Proceedings of Applied International Business Conference 2008
IMPACT OF HR PRACTICES ON EMPLOYEE PERFORMANCE IN TELECOM SECTOR
OF PAKISTAN
Haris Bin Riazψ, Urooj Zafar Alam and Muhammad Usman Sheikh
Riphah International University. Islamabad, Pakistan
___________________________________________________________________________________
Abstract
This study examines the relationship between the HR practices and employee performance in telecom
sector of Pakistan. The data has been taken from 250 employees working in telecom sector
organizations in Pakistan through questionnaire. Findings suggest that employee performance is highly
affected by the HR practices like compensation & benefits, health & safety, and training &
development. Strategies discussing these issues have also been identified. The purpose of conducting
this research is to study the impact of HR practices on employee performance in telecom sector of
Pakistan, because there is very less research work done on this aspect in the telecom sector of Pakistan
___________________________________________________________________________________
Keywords: Training and development; Compensation and benefits; Health and safety; Employee
Performance.
JEL Classification Codes: J24; L96.
1. Introduction
The purpose of conducting this research is to study the impact of HR practices on employee
performance in telecom sector of Pakistan. Hypothesis testing method has been used for this research.
The HR practices seem to be a result of managerial assumptions about employee reactivity and
obligation toward others (Aycan, Kanunglo & Sina, 1999).Much can be learned from the experiences
of state and local HRM experiments (Hays, 2004). Research also should explore the relationship
between high-performance work practices and HR flexibility (Bhattacharya, Gibson and Doty, 2005).
Private business support agencies tend to be more accepting of the connections between training
(particularly management training) and performance than are the more skeptical community of
business managers who administer the budgets and jostle with priorities (Bryan, 2006). If a firm is
focused primarily on short term cost efficiency, its managers would be advised to invest primarily in
skill flexibility because the performance returns are likely to be more apparent (Bhattacharya, Gibson
& Doty, 2005). This article focuses on the impacts on employee performance due to the following HR
practices i.e. recruitment & selection, compensation & benefit and health & safety. Employee’s
response to the compensation practice by and large may be a reflection of their perception of other HR
practices. Other two variables also play an important role in employee performance. Employees or
human capital in any organization is the most important element of that organization. Human capital is
one of the most important factors offering organizations a competitive advantage. So the HR practices
are there to facilitate the employee and look in to the problems of their employee to achieve the desired
organizational goals in today’s fast moving world. Analyzing and solving the problems of the
employee and giving them a better environment for working in an organization is the function of the
HR departments. There are many HR practices but in this research three particular practices are
discussed.
2. Training and development
Training was viewed as a skill or ability enhancement activity in the present study and thus as a source
of influence on employee retention/turnover, several issues remain in need of further examination
(Ferris & Urban, 1984). As technology and business markets evolve at a rapid rate and as organizations
undergo continuing changes, voluntary employee learning and development will remain a critical issue
in the workplace (Maurer, 2002). The strategy of selecting OJT trainers solely on the basis of their
content knowledge and skill may not result in the quality of training that is desired (Johnson & Leach,
ψ
Corresponding author. Haris Bin Riaz. Faculty of Management Sciences, Riphah International
University. Islamabad. Pakistan. Corresponding author Email: [email protected]
Proceedings of Applied International Business Conference 2008
2001).There appears to still be a strong need for management/supervisory Development, performance
appraisal, time management, communication and interpersonal skills training programs (Cacioppe,
Lang-ford & Bell, 1990). Participation of management in the training of its own employees enabled the
consultant to assume a less dominant role and transferred much credibility and skill to individuals in
the organization (Mai-Dalton & Barnes, 1991). HR management system is the most effective form of
HR management in enhancing employee performance (Horgan & Mu¨hlau, 2006). Personal benefits of
employee training and age are significantly related to affective and normative commitment, and career
benefits of employee training and years of service are significantly related to continuance commitment
(Al-Emadi & Marquardt, 2007). HR practices are strongly related to future performance but that they
are also strongly related to past performance, suggesting caution among both academics and
practitioners in making any causal inferences (Wright, Gardner, Moynihan & Allen, 2005). High
performance human resource systems can contribute to achieving sustainable competitive advantage to
the extent that they impact on the knowledge, skills, attitudes and behaviors that form the basis of
organizational learning (Lopez, Peon & Ordas, 2005). Investment in human resources does contribute
to the bottom line so they are thus able to make a better case for a higher allocation of resources to their
function (Singh, 2004). Training has a positive relationship with awareness of rules in the work
environment, perceptions of supervisor quality and morale (Roehl & Swerdlow, 1999). Employees
interpret human resource practices and the trustworthiness of management as indicative of the
personified organization’s commitment to them (Whitener, 2001). Effective implementation of key
strategic HRM practices should be able to bring in higher levels of organizational performance (Wan,
Ong & Kok, 2002). Training and development of the employees in today’s world is very important.
