The impact of HRM practices on organisational performance in the

Indian hotel industry

Mohinder Chand

Department of Tourism and Hotel Management, Kurukshetra University,

Kurukshetra, India, and

Anastasia A. Katou

Department of Marketing and Operations Management,

University of Macedonia, Thessaloniki, Greece

Abstract

Purpose – The study has a two-fold purpose: to investigate whether some specific characteristics

of hotels affect organisational performance in the hotel industry in India; and to investigate

whether some HRM systems affect organisational performance in the hotel industry in India.

Design/methodology/approach – A total of 439 hotels, ranging from three-star to five-star

deluxe,responded to a self-administered questionnaire that measured 27 HRM practices, five

organizational performance variables, and ten demographic variables. Factor analysis was

performed to identify HRM systems, one-way ANOVA was employed to test the association of

the demographic variables with organisational performance, and correlation analysis was used to

test the relation between HRM

systems and organisational performance.

Findings – The results indicate that hotel performance is positively associated with hotel

category and type of hotel (chain or individual). Furthermore, hotel performance is positively

related to the HRM systems of recruitment and selection, manpower planning, job design,

training and development, quality circle, and pay systems.

Research limitations/implications – Single respondent bias may have occurred because a single

respondent from each organisation provided information on HRM practices and perceived

measures of organisational performance. The sample was drawn from the population of best

performing hotels in India, so is not representative of the hotel industry in India.

Practical implications – If hotels are to achieve higher performance levels, they should

preferably belong to a chain and increase their category, and management should focus on “best”

HRM practices indicated in the study.

Originality/value – The study makes a modest attempt to add information to the very little

empirical knowledge available referring to the link between HRM and performance in the hotel

industry.

Keywords Human resource management, Organizational performance, Hotel and catering

industry,India

Paper type Research paper

Introduction

Since the concept of human resource management (HRM) emerged in the early 1980s,

two basic paths of research have been developed in investigating the relationship

between human resource management practices and organisational performance. The

first was based on the assumption that there is a “direct” relationship between

individual HRM practices and/or internally consistent HRM systems of HRM practices,

and organisational performance (e.g. Schuler and Jackson, 1999). The second was

based on the assumption that there is an “indirect” relationship between individual

HRM practices and/or HRM systems, and organisational performance (e.g. Ferris et al.,

1998; Edwards and Wright, 2001).

In relation to the first research path, three major perspectives emerge from the

existing literature:

(1) universalistic;

(2) contingency; and

(3) configuration (Katou and Budhwar, 2007).

The universalistic or “internal fit” perspective posits the “best practice bundle” of HRM

practices, implying that business strategies and HRM practices are mutually

independent in determining business performance (Arthur, 1994; Pfeffer, 1994; Huselid,

1995; Ichniowski et al., 1997; Brewster, 1999; Claus, 2003). The contingency or “external fit”

perspective emphasises the fit between business strategy and HRM practices, implying that

business strategies are followed by HRM practices in determining business performance (Schuler

and Jackson, 1987; Gomez-Mejia and Baklin, 1992; Huselid, 1995; Youndt et al., 1996). The

configurational perspective posits a simultaneous internal and external fit between a firm’s

external environment, business

strategy, and HRM strategy, implying that business strategies and HRM practices

interact according to organisational context in determining business performance

(Arthur, 1994; Guest and Hoque, 1994; Delery and Doty, 1996; Huselid and Becker,

1996; Ichniowski et al., 1997).

In relation to the second research path, although most studies speak of HRM

practices leading to performance, such a one-way line of “causation” is unsatisfactory

(Edwards and Wright, 2001). Thus, the general consensus developed among

researchers is that HRM practices and/or HRM systems do not lead directly to business

performance (Katou and Budhwar, 2006). Rather, they influence firm resources, such as

human capital, or employee behaviours, and it is these resources and behaviours that

ultimately lead to performance (Delery, 1998; Wright et al., 1994). This implicit model

assumes that there are variables that mediate a link between HRM practices and

business performance, although only a few researchers (Huselid, 1995; MacDuffie,

1995; Fey et al., 2000; Boselie et al., 2001; Park et al., 2003; Paul and Anantharaman,

2003; Katou and Budhwar, 2006) have measured these mediators and addresses their

importance.

