The Islamic University – Gaza
Deanery of Higher Studies
Faculty of Commerce
Dept. of Business Administration
The Strategic Impact of Human Resource
Management Practices on Business Performance of
Manufacturing Firms in Gaza Strip
Prepared by
Ashraf Akram Eleyan
Supervised by
Dr. Sami Ali Abu-Ross
A Thesis Submitted In Partial Fulfillment of the Requirements for the Degree of Master of
Business Administration
November, 2010
I
Dedication
I dedicate this study to my beloved mother whose love,
care, and support, inspired me to reach thus far.
I dedicate this study to my father who has always loved
and supported me, not only during this study, but also
throughout all my life
I dedicate this study to my beloved life partner, my wife,
and our children (Akram and Ayham)
I dedicate this study to my beloved brothers and sisters
I dedicate this study to those who prayed for me and
encouraged me to accomplish this mission, my parents in
law.
II
ACKNOLEDGEMENT
To complete this study, a lot of time and effort had been spent to arrive at this final
product which culminated in the compilation of this thesis. During my studies, I
was gratefully provided with invaluable assistance and advice from my academic
staff, which made this study possible to complete. Therefore, I would like to take
this opportunity to express my deep gratitude to all those who have helped to bring
this research to light. Amongst those, I would like to single out, with great
appreciation and thanks, my supervisor, Dr. Sami Abu-Ross, whose contribution
has greatly enhanced the quality of the material contained in this thesis.
I would also like to thank Professor Yousif Ashour and Dr. Nehaya EL-Telbani for
their comments and discussion of this thesis.
I would also like to express my thanks to Dr. Saif El-Dien Odah for his
contribution in reviewing and validating my statistical findings.
Also thanks are owed to those professors whose tuition during the MBA program
has greatly enhanced my knowledge and ability to come up with this work.
I would also like to thank my colleagues in the MBA program for their
encouragement, support, and friendship.
Finally, I would like to thank my father-in-Law, Dr. Ramadan Al-Omari, whose
editing of this thesis has added great value to its contents.
III
Table of Contents
Title
Page
Dedication
I
Acknowledgment
II
Table of Contents
III
List of Tables
VI
List of Figures
VIII
Abstract
IX
Chapter One: The Research General Framework
Introduction
2
Problem Statement
3
Research Hypotheses
3
The Research Model
4
The Research Variables
5
The Research Objectives
6
The Research Importance
6
Chapter Two: Literature Review
Section One: The Concept of Human Resources Management
Introduction
9
Human Resource Management (HRM) Practices
11
Evolution of HRM
12
Aims of HRM
14
HR Management Roles
15
Human Resource Management Functions
16
Section Two: HRM Dimensions of the Research
Introduction
21
HR Planning
21
Training And Development (T&D)
25
Performance Appraisal
29
IV
Compensation
33
Section Three: Organizational Performance
Introduction
37
Operational Performance
39
Non-Financial Performance
42
Financial Performance
42
Consequences of HRM Practices
43
Section Four: Manufacturing Industry in Gaza
Introduction
47
Definition of Manufacturing
48
Classification of the Industrial Sector
48
Basic Features of the Palestinian Industrial Sector
49
Basic Features of the Palestinian Economy
50
The Importance of Manufacturing Industry in the Occupied Palestinian Territory
53
Chapter Three: Previous Studies
Introduction
56
Palestinian (Local) Studies
56
Arabic Studies
62
Foreign Studies
70
General Commentary on Reviewed Studies
83
Chapter Four: Research Design and Methodology
Section one: Methodology and Procedures
Introduction
86
Research Methodology
86
Research Population
86
Inclusion and Exclusion Criteria
86
Research Sample
87
Data Collection
88
Questionnaire Design
89
V
Section Two: Testing of Research Tool
Introduction
91
Data Analysis
91
Validity of Questionnaire
92
Reliability of Questionnaire
100
Chapter Five: Data Analysis and Hypotheses Test
Introduction
102
Descriptive Analysis of the Sample Statistics
102
Data Analysis
107
Hypotheses Test
130
Chapter Six: Conclusions and Recommendations
Introduction
149
Conclusions
149
Recommendations
154
Future Researches
156
References
157
Annexes
166
VI
List of Tables
Tables
Table Title
Page
No.