This enhances the motivation level of the employees and they seem to be more committed and
dedicated to their work as a result of training and development. Hence training and development
increases employee performance.
H1: There is positive relationship between employee performance and training and development.
3. Compensation and benefits
The best people work for companies with a compelling future to offer, plus the chance to grow as
individuals, a place that offers a positive work experience and total pay including base pay, benefits,
incentives and recognition(Chen & Hsieh, 2006). To create an effective reward system, companies
need to understand where their reward dollars are being allocated (Chen & Hsieh, 2006). According to
Mercer’s survey, apart from salary increases, the most prevalent vehicles being used to reward
employees with strong skill sets are spot cash awards, project milestone awards and signing bonuses
(Hansen, 2006). Research indicates that strategic HRM practices bring higher levels of organizational
performance (Wan, Ong & Kok, 2002). Employers can use a model to achieve performance reviews
that increase employee satisfaction, reduce the likelihood of litigation and boost motivation (Posthuma
& Campion, 2008). Changes in rate of compensation have the intended effect of improving the
subsequent financial performance of establishments (Lchniowski &Delaney, 1990). Workers’
compensation represents by far the most influential governmental program for reducing workplace
fatalities (Moor & Viscusi, 1989). An increase in benefits generally reduces the likelihood that an
injury is classified in a less severe category and increases the likelihood that it involves days away from
work (Ruser, 1993). If low employment variability is a goal of a firm's business or compensation
strategy, variable pay should be present, for both the target employee groups and decision makers
(Gerhart & Trevor, 1996). The management of the compensation and benefits function is similar to the
management of other functional areas of internationally evolving firms (Toyne & Kuhne, 1983). A
firm's compensation policy can be broken into three independent dimensions for purposes of analysis The level, - The functional form, & - The composition (Baker, Jensen & Murphy, 1988). Employee
compensation is an increasingly complex area and one of critical importance to all types of
organizations (Riggs, 1989). Compensation and benefits are the things that are highly acceptable and
required for encouraging the employees and for increasing the motivation level of the employees.
Benefits may be given in form of pay i.e. extra pay or in form of other facilities that may include the
vehicle or transport facility for the employees. This also attracts employees towards work. Ultimately
the performance of the employees increases.
H2: Employee performance is positively related to compensation and benefits.
4. Health and safety
Absenteeism and productivity losses are often consequences of unrecognized and poorly managed
health conditions. Effective organizational health will decrease instances of disability, incidental
absences and productivity loss and will contribute to the overall business strategy through cost savings,
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Proceedings of Applied International Business Conference 2008
improved supplier relationships and employee satisfaction (Wolff, 2003). There was no avoiding the
need to make changes, changes which reflect the organization’s long support of consultation with
employees on health and safety which it believes can help create and maintain an effective health and
safety ’culture’ and have a positive effect on employees’ motivation and awareness of health and safety
issues (Hammond, 1997). There is mixed evidence on whether some of the cost-containment strategies,
such as disease management, are actually effective. According to HRDs, employees are generally
satisfied with their health benefits (Reddick & Coggburn, 2007). Leadership dimensions associated
with greater concern for group-members' welfare, arising from closer, indivi- dualized relationships,
promote supervisory safety practices creating higher safety climates, and hence, safer behavior.
Ordering leadership dimensions in terms of commitment to members' welfare provides a common
denominator for leadership and safety climate, encouraging further research in this direction (Zohar,
2002). This duty to carry out risk assessment extends to training scenarios and training exercises.
Importantly, the risks to the instructors as well as of trainees have to be considered (Cooper, 2000).