Irrespective of the research paths followed, the majority of researchers have focused on

the manufacturing sector. For example, Arthur (1994) focused on steel mini-mills, MacDuffie

(1995) focused on the auto industry, and Katou and Budhwar (2006, 2007) focused on the

industrial sector as a whole. The literature also highlights that most

studies examining the relationship between HRM and a firm’s performance have been

conducted in the USA and the UK. Recently, a few investigations have been initiated in

other parts of the world, especially in emerging markets such as China (e.g. Deng et al.,

2003; Ahlstrom et al., 2005) and transitional economies such as Slovenia (e.g. Zupan

and Kase, 2005). Nevertheless, although it is well accepted that HRM is positively related to

organisational performance, there is a great need for additional empirical evidence to support the

HRM-performance link (Gerhart, 2005) and investigations from different contexts (Ericksen and

Dyer, 2005;Wright et al., 2005). Furthermore, there has The impact of HRM practices 577

generally been a tendency for the services sector to be overlooked in HRM research (Sisson,

1993; Lucas, 1996; Hoque, 1999a). This lack of research relating to services was due to the fact

that the services sector was a very heterogeneous sector comprising financial companies,

retailing operations, transport operation, and hospitality (Hoque, 1999b). Thus, the heterogeneity

of the sector was a serious obstacle to researchers and any attempt to investigate the services

sector as a whole was meaningless unless specific control variables were properly developed and

a representative sample of the organisations belonging to the services sector was selected

(Hoque, 1999a). In contrast, Cappelli and Neumark (2001) argue that there is an advantage in

investigating HRM in a single industry.

Considering the above, i.e. “it seems unlikely that one set of HR practices will work

equally well no matter what context” (Gerhart, 2005, p. 178), more research is needed in the

services sector and in different contexts. To fill this gap and to further examine the existence of

the relationship between HRM and organisational performance, it is important to conduct

research in non-US/European contexts and in non-manufacturing sectors. This article

investigates the association between HRM and organizational performance within the Indian

hotel industry context.

The hotel industry is the largest and rapidly growing industry in India, employing

over 12 million people, accounting for 8.5 per cent of the total workforce, and

generating over 4 per cent of GNP. Although there is visible evidence towards growing

consolidation and franchising within the industry, the dominant business model

remains that of the small, independent family firm, except for some big international

chains. However, the Indian hotel industry is confronted with considerable challenges

imposed by the turbulent and rapidly changing external environment that it operates

in. Thus, in order for the success to continue, the industry requires a professional

approach to the management of operations, particularly in the area of human resource

development (HRD). Such an approach is crucial, considering the staffing problems the

industry is currently experiencing. Significant difficulties in attracting and retaining

staff result in employers being confronted with acute skill shortages, a tightening

labour market and high levels of staff turnover.

The structure of the paper is as follows. The next section discusses selected

literature on the HRM-performance link in the hotel industry and the hypotheses to be

tested. The third section discusses the research methodology used. The results are

presented in the fourth section. The paper concludes with practical implications, and

future research directions are also suggested.

HRM research in hotels, and hypotheses development

The hotel industry is undoubtedly a labour-intensive industry. Its success depends “on the

social and technical skills of its personnel, their ingenuity and hard work, their

commitment and attitude” (Gabriel, 1988, p. 7; Anastassova and Purcell, 1995, p. 172).

It is also true that in a labour-intensive industry, the effective utilisation of human

resources can give an organisation its competitive edge (Schneider and Bowen, 1993;

Mohinder, 2004). “By effectively linking HRM with organisational objectives and

needs, human resources can be recruited, developed, motivated and retained towards

gaining a competitive advantage” (Cheng and Brown, 1998). Thus, the success of the

hotel industry depends on the quality of its employees and their effective management

in order to assist the organisation to achieve its objectives (Berger and Ghei, 1995).

