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ISLAMIC HUMAN RESOURCE PRACTICES AND ORGANIZATIONAL PERFORMANCE: A PRELIMINARY FINDING OF ISLAMIC ORGANIZATIONS IN MALAYSIA
Ilhaamie Abdul Ghani Azmi Academy of Islamic Studies Universiti Malaya ilhaamie@yahoo.com ABSTRACT At the moment, there are lots of studies on conventional human resource practices. However, there are quite a few studies done on Islamic human resource practices. Using simple random sampling technique, final copies of questionnaires were sent to 300 Islamic organizations. However, only 114 questionnaires were returned and 111 were usable. These Islamic organizations implement Islamic human resource practices due to Islam; the religion is the way of life, type of their organizations and organizational mission. Two Islamic human resource practices were being implemented to a considerable extent are selection and recruitment and training and development. On the other hand, three Islamic human resource practices were being implemented to a moderate extent which are career development, performance management and reward practices. Thus, the overall implementation of Islamic human resource practices in Malaysian Islamic organizations is moderate. However, the impact of these Islamic human resource practices on organizational performance is considerable. This shows that Islamic human resource practices are better than the conventional perspective in producing higher organizational performance.

Field of Research:

Human Resource Practices, Organizational Performance, Islam, Malaysia

-----------------------------------------------------------------------------------------------------------------------------------------1. Introduction Islam is the national religion in Malaysia. Muslims constitute 60.4 percent of Malaysian population. However, there are lack of studies that try to examine the dimensions and the impact of Islamic human resource practices that are being implemented in Malaysian organizations. Islamic organizations must surely have the highest tendency to fully implement Islamic human resource practices due to their type of organizations, missions and visions. Hence, they are the focus of this study.

2. Literature Review According to Junaidah (2009) and Namazie and Tayeb (2006), there are five main Islamic human resource practices which are selection and recruitment, training and development, career development, performance management and reward.

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2.1 Islamic Selection and Recruitment Practice Islam emphasizes on the criteria of Muslim workers that should be selected which are identified as piety, competent or experts in terms of qualifications, skills, experiences, health, intelligence and possess good moral or akhlak and spirit of team work or amal jamai, (Surah al- Qasas: 26; Sunan alBukhari; Surah al-Bayinnah: 7; Surah al-Hujurat:13; Surah al-Nisa': 58). They should be dedicated, committed, hardworking, trustworthy, dedicated, loyal and disciplined. Furthermore, they should be someone who is familiar with the organization or persons (e.g. internal candidates, Surah al-Nisa: 36). The process of selection and recruitment should be just whereby the panel of selection does not practice discrimination in selecting and recruiting new employees. They should be selected based on the mentioned criteria after the panel has discussed their suitability. The candidates should be interviewed to ascertain whether they are suitable for the posts that they applied earlier. If the candidates are not suitable, the reasons of their rejection should be informed. However, if they are selected, the terms of employment should be stated clearly in the offer letter. Once selected, they should undergo some training program to expose them to the organizational culture and also to enhance their capabilities and skills in carrying out their roles and duties. After three months of probation, if they have successfully carried out their tasks, their positions have to be confirmed.

2.2 Islamic Training and Development Practice Training and development from Islamic perspective focuses on purifying ones soul (tazkiyah al-nafs), instilling Islamic values (al-tadib), understanding the philosophies of Allahs Oneness and Greatness (altawhid al-uluhiyyah and al-rububiyyah) and the concepts of working as a vicegerent (khalifah), a team (jamaah), full submission to Allah (ibadah) and a way to succeed (al-falah). Islamic training and development practices also stress on the importance of knowledge, physical development and the trainers themselves. In this respect, the teaching of Islam highlighted several important approaches to rationalize the concepts. They are, for example; through sermons (tazkirah), discussion of the Islamic principles in view of al-Quran and al-Hadith (Prophets prescriptions), congregational prayers and personal obligations (Ilhaamie, 2009).

2.3 Islamic Career Development Practice Islam does not discriminate employees on the basis of race, color, sex or religion in developing their careers (Surah al-Hujuraat: 13). Instead Muslim employees are encouraged to develop their careers as Muslims are encouraged to plan for their future (Nasri & Ahmad, 2006). Thus, employers should provide facilities e.g. career development program and give assistance e.g. special assignment, mentoring system to their employees in a way to help them to enhance their careers.

