Human Resource Strategic Orientation and Performance of Large Private Manufacturing Firms in

Kenya: A Moderating Effect of Business Strategy

*Dr. J.R.Busienei1; Prof. P.O.K’Obonyo2; Prof. M.Ogutu3

*1, 2, 3

Respectively, Lecturer and Professors in the Department of Agricultural Economics and Department of Business

Administration, University of Nairobi, P.O Box 29053-0625 Nairobi Kenya

Introduction

Study Variables•Human Resource Strategic Orientation (HRSO)– Universalistic HRSO– Contingency HRSO

•Firm Performance– Profitability– Employee development– Employee job commitment– Employee job satisfaction

•Business strategy – Defender (DS)– Prospector (PS)– Analyzer (AS)

Theoretical Frameworki. The Resource Based View (RBV) of the firm

with characteristics of value, rarity, inimitability and non-substitutability – (VRIN)

ii. Theory of Strategic Human Resource Management (universalistic, contingency and configuration HR perspectives) - (Conner & Prahalad, 1996; Youndt et al., 1996).

1. Human Resource Strategic Orientation

(i) Universalistic HRSO•Universalistic arguments are the simplest form of theoretical statements in the SHRM literature because they imply that the relationship between a given independent variable and a dependent variable is universal across the population of organizations (Pfeffer & Cohen, 1984).

(ii) Contingency HRSO•Contingency theorists on the other hand, argue that in order to be effective, an organization’s HR practices must be consistent with other aspects of the organization (Khatri, 2000; Delery and Doty, 1996). •A common contingency factor identified in this line of research is business strategy and organizational structure.

2. Firm Performance• Measurement of success of large

manufacturing firms is based on both quantitative and qualitative performance indicators (Flynn, et al., 1984; Smith, et al., 1991).

• The manufacturing firm efficiency and effectiveness are two major concerns for strategic human resource management scholars in this field today.

(i) Quantitative Performance IndicatorsThis study used the profitability ratios to

determine firm performance, because these ratios have been used by previous researchers to measure performance of organizations.

(ii) Qualitative Performance Indicators

– Employee development– Employee job commitment– Employee job satisfaction

3. Business Strategy• Katcher (2003); Truss (2008) and McDaniel and

Kolari (1987) among others argue that strategy typologies have been widely employed to describe various business strategies within a given industry.

• In this study, the researcher has examined business strategies of large private manufacturing firms in Kenya based on the strategy typology developed by Miles and Snow (1984; 1978) namely:–Defender (DS)–Prospector and (PS) –Analyzer (AS)

Cont..Miles and Snow (1978) argue that although organizational adaptation is complex and dynamic process, it can broadly be conceptualized as a cycle of adjustment potentially requiring the simultaneous solution of three major problems:•Entrepreneurial (domain definition), •Engineering (technological), and •Administrative (structure-process and innovation).

Research Problem• Most research works in this field have focused

mainly on the direct relationship between human resource strategic orientation and performance in addition to the attributes of strategy as it independently influence performance (Miles et al., 2003).

• Available literature seems to suggest that the strength of the relationship and interaction between human resource strategic orientation and performance is likely to depend on business strategy (Miles & Snow, 1978).

• Despite these, the hypothesized link between human resource strategic orientation and performance and the moderating effect of business strategy on this relationship is missing. • This study sought to close the gap identified

by introducing business strategy as moderating variable in the model that link human resource strategic orientation and firm performance.

Objectivesi. To establish the relationship between

human resource strategic orientation and performance;

ii. To determine the moderating effect of business strategy on the relationship between human resource strategic orientation and performance

Concept Model Showing the Effect of Business Strategy On the Relationship Between Human Resource Strategic

Orientation and Firm Performance

Hypotheses• Hypotheses 1: There is a significant relationship

between human resource strategic orientation and firm performance.

• Hypotheses 2: The strength of the relationship between human resource strategic orientation and firm performance significantly depends on business strategy

Methodology• This study adopted positivist paradigm • This was a correlational and descriptive research design. • The population of the study was 498 firms and out of these,

a sample size of 108 firms was used to collect primary data, however, 68 (63%) responded to the questionnaires administered.

• The respondents were human resource managers, finance managers and corporate planning managers.

• Data was analysed using correlation and regression analysis and that the findings indicate strong positive effect of business strategy on the relationship between human resource strategic orientation and performance.

DESCRPTIVE STATISTICS

(i) Test of Internal Consistency of Measurement Scales•All the measurement scales for the twelve constructs obtained an acceptable level of a coefficient alpha above 0.70, indicating that the measurement scales were reliable and appropriate for further data analysis. •Specifically, the average Cronbach’s Alpha Coefficient was 0.871.

S/NO Measurement Scale No of Items

Cronbach Alpha

1 Universalistic 10 0.859

2 Contingency 11 0.915

3 Defender strategy 16 0.765

4 Prospector strategy 16 0.797

5 Analyzer strategy 16 0.858

6 Development 10 0.929

7 Job satisfaction 9 0.859

8 Commitment 10 0.924

9 Profitability 10 0.934

Average 0.871

(ii) Composite Mean Scores and Standard Deviations for Measures of each Variable• These yielded mean scores of between

3.520 – 3.800 and standard deviations of between 0.491– 0.751.• This revealed that a majority of the

manufacturing firms under study had obtained good performance indicators.