Employees and employers are willing to contribute to insurance and recognize the need, and that they
seek preventive care once they have it. However, there is a price threshold on both sides that needs to
be determined for the optimum investment of all parties. A model of shared-cost responsibility is an
effective way to provide affordable insurance to small-business employees, thus increasing preventive
services in these populations (Kahn et.al., 2007). This broader view highlights the importance of
linking organizational, educational, medical, technological, and regulatory strategies to enhance the
health of employees and their dependents. The emerging paradigm is broadly concerned with the
ecology of work and health (Stokols, Pelletier & Fielding, 1996). New employee orientation and
ongoing health and safety in service educational programs should provide a method where all home
health care employees have an understanding for the need of and use of agency policies (Thobaben &
Woodward, 1996).The survey was intended to assist decision-makers in identifying key workplace
issues, as perceived by employees, in order to develop strategies to address and improve the quality of
working conditions for staff within each of the individual health care organizations and the SJHS as a
whole (Krueger et.al., 2002).In the context of health system infrastructure, an adequate work
environment is key to effective delivery of health care services and can actually improve worker
motivation (Esmail, Cohen-Kohler & Djibuti, 2007).The findings from this survey should go part-way
to informing the process of defining roles and competences, as part of the wider agenda of developing
health care professionals and service provision (Hennessy, Hicks, Hilan & Kawonal, 2006). Proper
health and safety measures should be taken into account for the employees who are working in the
organization. The workplace should be clean. Proper care for the health of the employees should be
taken in order to motivate the employees to work more efficiently and effectively.
H3: Employee performance is positively related to health and safety.
Error!
Training and Development
Employee
Compensation and Benefit
Performance
Health and Safety
Figure 1: Theoretical framework
3. Research methodology
The questionnaires were distributed to 250 employees working in the telecom sector organizations. In
this survey five major players in the telecom sector were selected for collecting the data. All in all 250
questionnaires were distributed out of which 226 useable questionnaires were returned. The
questionnaires were distributed in English language which didn’t need to be translated to the
employees working in telecom organizations. The data was collected in the month of May, June 2008.
The questionnaire we administered contained three HR practices, which includes the following items:
training & development, health & safety and compensation & benefits. The model therefore consists of
three HR practices as predictor/independent variables and their effect on employee performance as
dependent variable. Respondents were asked to indicate the degree to which they agree or disagree
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Proceedings of Applied International Business Conference 2008
with the above HRM issues. All the items were measured on a five point scale ranging from 5 ‘strongly
agree’ to 1 ‘strongly disagree’.
Demographics analysis
The following frequency tables from table 1 to table 3 in demographics describe the sample distribution
of the demographics.
Table 1: Demographics profile
Age
Age Scale
Frequency
Percentage
Qualification
20-30
145
64.1%
intermediate
frequency
38
percentage
16.80%
Years experience in present organization
-1
Frequency
27
Percentage
11.94%
N= 226
30-40
42
18.5%
40+
39
17.25%
bachelors
76
33.60%
masters
112
49.50%
1+
42
18.58%
2+
68
30%
3+
89
39.30%
Table 2 representing Co-relation analysis tells the relationship among the three variables. The negative
relation shows that there is an inverse relationship i.e. one variable is increasing and the other variable
is decreasing. Positive relationship is shown by the increase in both the variables i.e. when one variable
increases the other variable also increases. More the result is near to 1 more the relationship is strong.
If it goes near negative that shows that the negative relationship is stronger. The relationship of the
three variables discussed in this, have a positive relationship with the dependent variable i.e. health &
safety, training & development and compensation & benefits are positively related to employee
performance. Thus the positive relationship depicts that if there is increase in compensation & benefits,
training & development or health & safety that would definitely increase the employee performance.
Pearson
correlation
Pearson
correlation
Table 2: Correlation analysis
performance
training
1
0.621**
health
0.726**
0.621**
0.000
1
0.752**
0.000
Health
Pearson
correlation
0.726**
0.000
0.752**
0.000
1
0.799*
0.0000
Compensation
Pearson
correlation
0.715**
0.000
0.763**
0.000
0.799**
0.000
1
Performance
Training
compensation
0.715**
.0000
0.763**
0.000
**Correlation is significant at the 0.01 level (2-tailed)
Table 3 shows the model summary of the regression analysis. Based on the model summary the value
of R square is 0.578 which shows that our variables can bring 57.8% change and the remaining 42.2%
is itself. And the independent variable (health & safety, training and development, compensation &
benefits) has the positive interdependence on the dependent variable which is performance of
employee.
Table 3: Regression model summary
R Square
Adjusted R
Square
1
0.760a
0.578
0.572
a. Predictors: (Constant), compensation, training
Model
R
233
Std Error of the
Estimate
0.363
Proceedings of Applied International Business Conference 2008
Table 4 show result from the ANOVA which size of variance explains in the studied model. The most
important value in ANOVA is F which is 101.21 .We see if the variance is significant or not. The
significance should be less than 0.05 to be significant. It should not be more than 0.05. The value of
significance in our model is 0.000 which shows that the model is valid.
Table 4: ANOVA
Sum of
df
Mean square
squares
1
Regression
3
13.326
Residual
222
0.132
Total
225
a. Predictors: (Constant), compensation, training, health
b. Dependent variable: performance
Model
F
Sig.