Table (2.1)
Stereotypes (difference) of personnel management and human resource
management
14
Table (2.2)
HR Management Roles
15
Table (2.3)
Summary of the key sectors situation during three different periods
52
Table (2.4)
Industrial decline in Gaza
53
Table (2.5)
Number of Institutions in Operation and employees in the Palestinian
Industry sector
54
Table (4.1)
Sample size and distribution
88
Table (4.2)
Correlation Coefficient of each Paragraph of Human Resource Planning
(HRP) and the Total of this Field
93
Table (4.3)
Correlation Coefficient of each Paragraph of Compensation and the Total
of this Field
94
Table (4.4)
Correlation Coefficient of each Paragraph of Performance appraisal and
the Total of this Field
95
Table (4.5)
Correlation Coefficient of each Paragraph of Training & Development and
the Total of this Field
96
Table (4.6)
Correlation coefficient of each paragraph of ―Operational performance‖
and the total of this field
97
Table (4.7)
Correlation coefficient of each paragraph of ―Non-Financial Performance‖
and the total of this field
98
Table (4.8)
Correlation coefficient of each paragraph of ―Financial Performance‖ and
the total of field
99
Table (4.9)
Correlation coefficients of each field and the whole of questionnaire
99
Table (4.10)
Cronbach’s Alpha for each filed of the questionnaire and the entire
questionnaire
100
Table (5.1)
Age distribution of respondents
102
Table (5.2)
Education level of respondents
103
Table (5.3)
Position distribution of respondents
104
Table (5.4)
Seniority distribution of respondents
104
Table (5.5)
Number of employees in firms (firms size)
105
Table (5.6)
Distribution due to Years of operation
105
Table (5.7)
Distribution due to Industry type
106
VII
Table (5.8)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―HR Planning‖ field
108
Table (5.9)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―Compensation‖ field
110
Table (5.10)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―Performance Appraisal‖ field
112
Table (5.11)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―Training & Development‖ field
114
Table (5.12)
Average, Weight, Sign Test and significance of each construct of ―HRM
Practice”
116
Table (5.13)
Percentages of each item alternatives, Average, Weight, Sign Test and
significance of each item of ―Product Quality ” field
117
Table (5.14)
Percentages of each item alternatives, Average, Weight, Sign Test and
significance of each item of ―Product Cost ” field
118
Table (5.15)
Percentages of each item alternatives, Average, Weight, Sign Test and
significance of each item of ―Delivery ” field
119
Table (5.16)
Percentages of each item alternatives, Average, Weight, Sign Test and
significance of each item of ―Flexibility ” field
120
Table (5.17)
Average, Weight, Sign Test and significance of each construct of
―Operational Performance”
121
Table (5.18)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―Non-Financial Performance” field
122
Table (5.19)
Percentages of each item alternatives, Mean, Weight, Sign Test and
significance of each item of ―Financial Performance” field
124
Table (5.20)
Correlations between HRM practices and operational performance
127
Table (5.21)
Model Summary
129
Table (5.22)
ANOVA
130
Table (5.23)
The Regression Coefficients
131
Table (5.24)
Correlations between HRM practices and non-financial performance
132
Table (5.25)
Model Summary
135
Table (5.26)
ANOVA
135
Table (5.27)
The Regression Coefficients
136
Table (5.28)
Correlations between HRM practices and financial performance
137
Table (5.29)
Model Summary
139
Table (5.30)
ANOVA
140
Table (5.31)
The Regression Coefficients
140
Table (5.32)
Kruskal-Wallis test and their p-values for personal traits
142
Table (5.33)
Mean rank for each group of age
142
VIII
Table (5.34)
Kruskal-Wallis test and their p-values for personal traits
143
Table (5.35)
Kruskal-Wallis test and their p-values for personal traits
144
Table (5.36)
Kruskal-Wallis test and their p-values for personal traits
144
Table (5.37)
Kruskal-Wallis test and their p-values for company information
145
Table (5.38)
Kruskal-Wallis test and their p-values for company information
146
Table (5.39)
Kruskal-Wallis test and their p-values for company information
146
Table (5.40)
Kruskal-Wallis test and their p-values for company information
147
List of Figures
Figures
Figure Title
Page
No.