However, the usual criticism of the human resource management departments of

hospitality organisations is that they constitute a cost centre. This is because although

the investment on employees is directly measurable, in contrast, the outcomes of this

investment are very difficult to measure. These “outcomes are generally measured

with intangible factors such as employee satisfactions, customer satisfaction, customer

complaints, etc.” (Cho et al., 2006, p. 263). On the other hand, contradictory views exist

about the extent to which the hospitality industry has invested in its human resources

(Alleyne et al., 2006). Some studies are aware of the importance of people to hospitality

organisations (Haynes and Fryer, 2000) and some other studies argue that the

management of people in hospitality organisations has been regarded as being rather

low in priority (Croney, 1988; Price, 1994; Lucas, 1996; Kelliher and Johnson, 1997;

Haynes and Fryer, 2000). For example, McGunnigle and Jameson (2000, p. 403)

concluded that “currently there is little to suggest a shift towards HRM in UK hotels”.

Similarly, Kelliher and Johnson (1997, p. 330) concluded that “there is scant evidence of

any real shift towards a model of HRM”, and Watson (1996, p. 104) concluded that “few

hospitality organisations are taking a strategic approach to management of human

resources”.

Anastassova and Purcell (1995), Watson and D’Annunzio-Green (1996), and Buick and

Muthu (1997) support the view that “best HRM practices” in the hospitality

industry should include appraisal systems, training and development, empowerment,

team working, and a more consultative management style. Moreover, Price (1994)

found that the majority of firms employing more than 30 people follow good personnel

practices, although small firms follow informal HRM practices. However, the priority

in large hotels is to recruit, select and develop staff (Worsfold, 1999). Moreover,

according to the quantitative results of Hoque (1999a), it seems that the extent of HRM

practices was higher in the sample UK hotels in comparison to the sample

manufacturing organisations of the study.

A number of researchers have found that the hospitality industry suffers from

extremely high turnover (e.g. Woods, 1992; Kennedy and Berger, 1994; Cheng and

Brown, 1998). Factors that have an impact on turnover may be induction (Woods, 1992;

Kennedy and Berger, 1994; Cheng and Brown, 1998), discrimination in the workplace

(Antolik, 1993), labour markets (Debrah, 1994; Buick and Muthu, 1997; Jago and Deery,

2004), recruitment and selection (Bonn and Forbringer, 1992; Cheng and Brown, 1998;

Tsaur and Lin, 2004), training and development (Hogan, 1992; Conrade et al., 1994; Jago

and Deery, 2004), management style (Rowden, 1995), organisational commitment

(Denvir and McMahon, 1992; McGunnigle and Jameson, 2000; Jago and Deery, 2004),

organisational culture (Woods and Macaulay, 1989; Mohinder and Vinay, 2001), and

job satisfaction (Hom and Griffeth, 1995; Jago and Deery, 2004).

With respect to overall organisational performance, Harrington and Akehurst

(1996) and Gilbert and Guerrier (1997) argue that there is a positive correlation between

service quality and business performance in the UK hospitality industry. Hoque

(2000a, b) supports the view that UK hotels of the chain type adopt HRM practices as a

cost reducer and put emphasis on service quality in order to improve their performance.

Moreover, Hoque (1999a) found that the relationship between HRM and organisational

performance depends on the business strategy the hotel is following, and hotels that employ

HRM approaches with a focus on quality within their business strategy perform best.

