HPWS) focuses on key elements of workplace innovation, employee involvement and participation, and equality and diversity of systems. In many cases, the term SHRM is used interchangeably with HPWS. The common understanding in the SHRM literature is that it a set of practices that provide employees with skills, information and latitude to be a source of competitive advantage.

The behavioral perspective (Jackson, Schuler, & Rivero, 1987) suggests that an effective HR management system will acquire, develop and motivate the behaviors necessary to enhance firm performance (Bailey, 1993; Jackson et al.,1987; Pfeffer, 1994; Schuler and MacMillan, 1984). The behavioral perspectives describe how the HR management system creates new firm capabilities, while resource-based theory emphasizes the attributes required for these capabilities to generate competitive advantage. These are consistent with the theoretical work in the field of strategic management (Amit and Shoemaker, 1993).

Empirical studies, have examined the impact of HR practices (HRPs) on various aspects of organizational performance (Guest, Michie, Conway Sheehan 2003; Huselid, 1995; Ichniowski et al., 1997; Wall and Wood, 2005; Wright and Boswell, 2002), as well as on a range of employee attitudes and behaviours at work (Appelbaum et al., 2000; Guest, 2002; Godard, 2001; Ramsey et al., 2000;).

However, the mechanisms linking HR practices to both organizational performance and employee related outcomes have not received systematic research attention (Guest, 1997; Wright and Gardner, 2003). The present study focuses on the relationship between HR practices and employee attitudes and behavior, and on the mediating role played by employee work experiences in this relationship.

Specifically, based on the explanatory model proposed by Peccei (2004) regarding social exchange theory (Blau, 1964), it asserted that the exchange relationships between two parties are beyond economic exchange such as with respect, support and approval. (Eisenberger, Armeli, Rexwinkel, Lynch, & Rhoades, 2001). Based on social exchange and reciprocity, Eisenberger implied that perceived organizational support (POS), which refers to employees’ perceptions about the degree to which the organization cares about their well-being and values their contribution, describes the social exchange relationship between the organization and its employees. Employees with higher levels of POS are likely to have positive attitudes and behaviors. Mainly drawing on social exchange theory and organizational support theory, as well as other relevant literature in human resource management and organizational behavior research, this dissertation will examine the antecedents and outcomes of POS and affective commitment and the relationship between strategic human resource management and the employee’s outcome with perceived organizational support as the mediator.

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