Figure (1.1)
Research model
4
Figure (2.1)
Relation between organizational strategy, Strategic HRM, and
Competitive Advantage
11
Figure (2.2)
Human Resource Management Functions
16
Figure (2.3)
Model of a Training system
26
Figure (2.4)
Levels of Training Needs Assessment
27
Figure (2.5)
the common rater errors
33
Figure (2.6)
Components of total compensation program
34
Figure (2.7)
Business Performance classification
39
Figure (2.8)
Per capita GDP in West Bank and Gaza, 1997-2008
47
IX
The strategic impact of Human Resource Management practices on Business performance
of manufacturing firms in Gaza strip
ABSTRACT
This research aims to assess the impact of certain human resource management practices on the
operational, non-financial, and financial performance of manufacturing firms in Gaza Strip. This
research considers the linkage between business performance and the following human resource
management practices: (1) Human resource planning (2) performance appraisal, (3) training and
development (4) compensation policies.
This research surveyed top and middle management of a simple random sample of Palestinian
manufacturing firms and captured their perceptions about the linkage between the above human
resource management practices and business performance. 305 questionnaires were distributed
within 80 manufacturing firms in Gaza Strip to collect the primary data. 242 valid responses
were received and were analyzed using quantitative and qualitative statistical methods. The
response rate is 79.35%.
The results of the research generally support the hypotheses that certain HRM practices are
positively associated with the performance in manufacturing businesses within the Palestinian
context.
The results show that human resource planning; compensation policies, performance appraisal,
and training and development have a positive correlation with business performance. Multiple
regression analysis indicated that compensation policies, performance appraisal and training and
development have a significant effect on operational performance. The model of the regression
explained 44.5% of the variance in operational performance. Multiple regression analysis
indicated that compensation policies and performance appraisal have a significant effect on non-
financial performance. The model explained 39.2% of the variance in non-financial performance.
Multiple regression analysis indicated that compensation policies and training and development
have a significant effect on the financial performance. The model explained 33.7% of the
variance in financial performance. The results demonstrate that compensation policies are the
strongest predictor for the business performance.
Recommendations were made for management in order to reap the benefits of the adoption of
human resource management practices on business performance. Firms should appreciate the
need for professional implementation of human resource management. Therefore, human
resources planning should determine the needs of the workforce in the light of both the firm‘s
financial ability and the supply and demand in the labor market. Employee training and
development are essential investments in order to enhance the knowledge and skills of the
workforce. Performance appraisal should be exercised according to professional practices that
would enable a proper assessment of staff performance and acknowledgement of the variations
in their performance. Compensation policies should be clear and transparent in such a way that
would link staff remuneration to their respective responsibilities and performance.
It is hoped that this research will introduce a new dimension within the manufacturing sector in
Gaza regarding the adoption and implementation of the surveyed human resource management.