In spite of clear trends towards increased concentration, the Western hospitality

industry is characterised by fragmentation (Harrington and Akehurst, 1996; Ingram,

1999). The Indian hotel industry is no different. The hospitality industry generally

consists of small enterprises, both in India and worldwide. For example, it is estimated

that 87 per cent of all UK hotels and restaurants employ between one and ten people

(Worsfold, 1999), and 98 per cent of all enterprises in Ireland employee less than 50

people (Nolan, 2002). Thus, a number of authors (e.g. Conrade et al., 1994; Jameson,

2000; Barrows, 2000) state that academics have neglected the issue of human resource

management in the hotel industry because they have an endogenous bias towards

researching large organisations (Nolan, 2002). However, considering that small firms

have “an important contribution to the wealth [of] the nation” (Price, 1994, p. 44) there

is no reason to neglect HRM practices within small firms in the hotel industry.

Furthermore, it has been argued that key strategic variables are likely to exert an

influence on hotel performance (Brown and Dev, 1999; Claver-Cortes et al., 2007) such

as category, age, capital, number of employees and type of hotel (chain or individual).

Specifically, the first hypothesis to be tested in this article is:

H1. There is a positive relationship between organisational performance and

specific characteristics of hotels such as category, age, capital, number of

employees and type.

Although the hospitality industry is labour-intensive, only a few studies have

attempted to investigate the impact of HRM practices on organisational performance,

such as decreased turnover rates, increased labour productivity, and increased

profitability (Cho et al., 2006). These studies were conducted over the past decade in

domestic or multinational hotels with respect to the USA (Conrade et al., 1994; Ingram,

1996; Ingram and Baum, 1997; Woods, 1992; Chung and Kalnins, 2001), New Zealand

(Haynes and Fryer, 2000), Australia (Timo, 1999; Cheng and Brown, 1998; Timo and

Davidson, 2002; Knox, 2002; Nankervis, 2003; Jago and Deery, 2004; Davidson et al.,

2006), the UK (Worsfold, 1999; Price, 1994; Watson, 1996; Harrington and Akehurst,

1996; Lucas, 1996; Kelliher and Johnson, 1997; Hoque, 1999a, 2000a; McGunnigle and

Jameson, 2000; Maxwell et al., 2000; Watson et al., 2007), Singapore (Cheng and Brown,

1998), Bulgaria (Anastassova and Purcell, 1995), Ireland (Nolan, 2002; Garavan et al.,

2002), Slovakia (Lucas et al., 2004), Barbados (Alleyne et al., 2006) and India (Singh,

2003). These studies were mainly conducted with respect to single HRM practices and

not with respect to systems of internally consistent and supporting HRM practices, and

thus their results may be considered biased (Cho et al., 2006). Therefore, this study is

considering the impact of systems of HRM practices on organisational performance.

Specifically, the second hypothesis to be tested in this article is:

H2. There is a positive relationship between HRM systems and organisational

performance.

Methodology

Sample

A questionnaire survey in the Indian hotel industry was carried out between January and

December 2005. A sample of 845 hotel organisations, 405 chain hotels and 440 individual hotels

was used from the FHRAI directory. “Chain hotel” in the present context means any hotel that is

operating in terms of management contract, franchising or any other type of collaboration with

an international hotel group or a domestic hotel group. The sample included hotels ranging from

three stars to five stars deluxe, according to the Indian Ministry of Tourism approved

classification list, and moreover they were the best performing hotels during the last five years.

A total of 439 usable questionnaires were received, 265 chain hotels and 174 non-chain hotels, a

response rate of approximately 52 per cent.

Most of the questions for the survey were drawn from existing international HRM

surveys such as the Price Waterhouse Cranfield Project Survey (Brewster and Hegewisch, 1994),

Hall and Torrington (1998) and Hoque (1999a). The questionnaire was originally piloted in ten

organisations and it was e-mailed to the HR/personnel managers of the sample organisations,

who provided the answers on behalf of the organisation.We acknowledge the problems

associated with such a mechanism of data collection, i.e. of having single informers from each

organisation, and of subjective self-assessment of performance. However, this is usually the case

with large questionnaire surveys that aim to collect an adequate number of responses (Brewster

and Hegewisch, 1994).

