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International Conference on Technology and Business Management

March 28-30, 2011

Organizational Structure, HR Practices and its Outcomes: A Conceptual Model


A. Ravichandran raviappavoo@yahoo.com University of Delhi, Delhi 1. Introduction
Research studies in the past have shown that structural features of organization and Human Resource (HR) systems and practices have significant influence on organizational climate, Human Resource Development (HRD) climate, and Job Satisfaction. Past research have also found that there was strong relationship between climate perceptions and job satisfaction which in turn to both individual and organizational outcomes. Based on the past research evidence, the present paper proposes a conceptual model which links structural features and HR systems and practices to various outcomes. In the first part of the paper, the proposed model is presented in the form of flow chart. In the second part of the paper, evidence from the research literature is provided to substantiate the conceptual model. The model is constructed based on the structural and behavioral model developed by Venkat Raman (2005). The proposed model is a systematic compilation based on the available research evidence and it links the organizational structural features and HR systems to employees attitude and outcomes of both individual and organizational level which is provided in figure 1.

Figure 1 Organizational Structure, HR Systems and Practices and its Outcomes: A Conceptual Model

2. Research to Support the Model


Structural Features and HR Systems and Practices Every organization structures the internal configuration of its work activities into certain structural and administrative systems and sub-systems, depending upon the internal, functional requirements and the environmental contingencies. However, there has been no consensus regarding the degree of structuring and/or the degree of flexibility that an organization should adopt. But a prevalent notion is that, organization structures are developed from the organizational context such as year of existence or age, size, resources, technology, environmental dependencies, formalization, complexity and the form of ownership. The purpose of structure is to organize the labor into segments, task activities and to coordinate the complex relationship into some manageable state. According to Weick (1979) and Van Mannen (1979), structure is in fact a patterned action, 632

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interaction, behavior and cognition. It is, therefore, structure can be a precursor to determine both HR systems and practices and behavioral outcomes of employees. Size of the organization is one of the most important components in the organizational structure. Past studies have reported that larger organizations are more attractive to employees, because they provide many benefits (Brown, Hamilton, Medoff, 1990). Organizational size and job rewards are said to strongly related (Hodson, 1984; Evans and Leighton 1988; Brown and Medoff, 1989). Large organizations provide higher wages and fringe benefits, in order to elicit sufficient applicants to job openings (Mellow, 1982; Weiss and Landau, 1984). Evans and Leighton (1988) found size and wage relationship only in firms having more than 1000 employees. According to Kalleberg and Van Buren (1996), the reason why employees of larger organization differ with smaller organizations, in terms of their earnings, fringe benefits, promotion avenues and autonomy could be due to product market characteristics, labor market characteristics, relations between the organization and its institutional environment, structure of the organization, unionization, job characteristics and quality of the labor force. Size is related to complexity, and complexity to a high proportion of administrative persons. Complexity and size were observed to have positive and strong correlation to each other. The clerical component (Supportive staff) would increase with organization size (Rushing, 1974). Complexity and managerial component are positively related i.e. more complexity means more departments and more managers and a smaller average span of control. Research studies have shown that smaller, medium size and newly started business units do not have any formal HR policies and the proprietors/owners of the units directly deal all HR matters and found that there were significant differences between larger and smaller organizations with respect to HR systems and practices (Maki, 1993; and Srimannaryana, 2007). Szamosi, Duxbury and Higgens (2004) have suggested that small and medium size enterprises have not given their employees what they expect from their job such as career development and participation in decision making. Span of control and size are said to influence organizational climate perception and job satisfaction level (Schneider and Reichers, 1983; Joyce and Slocum, 1984). Organizations with a high degree of centralization are said to produce high amounts of employee turnover (Price, 1977). Lower levels of centralization leads to greater amounts of decision making and positively related to job satisfaction (Cotton, Vollrath, Frogatt and Jennings, 1988). The other important structural feature which influences HR systems, HRD climate, organizational climate and job satisfaction is ownership. Mathebulk (2004) found that there were significant differences in the pattern of HR practices between private and public sector organizations. He found that pay levels and employee satisfaction in private sectors had more than the public sectors. Similarly, Sharma (1991) highlights that in comparison to private sectors, less money is spent, less training is given and fewer employees are trained in the public sector organizations. Purang (2006) found that HRD climate as a factor of productivity in public and private sector enterprises. Results indicated that the private sector enterprises outperformed the public sector ones in both HRD climate and productivity.

