The research indicates that HRD system capability is best represented as a second order factor and in doing so, it provides an improved measurement of the construct. Therefore, the researchers developed a more feasible model by integrating the variable in a nomological network than those that exists today.
International Journal of Management (IJM) Volume 11, Issue 3, March 2020, pp 266–277, Article ID: IJM_11_03_029 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=3 Journal Impact Factor (2020): 10.1471 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication Scopus Indexed EXPLORING FACTORS OF HRD SYSTEM CAPABILITY: AN EMPIRICAL INVESTIGATION IN SERVICE INDUSTRIES IN INDIA Padmalita Routray Associate Professor, Department of Business Management, Fakir Mohan University, Balasore, Odisha, India Amarnath Padhi* Research Scholar, Department of Business Management, Fakir Mohan University, Balasore, Odisha, India *Corresponding Author Email: amarnath.padhi@gmail.com ABSTRACT HRD system capability has been instrumental in managing the shift from the traditional focus to a more transient thrust on making the organization more productive and efficient This research work conceptualizes HRD system capability as a second order factor and explores its effect on Immediate Capability, Intermediate Capability and Ultimate Capability by evaluating a model of structural equation The model is validated using data collected from 151strategic decision makers from the selective service industries (Retail, Hotel and IT) across odisha in eastern India The study follows a hierarchical approach using confirmatory factor analysis to test the second order factor model and structural equation modelling to test the overall model The results show that both empirically and conceptually the second order factor model is acceptable and better than other competing models of HRD system capability The findings support the hypothesis and evidence of a highly explanatory structural model The second order factor model allows for analysis of HRD system capability at different abstraction levels HR personnel involved in integrated strategic decision making should use global measures to determine the efficiency of the HRD system capability The research indicates that HRD system capability is best represented as a second order factor and in doing so, it provides an improved measurement of the construct Therefore, the researchers developed a more feasible model by integrating the variable in a nomological network than those that exists today Keywords: HRD System Capability, SHRD, Confirmatory factor analysis, second order factor, Service Sector http://www.iaeme.com/IJM/index.asp 266 editor@iaeme.com Padmalita Routray and Amarnath Padhi Cite this Article: Padmalita Routray and Amarnath Padhi, Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India, International Journal of Management (IJM), 11 (3), 2020, pp 266–277 http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=3 INTRODUCTION The services sector‟s significance in the Indian economy has continued to increase, with the sector now accounting for around 55 percent of total size of the economy and GVA growth, two-thirds of total FDI inflows into India and about 38 per cent of total exports It has become the largest and fastest growing market in the world and contributes more to global production and employment The share of services sector now exceeds 50 per cent of Gross State Value Added in 15 out of the 33 states and UTs (Economic Survey, 2018-19) Some services such as trade, hotels and restaurants, transportation, storage and communication including financing, insurance and property services as well as other services such as community, social and personal services expected to increase faster than the industry as a whole HRD system is responsible for making sure that global professional service firm employees understand the local culture and context to ensure service quality More specifically, national culture should be examined when service firms implement HRD, including organizational development (OD) and training and development (T&D) Human Resources Development has become over the past 20 years the most rapidly growing field of management studies HRD has evolved beyond the restricted viewpoint of merely training and has grown into a more comprehensive approach to human and organizational learning and information creation (Mittal 2013) Human resources are important to boost competitive advantages and better market efficiency in a sustainable way Werner and DeSimone (2006) indicated that human resources planning activities which are strategically focused lead to human resource growth and add to the organization's overall progress Haslinda (2009) agreed with the above point of view when he argued that the implementation of human resources activities increase employee capacities in jobs, productivity and efficiency and enhance goods and services quality The human resources development practices and programs when designed and