101.219
0.000a
Table 5 representing the coefficient table that us that how much an independent variable affects a
dependent variable. Here Beta shows an effect that an independent variable has made on the dependent
variable. The value of t in our model for training and development is 11.84, for compensation and
benefits it is 5.28 and for health and safety it its value is 4.28. The value of t is supposed to be greater
than 2 which are shown in the research.
Table 5: Coefficient table
Substandard co-efficient
Standard co-efficient
B
Std. error
beta
1.164
0.183
Constant
0.473
0.040
0.621
Training
0.390
0.074
0.412
Health
0.321
0.072
0.356
Compensation
a. Dependent variable: performance
Model
t
sig
6.360
11.84
5.286
4.280
0.000
0.000
0.002
0.000
5. Discussion and conclusion
After entering into the new millennium, one of the third world countries, like Pakistan has faced great
challenges in the development of human resource practices. There was no such trend of human
resource practices in the corporate organizations in Pakistan as compared to that in the developed
countries. Lack of HR practices has negatively affected the performance of the employees and mostly
skilled employees prefer to go abroad for the sake of benefits.
The culture of HR practices started when multi national telecom organizations entered into Pakistan
and preferred to concentrate on the human resource practices to set their challenging goals. In these
organizations employees get many benefits regarding human resource, after then the local
organizations also started following this trend of human resource practices to give more benefits to
their employees. The HR practices directly have a positive effect on the employee performance that is
shown in the above analysis. The most favorable practices followed up by these organizations are
compensation and benefits, training and development, and health and safety. In Pakistan these HR
practices are most frequently followed by the telecom sector.
If we are going to rank these practicing variables of HR then the first best practicing variable in
Pakistan is training and development .Employees usually prefer to have training on their jobs which
develop their skills and these are favorable for their future carrier .In telecom sector, employees of
information technology are practicing a lot of training in their fields as they must stay in touch with the
advancement of new technology in telecom .In MNC’s telecom companies operating in Pakistan hire
special foreign trainers which affect greatly on the effectiveness and the efficiency of the trainee.
The second best practicing variable in Pakistan’s telecom sector is compensation and benefits. Every
employee is sensitive about the compensation & benefits he gets from his job, it directly or indirectly
affects his performance .If we observe the telecom sector of Pakistan, the multinationals & private
sector telecom organizations are giving much better compensation plans as compared to the other
public sector telecom organizations. So the performance of the private sector telecom organizations is
much better than the public sector telecom organizations.
Then the third best practicing variable preferred here is health and safety. Although in Pakistan many
companies in co-operate sector do not practice it so much but in telecom sector of Pakistan this practice
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Proceedings of Applied International Business Conference 2008
is having so much importance, as it reflects the performance of the employee specially the practices
like health precautions, medical facilities, smoke free zones, and other miscellaneous safety measures.
This is important so that the employee has no stress about his health & safety and his all efforts are for
the organization.
Therefore in Pakistan the credit goes to the telecom sector (especially in Multi-national) in the
development of human resource practices, which can be set as a role-model for other organizations in
the country.
The value of R square is 0.578 which shows that 57.8% variation in dependent variable is caused by
independent variable which is quiet a significant value. Similarly the value of F is 101.21 and
significance 0.000 also supports our research model and hypothesis.
One of the goals of the present study was to test that to what extent the three HR practices were
affecting the employee’s performance. Regression analysis had been done to get the results. The basic
purpose of the regression analysis is to check that how much effect does the dependent variable makes.
This article deals with the three independent variables of HR practices, which are training &
development, compensation & benefits and health & safety. The three HR practices altogether explain
about 57.8 per cent of the variation in dependent variable caused by independent variables. Generally
speaking, we found reasonably good support for the propositions of our model. This may suggest that
more the HR practices are in place, the more employee performance would be up to the standard. These
findings are in lined with the predicted relationships and thus support our model.In this research we
have found that the relationship between employee performance and health & safety is positive. This is
in relation to the hypothesis (H3) that we developed. This positive relationship shows that when proper
health and safety measures are given to the employees, that decreases their absenteeism, reduces
burnout and ultimately increases the employee performance to achieve the organizational goals. This
research shows that there is a positive co-relation between compensation & benefit and employee
performance which is also in relation to the hypothesis that we had developed. When employees are
given compensation and benefits, those may be in a form of additional pay, or a vehicle or vehicle
allowance that ultimately increases the motivation level of employee which consequently increases the
employee performance.