X
االثر االستراتيجي لممارساث ادارة الموارد البشريت على اداء شركاث الصناع
اث التحويليت في قطاع غزة
ملخص
يهدف هذه البحثالى تقييم اثر ممارسة ادارة الموارد البشرية على كل من الاداء التشغيلي والاداء غيرالمالي والاداء المالي في الشركات الصناعية في قطاع غزة.لهذا يدرس هذا البحث العلاقة بين اداء الشركات اصناعية والممارسات التاليةلإدارة الموارد البشرية : (
1)تخطيط الموارد البشرية ، (
2)تقييم الأداء ، (
3)التدريب والتطوير،(
4)سياسات التعويض.لقد طُبِّقهذا
البحث
على
للإدارة العليا والمتوسطةلعينةعشوائية بسيطة ممثلةللشركات الصناعية الفلسطينية
.لجمع البيانات
الأولية،تم توزيع
305استبانة ضمن
80شركة من الشركات الصناعية في قطاع غزة. تم استرداد
242استبانة وتلحليلها باستخدام الأساليب الإحصائية الكمية والنوعية.نتائج هذاالبحثتدعم
بشكل عامفرضياتالربط بين بعض من ممارسات إدارة الموارد البشريةوالأداء في الشركات الصناعيةضمن السياق الفلسطيني.تظهر
نتائج
البحث
أن
هناكعلاقة
إيجابية بينتخطيط الموارد البشرية وسياسات التعويض وتقييم الأداء والتدريب والتطوير وبينأداء الأعمال. لقدأشار تحليل الانحدار المتعدد أن سياسات التعويض وتقييم الأداء والتدريب والتطوير لديها تأثير كبير على الأداء التشغيلي. وبلغت القدرة التفسيرية لنموذج إنحدارللأداء التشغيلي
4445%
. وأشار تحليل الانحدار المتعددأن سياسات التعويض وتقييم الأداء لديهاتأثير كبير على الأداء غير المالية. وبلغت القدرة التفسيرية لنموذج إنحدارللأداء غير المالي
3942%
. كما وأشار تحليل الانحدار المتعدد أن سياسات التعويض والتدريب والتطوير لديها تأثير كبير على الأداء المالي.
وبلغت القدرة التفسيرية لنموذج إنحدارللأداء المالي
3347%.
النتائج تثبت أن سياسات التعويض هي اقوى مؤشر لأداء الأعمال.وقُدمت توصياتللإدارة من أجل جني ثمار اعتماد ممارسات إدارة الموارد البشرية على أداء الأعمال.
حيث ينبغيأن تقُدِّرالمؤسسات ضرورة التنفيذ المهني لإدارة الموارد البشرية. لذلك، ينبغي لتخطيط الموارد البشرية تحديدالإحتياجات من القوى العاملة في ضوء قدرة الشركة على الصعيد المالي وعلى صعيد العرض والطلب في سوق العمل.
ينبغي إعتبار التدريب والتطوير إستثمار ضروريمن أجل تعزيز معرفةومهارات القوى العاملة.
وينبغي ممارسة تقييم الأداء وفقا للممارسات المهنية التي تمكنمن التقييم السليم لأداء الموظفين. كما وينبغيأنتكون سياسات التعويض واضحة وشفافة وبالطريقة التي من شأنها أن تربطمكافأة الموظفين بكل من مسؤولياتهم وأدائهم
.ومنالمؤَمَّلأن يعرضهذاالبحثبعدا جديدا في قطاع الصناعات التحويلية في غزة فيما يتعلق باعتماد وتنفيذ ممارسات إدارة الموارد البشرية التي شملها البحث
.
1
Chapter One
The Research General Framework
1.1 Introduction
1.2 Problem Statement
1.3 Research Hypotheses
1.4 The Research Model
1.5 The Research Variables
1.6 The Research Objectives
1.7 The Research Importance
2
1.1 Introduction
Today’s market environment is dynamic. The nature and pace of recent changes in the economic
environment have motivated both managers and scholars to look for new sources of competitive
advantage and profitability. Market stability today may become an uncertainty tomorrow. In the
kind of market, the intensity of competition increases from time to time. Firms are striving and
trying to defeat one another in order to be the last survival and are able to gain total benefits as
the market leader.
The increasingly competitive, pushes firms to exploit all of their available resources as a means
of achieving competitive advantage. The concept of competitive advantage is described by
Porter as the essence of competitive (Business) strategy (Porter, 1985). One resource recently
recognized as providing a source of competitive advantage is the human resources of the firm
(Pfeffer, 1998
The Palestinian manufacturing firms play significant role in the Palestinian economy and
national development. Manufacturing topped the list of contributors to GDP among the
commodity-producing sectors, making 13.4%–10.7% of GDP between 2001-2005 (PADICO, 2006,
p.2). Given the increasing competition among Palestinian manufacturing firms, the success in the
market is for those firms that achieve a competitive advantage in the market and maintain this
feature over time, has forced a lot of firms to exploit its resource in a way to be the last survival
and are able to gain total benefits as the market leader and to achieve a competitive advantage in
the market.
