The Role Of Human Resource In Organizational Performance
The study examined the relationship between human resource management and organizational performance of microfinance banks in Lagos State. The study surveyed three microfinance banks in Lagos State namely Reliance Microfinance Bank, Lapo Microfinance Bank and VFD Microfinance Bank. It was established that human resource management is a strategic approach to the effective management of employees in an organization, so they could boost the performance of an organization. Four human resource practices were reviewed. Recruitment and selection is aimed to improve the fit between employees, organization, team and work requirement. Three theories were reviewed namely contingency, AMO and resource-based theories.
The study made use of primary data. Descriptive statistics and correlation analysis were used to analyze the data.
The findings showed that employees unanimously agreed that their organization performed remarkably well with respect to profitability, market share, employee performance and customer satisfaction. Also, respondents generally agreed that human resource practices are well carried out in their organization. More importantly, the findings are outlined as follows: There is substantial relationship between recruitment and selection and profitability of microfinance banks in Lagos State (r=0.812; p<0.05).; There is robust relationship between training and development and market share of microfinance banks in Lagos State (r=0.782; p<0.05).; There is significant relationship between compensation structure and customer satisfaction of microfinance banks in Lagos State (r=0.834; p<0.05).; There is strong relationship between performance appraisal and employee performance of microfinance banks in Lagos State (r=0.904; p<0.05).
The study concludes that human resource management has positive and strong connection with organizational performance. The study recommended tat; Microfinance banks should pursue strategic and purposive human resource management strategies that will improve the quality of human resource- employees, in their respective organizations; The management leadership of selected microfinance banks should see investment on human capital as the only channel to improving the performance and productivity of employees; Microfinance banks should articulate their human resource strategies clearly, if possible explicitly in codified form. Human resource strategies should be given the seriousness it deserves by ensuring that human resource policies are well-enunciated, only trained professionals should handle human resource issues and that procedure should be fully understood by employees.
1.1 Background to the Study
Human resource management is concerned with the supervision and controlling of employees so as to enhance organizational performance. Human resource management covers such practices such as human resource planning, recruitment and selection, training and development, compensation management and performance appraisal (Osibanjo, Kehinde & Abiodun, 2012). According to Benjamin and Anthony (2014), human resource management practices are accepted to be the basic constituent of organizational procedure. In such manner, organizations need wise, instructed, skilled, committed and assiduous employees to build a way for boosting the performance of their organizations. Human resource management generally implies embarking on activities that supervise, counsel, instruct and empower employees in order to enhance their competence, harness their potentials and to encourage the organizational destinations (Khan & Kamar, 2016).
Organizational performance is an indicator that measures how well an organization accomplishes its objectives. Organizational performance as pointed by Caliskan and Nemli (2010) focuses on quality of administration, advancement of administration, fulfillment of employees and representative relationship. Literature on the subject matter revealed that human components of the organization are those equipped for learning, changing, enhancing and giving the innovative push which if legitimately roused can guarantee the long haul survival of the organization (Danlami, 2012). Based on this, human resources have been recognized to be both profitable and advantageous. Human resources examined the practices utilized by an organization to deal with its human resources and how it can affect numerous organizational results.
Human resource management practices are liable of organizational performance in precisely selecting and training, rewards and compensation and incidental advantages, obliged aptitudes to seek after the system viably and the assessment of performance of the employees. Human resource management can be depicted as a key, coordinated and recognized way of dealing with the occupation, growth and development of employees. It has a solid reasonable premise drawn from behavioral sciences and from key management, human capital and mechanical relations speculations. Human resource management is the approaches, practices and frameworks that impact on the conduct, states of mind and performance of employees (Fahad & Nadeem, 2015). Parallel to the understanding that human resource is fundamental for an organization; human resource management capacity is increasingly going up in organizational pecking order. Human resource management intends to guarantee that the organization gets and holds the talented, conferred and appropriate workforce it needs for enhanced performance.
Contemporary organizations are constantly undergoing the pressure to improve their service delivery and productivity. The precariousness of the external environment and the rapid rate of technological advancement increasingly requires innovative means of improving business performance in totality and as well as having a competitive advantage over rival firms. People are recognized as the core determinants of competitive advantage and the need for effective manpower management has become more important than ever before. The task of effective human resource management in the 21st century has gone beyond the human resources department of an organization alone. The task of exploring and harnessing the potentials of people in an organization for maximum performance is now being faced by senior managers, line managers and human resources professionals. However, organizations are facing the challenges of providing an ideal occasion for diverse human resource practices to prove its ability to contribute towards organizational performance and to particularly enhance the performance of human resource (employees).