2.4 Islamic Performance Management Practice In Islam, employees performance measurement should be based on justice and fairness and accountability and responsibility (Surah an-Nahl: 90, Surah al-Araf: 85, Surah al-Hujuraat: 13). In order to ensure this to happen, appraisers should be sent for training (Surah an-Nisaa: 58). They also should
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bear in mind that their task is a trust from Allah swt. and thus, should not publicize their employees weaknesses (Surah an-Nisaa: 149) even though the intention is to educate other workers. They also should not discriminate their employees on the basis of race, color or religion (Junaidah, 2007). Furthermore, if the employees are not happy with the appraisal scores given by the employers, they should be permitted to appeal the scores that they consider as to be inaccurate or unfair.

2.5 Islamic Reward Practice Islam encourages employers to reward their employees according to their qualification, experiences, knowledge, capabilities and amount of work they do. (Sunan Ahmad, Surah al-Yasin: 54, Surah An-Najm: 39). The reward should be given as soon as they have completed their work (Sunan Ibn Majah). To delay paying the employees is not allowed in Islam as it is an act of cruelty. Those employers that do not pay their workers are the enemies of the Holy Prophet and also Allah swt. (Sunan Bukhari, Surah Hud: 85; Surah al-Araf: 85; Surah al-Maidah: 8). The amount of reward should be adequate for them to buy food, clothing, place to stay and transportation. There is no discrimination in rewarding workers no matter the gender of the worker is (Surah an-Nahl: 97; Surah al-Kahfi: 30, Surah al-Araf: 85). However, the married employees should get more than the unmarried as they have children to feed, clothe and school. The employees also should be given allowances, bonuses, overtime pay, salary increment, leaves and medical treatment. All these terms of payment should be clearly specified out in the offer letter for the employees to consider before they accept the offer to work. If the employees are not satisfied with the terms of payment, they can negotiate with their employer as discussion or musyawarah is the principle of Islamic reward practice. Furthermore, the gap of pay of same position workers but with different grades should not be too wide as this will cause dissatisfaction among the employees (Junaidah, 2007).

2.6 Factors of Determination Islam is the dominant religion in the Middle East. Budhwar and Mellahi (2006) reported on the factors of HRP determination in Middle East countries. One of the most important factors is Islamic values, work ethics and principles. Others are socio-economic and political background, HRM historical developments in a country, organizational culture, national labour laws, types of institutions and others. Al-Hamadi and Budhwar (2006) found that Islam, the socialization process and the expatriate workforce influence HRM the most in Oman. Meanwhile in Kuwait, hiring and promotion in government sector is influenced highly by social connectivity, tribal identity and political and sectarian allegiances. On the other hand, the key factors that determine HRM practices in Turkey are institutional context, labour law, labour market, educational context, union, work life, cultural context, SME, family businesses, FDI, workforce characteristics and changing demographics (Aycan, 2006). Benson and Al Arkoubi (2006) stated that national culture mainly Islam, institutions, industrial sector and business environment and ethics as to be the factors that impact the HRM practices in Morocco.

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2.7 Organizational Performance

There is no consensus on the dimensions of organizational performance. Some studies focused one or two dimensions. However, two clear cut dimensions could be suggested: financial and non-financial performance. Dimensions of financial performance are such as profitability, ROA, ROI, market return, sales revenue and others. Meanwhile dimensions of non-financial performance are like customer satisfaction, job satisfaction, turnover, service quality, quality of job performance and others. Thus, organizational performance is a multi-dimensional concept. Seldon and Sowa (2004) suggested that researchers use a multi-indicator in order to measure the complexity of organizational performance dimension.

There are quite many studies that aim to examine the relationship between HR practices and organizational performance. Horgan and Muhlau (2005) studied the impact of high performance HR practices on performance which he categorized as employee and economic performances in Netherland and Ireland. Employee performance dimension consists of three variables which are work performance, cooperation and discipline. They found that the relationship between incentive structuring, selection efforts and sharing arrangement practices and employee performance was at the higher level in Ireland. Lambooij, Sanders, Kosters and Zwiers (2006) examined the relationship of internally and strategically fit HR practices on cooperative employees behavior and organizational performance. They classified organizational performance into two dimensions which are financial and non-financial performance. The non-financial measures were turnover and sick leaves. They did not found that both types of fit to be related to the cooperative behaviour of the employees. However, the cooperative behaviours are found to be related with the non-financial performance.

Vanhala and Toumi (2006) examined the relationship between HR practices and company performance which they classified into two dimensions which are employee wellbeing and company performance. Job satisfaction was one of the employee wellbeing dimensions whereas customer satisfaction was a dimension of company performance. They found that the relationship between company performance and employee well being is weak and sporadic. There is also a weak relationship between HR practices and employee wellbeing.

