HRD climate & customer satisfaction in Indian private banks.
Mittal, Shweta ; Gupta, Vishal ; Mottiani, Manoj 等
The present study examines the relationship between HRD climate and
customer satisfaction. The HRD climate is conceptualized as comprising
three components: general climate, OCTAPAC and HRD mechanisms. A survey
based study was conducted in the Indian private banks and collected dyad
level data. The data was collected from the employees and customers who
were served directly by the bank employees. Data analysis was performed
using a SEM technique, which showed that all the three components of HRD
climate have a positive impact on customer satisfaction. Implications
for research and practice are discussed.
Introduction
In today's complex business environment, there is continuous
and intimate exchange of not only information but also intense emotions
between employees and customers (Kellogg & Chase, 1995; Parasuraman,
1985). Employees are the face of organizations, and the quality of their
interactions with customers determines customer satisfaction, which, in
turn, affects repeat purchase and, thus, ultimately determines
companies' profitability (Brown & Lam, 2008). A customer's
experience of services is dependent on his/her interaction with
employees (Chase, 1977). Schmit and Allscheid (1995) suggested that it
is impossible for the organization to achieve customer satisfaction
without satisfied and loyal employees. Several empirical studies have
found a positive relationship between employee satisfaction and customer
satisfaction (Bernhardt et al., 2000; Harter et al., 2002; Koys, 2003;
Wangenheim & Bayon, 2007).
Given this positive relationship, it is important to examine the
factors that may affect employee satisfaction. An important determinant
of employee-related outcomes is organizational climate. Previous studies
have suggested that organizational climate is related to an
organization's profitability, productivity, customer loyalty and
employee retention (Pattanayak, 1998). Organizational climate can propel
employee performance (Carlopio & Gardner, 1995; Davis, 1984; Fried
& Slowik, 2001; Parish et al., 2008; Steele, 1986; Sundstrom &
Altman, 1989) and their interactions with the customers (Bitner, 1992).
There is considerable debate in literature on whether
organizational climate should be conceptualized as a broad, generalized
construct or there is a need for a specific construct (Schneider, 2000).
A more focused sub-set of broad organizational climate is Human Resource
Development (HRD) climate. HRD climate implies the perception that
employees have about the policies, procedures, practices and conditions
that exist in the working environment (Chaudhary, 2012). The difference
between HRD climate and organizational climate is that the former is
more development-oriented (Mishra & Bhardwaj, 2002). The climate in
which employees work is, to some extent, affected by the HRD practices
of the organization thus, introducing the 'HRD climate'.
Previous studies show that there is a link between organizational
climate and performance (Burke & Litwin, 1992; Denison, 1990; Kangis
et al., 2000; West & Smith, 1998). Solkhe and Chaudhary (2011) found
that if an organization scores high on various elements of HRD climate,
then it definitely positively impacts job satisfaction of employees.
Employees who are well motivated, well trained and highly competent are
more likely to perform their jobs better and satisfy both internal and
external customers.
To our knowledge, there is no empirical study that has investigated
the HRD climate-customer satisfaction link. The present study provides
useful insights into this and makes contributions to theory and
practice. The study empirically tests the relation between HRD climate
and customer satisfaction. Based on the data collected from employees
working in the Indian banking industry and their respective customers,
the study found evidence of a strong positive relationship between
employee perceptions of HRD climate and customer satisfaction.
Organizational Climate & HRD Climate
Organizational climate can be defined as a manifestation of the
values, feelings, attitudes, interactions and group norms of the members
(Brown & Harvey, 2006). It is reflected in an organization's
internal communication, organizational structure, professional
development and regard for personal concerns. Schneider (2000) argued
that organizational climate ought to be studied with situational
referents as 'climates for something' or 'strategic
climates' because these climates served as referents for specific
behaviors (Schneider & Bowen, 1992). In today's competitive
landscape, the scope of human resource management functions has shifted
from routine HR activities towards more strategic roles (Budhwar, 2000).