3. Relationship between Organizational Climate, HRD Climate and Job Satisfaction


Research Studies suggest that both Organizational Climate and HRD climate influence job satisfaction (Baker and Cantor, 1993; Jansen and Chandler, 1994; Venkat Raman, 1998; Sandberg, 2000; Rodrigues, 2005; and Mufeed, 2006; Ravichandran, 2010). While job satisfaction focuses on a particular job, climate perception refers to the organization as a whole. Job satisfaction concerns a persons affective response to his job, while organizational climate is derived from a persons description of what the organization is like. In summary, the concept of climate perceptions and job satisfaction are different and no amount of empirical similarity makes them conceptually the same (Payne, et al, 1976). Dutka (2002) found that women higher education administrators extrinsic job satisfaction was found to be strongly associated with the organizational climate, as was intrinsic satisfaction although to a lesser degree. Extrinsic job satisfaction was predicted by satisfaction with the climate for career development, communication, conflict management, and reward system. Intrinsic satisfaction was predicted by satisfaction with the climate for planning/decision making, conflict management and career development. The organizational climate dimension career development and a non-organizational climate variable, belief in equal opportunities for advancement within the institution, exhibited strong relationship with all aspects of women higher education administrators job satisfaction. The findings reported here revealed that women higher education administrators dissatisfaction with the organizational climate overall, and underscore the importance of the climate for career development. Rosli (2000) found that organizational climate and job satisfaction were significantly correlated in selected government and private secondary schools. The study indicated that the relationship between organizational climate and job satisfaction has been found quite significant for both government and private secondary school teachers. Moreover, the government secondary school teachers were found to obtain higher scores than private school teachers in terms of job satisfaction. Besides, organizational structure has the highest correlation to job satisfaction, compared to warmth and consideration had the least correlation to job satisfaction. The study also revealed that the overall 633

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teachers perception of climate and the level of job satisfaction and the factors influencing the perceptions of climate both government and private schools were different. Teachers in government schools were found to achieve more satisfaction compared to their counter parts in the private schools. Hassan (2006) found that HRD practices have been promoted HRD climate which in turn to quality of the employees. Emphasis on HRD climate perception result into several positive individual and organizational outcomes such as higher performance (Sanderson, 2000), high quality individual and organizational problem solving (Schroder, 1989); and enhanced career plans and employability (Raider and Burt, 1996). A study of Rao and Abraham (1999) observed that HRD climate is a powerful intervening variable in translating HRD practices into profit. Terborg and Lee (1984), in a study among sales personnel found a negative correlation between employee description of organizational supportiveness climate and voluntary turnover rates. They also found that climate perception was related to demographic characteristics. Friedlander and Greenberg (1971) showed that climate dimensions have relation to employee turnover, lower cost of production and reduced training time. A study (Tripathi and Tripathi, 2002) was found that organizational climate was influenced the organizational success variables which included effectiveness, job satisfaction, organizational commitment and intention to quit. Moreover, climate of reward and participation emerged as the best possible predictor of effectiveness. Priyadarshini and Venkatapathy (2004) found that HRD climate in banks have strong influence on their performance and that to performing banks have a high degree of innovative HRD practices in their organizations. Narayan and Rangnekar (2008) found that both organizational climate and HRD climate along with job involvement was significantly influenced the managerial effectiveness. They measured organizational climate variables as Results, Rewards and Interpersonal relations, Organizational process, Role clarity and problem sharing and HRD climate variables as Experimentation, Trust, Openness, Facilitation, Transparency and Reward system. The job involvement was measured as identification with the job and job centricity. Gelade and Ivery (2003) observed that there were significant correlations between work climate, HR practices and business performance. The results showed that the correlations between climate and performance cannot be explained by their common dependence on HRM factors, and that the data were consistent with a mediation model in which the effects of HRM practices on business performance were partially mediated by work climate.