The overall purpose of human resource management is to ensure that the organization is able to
achieve success through people. Human resource management (HRM) is utilization of
individuals to achieve organizational objectives (Mondy, 2008, p.4). Previous researches focused
on either operational performance (Ahmad & Schroeder, 2003) or business performance in
general (Abdullah (2009), Uysal and Koca (2009), Chand and Katou (2007), Katou and Budhwar
(2006), and Kaya (2006)). By using the same criteria, of HRM practices to test the relationships,
HRM and operational performance, HRM and non-financial performance, and HRM and
financial performance, this can be expectedly considered as a part of empirical evidence of the
impact of certain HRM practices on business performance in the Palestinian context.
3
Because firm performance stands out as one major organizational goal, the final output, it is
important that a firm adopts HRM practices that make best use of its employees as a
source to be exploited. The trends of understanding the relationship between HRM-performance
will led to increase interest in the impact of HRM on organizational performance. So the
researcher will be directed at understanding the relationship between HRM practices and
manufacturing firms‘ performance.
1.2 Problem Statement
People and how we manage them are becoming more important because many other sources of
competitive success are less powerful than they once were. However, recognizing that the basis
for competitive advantage has changed is essential to develop a different frame of reference for
considering issues of management and strategy, traditional kinds of resources failed to fulfill
their roles to defeat competitors presently. (Pfeffer, 1994, p.10)
After reviewing literatures which are trying to link between human resource management (HRM)
practices and business performance, this research focuses on answering the following research
question “What is the Impact of HRM practices on Business Performance of
Manufacturing Firms in Gaza Strip ?”
1.3 Research Hypotheses:
H1: HRM practices have a significant impact on operational performance.
H1a: Human resource planning has a significant impact on operational performance.
H1b: Compensation has a significant impact on operational performance.
H1c: Performance Appraisal has a significant impact on operational performance.
H1d: Training has a significant impact on operational performance.
H2: HRM practices have a significant effect on non-financial performance.
H2a: Human resource planning has a significant impact on non-financial performance.
H2b: Compensation has a significant impact on non-financial performance.
H2c: Performance Appraisal a significant impact on non-financial performance.
H2d: Training has a significant impact on non-financial performance.
4
Source: conceptual model created by researcher
H3: HRM practices have a significant impact on financial performance.
H3a: Human resource planning has a significant impact on financial performance.
H3b: Compensation has a significant impact on financial performance.
H3c: Performance Appraisal has a significant impact on financial performance.
H3d: Training has a significant impact on financial performance.
H4: There are statistical differences in responses of the respondents related to personal and
organizational variables.
H4a: There are statistical differences in responses of the respondents related to
personal variables.
H4b: There are statistical differences in responses of the respondents related to organizational
variables.
1.4 Research Model
The Dependant Variable in this research is the Business performance, which is divided, based on
previous studies, into three categories of performance (operational, non-financial and financial).
These dependant variables are affected by human resource management practices as an
independent variable, which was divided into four HRM dimensions (HR planning,
compensation, performance appraisal and training).Figure (1.1) shows this relations.
Figure (1.1): Research Model
HRM practices: Business Performance
Operational
performance
HR planning
Compensation
Performance appraisal
Training
Non-Financial
Performance
Financial
Performance
Operational
performance
Non-Financial
Performance
Financial
Performance
5
1.5 Research Variables:
1. Independent Variable: There is one independent construct, HRM practices which is
constructing of four dimensions; this research tends to identify four practices of HRM
practices. Measurement of HRM Practices:
a. HR planning
b. Compensation
c. Performance Appraisal
d. Training and development
2. Dependent Variable: The objective of this research is to find out the relationships between
HRM practices and business performance. Based on previous studies, the researcher
divides business performance into three criteria (variables) to obtain unambiguous results
and to make the analyses easy:
a. Operational performance: By following and modifying from some previous researchers‘
works, operational performance items are designed. This research proposes four
dimensions of operational performance to be tested:
Cost
Quality
Delivery
Flexibility
b. Non-financial performance (organizational performance): By following and modifying
from some previous researchers‘ works, the questionnaire is designed to ask respondents
to assess their firm performances in:
Absenteeism
Turnover
Ability to retain essential employees
Ability to attract essential employees
Work-related injuries and accidents
Customer satisfaction
6
c. Financial performance (marketing performance): By following and modifying from some
previous researchers‘ works, the questionnaire is designed to ask respondents to assess
their firm performances relative to competitors in:
Market share
Profitability
Sales growth rate
Return on Assets (ROA), (Net profit\Assets)
Return on Equity (ROE). (Net profit\Capital)
Return on sales (ROS). (Net profit\Total sales)
1.6 The Research Objectives
The research has the following specific objectives:
