CHAPTER ONE
INTRODUCTION
1.1     BACKGROUND OF THE STUDY
The management of people within the organisation has become an increasingly recognized important focus for researchers and practitioner over the past 20 years. Organisations are becoming more aware of important role human resource play in the success of their organisations to achieve financial performance. As a result, organisations are becoming more employee-centric by focusing on enhancing employees’ engagement and organisational commitment
It is important for organisation to adopt human resources management (HRM) system that optimizes workforce as it enables organisation to achieve competitive advantage in today’s global market economy that provides wider access to technology, finance and other resources. Pfeffer (1994) stated that firms have increasingly recognized the potential for their peopleto be a source of competitive advantage. Creating competitive advantage through people requires careful attention to the practices that best leverage these assets. According to Nishii, (2008) scholars generally agree that appropriately designed, Human resources management practices can enhance organizational performance. Related theories suggesting and supporting assumption holds that the practices of Human Resources Management influences employees attitudes and behaviours.
Human Resource Management is an invisible asset in an organisation. It creates value when embedded in the operational system that enhances organisational performance and ability to deal with turbulent environment. Effective HRM assists in developing human resources into high quality and efficient workforce thus enabling the organisation to obtain a competitive advantage through their people. In contrast, inefficient workforce can increase labour cost and decrease organisation productivity. However, in order to remain competitive, grow and diversify, an organisation must ensure that its employees are qualified, placed in appropriate position, properly trained, managed effectively and committed to the firm’s success. The goal of HRM is to maximize employees contribution in order to achieve optimal productivity and effectiveness while simultaneously attaining individual objective (such as having a challenging job) and obtaining recognition) and societal objectives (such as legal compliance and demonstrating social responsibility).
Human resource dimensions or practices (training, recruitment, reward system performance appraisal etc) have considerable impact on the performance of organizations and these contribute to the affirmative link between human resource management and organizational performance (Osman, 2012).
Training is a flexible way to develop an employee as it consists of both formal and informal ways to enhance the effectiveness and efficiency of employees (Ellstrom, 2011). Job security increases employees’ honesty, keeps employees committed to the organization and provides security to valuable information as well (Raji and Jackson, 2011). Reward system is imposed on organization to evaluate reward and organization reward employees on the basis to get value by elaborating what they have spent and what they have got (Armstrong, 2011). Employee performance can be evaluated by the evaluation of task and reward system. Employee performance is one that is affected by the knowledge transfer that helps employee to develop their understanding of networking as well as focusing on the organizational performance.
Organizational performance is related to organizational justice which allows employees to get committed to task assigned to him or her. HRM dimensions greatly influences the employees attitude which in turn affects employees’ performance. If HRM system works effectively, then increase in the organizational performance will be seen (Snape and Redman, 2010). Competitive advantage is viewed as a source of competitive advantage is a must for any organization and employees are always viewed as source of competitive advantage for any organization (Barney, 1991; Pfeffer, 1994). So, human resource management must be made in such a way that can utilize employees in the best possible way to increase performance of organizations.