CHAPTER 1

INTRODUCTION

1.1 Introduction
This chapter describes a brief background of the research. It explores the purpose of the study,
problem statement, research questions of the study, objectives of the study, significance of the
study and scope of the study. Definition of key terms and outline of the thesis is also provided at
the end of the chapter.

1.2 Background of the study

Normally, Human Resource Management (HRM) practice whether in the private and public
sector is an important strategic instrument used by organizations for creating and retaining
competitive advantage where the organizations come from the differences shapes and sizes than
the similarities. A general factor among these organizations is their achieved success which
dependent on the skill, knowledge and experience of the employees in the organization
(Development and Learning organizations, 2011). This is because the human resources activities
have been generally used to observe organizational performance. This demonstrates the
distinctive feature of HRM in achieving better performance through the people in the
organization (Guest, 1997).
The organizational performance consider as one of the major organizational goals which there
are many human resource management (HRM) research has been directed at understanding the
relationship between HRM practices and organizational performance. HRM activities are
including staffing, training and development, performance appraisal compensation management,
safety and health and industrial relations. Refers to Huang (2001), HRM practices are one area
that influences employees intention to leave, levels of job satisfaction, and organizational
commitment. Stavrou-Costea (2005) noted that an effective human resource management
practices can be the main factor for the success of a firm. It has been supported by Lee and Lee
(2007) which is HRM practices on business performance, namely training and development,
teamwork, compensation/incentive, HR planning, performance appraisal, and employee security

help improve firms business performance including employees productivity, product quality
and firms flexibility.

1.3 Problem Statement

This study arises to manage the human resources that need by firms to be more
effectively. Based on Kennedy & Daim (2009) many organizations in Malaysia do
not provide continual training program for their employees. It has been less
effective in appraisal by ignoring the results and compensation systems are not
adequate to provide the desired reward to the employees especially under current
working condition where less respect and recognition has been given to their
contribution. These factors made the employees lose their interest on the job that
leads to reduce the organizational performance. On the top of that, the previous

research has reported positive associations between HR practices and organizational

performance. These studies focus on the impact of several specific HRM practices, such as
compensation (Gerhart & Trevor, 1996, Gomez-Mejia, 1992), training (Bartel, 1994) or
performance management systems (McDonald & Smith, 1995).
There are plentiful studies documented the significant relationship between HRM practices and
organizational performance. HRM practices have a direct influence or consequence on
subordinate attributes such as human skills, attitudes and behavior, the so-called HRM outcomes,
which in turn enhances organizational performance Katou (2008). Thus, Pfeffer (2000) observes
that human resources have been essential in sustaining organizational performance. Other issue is
there some authors have faulted the relationship between the HRM practices and organizational
performance (Katou, 2008; Gerhart, 2005). But, the role of human resources remains important
in organizations by time to time, even some of organizations are slow in adopting HRM practices
which contribute to organizational success. Another issue is the authors have faulted
the relationship between the HRM practices and organizational performance
(Katou, 2008; Gerhart, 2005). They argued that their relationship lacks
transparency about what exactly leads to what. Based on this, they suggested

intervening or intermediary steps in the relationship between HRM practices and

performance (Becker & Gerhart, 1996). This indicates that the introduction of
mediator and moderator in the relationship between HRM practices and
organizational performance. In the previous studies of HRM practices and
organizational performance, employee retention, one of HRM Outcomes
components has not been adequately covered (Bowen & Ostroff, 2004 and
Collins & Smith, 2006). So, for adequate understanding on the relationship
between HRM practices and organizational performance, Wright, Gardner,
Moyiham & Allen, 2005; Purcell, Kinnie, Hutchinson, Rayton & Swart (2003) have
called on subsequent studies to interrogate the mediating role of HRM Outcomes
such as employee retention in the relationship between HRM practices and
organizational performance.

In order to solve this problem, the study will investigate relationship of staffing, performance
appraisal and compensation on organizational performance through surveying the Hotel at
Pahang. The research outcome will reflect the relationship between Human Resources Practices
and Organizational Performance
1.4 RESEARCH QUESTION
1. What is the relationship between Human Resources Practice and Organizational
Performance?
a. What is the relationship between staffing and organizational performance?
b. What is the relationship between training and development and organizational
performance?
c. What is the relationship between performance appraisal and organizational
performance?
d. What is the relationship between compensation and reward and organizational
performance?

