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86 The Journal of Institute of Public Enterprise, Vol. 39, No. 1 ©2016, Institute of Public Enterprise HRD Systems and Organizational Performance: Qualitative Review of Research Ravindra Jain 1 and Sanjay Gulati 2 In this article, an attempt has been made to review of a wide array of previous research studies on HRD and its impact on organizational performance as well as to synthesize the review results. Our review indicates that HRD system as a whole and its process mechanisms, viz., training & development, employee empowerment, job enrichment, and organizational climate in particular are positively associated with different outcomes of organizational performance that range from very proximal (i.e. better job performance of the employees) to more distal (i.e. increments in productivity of the organization). HRD system and processes contribute positively to increments in competencies, operational performance, productivity, job satisfaction and commitment of the employees on one side and on the other such system and processes have positive impact on the organization’s productivity, adaptability, flexibility, competitiveness, change in organizational climate, incremental improvements in quality of products / services, retention of valued employees, reduction of employee turnover, reduction in operating costs, and also in shaping customer and shareholder satisfaction and thus as a whole organization’s overall performance is improved on incremental basis. However, the mechanisms linking HRD and outcomes of organizational performance appear as fragmented.

Implications of the study have also been discussed..  Keywords: HRD, HRD and Organizational Per formance, Training, Employee Empowerment, Job Enrichment, Organizational Climate, Human Resource Development, Training and Development, Organizational Performance.

1. Professor in Business Management, Faculty of Management Studies, Vikram University, Ujjain (M.P.) India.

2. Dy. Director, Institute of Open and Distance Education (IODE), Barkatullah University, Bhopal (M.P.) India 87 Introduction “HRM as a system in an organiza- tional setting” works as a sub-set of the larger organizational system and HRD works as a sub-set of HRM system. There is a growing consensus that HRD system-subsystems have a direct or indirect bearing on organiza- tional performance. Alagaraja (2012) suggests that HR contributions em- phasize fuller integration of micro- level and macro-level approaches and analysis linking HR with organiza- tional-level performance outcomes.

This perspective of HR, therefore, is very significant for management of or- ganizations to look into while making strategic choices. HRD is the process of developing value additions in the capabilities of individual employees, teams of employees and organization as a whole. The extant literature indi- cated that the key HRD processes are:

training & development, job enrich- ment, employee empowerment, and productive organizational climate.

For example, Rao (1990) included training and job enrichment in his HRD framework, Kandula (2001) in- cluded training, job enrichment and involvement & empowerment in his Strategic HRD framework, and Jain, Premkumar & Kamble (2013) in- cluded employee training, job enrich- ment, and employee empowerment in their HRD framework. Based on such frameworks, we selected training & development, employee empower- ment, job enrichment, and organiza- tion climate as key process mecha- nisms of HRD for the purpose of this study. Methodology We started with a study of relevant research articles on human resources and Organizational performance. Our primary aim was to have an overview and gain an understanding of the contributions of existing literature on HRD and its impact on organizational performance; secondly, to integrate such contributions by the way of reviewing of a wide array of previous research studies and synthesizing of the review results; thirdly, to discuss the implications of such review results; and finally, to identify a few research issues that remain unattended in earlier research so as to give direction for further research. For the purpose of review of literature, relevant research articles published so far were identified primarily by the way of search through ‘Business Source Complete’ in EBSCOhost Data-base, and also through ‘Google Search’ using a number of key words such as human resource management, human resource development, training, employee empowerment, job enrichment, organizational climate, HR and performance etc. Relevant books, edited books, The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 88 conference proceedings etc. were identified through the libraries of a few institutions. In total, 130 journal articles and some conference proceedings / books have been studied in depth for the purpose.

HRD Systems and Organizational Performance ‘Organizational performance’ is gen- erally perceived by its indicators like organizational effectiveness, effi- ciency, productivity, profitability, or- ganization’s growth and development, satisfaction of various stake-holders (e.g., customers, employees, share- holders) of the organization, quality improvement in products and servic- es, and enhancement in organization’s capability for innovation. Organiza- tional performance indicators may be classified into three types: financial performance, HR performance and operational performance. Jiang, Hu, and Baer (2012) defined these variables.