HRD practices and policies not only determine the strategic direction of
firms but also play an important role in determining employee perception
about organizational climate (Kopeland et al., 1990). Hence, it is
essential to understand organizational climate from the perspective of
HRD.
According to Swanson (1995) "HRD is a process for developing
and unleashing human expertise through organization development and
personnel training and development for the purpose of improving
performance". HRD climate is defined as the perceptions that
employees have about the policies, procedures, practices, and conditions
which exist in the working environment (Chaudhary, 2012). HRD systems
and practices play a significant role in initiating, facilitating and
promoting HRD climate (Athreya,1988). Mufeed and Gurkoo (2006) argued
that in order to gain from HRD practices, it is important that these
practices are adopted as a company-wide philosophy in an integrated
manner indicating a need for proper HRD climate. HRD climate is
essential to sustain HRD efforts by focusing on the creation of
organizational culture congenial for development.
Pareek (1988) suggested that HRD climate facilitates sustains and
helps in the successful implementation of HRD practices and efforts.
Thus, both HRD practices and HRD climate are complementary and
interdependent (Agarwala, 2002).
Rao and Abraham (1986) listed the important characteristics of
developmental climate. These include: (1) a tendency at all levels
starting from top management to the lowest level to treat the people as
the most important resource; (2) a perception that developing the
competencies in the employees is the job of every manager/supervisor;
(3) faith in the capability of employees to change and acquire new
competencies at any stage of life;(4) a tendency to be open in
communications and discussions rather than being secretive (fairly free
expression of feelings); (5) encouraging risk taking and
experimentation, making efforts to help employees recognize their
strengths and weaknesses through feedback; (6) a general climate of
trust; (7) a tendency on the part of employees to be generally helpful
to each other and collaborate with each other; (8) team spirit; (9)
tendency to discourage stereotypes and favoritism; (10) supportive
personnel policies; and (11) supportive HRD practices including
performance appraisal, training, reward management, potential
development, job-rotation and career planning. Organizations differ in
the extent of having these tendencies. In the present-day +competitive
environment, where the initial stress is to harness the potential of
employees, making them innovative, creative and proactive is necessary
for the overall growth of the organization. This can only be achieved if
employees have an enabling culture in their organizations.
IIRD Climate & Customer Satisfaction
One of the most important typologies of HRD climate was developed
by Rao and Abraham (1986). They conceptualized HRD climate as comprising
three subconstructs: General Climate, OCTAPAC Culture and HRD Mechanism.
General Climate refers to the importance given to human resource
development in general by the top management and line managers as well
as concerns favorable personnel policies and positive attitudes towards
development. OCTAPAC Culture depicts the degree of openness,
confrontation, trust, autonomy, pro-action, authenticity and
collaboration, and the extent to which these values are promoted in the
organization. HRD Mechanism takes into account the existence of HRD
practices like performance appraisal, potential appraisal, career
planning, performance rewards, feedback and counseling, training,
employee welfare, quality of work life, job rotation, self-renewal and
institution building, personal growth laboratories and worker education
programs, quality circles, task forces, assignment groups, managerial
learning network and organizational development (Solkhe & Chaudhary,
2011).
HRD climate stresses that employees are the most important asset of
an organization, and that subordinates' skills are strengthened by
their superiors who have belief in their subordinates, maintain open
commitication, encourage risk taking and experimentation, put effort and
help employees' realize their strengths, provide a climate of
trust, collaboration and autonomy, supportive personnel policies and HRD
practices (Rao & Abraham, 1986). These values must flow from the top
management. When an organization adopts and internalizes them, it can be
said to have a positive HRD climate. This positive HRD climate makes the
internal system strong, effective, efficient and open for the new vistas
(Athreya, 1988). Srimannarayana (2009) concluded that a favorable HRD
climate improves the overall internal environment of the organization.