Chand and Katoui (2007) investigated the effects of HR practices on organizational performance in the Indian hotel industry. Productivity and good service quality were two dimensions of organizational performance measured. They found that the HR practices were positively related to organizational performance. Uysal (2008) studied the relationship between HR practices and firm performance. He classified firm performance to two dimensions which are organizational and market performance. Customer satisfaction is a dimension of the organizational performance. The findings were that staffing, training, compensation and promotion are significantly and positively related to organizational and market performance of the firms.

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Thus, there are mixed results on the findings of the relationship between HR practices and organizational performance and this indicates that the research is indefinite. Hence, the study on the relationship should be continued especially from the Islamic perspective.

3. Methodology The population of this study constitutes the Islamic institutions in Malaysia. This is because these Islamic institutions have the highest tendency to practice Islamic human resource practices compared to other institutions. These organizations are such as IKIM, ILIM, ISTAC, USIM, UIAM, KIAS, KUIS, KISDAR, JAKIM, YADIM, YAPIEM, MAIS, JAIS, BIMB, BMMB, Zakat Centre, Baitul Mal, ABIM, PERKIM, IBFIM, Shariah Court, MPI, Takaful, KIPSAS, INSANIAH, KOHILAL, INDAH and others. Thus, Islamic organizations are classified as government, NGO and private sectors.

As there is no existing questionnaire on the Islamic human resource practices and organizational performance, it was developed based on the literature review. The questionnaire contained three sections which are Islamic human resource practices, organizational performance and the background of the respondents. Respondents were requested to answer the statements based on 7 and not 5 Likert scale (to increase reliability and convenience in answering), ranging from 1 as not practicing at all to 7 for practicing to full extent.

Later, the questionnaire was pilot-tested in five organizations that practice Islamic human resource practices such as USIM, UIAM, ABIM, JAKIM and Shariah Court. After correction and editing, 300 copies of final questionnaires were distributed to the human resource managers of these Islamic institutions in Malaysia by using simple random sampling technique. This is to ensure that every single organization has the equal chance to be selected as the respondent.

As this study is an exploratory study, descriptive analysis was conducted on the data gained from the completed questionnaires in order to find the extent of practices and their impact on organizational performance.

4. Findings From 300 copies of questionnaires distributed, only 114 were returned and 111 were usable. This amounted to 37 percent rate of response.

Majority of the respondents are from other category of occupations (i.e. 45%, please refer to table 1) such as Account Executive cum HR Assistant, Administration Assistant Manager, Administrator, Assistant Accountant Assistant, Manager of Shariah Department, Chairman, Chief Executive Officer, Chief
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Registrar, Dean, Deputy Director, Deputy General Manager, Director, Director of Administration & HR, Executive, Head of Financial & Administration Unit, Head of Management, Head of Training Division, Head Resourcing & Talent Management, Head of Department, HR Officer, Imam Besar, Islamic Affairs Officer Manager, Operation & Service Manager, Operation Manager, Business Owner, Administration Officer, Assistant Administration Officer, President, Principal, PTK Officer and Senior Assistant Director.

It is found out that majority of the respondents are male (62.2%). Please refer to table 2.

Majority respondents are Malays (99.1%) in between 26 to 35 years old (33.3%). Please refer to table 3 and 4.

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Most of them are married (88.3%) and possessed bachelor degree (51.4%). Please refer to table 5 and 6.

Majority of them earned more than RM5, 000 (28.8%). Please refer to table 7.

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Most of the respondents are working in Kuala Lumpur (25.2%) in the government sector (51.4%). Please refer to table 8 and 9.

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Most of the respondents have a HR department or unit in their organizations (78.4%) and they have been practicing Islamic human resource practices for 10 years (15.3%).

These Islamic organizations design their Islamic human resource practices according to Islam the religion is the way of life (64.9%), organizational mission (42.3%) and type of institutions (34.2%). Other factors such as organizational culture (40.5%), leadership of the state (32.4%), service or administration circulars (37.8%), rules and regulation (32.4%), conventional HR practices (36%), top management (39.6%) and others (12.6%) are at a greater stage of being considered before implementing their Islamic human resource practices. Please refer to table 10 for further clarification.

Thus, in general, these factors are being considerably taken into consideration in designing their Islamic HR practices (5.57). Please refer to table 17.

Islamic selection and recruitment practice as a whole practice is being implemented to a considerable extent (5.08). Please refer to table 17. Practices such as selecting and recruiting candidates with Islamic values e.g. trustworthy, honesty (50.5%), conducting fair job interview for all candidates (36%), selecting candidates based on consultation e.g. syura (37.8%), giving employees appointment letter stating the terms and conditions of work after the probationary period (34.2%) are being practiced to
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full extent. Please refer to table 11. Other factors such as selecting and recruiting competent candidates (41.4%) and providing selected employees chances to try the job during the probationary period (27.9%) are being implemented to a greater extent. Meanwhile selecting and recruiting candidates with brotherhood spirit (25.2%), selecting and recruiting candidates based on religion (20.7%) and informing the candidates the reason of their rejected application (24.3%) are being implemented to a considerable extent. Finally, selecting and recruiting familiar candidates (21.6%) are being implemented to a moderate extent.