According to them, “HR outcomes refer to those most directly related to HR in an organization, such as employee skills and abilities, employee attitudes and behaviors, and turnover; operational outcomes are those related to the goals of an organizational operation, including productivity, product quality, quality of service, and innovation; financial outcomes reflect the fulfillment of the economic goals of organizations; typical financial outcomes include sales growth, return on invested capital, and return on assets” (p. 1265).

There exists consensus on the premise that HRD system-subsystems can contribute to gain sustainable competitive advantage through facilitating the development of competencies of people and team work in organization. HRD system and processes influence the organization’s productivity, adaptability, flexibility, employee retention, quality of products or services competitiveness, reduction in costs, and as a whole organization’s overall performance.

A burgeoning body of prior research indicates that HRM system, processes and practices are positively related to various parameters of organizational performance such as reduction of employee turnover (Singh, 2000; Batt, 2002), increments in productivity (Guzzo, Jettie & Katzell, 1985; Ichniowski, 1990; MacDuffie, 1995; Singh, 2000), producing a payoff in terms of bottom-line financial performance (Huselid,1995), greater organizational commitment (Meyer & Smith, 2000; Agrawal, 2003; Allen, Shore & Griffeth, 2003; Zacharatos, The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 89 Hershcovis, Turner & Barling, 2007; Gong, Law, Chang & Xin, 2009), higher safety performance (Zacharatos, Barling & Iverson, 2005), better service performance (Chuang & Liao, 2010) etc. In a recent study of Jain & Premkumar (2011), the various HRD sub-systems (viz., Employee Training, Employees’ Performance Appraisal, Job Enrichment, Career Planning, Employee Communication and Employee Empowerment) were found to have significant impact on ‘Productivity’ of human resources. In prior research (e.g., Huselid, 1995; Delery & Doty, 1996; Youndt, Snell, Dean, & Lepak, 1996), it has been reported that HR practices aligned closely with organizational strategy have positive impact on higher financial outcomes. Jiang, Hu, & Baer (2012) found that “three dimensions of HR systems (i.e., skill-enhancing, motivation-enhancing, and opportunity-enhancing HR practices) were positively related to human capital and employee motivation in different patterns in such a way that, compared with the other two HR dimensions, skill-enhancing HR practices were more positively related to human capital and less positively related to employee motivation. In addition, human capital and employee motivation mediated the relationships between three HR dimensions and voluntary turnover and operational outcomes, which in turn related to financial outcomes” (pp.1279-1280).

Thus, in extant research, HRD system has been found positively associated with different outcomes of organiza- tional performance (OP) that range from very proximal (i.e. productiv- ity enhancement) to more distal (i.e.

profitability). In extant research, pri- marily additive method has been ap- plied in order to assess the impact of HR systems / processes onorganiza- tional performance; however, in re- cent studies (e.g., Gong, Law, Ghang & Xin, 2009; Subramony, 2009; Batt & Colvin, 2011), it is contended that various HR systems and practices may have dissimilar impact on organiza- tional performance indicators. A few earlier research studies (e.g., Wright, McMahan, & McWilliams, 1994; Delery, 1998) generally indicate that HR systems / practices do not have di- rect effect on organizational effective- ness; rather they influence employees’ behaviour that ultimately has impact on organizational effectiveness. Katou (2011) tested a mediation model to examine the link between HR and or- ganizational performance in the Greek The Journal of Institute of Public Enterprise, V \2512016, Institute of Public Enterprise 90 manufacturing context and the results of his study indicate that “the impact of HRM policies on organizational performance is mediated through the HRM outputs of skills, attitudes and behaviour, and moderated by business strategies, organizational context and other contingencies” (p. 16). Prior research carried out in the past few decades indicates toward the hetero- geneous impact of HR systems on or- ganizational performance parameters (e.g., Dess & Robinson, 1984; Dela- ney & Huselid, 1996; Guest, 1997; Bjorkman & Xiucheng 2002; Gelade & Ivery, 2003; Sels, De Winne, Del- motte, Faems & Forrier, 2006; Gong, Law, Chang & Xin, 2009; Liao, Toya, Lepak, & Hong, 2009; Shaw, Dineen, Fang, & Vellella, 2009; Subramony, 2009; Batt & Colvin, 2011; Gardner, Wright, & Moynihan, 2011).