implemented properly enhances employee capacity to ensure effective organisational performance (Indradevi, 2010; Swanson and Holton, 2009) Yuvaraj and Mulugeta (2013) stated that through existing training, career development, performance appraisal and management and organizational development components, the HRD interventions continue to improve employee capacity and performance Kehoe and Wright (2013) argued that the improvement of skills of people significantly improve quality of service Clardy (2008) emphasised that companies use human resources development practices as a major strategy to encourage positive employee behaviour and enhance their competencies which in turn increase productivity and results With this background, the present study tries to explore whether the selected service organisations have the HRD capability to achieve the strategic goals, meet the requirement of stakeholders and make them competitive in the changing business scenario REVIEW OF LITERATURE Leonard Nadler introduced the concept of human resources development in 1969 and expanded it in 1970 Rao (1989) noted that the transition from manufacturing to service and the increasing speed of technological changes make human capital a key element for an industry's well-being and development Furthermore, he noted that it is not just a question of finding ways and means to resolve conflicts or to resolve differences, but also a question of ensuring that the employee and the employer work unconditionally HRD can be described as http://www.iaeme.com/IJM/index.asp 267 editor@iaeme.com Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India a mechanism by which human experience can be built and/or activated through organizational and personnel training and development for improved performance purposes (Swanson, 2001) The 21st century problems such as globalization, automation and demographic change pushed businesses to constantly seek new ways to achieve the highest efficiency and quality outcomes and to make the current employee more efficient 2.1 Strategic Orientation of HRD function Every organization's success depends on its human resources Human resources have the necessary skills, knowledge and expertise to implement the corporate strategy and planning With the passage of time the concept of HRD expanded to incorporate organizational development HRD is defined as an interdisciplinary area of inquiry (Jacobs,1990; Swanson and Holton,2001) that usually includes three areas of practice; i) Training and Employee Development, ii) Organization Development, and iii) Career Development This three-legged version of HRD is often debated as emerging from either systems theory or adult education, with the differing focus on organizational outcomes and individual development Lee (2001) and Wang and Swanson (2008) suggest that it has long been difficult to establish the definition of human resources development as part of the curriculum for human resources Ruona (2002) claims the academia has been paying attention to concepts of human resources growth for more than four decades HRD covers the organization's strategic practices If a person is to be successful, the organization's prevailing environment must be conducive to his/her growth Different research projects have been carried out for the identification and study of Strategic HRD variables in organizations In recent years, „work planning' (Garavan, 1991; Garavan, Morley, Gunnigle and McGuire, 2002) has been widely used in the fields “employee training”, “human resources development”, and “strategic human resources development”' (Garavan, 1991) Walton (1999) described Strategic HRD as “SHRD provides the implementation, replacement, change and administration processes to allow both individuals and teams to take the ongoing and upcoming tasks required of the company, with the abilities, skills and capacities they need” HR structures have become more multi-layered and dynamic in seeking to make HR more important and competitive to contemporary companies Reacting to Caldwell and Storey's (2007) allegations that efforts to increase HR performance have resulted in increased fragmentation and chaos in HR management, leading to frustration and confusion among internal clients.The HR job will learn to survive with increasing complexity (cited in Crabb, 2008 by Ulrich) and must be comfortable with being both managerial and strategic In this concern, HRD displays an imperative role in workforce strategy and in the development of the human–technology interface Garavan (2007) says that the framework and the significance of multiple partnerships and actors and the improvement of vertical and horizontal connections through the organization should be identified by strategic HRD He believes that strategic HRD must follow vertical and horizontal growth through learning practices First, alignment must be achieved between the organisational mission, corporate plans, and HRD vision Tseng and McLean (2008) recognize the importance of HRD's strategic thrust