HRD climate considers the managers' personal value system which, in
turn, affects their reactions to different situations and their approach
towards solving the contextual problems. Their decisions are majorly
influenced by their belief in their value system. This also affects
their interpersonal relations with others including colleagues and
customers, and the relational boundaries they maintain with them.
Consequently, the components of HRD climate can change customer
experience and customer satisfaction (Sharma & Purang, 2000).
HRD mechanisms measure the extent to which HRD mechanisms like
performance appraisal, potential appraisal, career planning, performance
rewards, feed-back and counseling, training, employee welfare and job
rotation are implemented in an organization (Rao & Abraham,
1986).Schneider and Bowen (1985) found a significant relationship
between HR practices and quality of service reported by customers.
Previous studies suggest that managerial practices can play a
significant role in improving and innovating the level of customer
satisfaction (Zhang et al., 2003). It can be inferred that HR practices
help in developing an efficient and effective human capital with
knowledge, skills and abilities. This is primarily achieved by training
& development, by acquiring new knowledge or by refining the
existing knowledge. The performance appraisal and related rewards and
disincentives convey the expectations of an organization and align
employees well with the organization's goals. Based on the above
arguments, we hypothesize:
H1: HRD Mechanism is positively related to customer satisfaction.
OCTAPAC sub-dimension of HRD climate measures the extent to which
openness, confrontation, trust, autonomy, pro-activity, authenticity and
collaboration are valued and promoted in the organization (Rao &
Abraham, 1986). Schmit and Allscheid (1995) found that employees'
climate perceptions of management, supervisor, monetary, and service
support were related to employee affect. Affect is related to service
intentions, which, in turn, is related to customer service. Trust among
organization members is a determinant of firm performance (Mishra &
Mishra, 1994). Berry and Parasuraman (1991) stated that buyer supplier
collaboration requires trust to maintain a long and sustainable
relationship. Once there is trust, the partner values the relationship
(Brown et al., 1996), wants to be identified with the collaboration
(Brown et al., 1996; Meyer et al., 2002; Porter, 1996) and is
constrained to leave (Gilliland & Bello, 2002). Collaboration and
trust are reciprocal processes; they depend upon and foster each other
(Mattessich & Monsey, 1992).
Kuvaas and Dysvik (2010) suggest that employee evaluation and
management's commitment to employee development by helping them
acquire new skills and competencies are related positively to desirable
work place, attitudes and performance. Reichheld (2001) noted that
people contribute to firms in terms of efficiency, customer selection,
customer retention, customer referral, and employee referral.
Guzzo and Noonan (1994) have found that HR practices are the
communications that assist in creating psychological contracts. If the
psychological contract is honored, employees will believe in and trust
the organization and further do what is in the best interest of the
organization, because it has delivered its aforementioned promises
(Robinson, 1996). This, in turn, will benefit the organization by
achieving higher levels of employee satisfaction and performance,
service quality, and customer retention and satisfaction. Based on the
above arguments, we hypothesize:
H2: OCTAPAC Culture is positively related to customer satisfaction.
General climate measures top management's support, concern and
development of human resource (Rao & Abraham, 1986). HRD climate is
the reflection of the top management's commitment to achieve the
desired organizational goals. Their belief in the system is projected
through their demeanor, appearance, and manner of interacting with their
subordinates and with their customers. Employees must be able to
effectively internalize the organizational values and norms before they
can communicate it to others (Joseph, 1996). Consistency plays a vital
role in this internalization process. When the messages received from
all the sources are consistent and credible, employees subscribe to
internalization process and are likely to deliver the explicit and
implicit promises inherent in the organization. According to Bach
(2009), it creates a chain effect. If a prospective or existing employee
subscribes to an organization's internal communication,
organizational structure, professional development and regard for
personal concerns, that employee is likely to internalize the
organizational values and then becomes motivated to project it to
customers and other stakeholders. Masterson (2001) research on social
exchange in organizations suggests that, in the case of service
employees, the positive behavior received by the supervisor will have an
impact on their management of customers (Shanock & Eisenberger,
2006). The perceived supervisor support would produce a desire to help
the supervisor to meet the goals (Stinglhamber & Vandenberghe,
2003). These efforts will improve the performance of standard activities
(Becker & Kernan, 2003). Thus, we hypothesize:
H3: General Climate is positively related to customer satisfaction.