1. To understand the current HRM practices of manufacturing firms in Gaza strip.
2. To investigate whether manufacturing firms use these four practices or not.
3. To explore the contents of HRM practices, which impact and lead to improve operational
performance, non-financial performance and financial performance.
1.7 The Research Importance
The study of HRM-Performance seems to be important both from the theoretical and practical
perspectives. This research would assist to enhance the understanding of the impact of HRM on
business performance of manufacturing firms in Gaza strip. The importance of the research
comes from the following aspects:
1. To offer some useful information about human resource practices for manufacturing firms
in Gaza strip. The research can help contribute to build up knowledge and understanding
of human resource management conditions in the manufacturing firm. Based on the
proposed model and discussion, the research is expected to:
a. Position human resource practices of manufacturing firms
b. Help understand the current situation of management practices.
c. Represent as reference data for some various uses.
7
2. To cover all types of business performance (operational, non-financial and financial) as
previous research did not cover all the types of performance.
3. It is apparent from the literature review and previous researches that there is a shortage of
research in the Arab world relating to the link between certain HRM practices and
business performance. The above illustrates the importance of this research which aims to
help in bridging the gap in this area of research.
It may be noteworthy that this research may be the first attempt to apply a framework to
examining the impact of certain HRM practices on business performance of the manufacturing
firms in Gaza strip.
8
Chapter Two:
The Research Theoretical Framework
Section One: The Concept of Human Resources Management
Section Two: HRM Dimensions of the Research
Section Three: Performance of Organization
Section Four: Manufacturing Industry in Gaza
9
Section One
The Concept of Human Resources Management
2.1.1 Introduction
The essence of human resources management is the human being, with all the implications of
productivity value, economic value and consumer value. It consumes what is produced, it is a
spiritually and humanity values. The story of human resource management has gone through
several stages in history; however, the modern concept of human resources management has
been materialized only after a long series of developments that have passed during exercised
employment. (Zulief, 2003, p.20)
Human resource management (HRM) refers to activities and tasks useful in maximizing
employees‘ performance in the organization, it is a dynamic and evolving practice used by
leaders and managers throughout a firm to enhance productivity, quality, and effectiveness.
(Gilley et al, 2009, p.1)
Today‘s organizations consist of three types of resources: physical, financial, and human. (Gilley
et al, 2009, p.17)
1. Physical resources are machines, materials, facilities, equipment, and component parts of
products, which are often referred to as fixed organization assets. Physical resources are
important to the health of the organization because they provide it with stability and growth
opportunities. Also, because they are tangible and can be seen, physical resources provide
the public with assurances of quality as well as a measure of the organization‘s success.
2. Financial resources are the liquid assets of an organization. These include cash, stocks,
bonds, investments, and operating capital. Similar to physical resources, financial
resources are vital to the organization‘s ability to react to opportunities for growth and
expansion, which reflect its overall financial stability and strength.
3. Human resources refer to the workers employed by an organization. Unlike the typical,
straightforward, standard measures used to value fixed and liquid assets. Forward-thinking
10
leaders of firms recognize the value of their employees and consider them in their asset
portfolios
Transformation exist in the perception of individuals in organizations as an element of cost that
must be reduced to the minimum, to being an asset of the organization that can invest in and add
value to the organization. This transformation in the perception of individuals has led this shift
to individuals as a resource for the organization, The human resource can achieve wealth or
income through the use of his skills and knowledge, not through a process of transformation and
change, which occurs for physical resources in order to achieve wealth, Without this skills and
knowledge, the individual will become incapacitated, that prevent him from transformation and
change. For that to become a resource, the individual must have the experience, skills,
capabilities and preparations needed to perform specialized functions. ( Hasan, 2005, p.29).