into each area of the organisation to encourage good and effective behaviour Furthermore, environmental screening should be conducted on a regular basis and should take the form of corporate strategy and HRD Tseng and McLean (2008) concluded that the situation poses a risk to the HRD plan and therefore to the practical obligation of HRD to be put in the business context Second, the systematic, coherent and coordinated preparation of HRD, both in business and organization planning will take place Luoma (2000) definitely recommends that practical HRD will facilitate the institution's development process by treating it as a knowledge-based set of problem solving and engaging Third, HRD solutions must be appropriate to the problems faced by the organisation and must add value Garavan http://www.iaeme.com/IJM/index.asp 268 editor@iaeme.com Padmalita Routray and Amarnath Padhi (2007) says that HRD should not, but should be operationally accountable, viewed as a way to eliminate all institutional problems 2.2 HRD System Capability (HRDSC) HRD system focuses on both employee development and organizational development For any organization seeking to be competitive and growth-oriented the development of human resources is critical The capacity can only be realized through the development of an environment that can continuously recognize, surface, cultivate and optimize people's capacities The HRD system is designed to create such an environment Throughout recent years, HRD methods have been developed to achieve this function on the basis of certain concepts Garavan (2007), in his article on SHRD, suggested that it is a multi-level activity and focus on stakeholder satisfaction Therefore, the HRD system, if addresses the need of stakeholders, can be called strategic Hence, the HRD role can be unique in the sense that it contributes to the strategy-making process and protect or upgrade the core competency by emphasizing those capabilities that are job-specific (Clardy, 2008) Yost et al (2011) attempted to bring out the idea of building separate systems and programs which may help the SHRD practitioners to adapt and adjust themselves to the changing demands of the organization HRD intervention with a focus on organizational objectives can be considered as one of the strategic moves which help both SHRD practitioners and the firm in achieving the desired goals Apart from the achievement of intentions, the HRD intervention may also help in maintaining sustainability The nature of various HRD interventions may support the organization to survive progressively It may affect delivering Human Resource activities by increasing the organization's flexibility in changing scenario In an emerging situation, offering HRD activities will be done by multiple players, and therefore the role of HRD managers and line managers will change Richard and Johnson (2001) explained that different HR activities start from acquisition, development, and retention and it can be strategic if it matched with business objectives and HR/HRD system when strategically implemented, could develop organizational productivity and that system may support to sustain future corporate developments 2.3 Objective of the Study The objective is to explore the factors under Human Resource Development System Capability (HRDSC) and to analyse the factor structure through Confirmatory Factor Analysis (CFA) 2.4 Hypothesis of the Study There is no significant difference on the perception of respondents on different sub-constructs and the construct of HRD system capability RESEARCH METHODOLOGY The study was conducted in selective service industries like Retail, Hotel and IT keeping in view the people intensiveness of such industries The respondents of the sample were having designation like Head-HR, Manager-HR, HR Business Partners, Forntline Managers, Store Managers and HR Consultants, etc The sample included those persons who were in strategic positions and significantly contribute to the HR and /or business strategy formulation and implementation A total of 290 respondents were approached initially having above designation, out of which 151 responded resulting in 52 percent response rate The research instrument for the study was developed by the researchers and tested for its validity initially by consulting experts and reviewing relevant literature The data were analyzed using http://www.iaeme.com/IJM/index.asp 269 editor@iaeme.com Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India descriptive statistics, followed by exploratory and confirmatory factor analysis using IBM SPSS statistics 21 and AMOS, 2020 version RESULTS AND ANALYSIS The profile of the sample is presented in Table Four levels of designation have been taken: „HR Head” as level 1, “HR Managers, HR Business Partners(HRBP) and Line Managers (LM)” as level 2; “HR Consultants, Front Office Managers(FOM), Store Managers (SM”) as level and HR executives as level The level consisted of respondents, i.e., 5.97% of the sample In this, were from hotel