4. Relationship between HR Systems and Practices and Job Satisfaction


HR practices, HRD climate and job satisfaction are interrelated. Both HR practices and HRD climate have been found to be related to the job satisfaction, both in the business organization (Ahuja, 2002; Mufeed, 2006; Mishra, 1995; Kahn and Robertson, 1992 and Biswas, 2006) and in the educational sectors (Sharma, 2000; Rao, 1991; Rastogi, 1997; and Mufeed, 2006). Studies have also indicated that satisfaction tends to be higher when employees believe their supervisors to be competent, have their best interest in mind, and treat them with dignity and respect (Sayeed, 1988). Supervisory style that influences job satisfaction is the degree to which the supervisor takes a personal interest in the employees welfare, provides advice, and communicates at a personal level (Dhawan, 2001). Supervisory behavior has been found to be the most important dimension of quality of work life contributing 21% of the variance in the employees role efficacy (Gupta and Khandelwal, 1988). Managerial apathy has been found to be negatively related to job satisfaction (Sharma, 1991). Working conditions have acquired a special significance. It is a broad-based concept and includes not only the organizational policies but the work environment as well. A number of studies have focused on a wide variety of the components which constitute the working conditions of an organization. A group of studies have shown that job satisfaction the employee is directly proportionate to the degree of participation in the process of decision making. Some authors have built a strong case of increasing the aspiration for need satisfaction from work and satisfying these aspirations through participation (Akhilesh and Ganguli, 1982; Padki, 1984), while satisfaction with supervisory style has been found to correlate significant role in job satisfaction (Dhawan, 2001). In a study of 60 scientists Dhawan and Roy (1993) found that Indian scientists identified 5 factors contributing to job satisfaction. Of these five one was relationship with co-workers. The other factors were comfort, challenge, salary, and resource availability. Venkat Raman (1998) found level of job satisfaction among the physicians in government, missionary, and private hospital. The result showed that the overall satisfaction level was found to be more among the private hospital physicians, compared to the physicians from other two hospitals. Training and development facilities offered to employees go a long way in generating high levels of job satisfaction (Rangaswamy and Markhandeyar, 1998). In an extensive study of 124 managers from various departments and levels in a private sector organization, Joshi and Sharma (1997) measured their responses on 15 job and organization-related variables. Of all the variables, job contents and training facilities were found to the best predictors of job satisfaction. Research has also demonstrated that job satisfaction, to some extent, is dependent on working environment. Overcrowding, dark and noisy shop floors, extreme temperature, and poor air quality tend to create low or no satisfaction at work. In a study of 100 production workers, Shantamani (1988) found that poor perception of working conditions created dissatisfaction with the job. Not only has this, long working hours also contributed to a high degree of job dissatisfaction. Studies of clerical employees (Nazir, 1998) and 634

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dot com employees (Panda, 2001) both showed that as the working hours increased, job satisfaction decreased. Another area of concern within the larger context of working condition has to do with the policies regarding employees. Any sense of job insecurity may lead to a drop in the degree of satisfaction derived from the job. A number of studies have shown that the degree of job satisfaction is directly proportionate to the degree of job insecurity (Panda, 2001; Rangaswamy and Markhandeyar, 1998).