Measures

HRM practices. We used 27 existing HRM practices (see first column of Table I) measured on a

Likert-type scale ranging from 1 ¼ very little to 5 ¼ very much. HRM systems. For the

classification of the HRM systems we followed the methodologies of Tsui et al. (1997) and Fey

et al. (2000). However, in creating a HRM system variable in this study we followed a three-step

procedure (Katou and Budhwar, 2006). First, we verified empirically a theoretical grouping of

the HRM practices. Second, we calculated the Cronbach’s alphas to check the interrelatedness

among the relevant items. Third, scores were calculated for each factor as the average of the

scores on the individual HRM practices that loaded most strongly on that factor. Table I presents

the results from exploratory principal components factor analyses with Varimax rotation on the

27 individual HRM practice items categorised into six groups. The HRM practice items were

factored into six factors explaining between 79.87 and 83.50 per cent of the total variation. The

first factor (HRM system) we label as “recruitment and selection” (RS), which comprises

harmonized and term conditions, single status for all staff, internal promotion norm, employment

test criteria, merit element in selection, and multi-skilling and experience. The second factor,

“manpower planning” (MP), comprises formal manpower planning, work culture, career

planning, and involvement of all departments. The third factor, “job design” (JD), comprises

flexible job description, development of learning organisation, cross-cultural job design, and

team working. The fourth factor, “training and development” (TD), comprises need-based

training and development criteria, formal system induction, learning organisation, formal

training and development. The fifth factor, “quality circle” (QC), comprises staff involvement in

objective setting, production/service staff responsible for their service, employee’s involvement

in quality circles, and regular use of attitudes surveys. Finally, the sixth factor, “pay system”,

comprises staff informed about market condition and company performance, merit element in

pay package, formal appraisal for all staff, no-financial incentives, and social appreciation and

recognition.

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 (RS) (MP) (JD) (TD) (QC) (PS)

Variation explained (per cent) 82.12 83.50 80.16 79.75 80.20 79.87Eigenvalues 2.78 2.48 2.49 1.79 1.78 2.41

1. Recruitment and selection (RS)Harmonized terms andConditions 0.85Single status for all staff 0.79Internal promotion norm 0.70Employment test criteria 0.65Merit element in selection 0.80Multi-skilling and experience 0.86

2. Manpower planning (MP)Formal manpower planning 0.85Work culture 0.79Career planning 0.82Involvement of all departments 0.77

3. Job design (JD)Flexible job description 0.85Development of learningOrganization 0.77Cross-cultural job design 0.79Team working 0.64

4. Training and development (TD)Need-based T&D criteria 0.69Formal system of induction 0.79Learning organization 0.65Formal training anddevelopment 0.62

5. Quality circle (QC)Staff involvement in objectiveSetting 0.45Production/service staffresponsible for their service 0.92Employees are involved inquality circles 0.75Regular use of attitudesSurveys 0.78

6. Pay system (PS)Staff informed about marketcondition and companyperformance 0.77Merit element in pay package 0.68Formal appraisal for all staff 0.55No financial incentives 0.52Social appreciation andRecognition 0.88

Cronbach’s a 0.83 0.90 0.79 0.81 0.82 0.77

Table I.Factor analysis results for the HRM practices items

All items pass the eigenvalue (more than 1.00), the cut-off points (factor loading not less

than 0.40), and the cross-loading (not less than 0.10) requirements (for details regarding

these requirements, see Youndt et al., 1996; Huselid et al., 1997; Ngo et al., 1998). The

Cronbach’s alphas of the six factors are very high (ranging from 0.77 to 0.90), and are

above the generally acceptable level of 0.70 (see Nunnally, 1978). The six factors

derived based on our data coincide with the conceptually derived HRM systems (e.g.

Huselid, 1995; Delaney and Huselid, 1996; Youndt et al., 1996; Huselid et al., 1997; Ngo

et al., 1998).