Human resource in organizations in this present century is seen has been a vital component in the enhancement and sustenance of employees’ performance (Bowen, 2014). Human resources practices are believed to affect knowledge, skills, attitudes, abilities and behaviour of employees, which further affects the performance of an organization. Research has showed that human element is an important asset organizations must possess to gain competitive advantage in the industry where they are operating. Research further evidenced that human resource plays a decisive role in employee performance as well as organizational performance (Dietz & Boon, 2013; Conway & Shanna, 2015).
1.2 Statement of Problem
Human resource practices are inappropriately implemented in most Nigerian private and public organizations (Onyeama, 2014). There are evidences of impartiality in human resource management practices in most Nigerian organizations (Kolawole & Komolafe, 2013). The high rate of employee turnover and low employee retention could be attributed to poor utilization of human resource practices in Nigerian organizations. The cases of impartiality and nepotism in recruitment and selection process, poor remuneration, biasness in performance appraisal review, management’s little or lack of interest in the progression of their staff, rigid work arrangement and non-involvement of employees in the decision-making process further confirms the unhealthy practices of human resource in most Nigerian organizations. Unhealthy human resource practices de-motivates staff, which results in dwindled employee’s productivity, consequently resulting in poor organizational performance as it is believed that employees are the lifeblood of any organization.
The impact of human resource management practices on organizational performance has been broadly researched. Numerous studies from developing and developed countries showed that human resource management practices have tremendous impact on organizational performance (Fadugba, 2008; Onyema, 2014; Naftal, 2015; Khan & Kamal, 2016). Virtually all studies on the subject matter concentrated on the manufacturing firms, oil firms, government agencies, telecommunication firms, construction firms and deposit money banks. There is paucity of studies as regard textile industry, microfinance banking sector, real estate firms, agro-allied industry, educational sector and health sector in literature. Since institutional factors and manner of practices of human resources vary across sectors, it is imperative to conduct study in these uncovered areas to determine whether findings would corroborate established outcomes.
1.3 Objectives of the Study
The broad objective of the study is to examine the role of human resources in the organizational performance of selected microfinance banks in Lagos State.
The specific objectives are:
- To assess the relationship between recruitment and selection and profitability of selected microfinance banks in Lagos State.
- To determine the relationship between training and development and market share of selected microfinance banks in Lagos State.
- To explore the relationship between compensation structure and customer satisfaction in selected microfinance banks in Lagos State.
- To find out the relationship between performance appraisal and employee performance in selected microfinance banks in Lagos State.
1.4 Research Questions
Based on the research objectives, the study attempted to provide robust answers to the following questions:
- How does recruitment and selection process affect profitability of selected microfinance banks in Lagos State?
- To what extent does training and development contribute to market share of selected microfinance banks in Lagos State?
- How does compensation structure affect customer satisfaction in selected microfinance banks in Lagos State?
- To what extent does performance appraisal affect employee performance in selected microfinance banks in Lagos State?
1.5 Research Hypotheses
In order to make valid conclusions about the specific objectives of the study, the following hypotheses were stated:
H01: There is no significant relationship between recruitment and selection and profitability of selected microfinance banks in Lagos State.
H02: There is no significant relationship between training and development and market share of selected microfinance banks in Lagos State.
H03: There is no significant relationship between compensation structure and customer satisfaction in selected microfinance banks in Lagos State.
H04: There is no significant relationship between performance appraisal and employee performance in selected microfinance banks in Lagos State.
1.6 Operationalization of Variables
Human resource (X), the independent variable, is captured by four variables namely recruitment and selection (x1), training and development (x2), compensation structure (x3) and performance appraisal (x4).
On the other hand, organization performance (Y), the dependent variable, is surrogated by four variables namely profitability (y1), market share (y2), customer satisfaction (y3) and employee performance (y4). Connecting the variables in the specific objectives, we have:
Specific objective One: Recruitment and Selection and Profitability
y1= f(x1)… … (1.1)
Specific objective Two: Training and Development and Market Share
y2= f(x2)… … (1.2)
Specific objective Three: Compensation Structure and Customer Satisfaction
y3= f(x3)… … (1.3)
Specific objective Four: Performance Appraisal and Employee Performance
y4= f(x4)… … (1.4)
1.7 Scope of the Study
The study is streamlined to three microfinance banks in Lagos State namely Lapo Microfinance Bank, Epe; VFD Microfinance Bank, Lagos State and Reliance Microfinance Bank, Ikeja. These banks were used as case studies because of their prominence in the Nigerian microfinance banking sector with respect to quality of management, customer confidence, brand and reputation. The unit of analysis is employees of selected microfinance banks at junior, middle and senior level positions. The population of the study comprised 268 employees of selected microfinance banks. However, the sample size of the study comprised 208 employees of selected microfinance banks after applying the Taro-Yamane sampling determination formula. The study also applied the proportional sampling technique to determine the number of employees to be selected in each microfinance bank. Based on this, the 63 employees are sampled in Lapo Mfb; 48 employees in VFD MfB and 97 employees in Reliance MfB. The time horizon of the study would last for 9 months in the 2018/19 academic session.
