Human Resource Management Practices and Employee Performance: The Role of Job Satisfaction

Abstract

This study aims to investigate the impact of Human Resource Management Practices (HRMP) on improving Employee Performance (EP). The study is accomplished by hypothesizing the impact of HRMP on EP, additionally, this impact is theorized to be mediated through job satisfaction. Employee engagement is also taken into account because of the potential moderating effect it has within the theorized model. Data was collected from 480 questionnaires which were distributed among commercial banks' workers in Jordan and were analyzed using structural equation modeling techniques (SEM), path analysis, and confirmatory factor analysis (CFA). Analysis of a moment structures (AMOS) software version 24 was applied to complete our analysis. The results show that HRMP had a positive impact on EP, as well as job satisfaction and its components (job stability and job enrichment). The mediating role of job satisfaction (enrichment and stability) was discovered. Finally, employee engagement emerged as a moderating variable linking HRMP and EP. The findings of this study show the importance of the role played by job satisfaction and employee engagement in achieving human resources performance goals. Future analysis is recommended to gain deeper insight into the relationship between HRMP, job satisfaction, worker training, and performance appraisal.

1. Introduction

This study analyzes human resource management in commercial banks in Jordan. Commercial banks provide financial services to the general public and business, ensuring economic and social stability and sustainable growth of the economy; however, commercial banks are not restricted to native banking services. The commercial banking system has gone through several transformations in the last several decades. There have been dramatic regulatory changes, considerable advances in information and banking technologies, the extensive dominance and acceptance of the market economy by less open economies, and the increase and integration of global financial markets and markets and institutions have created new opportunities and challenges for commercial banking institutions. While these transformations have provided an expanded opportunity set for banks, they have intensified the competitive pressure in the global banking arena as well (Al-Safadi, 2016; Alzoubi et al., 2020).

Commercial banks in Jordan contribute to enhancing the formation of capital and investment and play a significant role in influencing the economy. The commercial banks in Jordan play a decisive role in the growth and development of the country. They are the pillar of economic activity as well as key providers to the national economy as they play a leading role in improving economic growth in the country. Low-interest rates will encourage investment and jointly commercial banks contribute to the implementation of the financial policy that is controlled by the Central Bank of Jordan (CBJ). By increasing the quantity of cash in circulation through the supply of credit or by reducing interest rates, commercial banks directly impact economic development.

Commercial banks suffer from several challenges that threaten their capabilities and competitiveness, particularly since the beginning of the monetary crisis that the worldwide economy was exposed to. This has negatively impacted several commercial banks in terms of their monetary performance such as weak portfolio, poor investment, low liquidity, among others. The poor performance of the inner and external operations of these banks in terms of meeting the wants of consumers The commercial banks have not been able to avoid risks and protect investments from the customers and shareholders. Further, operational, credit, and liquidity risks suggested having an impact on bank performance in Jordan (Al- Safadi, 2016).

Therefore, commercial banks have rethought the way they are doing business. The foremost need for commercial banks is to predict changes and confront these challenges, develop its internal settings, and adapt to the external settings (Almaaitah et al., 2020) Therefore, there is an increasing need for human resources who have distinct capabilities and high skills that competitors are unable to imitate. Human resource management (HRM) has emerged mainly in recognition of the fact that human resources need to be managed strategically for the firm to enjoy a sustainable competitive advantage over the competition. HRM can be defined as the policies and practices required to perform the routines of human resources in an organization, such as employee staffing, staff development, performance management, compensation management, and encouraging employee involvement in decision-making. Hence, the banks are required to activate the role of HRM through the utilization of Human Resource Management Practices (HRMP). HRM plays an important role in the creation of better human resources (who are the main assets of the organization), and retention of such resources, and provide flexibility and the ability to adapt to achieve a sustainable competitive advantage (Khatri, 1999).