Organisational performance. We used multiple organisational performance

variables (sales growth, productivity, profitability, goal achievement, good services)

that were measured under the philosophy of a perceived rating of the organisation’s

performance on a Likert-type scale ranging from 1 ¼ very bad to 5 ¼ very good.

Controls

Size. Size is used to capture size and scale effects, since large organisations may be

more likely than small ones to have well-developed HRH practices (Huselid, 1995;

Youndt et al., 1996). It has been argued that the larger the size of hotels, the higher the

performance (Pine and Phillips, 2005; Claver-Cortes et al., 2007). In contrast, other

researchers have argued that there is no relationship between hotel size and

performance (Brown and Dev, 1999).

Age. Age is used to capture any founding values of the organisation (Delaney and

Huselid, 1996).

Capital. Capital is used to capture the variations in the amount of capital on

performance (Hayes et al., 1988; Huselid, 1995; Richard and Johnson, 2001).

Category. Category is used to capture how category affects hotel performance. It is

argued that the higher the category, the higher the hotel’s performance (Brown and

Dev, 1999; Pine and Phillips, 2005; Claver-Cortes et al., 2007).

Hotel type. Hotel type is used to capture specific effects with respect to chain hotels

and independent hotels. It is argued that chain hotels have more chances of surviving

(Ingram, 1996; Ingram and Baum, 1997; Chung and Kalnins, 2001; Claver-Cortes et al.,

2007).

Table II presents the distribution of the sample organisations according to the

controls used in the study. The vast majority (84 per cent) of the sample hotels were at

most four stars, and 52 per cent of the sample hotels were established in the last ten

years. With respect to the size of the organisations, 86 per cent of the sample hotels

were rather small organisations with less than Rs50 million in operating capital, and 59

per cent of the sample hotels were also small organisations with less than 100

employees. Finally, nearly 40 per cent of the sample hotels were individual enterprises.

Results and discussion

In order to assess the relationship between some of the controls (or demographic

variables) and organisational performance, or in other words to be able to test H1,

one-way ANOVAS were performed. The results of this analysis are summarised in

Table III, which presents the corresponding F-values. The findings in Table III are

informative. In the column headed “Mean scores” the average scores of the

corresponding performance variables are reported. It is seen that all means are much

above level 4 in the five-level Likert scale. This should be of no surprise because all

The impact of

HRM practices

583

hotels included in the sample were the “best performing hotels” according to the

FHRAI directory.

The dimensions “hotel category” and “type of enterprise” were found to be

statistically significant on all performance variables, except “good service quality” for

the “type of enterprise” dimension. Post hoc examination revealed that the higher the

star category of the hotel, the higher the hotel’s performance levels. This result is

similar to the results of Brown and Dev (1999), Pine and Phillips (2005) and

Claver-Cortes et al. (2007). Moreover, it is found that hotels performed better when they

belonged to a chain, a result that is similar to the results of Ingram (1996), Ingram and

Baum (1997), Chung and Kalnins (2001), and Claver-Cortes et al. (2007). In contrast, the

dimensions “hotel age”, “size in capital” and “size in employees” did not produce

statistically significant results with respect to the performance variables. This result is

similar to the results of Brown and Dev (1999).

In the light of these results, we can say that regarding H1, there is a positive

relationship between organisational performance and hotel category and type, and

there is no relationship between organisational performance and hotel age and size

Number Percentage

Category of hotel

Three-star 163 37.13

Four-star 206 46.92

Five-star 55 12.53

Five-star deluxe 15 3.42

Age of hotel (in years)

#5 75 17.08

6-10 154 35.08

11-15 105 23.92

16-20 85 19.36

$21 20 4.56

Capital (million Rs)

#10 164 37.36

11-30 125 28.47

31-50 90 20.50

51-100 45 10.25

$101 15 3.42

Employees (numbers)

#50 125 28.47

51-100 135 30.75

101-200 95 21.64

201-300 70 15.95

$301 14 3.19

Type of enterprise

Individual 174 39.64

Chain 265 60.36

Table II.