Similarly, a positive relation has been found between training & development and employee
performance. When employees are trained properly, their self esteem, interest in job and motivation
level increases. Which ultimately increases the employee performance, which is what we had
formulated in our hypothesis?
6. Regression analysis of Pakistani telecom companies
Now comparing the telecom companies with regard to HR practices and employee performance in the
leading telecom companies of Pakistan i.e. Telenor, Mobilink (Orascom), U fone and Zong.
Model
( Constant)
Training
Health
R square =0.777
N=36 Sig= .000
Table 6: TELENOR model Summary
Beta
t
…
2.794
0.094
5.685
0.636
10.243
Adjusted R square=0.756
F=37.22
Dependent variable = performance
Sig...
0.009
0.000,
0.000,
Table 7: MOBILINK model summary
Model
Beta
t
Sig...
( Constant)
…
2.716
0.009
Training
0.694
6.747
0.001
Health
0.763
8.01
0.000,
Compensation
0.746
4.169
0.000,
R square =0.687 Adjusted R square=0.667
F=34.45
N=51
Sig= .000
Dependent variable = performance
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Proceedings of Applied International Business Conference 2008
Table 8: WARID model summary
Model
Beta
t
( Constant)
…
2.578
Training
0.154
0.914
Health
0.538
2.801
Compensation
0.652
5.571
R square =0.554 Adjusted R square=0.521 , F=16.56 , N=44 ,
Dependent variable = performance
Sig...
0.000.
0.000,
0.008
0.000,
Sig
Table 9: U.FONE model summary
Model
Beta
t
( Constant)
…
3.125
Training
0.275
1.438
Health
0.648
5.11
Compensation
0.231
1.283
R square =0.513 Adjusted R square=0.470 F=11.91 N=38 Sig =.000
Dependent variable = performance
Table 10: ZONG model summary
Model
Beta
t
( Constant)
…
3.168
Training
0.463
3.871
Health
0.216
1.296
Compensation
0.485
2.949
R square =0.416 Adjusted R square=0.383 F=12.6 N=57 Sig= .000
Dependent variable = performance
=
.000
Sig...
0.004
0.001
0.002
0.000,
Sig...
0.003
0.002
0.000,
0.001
In the analysis of regression the R2 value is the most important one. The value of R square indicates
that what percentage of variance in dependent variable (which is performance) is caused by
independent variable .The bigger the percentage of variance, higher is the affect of independent
variable over dependent variable.
In this all analysis telenor has the highest value of R square i.e.0.777 that shows 75% of variance in
performance is caused by health & safety, training & development, and compensation & benefits.
Comparison of co-relation analysis
TELENOR
Training
Health
Compensation
.698
.869
.816
PERFORMANCE
MOBILINK
UFONE
(ORASCOM)
.694
.649
.753
.648
.821
.622
WARID
ZONG
.624
.732
.652
.463
.556
.629
In comparison we can divide telecommunication sector in two blocks.
Block A : Telenor, Mobilink (Orascom).
Block B : Ufone, Warid, Zong.
Our analysis conclude results that Block A is practicing the best HR practices in Pakistan telecom
sector. If we analyze the variables co-relation in Block A, we will see that in training sector telenor has
the best practice which shows 0.698 correlations with employee performance and mobilink is very
close to the figure of it i.e. 0.694. So these both institutions have the best training policies and
strategies.
In Health sector again telenor is performing the best practices. The correlation of health & safety with
respect to employee performance comes out to be .869. As we compare mobilink with telenor,
mobilink correlation of health & safety with respect to performance comes to be 0.753.
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Proceedings of Applied International Business Conference 2008
Now coming towards the compensation & benefits that is the third variable of HR practices. Here,
Mobilink is leading and having 0.821 correlations with respect to employee performance, here telenor
is very close to it i.e. 0.816. So overall the Block A: Telenor and Orascom are playing as benchmarks
for others in the telecom sector of Pakistan. This shows that telenor is leading from the front in HR
practices.
In Block B the HR practices are practiced low as compared to the Block A, Warid is performing good
in health & safety department, Ufone is performing well in training and health departments and when it
comes to Zong, it is a new company and still it is good in accommodating its employees with their
compensations.
6. Conclusion
Research and findings from the facts and figures concluded that the impact of the human resource
practices have a positive affect on the employee performance in the telecom sector of Pakistan. The
trend of HR practices in telecom sector of Pakistan is the role model for the other co-operate sector
organizations of Pakistan as it has greatly affected the performance of the telecom sector employees,
especially due to training and development, health and safety, and, compensation and benefits.
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