The Islamic organizations stress on understanding of work as ibadah (45.9%), understanding of al-falah philosophy (32.4%), understanding the meaning of Khalifah philosophy (29.7%), the importance of brotherhood (34.2%) and providing Islamic training to all levels of employees (35.1%) to the full extent. Please refer to table 12. However, other practices such as integrating Islamic and conventional training into one training program (37.8%), stressing on the objective of training (33.3%) and providing Islamic training on a continuous basis (30.6%) are being implemented to a greater extent. Meanwhile, stressing on physical activities as one of the training activities (29.7%) and employing a pious trainer to train the trainees (30.6%) are being implemented at a considerable extent.

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Thus, the Islamic training and development practice in overall is being implemented to a considerable extent (5.64) by these Islamic organizations. Please refer to table 17. However, the Islamic career development is being practiced to a moderate extent (4.61). Please refer to table 17. These Islamic organizations also provide special examination for career advancement (26.1%) to the full extent. Please refer to table 13. On the other hand, the other practices are being implemented at a considerable extent (24.3%-41.4%). Meanwhile, only few of these Islamic organizations discriminate employees on the basis of race, color, sex or religion (18.9%) in developing their careers. These organizations must have their own reasons why they are discriminating their employees in developing their careers.

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These Islamic institutions make clear of the performance standards to all employees to the full extent (30.6%). However, they neither discriminate employees based on race, color or religion (60.4%) nor publicize employees' weaknesses to others as excuses for giving low marks (55.9%). Please refer to table 14. However, other practices such as using a fair appraisal instrument to evaluate all levels of employees (35.1%), appraising employees justly and consistently by referring to the performance standards (31.5%), training appraisers to evaluate employees justly and consistently (30.6%), informing employees of their performance (39.6%), taking further actions based on appraisal results e.g. sending for further training (28.8%) are being implemented to a greater extent. Meanwhile practices such as employees take turn to be given high marks (18.9%) and permitting employees to appeal appraisal results they consider inaccurate or unfair (25.5%) are implemented at a considerable extent. This shows that the Islamic organizations are being considerate in giving high marks to their employees in the performance appraisal evaluation.

Thus, the Islamic performance management is being practiced to a moderate extent (4.49). Please refer to table 17.

Islamic reward practice is also being practiced to a moderate extent (4.11). Please refer to table 17. The Islamic organizations did not reward employees according to their family size (33.3%) and gender (54.1%). Majority of the respondents reward their employees according to their competencies (30.6%) to a greater extent. Please refer to table 15. On the other hand, rewarding employees as soon as they complete their work (29.7%), considering the factor of cost of living in rewarding employees (28.8%), rewarding employees intrinsically e.g. letter of appreciation, praise (27.9%), ensuring that there is not much difference of salary amount among the employees of the same level (25.2%) and informing the terms of reward before employees start to work (20.7%) are being implemented at a considerable
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extent. Two other reward practices such as rewarding employees on the amount of work they do (22.5%) and providing employees with non monetary rewards (19.8%) are being practiced at a moderate extent.

The impacts of the Islamic human resource practices on organizational performance are greater job satisfaction (28.8%), service quality (33.3%), profits (29.7%) and customer satisfaction (36.9%). Please refer to table 16. However, the impact of higher productivity (34.2%), lower rate of defects (30.6%) and higher quality of work (37.8%) are considerable. Meanwhile, the impacts on lower turnover (25.2%) and lower absenteeism (30.6%) are moderate.

Thus, the impact of Islamic human resource practices on the organizational performance in general is considerable (5.01). Please refer to table 17.
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5. Conclusion The overall implementation of Islamic human resource practices in Malaysian Islamic organizations is moderate. However, their impact on organizational performance is considerable. This shows that some of them do not fully implement Islamic human resource practices. It could be due to that they are not fully aware of the elements of the practices or conventional HR practices are more dominant in these organizations. However, the impacts on organizational performance are higher than the extent of implementation. This shows that Islamic human resource practices are better than the conventional perspective in producing higher organizational performance. Thus, it is suggested that Islamic HR practices to be implemented in any organization no matter what the type and objective of the organizations are. Furthermore, the Islamic organizations should continue and at the same time increase the level of implementation in order to obtain higher outcomes.

6. Acknowledgement Special thanks to the FS 141/2008B, UM for funding this research.

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