sector, were from IT sector and from retail sector The level consisted of 65 respondents, i.e., 43.04% of the sample In this, 17 were from hotel sector, 27 were from IT sector and 21 were from retail sector The level consisted of 51 respondents, i.e., 33.78% of the sample In this, 26 were from hotel sector, were from IT sector and 16 were from retail sector The level consisted of 26 respondents, i.e., 17.21% of the total respondents In this, 12 were from hotel sector, were from IT sector and were from retail sector Table Demographic Profile: Designation of the respondents Level of Designation HR Head HRM/HRBP/LM HR Consultant/FOM/SM HR Executive Total Sector under which respondents comes Hotel IT Retail Sector Sector Sector 17 27 21 26 16 12 57 51 Total Percentage 65 51 5.97 % 43.04% 33.78% 26 151 17.21% 100% 43 4.1 Exploratory Factor Analysis Initially 10 variables under HRD System Capability were factor analysed and the variable namely, “HRD system has the capacity to meet the requirement of the society” found to be a single factor with factor loading of 0.798 The scale reliability with 10 variables yielded Cronbach‟s alpha 0.683 However when the above variable was deleted the Cronbach‟s alpha improved to 0.711 (Table-4) Further this variable was found to be uncorrelated with other nine variables and therefore dropped The other variables were factor analysed using principal component analysis and Varimax rotation To test the suitability of the variables for factor analysis, two tests are performed such as Kaiser Meyer Olkin (KMO) test of sample adequacy and Bartlett‟s test of spherecity, which result a significant value The results are given below in Table-2 Table KMO and Bartlett‟s Test (HRDSC) Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett‟s Test of Sphericity Approx Chi-Square Df Sig 0.721 271.044 36 000 The KMO statistics (0.721) is found to be significant (p=0.000) So the sample is adequate suggesting that items can yield distinctive and reliable factors The Bartlett‟s test of Sphericity http://www.iaeme.com/IJM/index.asp 270 editor@iaeme.com Padmalita Routray and Amarnath Padhi reveals a chi-square statistic of 271.004 with 36 degrees of freedom, is also found to be significant at 0.000 levels Table Total Variance of HRDSC Cumulative % Cumulative % 31.845 12.057 11.190 10.472 9.389 8.105 6.887 5.721 4.335 % of Variance 2.866 1.085 1.007 942 845 729 620 515 390 Rotation Sums of Squared Loadings Total % of Variance Total Component Initial Eigen values 2.189 1.506 1.263 24.325 16.734 14.034 24.325 41.059 55.092 31.845 43.902 55.092 65.564 74.953 83.057 89.945 95.665 100.000 Extraction Method: Principal Component Analysis Three factors emerged which are named as “Immediate Capability”, “Intermediate Capability” and “Ultimate Capability” The total variance extracted shown in Table- shows cumulative percentage ranges from first to third portion between 31.845% and 55.092% For the first component the initial Eigen values, the total percentage of variance, and the cumulative percentage values are 2.866, 31.845% and 31.845% respectively For the second component the initial Eigen values, the total, the percentage of variance and the cumulative percentage values are 1.085, 12.057% and, 43.902% respectively For the third component the initial Eigen values, the total, the percentage of variance and the cumulative percentage values are 11.007, 11.190% and 55.092% respectively Table Rotated Component Matrixa Variables HRD system has the capability to make the organisation efficient HRD system has the capability to make the organisation productive HRD system has the capability to meet the requirement of the customer HRD system has the capability to meet the requirement of the investors HRD system has the Descriptive Statistics Mean SD Factors 4.06 0.732 629 4.14 0.684 473 3.90 661 677 4.13 585 757 3.31 850 http://www.iaeme.com/IJM/index.asp 271 Cronbac h’s alpha 480 editor@iaeme.com Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India capability to meet strategic goals HRD system has the 4.34 588 855 capability to support organisation innovation HRD system has the 3.46 737 530 capability to make people quality focused HRD system has the 845 4.28 687 capability to meet requirement of employees HRD system 617 3.97 761 contribution is important for organisational effectiveness Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization 0.711 From Table it shows the rotated component matrix, in which the factors extracted were having loading above 0.40 The factor loadings, reliability statistics and descriptive statistics among variables are given in table Confirmatory Factor Analysis (CFA) was performed on the above factors The CFA using maximum likely method of estimation was done to evaluate the first order structural model (Figure -1) which shows a decent model fit indices (Table-5) In order to evaluate the psychometric properties convergent validity was assessed To assess such validity the average variance extracted (AVE) and composite