In nutshell, HRD system and process mechanisms are positively associated with different outcomes or indicators of organizational performance (OP) that range from very proximal (i.e.

better job performance of the employees) to more distal (i.e. increments in productivity of the organization).

HRD system and processes contributes positively to increments in competencies, operational performance, productivity, job satisfaction and commitment of the employees on one side and on the other such system and processes have positive impact on the organization’s productivity, adaptability, flexibility, competitiveness, change in organizational climate, incremental improvements in quality of products / services, retention of talented & valued employees, reduction of employee turnover, reduction in operating costs, and also in shaping customer and shareholder satisfaction and thus as a whole organization’s overall performance is improved on incremental basis. Employee Training & Development and Organizational Performance There is an increasing recognition among people in organizations that the investment in training contrib- utes in improving organizational performance in terms of increased productivity, enhanced level of qual- ity of products / services, increments in sales, higher market share, reduced employee absenteeism and turnover, and less interpersonal and inter-group conflict.

All the people in organiza- tions, therefore, are expected to agree that employee training is a strategic move rather than a tactical action.

“There is an increasing recognition that training is a critical system not only for individual effectiveness but also for enhancing organizational effectiveness leading to a The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 91 more holistic approach to training in practice. Such an understanding enables the concerned managers (i) to adopt the corporate strategies aligned training system; (ii) to focus on developing competencies in an integrated fashion; (iii) to encourage collaborations within and outside the organizations in the matter of employees’ training – learning” (Jain & Agrawal, 2005, p.84).

According to the model developed by Devanna, Formbrum, Tichy & War- ren (1982), training and other HRM activities aim to enhance performance of the individual employees, which lead to higher organizational perfor- mance. Most organizations make in- vestment in employee training due to their beliefs that such an investment results in enhanced level of organiza- tional performance (Alliger, Tannen- baum, Bennett, Traver & Shotland, 1997; Kozlowski & Klein, 2000). A burgeoning body of prior research studies found to have positive im- pact of employee training on various parameters of organizational perfor- mance such as increase in productiv- ity (e.g., Bartel, 1994; Black & Lynch, 1996; Lawler, Mohrman & Ledford, 1998; Barrett & O’Connell, 2001; Paul & Anantharaman, 2003; Ely, 2004; Guerrero & Barraud-Didier, 2004; Kintana, Alonso & Olaverri, 2006; Cho, Woods, Jang & Erdem, 2006; Zwick, 2006), enhancement in profitability / ROI / ROA / ROE (e.g., Lawler, Mohrman & Ledford, 1998; Meschi & Metais,1998; Vanden- berg, Riciiardson & Eastman, 1999; Huang, 2000; Khatri, 2000; Storey, 2002; Paul & Anantharaman, 2003; Faems, Sels, DeWinne & Maes, 2005; Ballot, Fakhfakh & Taymaz, 2006), sales growth (e.g., Birley & Westhead, 1990; Wiley, 1991; Bracker & Co- hen,1992; Barling, Weber & Kello- way, 1996; Ngo, Turban, Lau, & Lui, 1998; Cappelli & Neumark, 2001; Gelade & ivery, 2003; Paul & Anan- tharaman, 2003; Rodriguez & Ventu- ra, 2003; Ng & Siu, 2004; Ely, 2004; Garcia, 2005; Bernthal & Wellins, 2006; Cho, Woods, Jang & Erdem, 2006; Ghebregiorgis & Karsten, 2007), increments in market share / improvement in market performance (e.g., Kalleberg & Moody, 1994; Delaney & Huselid, 1996; Harel & Tzafrir,1999; Thang & Ouang, 2005; Tzafrir, 2005), customer satisfaction (e.g., Kalleberg & Moody, 1994; Ich- niowski, Shaw & Prennushi, 1997; Lawler et al., 1998; Garcia, 2005), quality of products / services (e.g., Lawler, Mohrman & Ledford, 1998; Paul & Anantharaman, 2003; Katou & Budhwar, 2007), employee com- mitment (e.g., Ahmad & Schroeder, 2003; Paul & Anantharaman, 2003; The Journal of Institute of Public Enterprise, V \2512016, Institute of Public Enterprise 92 Zheng, Morrison & O’Neiil, 2006; Bulut & Culha, 2010), and also on overall firm’s performance (e.g., Mar- tell & Carroll, 1995; Fey, Bjorkman & Pavlovskaya, 2000; Fey & Bjork- man, 2001) or on business results (e.g., Aragon-Sanchez, Barba-Aragon & Sanz-Valle, 2003). According to the empirical findings from the study of Ji, Huang, Liu, Hong & Cai (2012), “employee training, as an important element of HRM, does influence firms’ performance in sus- tainable development” (p. 3006). In nutshell, employee training contributes positively to incremental performance in productivity / profitability, sales, market share / market performance, quality of products / services, and it also results in reduced turnover, absence and conflict and thus as a whole overall performance of the organization becomes better.