The collective knowledge, competencies, skills, and attitudes of the members of the organization
are viable for the organization. These intangibles have value and these values manifest
themselves in increased quality, productivity, effectiveness, efficiency, and customer service.
(Gilley et al, 2009, p.2)
The world of work as we know is rapidly changing. As Human resource management (HRM) is
a part of an organization, then, it must be prepared to deal with the effects of the changing in
world of work. This means understanding the implications of globalization, technology changes,
labor shortages, changing skill requirements, workforce diversity, decentralized work sites , the
contingent workforce, and employee involvement. (Decenzo and Robbins, 2005, p.4).
That strategic human resource management emerge from the organization’s strategy, that mean, it
must first formulate the organization’s strategy and then the formulation or development of the
other functional strategies, such as marketing, production, financial strategy, and of course
human resources strategy, in order to achieve the organization’s strategy. It is clear that all these
strategies must be integrated with each other in order to achieve sustainable competitive
advantage; figure (2.1) shows the integration between organizational strategy and strategic HRM
which will lead to competitive advantages. (Durra and Sabbagh, 2008, p.115)
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Figure (2.1)
Relation between organizational strategy, Strategic HRM, and Competitive Advantage
Source: Durra and Sabbagh, ‘Human Resource Management’, Amman, Dar Wael publisher, first edition,
2008, p. 118.
It should be mentioned that the well known strategist Porter stated, in his famous book
―competitive advantage‖, that human resource is one of the core competency that must be owned
by organizations in order to be able to achieve competitive advantage and that this resource
should play a key role in shaping the organization’s strategy and its implementation. (Porter, 1985,
p.43)
2.1.2 Human Resource Management Practices (HRM Practices)
The overall purpose of human resource management is to ensure that the organization is able to
achieve success through people. Human resource management (HRM) is utilization of
individuals to achieve organizational objectives (Mondy, 2008, p.4). Mathis and Jackson defined
Human resource management as the design of formal systems in an organization to ensure
effective and efficient use of human talent to accomplish organizational goals (Mathis and Jackson,
2004, p.4)
Traditionally, human resource management is something which an organization has used to deal
with staff activity. Traditional human resource practices have never been paid much attention as
a main driving of organizational success by top management (Fulmer, 1990, p.1).
HR has been viewed as the ―employee advocate‖ in organizations. As the voice for employee
concerns, HR professionals traditionally have been seen as ―company morale officers‖ who do
not understand the business realities of the organizations and do not contribute measurably to the
strategic success of the business. Some have even suggested dismantling HR departments totally
Strategic HRM
Competitive
Advantage
Organizational
strategy
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because they contribute little to the productivity and growth of organizations. (Mathis and
Jackson, 2004, p.14).
When business people, traditionally, talked about how to win in markets, they intuitively think of
roles of their financial functions, power of production processes and marketing strategies.
Commonly, tangible resources and capabilities are preferred to achieve the goals and objectives.