Distribution of sample

according to hotel

characteristics

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Performance variables Control variables

Measures Mean scores Hotel category Hotel age Size in capital Size in employees Type of

enterprise

Sales growth 4.20 5.435 * * 1.237 1.891 1.584 5.435 * *

Productivity 4.73 4.563 * * 1.785 1.237 0.768 5.751 * * *

Profitability 4.71 4.491 * * 1.542 0.327 1.084 4.920 * *

Goal achievement 5.42 4.082 * * 0.725 0.739 0.781 3.720 *

Good service quality 4.09 4.862 * * 1.262 0.531 0.735 2.352

Notes: *p # 0:05; * *p # 0:01; * * *p # 0:001

Table III.

F-values from the

one-way ANOVA on

organisation performance

variables

The impact of

HRM practices

585

(capital or employees). In other words, if hotels are to achieve higher performance

levels, they should preferably increase their category and belong to a chain.

Correlations were calculated between the factors representing the six HRM systems

of HRM practices derived in Table I, and the organisational performance variables.

These six factors were made up by a number of conceptually consistent HRM practices

in the questionnaire, determined by factor analysis. This approach is acceptable when

testing hypotheses about a number of factors to be extracted (Hair et al., 1998; Jago and

Deery, 2004). The resultant correlation coefficients are presented in Table IV, where it

can be seen that all correlations are positive, highly significant and in most cases their

values are rather high. In light of these results we may accept H2, supporting that there

is a positive relationship between HRM systems and organisational performance.

Specifically, the HRM system of “recruitment and selection” (RS) proved to

demonstrate the strongest correlation (0.448) with “profitability”. Considering that this

system includes the HRM practices of “multi-skilling and experience” and “harmonised

terms and conditions” (which have the highest loading values of 0.86 and 0.85,

respectively), thus suggests that management focus on these HRM practices will do

more to improve organisational profitability. It should be expected that “multi-skilling

and experience” are the first priority in the recruitment and selection process in the

hotel industry.

Furthermore, the HRM system of “manpower planning” (MP) proved to have the

highest correlation (0.542) with “productivity”. Considering that this system includes

the HRM practices of “formal manpower planning” and “career planning” (which have

the highest loading values of 0.85 and 0.82, respectively), this suggests that

management focus on these HRM practices will do more to improve organisational

productivity. This result verifies the fact that best performing hotels in India follow

“formal manpower planning” to ensure smooth running of their operations.

Similarly, the HRM system of “job design” (JD) proved to have the highest

correlation (0.382) with “productivity”. Considering that this system includes the HRM

practices of “flexible job rotation” and “cross-cultural job design” (which have the

highest loading values of 0.85 and 0.79, respectively), this suggests that management

focus on these HRM practices will do more to improve organisational productivity. The

reasoning behind this is that “flexible job rotation” and “cross-cultural job design” go

hand-in-hand with respect to the hotel industry’s needs.

Moreover, the HRM system of “training and development” (TD) showed the highest

correlation (0.410) with “good service quality”. Considering that this system includes

the HRM practices of “formal system of induction” and “need based training and

development criteria” (which have the highest loading values of 0.79 and 0.69,

respectively), this suggests that management focus on these HRM practices will do

more to improve good service quality in the organisation. We were expecting this

result because a “formal system of induction” may constitute the beginning of human

resource development in the hotel industry.

Similarly, the HRM system of “quality circle” (QC) proved to demonstrate the

strongest correlation (0.424) with “profitability”. Considering that this system includes

the HRM practices of “production/service staff responsible for their service” and

“regular use of attitude surveys” (which have the highest loading values of 0.92 and

0.78, respectively), this suggests that management focus on these HRM practices will

do more to improve organisational profitability. This result is not surprising, especially

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HRM systems (factors)

Performance variables

Recruitment and selection

(RS)

Manpower planning

(MP)

Job design

(JD)

Training and development

(TD)

Quality circle

(QC)