Employee Empowerment and Organizational Performance Employee empowerment historically is the extension of employee involvement and employee participation in managerial decision making.

Employee empowerment enables employees to apply their explicit and tacit knowledge more effectively to opportunities and problems; it also enhances initiative-taking capability of the employees as it inculcates in them more psychological ownership of their work role. “Psychological empowerment is defined as a motivational construct manifested in four cognitions: meaning, competence, self-determination, and impact” (Spreitzer, 1995, p. 1444) regarding work role of the employees in an organization. Singh (2000) revealed that both HR policies and employee empowerment are positively correlated with organizational performance. It means that higher the level of employee empowerment higher will be the motivation and morale of the employees and hence better organization’s overall performance would be. Logan & Ganster (2007) designed an empowerment intervention in a large trucking company in which participants’ beliefs in their personal control and self-efficacy with regard to key aspects of their jobs were increased and then they tested the effects of such empowerment intervention among unit managers; and they revealed that “the empowerment intervention produced significant improvements in unit performance” (p. 1544). The study of M Nzuve & Bakari (2012) found that “there is a very strong positive correlation between employee empowerment and performance” (p.83). The study of Hechanova, Alampay & Edna, (2006) found that psychological empowerment was positively correlated with performance among Filipino service The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 93 workers. Prior research (e.g., Thomas and Velthouse 1990; Koberg, Boss, Senjem & Goodman, 1999) reveals that empowered employees have motivation for their work role at very high level, which in turn, contributes to higher level of organizational performance. As Fernandez and Moldogaziev (2013a) synthesized, a number of prior research studies (e.g., Lawler, Mohrman & Ledford, 1992; Spreitzer, 1995; Kirkman & Rosen, 1999; Nielsen & Pedersen, 2003; Lee, Cayer & Lan, 2006; Fernandez & Moldogaziev, 2011) and revealed that employee empowerment has positive correlation with work performance.