Sample & Data Collection
Dyad-level data were collected from 203 private bank employees
regarding their perception of HRD climate. Then, we randomly selected
customers who were served directly by the employees and collected data
about their satisfaction with the bank. Of the 203 participants, 84.72%
were males and 15.27% were females. The mean age was 32.6 years. The
educational levels of the participants were varied: 182 undergraduates
(89.65%), 18 postgraduates (8.86%) and 3 diploma holders (1.4%). The
work experience profile of the sample was as follows: less than 5 years
(19.7%), between 5 years and 10 years (59.6%) and above 10 years
(20.7%). The sample was drawn through personal contacts based on
convenience and readiness of the employees to respond to the
questionnaire.
Measures
We measured HRD Climate using 'The HRD Climate Survey'
developed by Rao and Abraham (1986). The survey comprises 38 items on a
five -point Likert scale ranging from 1 = not at all true to 5 = almost
always true. Sample item to measure general climate was "The top
management of this organization goes out of its way to make sure that
employees enjoy their work." Sample item to measure OCTAPAC culture
was "People trust each other in this organization." Sample
item to measure HRD mechanism was "Promotion decisions are based on
the suitability of the promotee rather than on favoritism.'The
reliability and validity of this scale is pre-established in literature
(Chaudhary, 2013). Several researchers have used the HRD climate survey
to study the link between HRD climate and different individual and
organizational outcomes such as job satisfaction (Ahuja, 2002; Kumar
& Patnaik, 2002; Rohmetra, 1998), organizational commitment (Purang,
2008), organizational citizenship behavior, turnover intentions
(Benjamin, 2012), organizational effectiveness and productivity (Jain et
al., 1997).
Customer satisfaction was measured using a 5-item scale developed
by Levesque and McDougall (1996). This is a widely used scale and was
developed in the context of banking service. The response was measured
on a 5 point Likert scale ranging from 1= very satisfied to 5=very
dissatisfied.
Data Analysis & Interpretation
Coefficient alpha (a) was used to test the internal consistency
among the measurement items for a given construct. In this study,
coefficient alpha was 0.87 for HRD Mechanism, 0.96 for General Climate,
0.95 for OCTAPAC Culture and 0.897 for Customer Satisfaction. These
results reveal that the reliability for each construct exceeds the
general recommended criteria of 0.7 (Nunnally et al., 1967) and meets
the requirement of reliability. Analysis was performed through
Structural Equation Modeling technique using LISREL 8.7 software. We
performed the analysis in two stages. In the first stage, confirmatory
factor analysis (CFA) was performed to assess the fit of the measurement
model. The overall fit of the measurement model was evaluated on the
basis of its reliability, convergent validity, discriminment validity
and estimated level. The measurement model showed very good fit with the
data ([chi square][913] = 1341.74, p< .01; [chi square]/df = 1.47;
CFI = .94; RMSEA =.05; SRMR = .04). As can be seen from Table 1, the
composite reliability (CR) was in the range of .89-.97, average variance
extracted (AVE) was in the range of .42-70, maximum shared variance
(MSV) was in the range of .57-62, average shared variance (ASV) was in
the range of .46-.59, thereby, providing support for the reliability and
convergent validity of the measures used in the study (Bagozzi & Yi,
1988). Discriminant validity is evaluated using confidence interval test
to examine the degrees of correlation among the constructs (Anderson
& Gerbing, 1988). The results revealed that the correlation
coefficient between any two constructs plus or minus two standard errors
did not include 1, thus providing support for the discriminant validity
of the constructs.