Pay system

(PS)

Sales growth 0.223 * * 0.261 * * 0.210 * * 0.310 * * 0.342 * * 0.291 * *

Productivity 0.374 * * 0.542 * * 0.382 * * * 0.378 * * 0.361 * * * 0.540 * * *

Profitability 0.448 * * * 0.328 * * * 0.289 * * 0.327 * * 0.424 * * 0.351 * * *

Goal achievement 0.375 * * * 0.291 * * 0.247 * * 0.261 * * 0.394 * * * 0.285 * *

Good service quality 0.430 * * * 0.246 * * 0.294 * * 0.410 * * * 0.382 * * 0.215 * *

Notes: *p # 0:05; * *p # 0:01; * * *p # 0:001

Table IV.

Correlation coefficients

between HRM systems

and organisation

performance variables

The impact of

HRM practices

587

in the hospitality industry where the delivery of products/services is the main criterion

for guest satisfaction.

Finally, the HRM system of “pay system” (PS) proved to have the highest

correlation (0.540) with “productivity”. Considering that this system includes the HRM

practices of “social appreciation and recognition” and “staff informed about market

condition and company performance” (which have the highest loading values of 0.88

and 0.77, respectively), this suggests that management focus on these HRM practices

will do more to improve organisational productivity. This result is rather surprising,

because in India one would expect “financial incentives” to be rated first, followed by

“social appreciation and recognition”.

Conclusions

The scope of this paper was two-fold:

(1) to investigate whether some specific characteristics of hotels such as category,

age of organisation, size of organisation (in capital and in number of employees

terms), and type (chain or individual) affect organisational performance in the

hotel industry in India; and

(2) to investigate whether HRM systems such as recruitment and selection,

manpower planning, job design, training and development, quality circles, and

pay system also affect organisational performance in the hotel industry in India.

Organisational performance was measured with sales growth, productivity,

profitability, goal achievement, and good service quality, in the form of perceived

opinions of the survey respondents.

The major finding with respect to the first objective may be summarised as follows:

hotel performance is positively associated with category and type. Regarding the

category, it would be advisable for the hotel to increase its category, because it would

be more convenient to position a higher category hotel in the hotel industry, thus

attracting prospective guests (Claver-Cortes et al., 2007). Considering the type of hotel,

it would be advisable for the hotel to belong to a chain, “since performance levels in

that situation are always above those achieved by independent establishments”

(Claver-Cortes et al., 2007, p. 16).

The major finding with respect to the second objective may be summarised as

follows: hotel performance is positively related with HRM systems. Regarding these

systems, it would be advisable for the hotel management to focus on the “best” HRM

practices for the hotel industry in India, those being multi-skilling and experience,

harmonised terms and conditions, formal manpower planning, career planning,

flexible job description, cross-cultural job design, formal system of induction,

need-based training and development criteria, production/service staff responsible for

their service, regular use of attitudes surveys, social appreciation and recognition, and

staff informed about market condition and company performance. Improvement of

these HRM practices may develop competitive advantages for the hotels that adopt

these practices.

There are two basic limitations of the study. The first refers to the fact that a single

respondent from each organisation provided information on HRM practices and

perceived measures of organisational performance. Thus, respondent bias may have

occurred in the form of upward or downward reporting of measures (Paul and

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588

Anantharaman, 2003). The second refers to the sample itself. By including in the

sample only the best performing hotels in India the sample is not representative of the

hotel industry in India.

Considering the limitations of the study, we propose paths for future research. In

this study we concentrated only on the two endpoints of evaluation, i.e. “HRM

systems” and “organisational performance”. However, we believe that more research is

needed to investigate the intervening steps, analysing variables that mediate or

moderate the two endpoint variables (Becker and Gerhart, 1996). Furthermore,

research is also needed on “how” something is done and not just “what” has been done

(Paul and Anantharaman, 2003).

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Corresponding author

Mohinder Chand can be contacted at: mohinderchand@rediffmail.com

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