The role of strategic HR practices in organisational effectiveness: an empirical investigation in the country of Jordan

Abstract

This study responds to the call of researchers, and is conducted in a non-western context in the country of Jordan. The study contributes to our understanding of human resource (HR) practices' impact on organisational effectiveness. The empirical analysis is based on theoretical prepositions that motivated employees through good HR practices stay longer and contribute positively to the overall financial performance of organisations. Rigorous statistical testing of the data on the population of financial firms shows that careful recruitment and selection, training and internal career opportunities have a positive impact on reducing employee turnover. Training, in particular, is found to have a strong positive impact on financial performance measured by return on assets and return on equity. Furthermore, the findings provide strong support for the direct approach in strategic HR management–performance research that a group of best HR practices will continuously and directly generate superior performance. Despite such compelling arguments, however, we did not find evidence to support the notion that a bundle of HR practices impact better on financial performance than individual HR practices. It is possible that the optimal configuration may not only be contingent on national context, but could be due to the sector and the specific characteristics of the firm.

Keywords::

• factor analysis
• hierarchical regression
• HR practices
• organisational effectiveness
• SHRM–performance link

Acknowledgements

Authors are indebted to an anonymous referee and to the editor of this journal for constructive comments and feedback on an earlier draft of the paper which led to several improvements. All shortcomings are ours.

Notes

^1. The terms ‘organisational performance’ and ‘organisational effectiveness’ are sometimes used interchangeably.

^2. This has led to a plea by some authors for a specific theory on HRM in the first place (Guest 1997, 2011; Paauwe and Boselie 2005; Paauwe 2009).

^3. In fact there is a call here as well for a better theory on performance itself from some scholars (Paauwe and Boselie 2005; Guest 2011).

^4. The survey questionnaire used in this study is derived from the work of Casson, Loveridge and Singh (1995, 1996, 1997, 1998).

^5. The Durbin–Watson test is largely used in time-series data. However, the statistic of the test can be an important diagnostic indicator even when the researcher is not utilising time-series data. A statistically significant Durbin–Watson test when the researcher is testing a model based on cross-sectional data can be an indication of specification error such as omitted variables or incorrect functional form (Crown 1998).