The employee’s performance is considered one of the factors that have an impact and role on the organization’s performance, as it directly contributes to the success of the organization through the behavior of the individual despite the presence of other factors that help in its success (Saleh et al., 2020). Employee’s behavior is shaped through a bundle of distinct but interrelated HRM practices. HRMP is used to measure the performance of the individual working within the organization and raising the performance of workers by motivating them and creating competition among them (Ahmad & Schroeder, 2003).

2. Literature Review

2.1. Human Resource Management Practices (HRMP)

An organization that performs HRMP such as development, training, selection, appointment, and compensation system is able to achieve goals and develop strategies effectively and flexibly and is also able to implement policies within the organization, HRMP is consistent with internal policies and methods established and applied to ensure the organization’s human resources contribute to achieving the organization’s goals, coming up with solutions for developing human to help improve the ability, opportunity, and motivation of employees (Nguyen et al., 2020). HRMP and their implementation are among the most important factors that contribute to increasing employee satisfaction and achieving job commitment, which contributes to raising productivity (Khan, 2010; Quresh et al., 2010).

HRMP is an important predictor of organizational performance and has the potential to promote organizational innovation. Effective HRMP such as including sophisticated methods to recruitment and selection, orientation, appraisal, and training envisage organizational innovation in products and services (Shipton et al., 2005). In line with the changing business environment and the rising demands and desires of the employees, companies need to constantly change their HRM practices. Employee engagement will be fostered by this, which in turn leads to improved performance for the organization and also improved well-being and development for employees to influence employee behavior and thus promote business goals. Companies must create a bundle of internally consistent HRM practices (Jiménez & Valle, 2005). Training and development in organizations positively affect the employee and improves his/her performance and development. As for evaluation, it gives the individual the ability to work better to reach the highest levels. (Abdullah et al., 2009).

Therefore, we assume the following:

H1: HRMP has a positive impact on EP within the Jordanian commercial banking sector.

H2: HRMP has a positive impact on job satisfaction. within the Jordanian commercial banking sector. Above all, this impact is studied through examining HRMP impact on (a) Job Stability, (b) Job Enrichment, and (c) Job ability.

2.2. Employee Performance (EP)

HRMP refers to the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals. It involves all of the activities that are implemented by an organization to affect the behavior of individuals to implement the strategic needs of a business (Nishii & Wright, 2008). There is a relationship between performance and return, the higher the return, the more effective the performance, and thus this, in turn, affects the implementation and execution of the tasks assigned to the employee (Saleh et al., 2020). The positive factor performance provides the profit to the organization wherein human resources assist the organization in achieving its goals of producing a quality product (Anitha, 2014). Job performance is considered as the employees performing the duties and tasks that they are committed to within the organization, through the organization setting these tasks and duties, and the performance must be good according to the goals set by the organization (Liao, 2009).

2.3. Job Satisfaction

In this analysis, we tend to use 3 dimensions: Job Stability, Job Enrichment, and Job ability (Mahmood et al., 2019). Job satisfaction received the attention of many researchers because it is important for the individual’s performance within the organization (Mohammad et al., 2017). HRMP supports employees by raising their confidence, motivating them, and obtaining job satisfaction through additional activities and enthusiasm in the job. This, in turn, increases the effectiveness of the individual’s job performance to achieve the goals of the organization (Astuti et al., 2020; Pradhan et al., 2017).

Job satisfaction is significant because an employee’s attitude and beliefs may affect his/ her behavior and his/her dealings with the organization. Job satisfaction can also be seen within the broader context of the range of issues that affect an employee's work experience, or quality of working life (Byremo, 2015). HRMP affects employees’ behavior supported by social exchange theory and signal theory. Social exchange theory states employees are in an exchange relationship with the organization and payback in kind what they receive from an organization. Maximum organizational support through HRMP will make the employees satisfied with their concerned organization.