Human resource department was treated as a follower rather than initiator. This was a very big
mistake that they had ignored this lever of intangible resources. Ahmad and Schroeder said,
“sophisticated technologies and innovative manufacturing practices alone can do very little to
enhance operational performance unless the requisite human resource management (HRM)
practices are in place to form a consistent socio-technical system.” (Ahmad and Schroeder, 2003,
p.19
2.1.3 Evolution of HR Management
There are four base phases (stations) in the evolution experienced by the human resources
management since the beginning of the twentieth century until now:
1. The First Phase (The Industrial Revolution): This phase includes the period before and
during the industrial revolution. In the period before the Industrial Revolution, the
concentration on production by using primitive methods, the personnel management was
stationed to clarify the conditions for entry to the profession, wages of workers, and to
implement the penalties for violating the systems, while the period of the Industrial
Revolution was distinctive by the emergence of machines and Large factories, long
working hours , and production-oriented, which led to the emergence of supervisors and
foremen, who often abused to the personnel under their command, which led to calls to
improve working conditions and then set up labor unions and federations of workers
demanding for their rights. (Abdel Baki, 2000, p.2)
2. The Second Phase (The Scientific Management Movement): This Phase extends from the
1890 till the twenties of the last century, in which the scientific management studies
conducted by Frederick W. Taylor and others, beginning in 1885, helped management
identify ways to make work more efficient and less fatiguing, thus increasing worker
productivity (Mathis and Jackson, 2004, p.24). The scientific management stage was
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associated with “Ferdirk Taylor”, who tried to regulate the relationship between
management and workers, and highlighted the impact of specialization, training and
stimulus material to employees. Taylor‘s put four pillars for management:
a. The development of real management
b. The scientific Selection of workers
c. Attention for staff development and education
d. Real cooperation between the management and human resources
Both the Frank Gilbert and Henry Janet Taylor’s provide assistance especially in their own
way to pay the wages of workers, as well as their own way in the preparation of work
schedules. The bureaucracy school headed by Max Weber, who establishes procedures to
improve the work, illustrates the importance of official communication, and establishes the
organizational hierarchy of regulation which defines the responsibilities and powers. (Abdel
Baki, 2000, p.24)
3. The Third Phase (Between World War I and II): With the early of thirties, human
relations form was emerged, which is headed by Elton Mayo. Through the study of
Hotsorn plant, who shows the attention of personnel management, and the pursuit to satisfy
employees‘ desires and to maintain their sense. The study showed that the spirit of
teamwork and social worker are reason in motivating individuals (Hitti, 2003, p.26).
4. The Fourth Phase (Post- War World II Until Now): Human resources management is
dramatically developed and it is no longer only concerned with formalities and routine
work such as filing and set the attendance and absence, but rather extended to human
resources training and development, and encouraging them and controlling labor relations,
human resources management has benefited from the development of psychology and
sociology and anthropology, which led to the behavioral entrance in management, which
focuses on the working environmental aspects and working conditions, worker and their
impact on behavior, al that lead to the development of stimulus policies, administrative
communication systems, and leadership styles (Abdel Baki, 2000, p.2).
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One of the most important shifts in the emphasis of HR management in the past years has been
the recognition of HR as a strategic business contributor. Even organizations that are not-for-
profit, such as governmental or social service entities, must manage their human resources as
being valuable and in a ―business-oriented‖ manner. Table (2.1) shows the different between
traditional personnel management and the new approach of human resource management.
Table (2.1)
Stereotypes (difference) of personnel management and human resource management
Items
Personnel
Management
Human Resource
Management
Time And Planning
Perspective
Short-term, reactive, ad-hoc,
marginal
Long-term, pro-active, strategic,
integrated
Psychological Contract
Compliance
Commitment
Control Systems
External controls
Self-control
Employee-Relations
Perspective
Pluralist, collective, low-trust
Unitarist, individual, high-trust
Preferred Structures/Systems
Bureaucratic, mechanistic,
centralized, formal defined
roles
Organic, devolved, flexible
roles
Roles
Specialist/professional
Largely integrated into line
management
Evaluation Criteria
Cost-minimization
Maximum utilization
(human asset accounting)
Source: Torrington, D., Hall, L., & Taylor, S. Human Resource Management (7thed). (2008), p.15.
2.1.4 Aims of HRM
1. The overall purpose of human resource management is to ensure that the organization is able
to achieve success through people (Armstrong, 2006, p8).
2. HRM systems can be the source of organizational capabilities that allow firms to learn and
capitalize on new opportunities. (Ulrich and Lake, 1990, p.91)
3. The central focus for HR management must be on contributing to organizational success by
ensuring that human resources activities support organizational efforts and by enhancing
organizational performance. (Mathis and Jackson, 2004, p.10)
4. To facilitate organizational performance, productivity, and to change through organized
(formal and informal) interventions, initiatives, and management actions in order to
enhance a firm‘s performance capacity, capability, competitive readiness, and renewal.
(Gilley et al, 2009, p.3).