5. Organizational Outcomes
HR outcomes of worldwide empirical research summarized in recent work of Boselie and Dietz, (2003) and katou and Budhwar (2006) suggest that there are commonalities and also contradictions in HRM and performance research (Wall and Wood, 2005; Wright and Boswell, 2002). Huselid (1995) studied on the relationship between HR practices and corporate performance serves probably as the seminal and definitely most cited work in this area. He developed and validated indexes of high-involvement HR practices through factor analysis. His work supports a configurationally view of HR practices, where techniques tend to work synchronously. He found high involvement HR practices to be strongly and positively linked to various measures of organizational performance, including work attachment, firm financial performance, and productivity. In an another study, Delaney and Huselid (1996) found that practices consistent with a high involvement HR strategy, such as highly selective staffing, incentive compensation, and training, were positively linked to organizational performance. Katou and Budhwar (2006) in their study of 178 Greek manufacturing firms found that HR policies of recruitment, training, promotion, incentives, benefits, involvement and health and safety are positively related to organizational performance. Follow up empirical works have shown reasonably strong, positive relationships between the extent of a firms adoption of highinvolvement HR strategies and organizational performance (MacDuffie, 1995; Delery and Doty, 1996; Youndt 1996; Huselid, Jackson and Schuler, 1997; Ichniowski, Shaw, and Prennushi, 1997; and Katou & Budhwar, 2007). Green (2006) reported that organizations that vertically aligned and horizontally integrated HR function and practices performed better and produced more committed and satisfied HR function employees who exhibited improved individual and organizational performance. The other important factor which influences corporate performance is Strategic Human Resource Management (SHRM). It has emerged in the recent past and it is a dominant area of research among scholars and practitioners in different parts of the world. This is apparent from the recent literature on international human resource management (Schuler, 1993), as well as from reviews of the trends in the US (Schuler and Jackson, 1999), Canada (Betcherman, 1994), and the UK (Lundy, 1994; Truss and Grattan, 1994; Guest, 1997). Better human resource planning is the basis of superior business performance has received support from various angles, even from authors whose overall work reflects a critical attitude to strategic human resource management (Mueller, 1996). It has become a widely held premise that people provide organizations with an important resource of sustainable competitive advantage (Prahalad and Hamel, 1990; Pfeffer, 1994; Wright, 1994) and that effective management of human capital, not just physical capital, may be the ultimate determinant of organizational performance (Adler, 1988; Reich, 1991). Abowd (1990) found that the degree to which compensation for managers was based on an organizations performance. Gerhart and Milkovich (1990) found that pay mix, i.e. pay structure having fixed component and a performance linked variable component, was related to organizational performance. Leonard (1990) found that organizations having long-term incentive plans for their executives had larger increases in return on equity over a four-year period than other organizations. Comprehensive selection and training activities are frequently correlated with both productivity and organization performance (Russell 1985; Kleiner 1987; Terpstra and Rozell, 1993). Huselid (1993, 1995) identified a link between the organizational levgel outcomes and groups of high-performance work practices. There is significant correlation between strategic HR effectiveness on employee productivity, cash flow and market value (Huselid 1997; Barness and Huselide 2000). HR practices would also influence a positive effect on organizational learning, which in turn better business performance. For example, (Lopez, Peon and Ordas, 2005) found that high performance human resource practices have a positive effect on organizational learning, which in turn has a positive influence on business performance. Harel and Tzafrir (1999) found that among public and private organizations within Israel, HR practices were related to perceived organizational and market performance. Ngo, Turban, Lau, and Lui (1998) investigated certain work practices (training and compensation techniques) with high involvement characteristics and found they tended to increase organizational performance in Hong Kong companies. Tessema and Soeters (2006) examined how, when and to what extent HR practices affect performance in Eritrea, Africas youngest and poorest country. They reported that successful implementation of HR practices could enhance individual and the civil service organization of Eritrea, but the economic and political environment within which HR practices operate are not conducive. Tsai (2006) studied in Taiwan and reported that effective use of employee empowerment practices is positively related to organizational performance. Zheng (2006) explored high performance HRM practices in 74 Chinese SMEs and within performance-based pay, participatory decision-making, free market selection and performance 635

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evaluation, only high level employee commitment was identified as the key HRM outcome for enhancing performance.