Earlier research also indicates that there exists a positive relationship between employee empowerment and innovativeness (e.g., Spreitzer 1995; Fernandez & Moldogaziev, 2013b), creativity and innovation (e.g., Carter, 2009), higher level of organizational commitment (e.g., Kirkman & Rosen, 1999; Avolio, Zhu, Koh & Bhatia, 2000; Guthrie, 2001), job involvement (e.g., Coye & Belohlav, 1995), higher level of job satisfaction (e.g., Bowen & Lawler, 1992; Lawler, Mohrman & Ledford, 1992; Fulford & Enz, 1995; Klecker & Loadman, 1996; Wu & Short, 1996; Ugboro & Obeng, 2000; Savery & Luks, 2001; Kim, 2002; Kuokkanen, Leino-Kilpi & Katajisto, 2003; Seibert, Silver & Randolph, 2004; Sarmiento, Laschinger & Iwasiw, 2004; Wright & Kim, 2004; Aryee & Chen, 2006; Davies, Laschinger & Andrusyszyn, 2006; Lee, Cayer & Lan, 2006), and organizational citizenship behaviour (e.g., Bhatnagar & Sandhu, 2005). “Psychological empowerment not only has direct and positive performance consequences, but also indirect effects, mediated by intrinsic motivation, opportunity to perform and ability to perform” as revealed in the study of Tulli & Rowlinson (2009, p.1334). In nutshell, in prior research, it was found that more the employee empowerment higher will be adaptation, job involvement, job satisfaction, organizational commitment, creativity & innovation, morale & motivation, and organizational citizenship behaviour and hence better will be the organization’s overall performance. Job Enrichment and Organiza- tional Performance Job enrichment is enriching the job of an employee which involves three basic elements: elimination of de-motivating tasks from the job, horizontal stretching and vertical loading. Job involves adding more motivators to a job to make it more rewarding. Job becomes enriched when its nature gives job- holders more powers for planning, execution, control, evaluation and The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 94 decision making regarding his / her work in an organizational setting.

Job enrichment entails redesigning jobs to include greater job contents by increasing one or more of the core characteristics, to assign more interesting & challenging tasks to the employees that require newer or better knowledge & skills, to give increasing responsibility & accountability along with more autonomy to the existing job holders and to provide a variety of opportunities to the employees for more meaningful work experiences to them. Job enrichment, thus, solves the employees’ problems like boredom, monotony, feeling of worthless engagement etc. It tries to embellish the job with factors that Herzberg (1968) characterized as motivators.

In the study of Jain & Premkumar (2011), Job Enrichment was found to have significant impact on productivity of human resources. In Alber’s (1979) extensive investigation of 58 job enrichment projects, most organizations appeared to be seeking economic returns from their job enrichment projects and the benefits which resulted were varied and often produced substantial monetary returns, increased production, quality products and job satisfaction among employees. In a longitudinal quasi- experimental Chinese field study, Yan,  Peng & Francesco (2011) found positive relationship between job enrichment and job satisfaction and also with task performance for knowledge workers. The longitudinal quasi-experimental study conducted by Morgeson, Johnson, Campion, Mdsker & Mumford (2006) showed that redesigned jobs from a traditional workgroup structure to a semiautonomous team structure had positive effects on performance behaviors (effort, skill usage, and problem solving). In nutshell, in earlier research, job enrichment was found to have positive correlation with productivity, quality of products, performance behaviour and job satisfaction. Organizational Climate and Organizational Performance Bowen and Ostroff (2004) contend that climate constitutes a significant factor in the HR-OP relationship.

Organizational Climate refers to the quality of the organization’s environment as experienced by its members and can be described in terms of values or the meaning of a particular set of characteristics of the environment (Tagiuri, 1968).

Payne and Pugh (1976) observes that organizational climate is influenced by organization members’ individual perceptions and is, thus, relatively subjective. The climate of an organization, in fact, is determined The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 95 by employees’ shared perceptions of the managerial practices and kinds of behaviors that are expected, supported, and rewarded in a contextual setting (Schneider, 1990). Climate has been described as an experientially based description of the work environment and, more specifically, employees’ perceptions of the formal and informal policies, practices and procedures in their organization (Schneider, 2000). There are four key factors concerning organizational climate that are commonly agreed upon: (1) autonomy granted to an employee in the matter of his /her job performance, (2) organizational structure prescribed upon a specific job position, (3) philosophy of the top executives concerning how to reward and motivate employees, and (4) the quality of social network and interpersonal relations between superiors and subordinates and also among peers.