Signaling theory relates to the description of the two behaviors, that is, individual and organization. The impact of HRMP on the employees’ behaviors acts as ‘signals’ carrying the organizational purpose for the employees and in response, the employees will respond to it through effectual and high job performance. If the organization signals the HR practices in the way that employees interpret them as fair, just, right and according to their needs in response, they interpret the signal of the organization and exhibit satisfaction and maximum job performance (Khalid et al., 2014). Job satisfaction represents an acceptable study of the impact of HRMP on EP. Thus, we tend to examine the subsequent hypotheses to review job satisfaction within the context of HRM Practices:

performance

H3: The impact of job satisfaction on commercial banks’ EP is positive. Above all, this impact is studied by examining 3 dimensions of job satisfaction effects, and that they are (a) Job Stability, (b) Job Enrichment, and (c) Job ability.

H4: Job satisfaction mediates the impact of HRMP in commercial banks on increasing EP. This mediation impact is studied through (a) Job Stability, (b) Job Enrichment, and (c) Job ability.

2.4. Employee Engagement

Employee engagement is defined as the level of commitment and involvement an employee has towards the organization and its values. When an employee is engaged, she/he is aware of her/his responsibility in the business goals and motivates others alongside, for achieving the organizational goals (Nishii & Wright, 2008). When confidence and commitment exist between the organization and individuals, this will lead to an increased opportunity for development, an increase in the productivity that the organization seeks to achieve, and ultimately success in organizational performance (Anitha, 2014).

The employee’s participation to achieve the goals of the organization, and how this participation is effective for the sake of creativity and presentation of ideas as this affects the decisions within the organization. Employee involvement helps the organization expand knowledge within the organization (Liao, 2009).

The participation of employees in the organization is a successful process because it does not feel people have been used negatively or have been differentiated. The participation of employees is necessary for any organization seeking to achieve commitment to the organization’s values and its performance (Ketter, 2008). Also, it is significant to have engaged employees to make the strategic goals of any organization (Vu, 2020)

Based on this understanding of employee engagement in the literature we propose that:

H5: Employee engagement does have a moderating impact on the HRMP and commercial bank EP (Al-Safadi, 2016)

Researchers have developed a study model based on studies and literary references, see Figure 1.

Figure 1: Research model

3. Methodology

3.1. Study Style And Knowledge Assortment

Data was collected from employees within the Jordanian commercial banks. 13 commercial banks were targeted in our analysis, as per the Banking Sector Guide. 519 responses were collected from 1,100 distributed questionnaires. Responses with missing data were deleted. Likewise, unrelated responses were deleted. The final dataset used d in the subsequent analysis consists of 480 responses.

3.2. Constructs Activity

The form developed for this analysis was tailored from the prevailing leading literature within the field. Likert scales are the most broadly used method for scaling responses in survey studies. A 5 point-Likert scale was used as followed by previous studies, and answers ranged from strongly disagree to strongly agree. HRMP was measured by adopting 27 items from Chen and Huang (2009). Job satisfaction was measured by adopting 16 items from Fabi et al. (2015). Employee engagement was measured by adopting 9 items from Albrecht et al. (2015). EP was measured by adopting 7 items from Anitha (2014) and Nishii and Wright (2008).

4. Data Analysis

Using the descriptive analysis, frequency and arithmetic mean of the analyzed, demographic information was analyzed after it was collected for statistical analysis. Analysis of all variables and indicators was from the data collected. After that, the researcher conducts a test of the hypotheses using structural equation modeling (SEM). The researcher used the following statistical methods: IBM, SPSS, AMOS. This is due to the presence of intermediate and moderate variables through the frequency and variance applied to the respondents.

Given the character of the abstract analysis model developed for this study, the SEM technique was adopted, thanks to the very fact that, SEM is that the common strategies used by researchers in SHRM analysis, particularly to assess the causative analysis model and study/research hypotheses (Hussein & Çağlar, 2019). SEM permits the researcher to conjointly check a group of complicated hypotheses by evaluating the impact of multiple individual and dependent constructs in an exceedingly structural model (Gefen & Straub, 2000). AMOS version 24 was used in this study to estimate model activity and structural models.