6. Individual Outcomes
HR systems and practices, HRD climate and job satisfaction have shown to influence both individual performance and organizational performance. Schneider and Bowen (1995), Bettencourt and Brown (1997) and Chebat (2002) found that employees perception of workplace fairness, which includes pay rules, job supervision and recruitment and selection procedures, is a key predictor of service behavior. Davindow and Uttal (1989) and Peccei and Rosenthal (1997) studied that training and in particular multi-skill, improves an employees sense of competence in dealing with the conflicting demands of customers. Zerbe (1993) found that satisfaction with human activities results in overall job satisfaction that increases the level of job performance. Job performance is the degree of involvement or commitment towards his/her nature of job or work and it can be measured in terms of service behavior, productivity; meet the demand for customer satisfaction. The performance of the faculty working in higher educational sector has been described in terms of teaching, research, and service (Peterson and Faye, 2006). Few research studies measured facultys performance in terms of teaching, research and development activities and services (Narimawati, 2007; and Begum, 2006). HR practices have been considered to be effective tools for enhancing organizational commitment. Pare, Tremblay, and Lalonde (2000) found that HR practices such as recognition, empowerment, and competence development had a significant positive effect on organizational commitment among IT professionals. A study of software professional in India revealed that key motivators for these individuals are money, work environment, career development, and training (Softwares best employees, 2001). Another study of software professionals in India (Paul and Anantharaman, 2004) revealed that HRM practices such as employee friendly work environment, career development, development oriented appraisal, and comprehensive training show a significant positive relationship with organizational commitment. Schneider and Bowen (1995), Bettencourt and Brown (1997) and more recently Training and in particular multi-skill, improves an employees sense of competence in dealing with the conflicting demands of customers (Davindow and Uttal, 1989; Peccei and Rosenthal, 1997). Past research also shows that the effectiveness of HR practices have also influenced the Organizational Citizenship Behavior (Moorman, 1993; Deckop and Cirka, 1999; OBannon and Pearce, 1999). A substantial research effort has been directed to explaining the relationship between HR systems, job satisfaction and intention to quit, employee turnover and absenteeism. The HR systems and practices, HRD climate perception, job satisfaction, and demographic attributes influenced various outcomes of employees including burnout, alienation, frustration, absenteeism, willingness to leave the organization and ultimately turnover. It is also said that intention to quit is the precursor to actual turnover of the employee. In the higher educational sector concerns about faculty turnover have generated a number of studies that examine why faculty members leave or intent to leave their institutions (Barnes, Agago, and Goombs, 1998; Johnsurd and Rosser, 2002; Manger and Eikland, 1990; Rosser, 2004; Smart, 1990; Zhou and Volkein, 2004; Ravichandran, 2010).

7. Demographic Variables, Organizational Climate, HRD Climate and Job Satisfaction: Inter-relationship
It is not only the organizational structures and HR systems and practices which influence the climate perception and job satisfaction. Personal, demographic and professional variables of employees are also said to influence the climate perception. Research evidence indicates that demographic variables such as age, gender, qualification, salary, designation, etc. have strongly associated with organizational climate, HRD climate and job satisfaction level both in industrial and service sector (Nazir, 1998; Venkat Raman, 1998; Dhawan, 2001; Hassan 2005; Malni, 2001; Mufeed, 2006; Srimannarayana, 2007; Pillais, 2008; Ravichandran, 2010).

8. Conclusion
From the above discussion, it seems that the proposed model is substantiated by adequate research evidence. However, only few studies (Zhou and Volkein, 2004; Mufeed, 2006; Ravichandran, 2010) indicate that there was relationship between HRD climate perception and job satisfaction which in turn to both organizational and individual outcomes though number of studies indicate that there were strong relationship between organizational climate and job satisfaction. Further, the proposed model brings various new research possibilities in future, in the form of hypothesized relationship between certain variables provided in the flow chart.

9. References
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16. 17. 18. 19. 20. 21. 22.

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26. 27.

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