How Does Successful International Human Resource Management Contribute to Organisational Performance?

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(I)HRM - Performance link

The link between HRM and performance has been examined in many studies so far. But before the link can be classified, it is necessary to take a brief understanding on the meaning of “Organizational performance”.

Diversity in literature, definitions of “organizational performance” were provided in various meaning overtime. Georgopoulos & Tannenbaum (1957) defined OP as "a social system" that constituted by work, employees, and organizational structure to help organization fulfilled their goals. Later in 1960s, OP was viewed as "organization's ability" to exploit and use effectively its limited resources (Yuchtman & Seashore, 1967: p. 379). In 1980s and 1990s, OP was realized to be more complex than initially considered, organizational profit became one of essential components when assessing OP (Lusthaus & Adrien, 1998). Today, definition of OP is expanded and can be identified differently depending on organizations. It can be financial and nonfinancial indicators, which offer information on different level of organizational achievements (Lebans & Euske 2006). It can also be a casual model that illustrated operational efficiency of the business etc. Nevertheless, to OP, 1) Financial and Market performance, 2) Operational Performance, and 3) Employee attitude and behavior are main categories that have to be mentioned

In term of reasons why human resource practices can influence organizational performance, Saratoga Institute (1994), took a view that Human resources is a business function, a cost to be minimized, and a potential source help to attain business performance. So HR practices, which related to the efficiency of using human resources will create economically significant effects on a firm's performance. Barney (1986), in other hand, considered HRM as organizational competitive advantage. According to the resource-based view of the firm (Barney, 1986), firms can develop sustained competitive advantage based on either traditional sources as natural resources, technology, economies of scale, etc. or human resource, in which HR considered as especially important source (Lado & Wilson, 1994). HRM practices are dependent systems. They consist of policies, and involved in all activities of organization. They are developed over time and cannot be simply purchased in the market by competitors.

There have been many studies point out positive links between HRM and OP, in different sectors. In 1995, Huselid demonstrated that High Performance Work Systems have major contribution for the increasing of productivity and financial performance, as well as leading to lower turnover (Huselid, 1995). MacDuffie (1995) examined 62 automotive plants in US conclude that team-based work systems, high commitment with HR practices, and low inventory worked together to improve organizational performance. Delaney and Huselid (1996), in their research noted that HRM practices including staffing, training, and incentive compensation are positively relates to organizational performance (with the financial results gained 30 % higher compared to other banks). Ichniowski and Shaw (1999), after comparing 41 steel companies operating in US and Japanese has found that Japanese's HR practices (that includes problem-solving teams, extensive orientation, employee training, employment security, and profit sharing) help to bring higher performance for Japanese companies in average compared to US companies. Macky and Boxall (2007) explored that higher levels of HR exposure lead to higher level of job satisfaction, and organizational commitment, which create indirect affects to improve financial and organizational performance.

It can be seen that HRM and its practices have positive links to various categories of organizational performance. Summing up all makes a convincing reason for the importance of HRM. In the next part, 2 among 5 main HR practices including Training and Reward will be further studied in order to clarify contributions of these practices for OP

Training and Development

Training and Development is not a strange definition in today's business life. Its definition appeared in the very first Glossary of Training Terms, defied T&D as "the systematic development of the attitudes/knowledge/skill behavior patterns required by an individual in order to perform adequately a given task or job" (Department of Employment, 1971). Goldstein (1992) added a perspective for the purpose of T&D is "improving organizational performance". According to The UK Department for Employment and Learning, T&D is "the sort of thing" that organizations should be interested in, based on its major contribution for the success of organizations

Reviewed in literature, many studies have found the connections between T&D practices and different measures of organizational performance.

Ahmad and Schroeder (2003) studied the effects of training (that include job skills training and training in multiple functions) on organizational performance at total 107 companies in USA, Japan, Germany and Italy. Their results showed significant efforts that Japanese companies have put on Training helped to receive higher performance compared to Germany and Italy. They also concluded that Training played important roles to improve employees’ commitment (r = .52**), through which impacted positively on operational performance (r = .37**) (Ahmad & Schroeder, 2003). Also study relationship between T&D and OP, María, Daniel, and Raquel (2014) stressed on the mediating role of organizational learning. In this study, 3 authors used sample of 832 Spanish companies, and measured performance through Return on assets, Profit per employee, Profit margin, and Return on equity. The results showed a clear effect of T&D on organizational learning (β = 0.130, p productivity (value add per employee) in 290 firms in France and Sweden. Result showed T&D led to improve Rate of Return 288% for France and 441% for Sweden. This high rate of return in productivity is signal that may imply high performance (Ballot, Fakhfakh & Taymaz, 2001).

In specific companies, in 2013, a group of Independent Researchers has examined the importance of training for school’s teachers and analyzing its impacts on organizational performance in Private School - Azad Kashmir - Kotli, a school from Kotli AJK district, Pakistan. Organizational performance was measured through Quality Of Services, Development Of New Services, Employee Attraction Ability, Trustful Relationship, Increased Market Share, Better Standing, and Goal Setting. The authors concluded that