In the second stage, the structural model was analyzed. Fig. 1
provides the results of path analysis performed. The structural model
showed good fit with the data ([chi square]2[935j = 1711 ,p < .01;
[chi square]/df = 1.83; RMR=.045; RMSEA = 06; SRMR = .04). As can be
seen from fig. 1, HRD mechanism was positively related to customer
satisfaction ([beta] = .42, p < .01), OCTAPAC culture was positively
related to customer satisfaction ([beta] = .42, p < .01), and general
climate was positively related to customer satisfaction ([beta] = .34, p
< .01). Thus, hypotheses 1, 2 and 3 were supported.
Theoretical & Managerial Implications
[FIGURE 1 OMITTED]
The present study analyzed the relationship between HRD climate and
customer satisfaction. The findings suggest that all the sub-dimensions
of HRD climate, namely, General Climate, OCTAPAC Culture and HRD
Mechanism, have a positive impact on customer satisfaction.
Organizations should work on improving HRD climate, because
employees' perception of HRD climate affects customer satisfaction.
If an organization provides an appropriate environment where the top
management lays policies that are employee centric, the HR interventions
as a whole provides a growth trajectory for them, and employees are free
to vent out their feelings; trust prevails and the work provides
authority with responsibility.
In today's competitive and fragmented market, competitive
advantage which was realized through tangible, functional benefits is no
longer sustainable. According to the resource based view of the
organization (Barney, 1991), an organization can develop sustained
competitive advantage only when it can create value in a way that is
rare and difficult for competitors to imitate. Organizational employees
are the resource which is very difficult to imitate due to the complex
social structure and interpersonal interactions and relationships
(Becker & Gerhart, 1996). Human resources, who are the competitive
advantage developed by the HRD climate, can further contribute to
achieve such high performance goals.
Deolalkar (2010) has suggested that HR practices such as
recruitment, career development, strong staff management and matching
the new responsibilities with the resources need to be changed or
adjusted accordingly. The focus needs to be on the core competencies
along with staff morale, organizational culture and training/retraining
so that human resource is a key for productivity excellence (Bhasin
& Burcher, 2006).We can conclude that an organization needs to focus
on all the aspects of HRD climate in order to have satisfied customers.
Limitations & Future Research
The study has limitations that can be improved in future research.
First, the sample was drawn from a small number of organizations. For a
better understanding of HRD practices, a larger sample is required. Most
studies of this nature involve organizations as the unit of analysis.
Second, this study does not take into account of how a change in HRD
climate will affect customer satisfaction over time. A longitudinal
study could provide an interesting research avenue for future. Finally,
the data was collected just from one industry, which limits the capacity
to generalize the findings to other settings. Future studies in this
area should collect data from multiple industries and compare the
results across industries for establishing more generalized results.
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Shweta Mittal is from Institute of Management and Research.
Ghaziabad. E-mail: shwetamittal11@gmail.com. Vishal Gupta is from Indian
Institute of Management, Ahmedabad. E-mail: vishal@iimahd.ernet.in.
Manoj Mottiani is from Indian Institute of Management, Indore. E-mail:
manojm@iimidr.ac.in
Table 1 Descriptive Statistics
Measured [alpha] CR AVE MSV ASV
constructs/items
HRD Mechanism (13-items) .87 .95 .59 .62 .53
General Climate (13-items) .96 .97 .70 .57 .46
OCTAPAC culture (12-items) .95 .91 .42 .58 .51
Customer Satisfaction (5-items) .90 .9 .6 .62 .59
[alpha]: Cronbach's Alpha; CR: Composite Reliability; AVE: Average
Variance Extracted; MSV: Maximum Shared Variance; ASV Average Shared
Variance; N = 203