reliability (CR) were calculated for each sub-construct viz Immediate Capability (AVE= 0.41; CR= 0.73), Intermediate Capability (AVE = 0.41; CR=0.66), and Ultimate Capability (AVE= 0.55; CR= 0.70) using Fornell and Larcker (1981) procedure Though, the AVE is less than 0.50 for two sub-constructs but the value exceeds 0.40 and the CR is above 0.60, the convergent validity can be found to be adequate in this case However, the model didn‟t achieve discriminate validity as the sub-constructs were highly correlated However, the all the indicator under different subconstruct were found to be significant Therefore, a second order factor structure was considered to develop a single construct i.e., “HRD System Capability (HRDSC)” which is shown in Figure-2 Figure Confirmatory Factor Analysis (First order structural model of HRDSC) http://www.iaeme.com/IJM/index.asp 272 editor@iaeme.com Padmalita Routray and Amarnath Padhi Table Fit indices for Structured Model Fit Index Structural Model Values 1.499 χ2/df ( Chi-square / degree of freedom) RMSEA (Root mean- square error of approximation) GFI ( Goodness of fit index) (TLI) Tucker-Lewis Index NFI (Normed fit index) CFI (Comparative fit index) 0.058 0.957 0.904 0.845 0.939 Figure Confirmatory Factor Analysis (Second order structural model of HRDSC) Table Path analysis of Structural Model Measurement Path Immediate capability Intermediate capability Ultimate capability HRD system has the capability to make the organisation efficient HRD system has the capability to make the organisation productive HRD system has the capability to meet the requirement of the customer HRD system has the capability http://www.iaeme.com/IJM/index.asp HRDSC HRDSC HRDSC Immediate capability Estimate 941 882 733 395 Immediate capability 772 Immediate capability 452 Immediate capability 528 273 editor@iaeme.com Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India to meet the requirement of the investors HRD system has the capability to meet strategic goals HRD system has the capability to support organisation innovation HRD system has the capability to make people quality focused HRD system has the capability to meet requirement of employees HRD system contribution is important for organisational effectiveness Intermediate capability Intermediate capability 680 Intermediate capability Ultimate capability 527 Ultimate capability 351 409 539 Analysing the path coefficient (Table.6.), it is found that immediate capability (+.941) contribute highest followed by intermediate capability (+.882) and ultimate capability (+.733) It is found that immediate capability contributes highest followed by intermediate and ultimate capability All the path coefficient was found to be significant Table Squared Multiple Correlations Variables Ultimate Capability Intermediate Capability Immediate Capability HRD system has the capability to make the organisation efficient HRD system has the capability to make the organisation productive HRD system has the capability to meet the requirement of the customer HRD system has the capability to meet the requirement of the investors HRD system has the capability to meet strategic goals HRD system has the capability to support organisation innovation HRD system has the capability to make people quality focused HRD system has the capability to meet requirement of employees HRD system contribution is important for organisational effectiveness Estimate 537 779 886 279 205 596 156 462 167 227 123 290 Table-7 shows the squared multiple correlations, in which it is found that the predictors of ultimate capability explain 53.7 percent of its variance Similarity intermediate capability explains 77.9 percent and immediate capability explain 88.6 percent of their variances Since the service industries chosen were distinct from each other; to find the industry effect one way analysis of variance was conducted to evaluate the hypothesis: http://www.iaeme.com/IJM/index.asp 274 editor@iaeme.com Padmalita Routray and Amarnath Padhi “There is no significant difference on the perception of respondents on different subconstructs and the construct of HRD system capability.” Figure 8(a) Descriptive Statistics HRD System Capability Sectors Hotel Sector IT Sector Retail Sector Total N 57 51 43 151 Mean 4.2953 3.9504 3.6195 3.9864 Std.Deviation 21527 33616 22669 38033 Std.Error 02851 04707 03457 03095 Figure 8(b) ANOVA Immediate Capability Intermediate Capability Ultimate Capability HRD system Capability Between groups Within groups Total Between groups Within groups Total Between groups Within groups Total Between groups Within groups Total Sum of Squares 17.661 17.320 34.982 12.579 28.914 41.492 7.125 33.871 40.997 11.294 10.404 21.697 Df Mean Square 8.831 117 148 150 148 150 148 150 148 150 F Sig 75.456 000 6.289 195 32.194 000 3.563 229 15.567 000 5.647 070 80.333 000 Figure (c) Post Hoc Test TukeyB a, b Sector under which respondent comes Immediate Retail Sector Capability IT Sector Hotel Sector Intermediate Retail Sector Capability IT