4.1. Descriptive Analysis

From Figure 2, we can see that the number of males (89%) is higher than the number of females (11%), and therefore, they are well prepared

From Figure 3, the marital status of the respondents was 59% married, followed by single 38%, and divorced 3% From Figure 4, the age demographic characteristic shows that respondents were mainly between the age group of 26- 40 years, followed by 33% less than 25 years old, and 14% more than 40 years. With the majority of the respondents in the youth to middle age group, this can have a positive impact on performance. Most employees in this age group are eager to learn, build their experience, and apply their skills in the workforce. This enthusiasm is great for team building, productivity (EP), and workplace morale (Locke, 1976). From Figure 5, the education demographic characteristic shows that 56% hold a bachelor’s degree, 31% have a master’s degree, and 13% are a doctorate. This means that the respondents have the necessary qualification needed for various positions (jobs) in the bank and they adapt to the HRMP in improving the EP as well as the bank’s performance.

Figure 2: Gender 

Figure 3: Marital status

Figure 4: Age Distribution Chart 

Figure 5: Education

Figure 6: Job Position

Figure 7: Years of Experience

From Figure 6, the respondent’s position (job role/title) within the bank shows that 59% were front-line employees, 16% were middle-level managers, 13% were TL managers (top management), and 12% were HRM specialists. From Figure 7, we can see that 56% of the respondents had 1-5 years of experience, 25% of the respondents had less than one year of experience, 10% of the respondents had more than 11 years of experience, and 9% of the respondents had 6-10 years of experience. This shows that with the majority of the respondents having less than one year of work experience, it can impact performance. Past research has shown a positive relationship between the amount of work experience and performance. The positive effect of prior related experience on task-relevant knowledge and skill is  attenuated by higher levels of experience within the current firm (De Menzes, 2012).

4.2. Model Activity

Confirmatory factor analysis (CFA) is a multivariate statistical procedure that is used to test how well the measured variables represent the number of constructs. CFA allows the researcher to test the hypothesis that a relationship between observed variables and their underlying latent constructs exists (Bagozzi & Yi, 1988). Besides, CFA assists researchers in distinctive and decisive construct validity (i.e., convergent, discriminant, and nomological validity). CFA was conducted on the general model.

Table 1: CFA Standardized Loading, AVE, CR

continued

Convergent validity means that the variables within a single factor are highly correlated. This is evident by the factor loadings. As a rule of thumb, your variable should have a factor loading of 0.7 or more. As shown in Table 1 all the things loading on their corresponding factors are a unit higher than 0.7, which represents an extremely good level of convergent validity (Hair et al., 2010). Also, loadings below 0.5 inform to an appropriate level of discriminate validity. Discriminant validity shows that two measures that are not supposed to be related are, unrelated, Then, we check composite reliability (CR), which measures scale reliability overall and preferred with CFA, and the minimum CR value in SEM analysis should exceed 0.7 for major internal dependability (Fornell & Larcker, 1981; Hair et al., 2010). All the variables were greater than 0.7, hence our model meets the criterion for dependability and validity. The goodness of fit model was used to confirm the developed model. A goodness-of-fit test, in general, refers to measuring how well do the observed data correspond to the fitted (assumed) model. The data in Table 2 shows that the model developed was a fit model

4.3. Structural Model

The evaluation of the structural model is the last step because of its great importance in analysis and impact.

4.3.1. Direct Effects

H1 results (β = two.25, p < 0.58***) show that HRMP has a positive direct impact on EP. Therefore, H1 is accepted. H2a results (β = zero.236, p < 0.016) show that HRMP has a positive direct impact on job satisfaction. Therefore, H2a is accepted. H2b results (β = zero.726, p < 0.23***) show a positive impact of HRMP on job enrichment. Therefore, H2b is accepted. H2c results (β = -0.030, p < 0.829) show that there is no impact of HRMP on job ability. Therefore, H2c is rejected.