A large number of studies have con- sistently demonstrated relationships between psychological climate and organizational performance indica- tors such as job involvement, organi- zational commitment, job satisfac- tion, job performance and stress level of individual employees. In the study of Gelade & Ivery (2003), significant correlations were found between work climate, human resource practices, and business performance. In a study of 42 manufacturing companies car- ried out by Patterson, Warr & West (2004), perceived supervisory sup- port, concern for employee welfare, skill development, effort, innovation and flexibility, quality, performance feedback, and formalization (the components of organizational cli- mate) were found to predict produc- tivity. Bogdanovic (2011) found high degree of positive correlation between the perceived stimulating work envi- ronment and perceived organizational efficacy. The findings of a recent study of Kataria, Garg & Rastogi (2013) suggest that the safe and meaningful working environments (supportive management, role-clarity, self-expres- sion, job challenge, recognition, and contribution) are positively related to work engagement, which in turn is positively related to organizational effectiveness. The results of a recent study of 106 firms carried out by Diamantidis & Chatzoglou (2011) indicate that job characteristics and workplace characteristics directly affect satisfaction and firm perfor- mance, while HR involvement has a direct impact on job characteristics and workplace characteristics and an indirect effect on satisfaction and firm performance.

Thus, productive organi- zational climate appears to be a signifi- cant indicator of organizational perfor- mance as a number of cross-level studies The Journal of Institute of Public Enterprise, V \2512016, Institute of Public Enterprise 96 have demonstrated positive relationships between organizational climate and in- dividual outcomes such as performance, satisfaction, commitment, job involve- ment, work engagement, business per- formance and as a whole organizational effectiveness.

Discussion and Direction for Future Research Previous researchers (e.g., Arthur, 1992; Huselid, 1995; Huselid & Becker,1996; Huselid, Jackson & Schuler, 1997; Harel & Tzafrir, 1999; Bae & Lawler, 2000; Bjorkman & Fan, 2002; Singh, 2003; Wright, Gardner, Moynihan & Allen, 2005; Tessema & Soeters, 2006; Wattanasupachoke, 2009) have a broad consensus that there exists a positive link between HR practices and organizational performance. The results of our review of prior research as presented in the foregoing paragraphs also indicates that HRD system as a whole and its process mechanisms like training & development, employee empowerment, job enrichment, and organizational climate in particular have positive impact on one or the other indicator of organizational performance. However, in earlier research, the mechanisms linking HRD and outcomes of organizational performance appear as fragmented and a very few prior studies attempted to establish direct causal connection between specific HRD process mechanism (sub-system) and financial performance. The review results indicate that relationship between HRD system / sub-systems and financial performance is quite less explored area of research. In fact, HRD system applies its interventions (sub-systems) as a means to achieve the goal of financial performance. A high-cost HRD program does not always result in a large performance gain, while a low-cost HRD program may result in a large performance gain and hence determining the critical performance to be attained and its value to the organization should precede the financial assessment of an HRD program (Swanson & Holton, 2009). The review of literature also reveals that a wide range of indicators of organizational performance were used in extant research. Previous researchers used both proximal (e.g., employee attitudes) and distal (e.g., quality of product / service) outcomes to assess the impact of HRD system or its specific process mechanism on organizational performance.

However, the question: “in what proportion will be the impact of HRD system or its particular component on proximal and distal outcomes?” remain unattended in prior research.

Future researchers may explore the impact of effectiveness of HRD systems on a range of outcomes, The Journal of Institute of Public Enterprise, Vol. 39, No. 1 2016, Institute of Public Enterprise 97 hypothesizing that the association would be stronger for proximal outcomes and gradually weaken as they became more distal. The results of many past studies were found exclusively on the basis of responses of HR managers. HR managers generally have a consistently more optimistic view of the effectiveness of HR practices, of HR roles and of the HR contribution than those that are generally expressed by the senior line managers. It may be argued that the views of the line managers, with their wider perspective as users of the practices or as implementers of the HRD systems may be more valid, though both HR managers and line managers help to determine the strength of the organizational climate.

In view of such an argument, it may be suggested that future studies aimed at assessing relationship between HRD systems and proximal or distal outcomes should collect data from both HRD managers and line managers. This implies that there needs to be a consensus about the effectiveness of HR practices which may be sought between line managers or perhaps more critically between line and HR managers (Guest & Conway, 2011). In fact, effectiveness of HRD systems depends on the three factors:

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