1.8 Significance of the Study
The study provides insight to microfinance banking sector in Nigeria on the effect of the human resource on performance indicators, thus enabling them to take necessary action to improve overall organizational performance.
The management of Reliance Microfinance Bank would find this study informative and useful in their daily operations. The study would inform the senior management about the appropriate utilization of human resource practices in their activities.
Other Microfinance Banks would also find this study enriching as it would provide the appropriate combination of human resource practices that would spur organizational performance.
The study would enable government more specifically, the Ministry of Finance, to develop and implement human resource management policies that are favorable to microfinance banks in Nigeria.
The study paves the way for other researchers embarking on further studies on the subject matter. The study through its findings would add to the increasing body of theoretical and empirical knowledge in human resource management field in particular, and serves as a body of reserved knowledge that can be consulted by other researchers
1.9 Historical Perspective of the Study Areas
Reliance Microfinance Bank, Ikeja, Lagos
Reliance Microfinance Bank Limited, a member of the Reliance Group was incorporated on October 20th 2015, as a private limited company but obtained license from Central Bank of Nigeria on February 3rd 2016, to carry out microfinance banking business in Nigeria. Reliance MFB is primarily a financial service institution for the unbanked to contribute positively to the country’s economic development by facilitating financial inclusion. The Bank is well-positioned to support entrepreneurship and empowerment of the economically disadvantaged individuals, micro, small and medium scale enterprises in achieving their financial goals.
Lapo Microfinance Bank, Epe, Lagos
Lapo Microfinance Bank is a pro-poor financial institution committed to the social and economic empowerment of low-income households through the provision of access to responsive financial services on a sustainable basis. The institution was established in the late 1980s, as a Non-Governmental Organization by Godwin Ehgiamusoe in response to the effects of the implementation of the Structural Adjustment Programme (SAP) in 1986. In 2010, Lapo MfB obtained the approval of the Central Bank of Nigeria to operate as a state microfinance bank and in 2012, it got an approval as a national microfinance bank.
VFD Microfinance Bank, Lagos Island
VFD MfB is a dynamic, Lagos-based financial services institution operating in the microfinance banking sector. VFD MfB is in the business of helping its customers achieve their desires, solve intermittent problems and create wealth through high yield savings account and low interest rates on loans. VFD MfB is a limited liability company, regulated by the Central Bank of Nigeria as a microfinance bank.
1.10 Definitions of Operational Term
This refers to salaries, commission, fringe benefits, allowances, bonuses and other financial and non-financial rewards, employees are entitled to.
This refers to the measurement of employees’ performance on the basis of objective and quantifiable results.
Recruitment and Selection:
This refers to the inflow of chosen skill aimed at enhancing the human resources capabilities of an organization.
Training and Development:
This refers to the tool to develop the knowledge and skills of employees with the aim of improving their performance.
This refers to the extent to which an organization accomplishes its designated objectives.
This refers to the capacity of an organization to make profits.
This refers to the proportion of revenue of a company to the revenue of other companies in the same industry.
This refers to the extent to which customers are pleased with the products and services of an organization.
This refers to the extent to which employee are accomplishing the tasks assigned to them. Employee performance indices include productivity, competence, effectiveness and efficiency.
This refers to the people who make up the workforce of an organization, business sector or economy. Human capital is interchangeably used with human resources, although human capital typically refers to a more narrow effect, i.e, the knowledge of individuals and economic growth.
The Role Of Human Resource In Organizational Performance
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Frequently Asked Questions
What is the role of the human resource professional in organizations?
Traditionally the role of the Human Resource professional in many organizations has been to serve as the systematizing and policing arm of executive management. Their role was more closely aligned with personnel and administration functions that were viewed by the organization as paperwork.
What are the objectives of Human Resources Management in organizations?
Mostly, organizations are focused on the market to put their goals in their performance. The comprehension of the objectives will be attained through the human resources management in organizations. Workforce is the entry to success, will facilitate the accomplishment of organizational performance.
How important is HRM for organizational performance?
Organisational performance is measured by various methods. It helps the organisation to be competitive in the market. HRM are the medium for keeping organisation going in right track. In this paper, study has been made on HRM and practices. How important is the management of human resources to achieving organizational performance?
What are the human resource management practices?
Human resource management practices are able to create organizations that are characterized by intelligence, flexibility and competence compared to their rivals. These organizations apply policies and practices of recruiting, selecting, training skilled employees.
What is the importance of strategic human resource management?
Strategic human resource management is important because it aligns company culture and management with the needs and desires of consumers and employees. This often helps companies run more efficiently and improve their daily operations and employee satisfaction. When companies effectively implement strategic human resource management practices