Composite Mean Scores and Standard Deviations

S/NO Item N Mean Std. Deviation

1 Universalistic 68 3.73 0.518

2 Contingency 68 3.66 0.560

3 Defender strategy 68 3.21 0.395

4 Prospector strategy 68 3.32 0.426

5 Analyzers strategy 68 3.17 0.455

6 Development 68 3.79 0.564

7 Job satisfaction 68 3.53 0.527

8 Commitment 68 3.80 0.491

9 Profitability 67 3.68 0.544

Average 68 3.541 0.5231

TEST OF HYPOTHESES

Hypothesis 1: There is a relationship between human resource strategic orientation and firm performance

(a) Correlation Analysis

•The findings in the Table below show strong positive correlation between human resource strategic orientation and firm performance, (n=68, r = 0.772, p < 0.01), two tailed, implying that firm performance is affected by human resource strategic orientation adopted by the firm.

Table 3: Correlation Coefficients for Human Resource Strategic Orientation and Performance Organization Performance Human resource

strategic orientation

Organization Performance

Pearson Correlation (r) 1 Sig. (2-tailed) n 68

Human resource strategic orientation (HRSO)

Pearson Correlation 0.772(**) 1 Sig. (2-tailed) 0.001 n 68 68

** Correlation is significant at the 0.01 level (2-tailed)

Relationship between Universalistic Human Resource Strategic Orientation and Individual Dimensions of Performance•The results presented in Table below show that there is considerably strong positive correlation between the variables. •Specifically, it is noted that there is a strong positive correlation between the universalistic human resource strategic orientation and the qualitative aspects of firm performance including; employee development, (n=68, r = .781, p < .05), employee job satisfaction (n=68, r = .655, p < .05) and employee commitment to work (n=68, r = .655, p < .05).

Development Pearson Correlation

Sig. (2-tailed)

n

.781(**)

.001

68

Satisfaction Pearson Correlation

Sig. (2-tailed)

n

.655(**)

.001

68

Commitment Pearson Correlation

Sig. (2-tailed)

n

.655(**)

.001

68

Empowerment Pearson Correlation

Sig. (2-tailed)

n

.525(**)

.001

68

Profitability Pearson Correlation

Sig. (2-tailed)

n

.354(**)

.003

68

Relationship between Contingency Human Resource Strategic Orientation and Individual Performance Indicators

• it is noted that there is a high positive correlation between the contingency human resource strategic orientation and the qualitative aspects of firm performance including; employee development (n=68, r = .690, p < .05), two tailed, employee job satisfaction (n=68, r = .730, p < .05) two tailed and employee commitment to work (n=68, r = .641, p < .05) two tailed.

S/No Development Pearson CorrelationSig. (2-tailed)n

.690(**).00168

1 Satisfaction Pearson CorrelationSig. (2-tailed)n

.730(**).00168

2 Commitment Pearson CorrelationSig. (2-tailed)n

.641(**).00168

3 Empowerment Pearson CorrelationSig. (2-tailed)n

.582(**).00168

4 Profitability Pearson CorrelationSig. (2-tailed)n

.282(*).02068

(b) Regression Analysis

Hypotheses 2: The strength of the relationship between human resource strategic orientation and firm performance depends on business strategy

• Model 1 shows the results of stepwise regression analysis when only human resource strategic orientation and firm performance variables are in the equation (n=68, R2 = 0.596, p < 0.05).

• As shown in the table, models 2, 3 and 4, in addition to human resource strategic orientation, prospector strategy (PS), defender strategy (DS) and analyzer strategy (AS) were entered into the regression equation, respectively.

• From the table, prospector strategy appears to have the strongest effect on the relationship between human resource strategic orientation and firm performance (R2 = 0.818) as opposed to analyzer and defender strategies with R2 = 0.807 and R2 =

0.746, respectively.

Model

Standardized Coefficients

Model Summary

Beta R2

Adjusted R2 F-Value df1 df2

1 Constant 0.596** 0.589 0.994** 1 66

HRSO 0.602**2 Constant 0.818** 0.812 0.716** 1 66

HRSO * PS 0.646**3 Constant 0.746** 0.738 1.649** 1 66

HRSO * DS 0.743**4 Constant 0.807** 0.802 1.081** 1 66

HRSO * AS 0.556**5 Constant 0.791** 0.787 1.029 2 65

HRSO * BS 0.750**

SUMMARY OF FINDINGS

No Objectives Hypotheses Type of Analysis Results Decision

1 To establish the relationship between human resource strategic orientation and firm performance

H1: There is a relationship between human resource strategic orientation and performance

Pearson’s Product Moment Correlation Co-efficient (r) (PPMC)

r (68) = 0 .772, p < 0.001, two tailed

Confirmed

2

To determine the moderating effect of business strategy on the relationship between human resource strategic orientation and performance

H2: The strength of the relationship between human resource strategic orientation and firm performance depends on business strategy

Stepwise Regression Analysis

R2 = 0.596

Change in R2

= 0.195 (i.e. 0.791 – 0.596) Changes in the R2 Statistic from 0.596 to 0.791 p < .001, two tailed

Confirmed

Contributions • The main contribution of this study

lies in highlighting the fact that, proper alignment of business strategy and human resource strategic orientation in private manufacturing firms that are registered members of KAM, enable them enhance performance.

Future Research• Future study should focus on the

longitudinal research design, while at the same time consider information technology as either moderating or intervening variables in a bid to enhance robustness of the study.

THANK YOU