Sector Hotel Sector Ultimate Retail Sector Capability IT Sector Hotel Sector HRD System Retail Sector Capability IT Sector Hotel Sector N 3.3547 43 51 57 43 51 57 43 51 57 43 51 57 Subset of alpha = 0.05 3.99461 4.1930 3.5504 3.8954 4.2632 3.9535 4.0098 4.4298 3.6195 3.9504 4.2953 Means for groups in homogeneous subsets are displayed a Uses Harmonic Mean Sample Size = 49.663 b The group sizes are unequal The harmonic mean of the group sizes is used Type I error levels are not guaranteed The table- 8(a-c) shows the descriptive statistics, ANOVA table, and results of post -hoc test From the post hoc test it was found that hotel industries HRD capability was found to be better (Mean=4.29; SD=0.215; N=57) in comparison to IT industries (Mean=3.95; SD=0.336; http://www.iaeme.com/IJM/index.asp 275 editor@iaeme.com Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India N=51) and retail industries (Mean=3.819; SD=0.226; N=43) The poor performer among the three industries was the retail industry DISCUSSIONS Data analysis shows that the HRD system‟s immediate capability is more on making the organization efficient, productive and customer oriented The HRD function plays an important role in increasing people competency and thus can create desired kind of service capability to meet the requirement of the customers and hence can impact financial performance of the company The descriptive statistics shows that the companies are doing fairly good on these aspects So far as immediate capability of HRD is concerned; it is found that making organization productive is an important contribution of it In medium run the intermediate capability focuses on the ability to meet strategic goals, make the organization innovative and quality focused However, the descriptive statistics shows that the companies‟ HRD capabilities are not well developed to meet the strategic goals and make them more quality focused However, the capability of HRD system is very good for making the organization innovative While analysing the ultimate capabilities of HRD the focus should be more on meeting the requirements of employee and make the organization effective The descriptive statistics reveal that companies meet the requirements of employees and are fairly good in contributing to organizational effectiveness Comparison across industries reveals that Industries are different in terms of their HRD capability Hotel industries‟ quest for excellence far surpasses that of IT and retail industries They are good in making the organisation efficient and productive using HRD capability; hence meet the requirements of customers and investors successfully They are able to meet the strategic goals and the contribution of HRD system in making the organisation effective is important for them IT and retail industries, though capable of meeting the requirements of employees, are not able to perform very effectively so far as efficiency, productivity and customer orientation is concerned In these organisations HRD capabilities are not aligned properly to achieve the strategic goals CONCLUSION Service industries are people intensive and therefore the role of HRD system is vital to increase the competitiveness of these industries (Hotel, Retail and IT) Hotel industries giving thrust on this aspect will be the future leaders In future years there will be more competition in retail industries and thus increases the importance of HRD in making the organization more capable in meeting the strategic goals by developing people capability Such the capability will enhance the organizations‟ capacity not just to compete on cost front but also to create a better service climate to attract customer and stay ahead of the competition In case of IT industries the focus on innovation will be more profound and the people capability can be more strategy focused if the HRD system capability can be developed to meet the strategic goals of the organizations REFERENCES [1] [2] [3] Arthur, J.B and Boyles, T (2007) Developing the Human Resource System Structure: A Levels-based Framework for Strategic HRM Research Human Resource Management Review 17(1), 77-92 Clardy, A (2008) The strategic role of human resource development in managing core competencies Human Resource Development International, Vol.11, 183-197 Fornell, C., and Larcker, D (1981) Evaluating Structural Equation Models with Unobservable variables and Measurement error Journal of marketing Research, 18(1), 3950 http://www.iaeme.com/IJM/index.asp 276 editor@iaeme.com Padmalita Routray and Amarnath Padhi [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] 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Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India N=51) and retail industries (Mean=3.819; SD=0.226; N=43) The poor performer among the three industries. .. Routray and Amarnath Padhi Cite this Article: Padmalita Routray and Amarnath Padhi, Exploring Factors of HRD System Capability: An Empirical Investigation in Service Industries in India, International