1.5 RESEARCH OBJECTIVES

1. To study the overall relationship between Human Resources Practices and Organizational
performance

a. To identify the relationship between staffing and organizational performance

b. To identify the relationship between training and development and organizational
performance
c. To identify

the

relationship

between

performance

appraisal

and

organizational performance
d. To identify the relationship between compensation and reward and
organizational performance

1.6 SIGNIFICANCE OF STUDY

The significance of this study can contribute many benefits to others such as business strategy
and empirical researchers. This study can provide the management and organization of an
understanding about the relationship between Human Resource Practices and Organizational
Performance.

1.7 SCOPE OF STUDY

This academic study is conducted on the relationship between Human Resource Practices and
Organizational Performance. The industries targeted are known to employ knowledge among
employees such as hotel industry. The respondents are selected among most of the big company.
The survey instrument of this study is by distributing questionnaire to collect data and response
in conducting this research activity.

1.8 CONCLUSION
This project paper which as presented is the first chapter out of three chapter that study on the
background of the study, as an introduction which highlighting the independent variable is
Human Resource Practices on the dependent variable, Organizational Performance that are
assumes to have interaction between each variables. This research is describes the problem
statements, research questions, research objectives, significance of study and the scope of study.

REFERENCES
Alleyne, P., Doherty, L., & Greenidge, D. (2006). Approaches to HRM in the
Barbados hotel industry. International Journal of Contemporary Hospitality
Management, 18(2), 94 - 109.
DLO (2011) "Putting people first: Employee retention and organizational performance",
Development and Learning in Organizations, 25( 1), 25 27

Hoque, K. (1999). Human resource management and performance in the UK

hotel industry. British Journal of Industrial Relations, 37(3), 419 - 443
Guest, D., & Conway, N. (2004). Employee well-being and the psychological contract: a
report for the CIPD. Chartered Institute of Personnel and Development, London .

Huang, T. C. (2001). " The relation of training practices and organizational

performance in small and medium size enterprises". Education and training,
43(8/9), 437-444.
Katou, A. A. (2008). Measuring the impact of HRM on organizational performance.
School of Industrial and Aeronautic Engineering of Terrassa (ETSEIAT). Universitat
Politcnica de Catalunya (UPC).
Pfeffer, J. (2000). Seven practices of successful organizations. In W. L. French, C.H. Bell.,
& J. Pfeffer (Eds.). Seven practices of successful organizations (pp. 96-124). California
Management Review.

Gerhart, B. & Trevor, C. (1996) Employment Variability under Different Managerial

Compensation Systems, Academy of Management Journal, 39, 1692-1712.
Gerhart, B. (2005). Human resources and business performance: findings, unanswered
questions, and an alternative approach. Management Revue, 16, 174185

Becker, B. E., & Gerhart, B. (1996). The impact of human resource management on
organizational performance: Progress and prospects. Academy of Management Journal,
39 (4), 779-801.

Gmez-Meja, L. (1992) Structure and Process of Diversification, Compensation

Strategy, and Firm Performance, Strategic Management Journal, 13, 381-397.
Bartel, A (1994) Productivity Gains from the Implementation of Employee Training
Programs, Industrial Relations, 33, 411-425.
McDonald, D. & Smith, A. (1995) A Proven Connection: Performance Management
and Business Results, Compensation and Benefits Review, January-February, 59-64.
Kennedy & Daim (2009). A strategy to assist management in workforce engagement
and employee retention in the high tech engineering environment. Evaluation and
Program Planning 33 (2010) 468476.
Bowen, D. E., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The
role of the Strength of the HRM system Academy of Management Review, 29(2), 203
221.
Collins, C. J., & Smith, K. G. (2006). Knowledge exchange and combination: The role of
human resource practices in the performance of high-technology firms. Academy of
Management Journal, 49(3), 544560
Wright, P. M., Gardner, T. M., Moynihan, L. M., & Allen, M. R. (2005). The relationship
between HR practices and firm performance: Examining causal order. Personnel
Psychology, 58, 409446.
Stavrou, E. 2005. Flexible Work Bundles and Organizational Competitiveness in Europe:
Toward a Framework Journal of Organizational Behavior, vol. 26, pp

. Lee, F-H. & Lee, F-Z. (2007). The relationships between HRM practices, Leadership
style, competitive strategy and business performance in Taiwanese steel
industry,

Chand, M., & Katou, A. A. (2007). The impact of HRM practices on organizational performance in
the Indian hotel industry. Employee Relations, 29( 6), 576 - 594.
Collier, P., & Gregory, A. (1995). Strategic management accounting: a UK hotel
sector

case

study.

International

Management, 7(1), 16 - 21.

Journal

of

Contemporary

Hospitality