H3a results (beta β = zero.219, p < 0.006) show a positive impact of job stability on EP. Therefore, H3a is accepted. H3b results (β = zero.149, p < 0.008) show that job enrichment had a major direct impact on EP. Therefore, H3b is accepted. In distinction, H3c results (β = -0.517, p < -0.32***) show a negative impact of job ability on EP. Therefore, H3c is accepted negatively. These results are summarized in Table 3 below.

4.3.2. Indirect Effects

Following Baron and Kenny (1986) recommendations for testing the mediation effects, we have found that job enrichment (β = zero.053, p < 0.013) and job stability (β = zero.109, p < 0.004) exhibited partial mediation impacts whereas job ability did not show any mediation effect as shown in Table 4 below. Thus, H4a and H4b were accepted whereas H4c was rejected.

Table 2: CFA Goodness of Fit Indices 

Table 3: (DHT)

Table 4: Mediation analysis results 

Table 5: IE of job satisfaction.

4.3.3. Moderation

Table 5 indicates that job satisfaction diminishes the positive impact of HRMP on EP (β = -0.146, p < - 0.13***). Therefore, H5 is accepted. Figure 5 explains the interaction impact of job satisfaction on the linkage impact HRMP and EP and has illustrated that HRMP related to job satisfaction weaken the positive impact of HRMP on improving EP. Therefore, these variables play a major role in the development and improvement of strategic HRM analysis.

5. Discussions

This study aimed to analyze the impact of HRMP on improving EP through job satisfaction. This study considers job enrichment as one of the factors impacting EP, which is a novel concept in SHRM, research particularly within the Jordanian commercial banks (Mahmood et al., 2019). The results show that HRMP had a positive impact on EP, as well as job satisfaction and its components (job stability and job enrichment). The mediating role of job satisfaction (enrichment and stability) was discovered. Finally, employee engagement emerged as a moderating variable linking HRMP and EP. The findings of this study show the importance of the role played by job satisfaction and employee engagement in achieving HRM performance goals within the context of the Jordanian business banks sector.

Our results confirmed that once adapting HRMP, commercial banks will be able to improve EP (H1). These results are consistent with the results of Zulfqar et al. (2010). World Health Organization (WHO) found a positive and direct impact on HRMP and EP. Our results offered another perspective as our primary research linked the impact of HRMP on improving employee performance in the commercial banking sector, particularly in Jordan. Furthermore, we contributed to the HRMP literature wherein future research can use our HRMP model developed in this study for considering other factors such as training, appraisal, and compensation that boost EP.

5.1. Theoretical Implications

We have tested and created the planned model of HRMP affecting EP in the Jordanian commercial banking sector. Previous studies have investigated the impact of HRMP on improving EP in MNC banks in Asian countries (Bowra et al., 2012), and even have been tested in Singapore contexts (Khatri, 1999). Hence, during this study, we have found that HRMP had a positive impact on improving employee performance in Jordanian commercial banks. Our results are in line with previous studies where researchers showed that HRMP was associated with EP (Baloch et al., 2010).

5.2. Limitations and Future Analysis Directions

First, this study used the demographic analysis method. A weakness with demographic analysis is that it generally does not provide enough information to separate errors of coverage from errors in content. Moreover, demographic methods require reliable data. Future analysis is recommended to gain deeper insight into the relationship between HRMP, job satisfaction, worker training, and performance appraisal. Future research can incorporate alternative factors/variables in explaining the impact of HRMP on improving EP with job satisfaction playing a mediating role. Finally, this study was conducted on the Jordanian commercial banking sector, therefore, the results of this study must also be compared with studies in alternative industries such as the service sector or manufacturing sector in different contexts aside from the Jordanian context. Future studies should investigate these limitations to produce more insights into the impact of HRMP on job satisfaction.