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European Journal of Training and Development
Measuring the impact of human resource development (HRD) practices on
employee performance in small and medium scale enterprises
Frank Nana Kweku Otoo, Mridula Mishra,
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Frank Nana Kweku Otoo, Mridula Mishra, (2018) "Measuring the impact of human resource
development (HRD) practices on employee performance in small and medium scale enterprises",
European Journal of Training and Development, Vol. 42 Issue: 7/8, pp.517-534, https://
doi.org/10.1108/EJTD-07-2017-0061
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Measuring the impact of human
resource development (HRD)
practices on employee
performance in small and
medium scale enterprises
Frank Nana Kweku Otoo
Department of Accountancy, Faculty of Business and Management Studies,
Koforidua Technical University, Koforidua, Ghana, and
Mridula Mishra
Department of Human Resource Management,
Faculty of Business and Applied Arts, Lovely Professional University,
Phagwara, India
Abstract
Purpose –The purpose of this paper is to examine the impact of human resource development practices on
employee performance in small and medium scale enterprises.
Design/methodology/approach –An integrated research model was developed by combining principal
factors from existing literature. Data were collected through questionnaire from 500 employees of the selected
SME’s. The validity of the model and hypotheses was tested using structural equation modeling. The
reliability and validity of the dimensions are established through confirmatoryfactor analysis.
Findings –The results indicate that some human resource development practices impact employee
performance. Performance appraisal however does not impact employee performance of the firms studied.
Research limitations/implications –The research was undertaken in small and medium scale
enterprises, and the analysis based on cross-sectional data which cannot be generalized across a broader
range of sectors.
Practical implications –The findings of the study will help stakeholders, policy makers and
management of SME’s in espousing appropriate and well-articulated HRD practices to improve employee
competencies and enhance organizational effectiveness.
Originality/value –This study extends the literature by empirically adducing evidence that, human resource
development practices impact employee performance of small and medium scale enterprises in Ghana.
Keywords SEM, Employee performance, Service sector, Manufacturing sector, HRD practices,
Small and medium scale enterprises
Paper type Research paper
Introduction
Organizations have tried to more clearly identify and focus on factors that impact their
success (Reich, 1991;Sims, 2002). Reich (1998) postulate that, one factor that seems to be
receiving more attention than any other are people who work for organizations. Human
resources are considered a specific resource in an organization which influences a
company’s success and its competitive position (Becker and Huselid, 1998;Wright et al.,
Impact of
human
resource
development
517
Received 14 July2017
Revised 1 August 2018
Accepted 1 August2018
European Journal of Training and
Development
Vol. 42 No. 7/8, 2018
pp. 517-534
© Emerald Publishing Limited
2046-9012
DOI 10.1108/EJTD-07-2017-0061
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2046-9012.htm
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1994). Establishing a competitive edge via people necessitates conscientious thought to
processes that perfectly influences these resources. Human resource development practices
are programs designed and implemented to improve employee capabilities, so that the
employees perform effectively and meet performance expectations (Indradevi, 2010;
Swanson and Holton, 2009). Small and medium enterprises (SMEs) occupy a place of pride in
virtually every country or state due to their significant roles in the development and growth
of various economies (Awoniyi, 2010). Basil (2005) asserts that SMEs are the engine of
growth and catalysts for socio-economic transformation of any country. SMEs in Ghana are
said to be a characteristic feature of the production landscape and have been noted to
provide about 85 per cent of manufacturing employment of Ghana (Abor and Quartey,
2010). Ackah et al. (2014) indicated that SMEs contribute about 70 per cent to Ghana’s GDP
and account for about 92 per cent of businesses in Ghana. Mathis and Jackson (2009) posited
that employee performance is the performance associated with the quantity of output,
quality of outputs, timeliness of output, presence or attendance on the job, efficiency of the
work completed and effectiveness of work completed. Human resource development has
been studied in different industries across the globe; nevertheless, relatively fewer studies
exist on HRD in the SME setting (Hill, 2004;Pajo et al.,2010;Iles and Yolles, 2004).
Therefore, this study attempted to examine the impact of human resource development
practices on employee performance in SMEs.
Literature review and hypothesis development
Human resource development practices
Werner and DeSimone (2006) posited that human resource development practices are
programs which are designed to be strategically oriented to organizational process for
managing the development of human resources to contribute to the overall success of the
organization. Haslinda (2009) concurred with the above view when he postulated that
human resource development practices improve employees’capabilities on the job,
productivity and efficiency, as well as enhance the quality of goods and services. Yuvaraj
and Mulugeta (2013) opined that HRD interventions continuously improve employees’
capability and performance through the existing practices of training, career development,
performance appraisal and management and organizational development component of
HRD. Similarly, Rao (1987) identified training and development, performance appraisal,
rewards, organizational development, career development, feedback and counseling,
potential development and job rotation as HRD practices. Therefore, for the purpose of this
study, the following human resource development practices are examined: career
development, training and development, performance appraisal and compensation.
Employee performance
Mathis and Jackson (2009) posited that employee performance is the performance associated
with the quantity of output, quality of outputs, timeliness of output, presence or attendance
on the job, efficiency of the work completed and effectiveness of work completed. Price
(2001) concurred with the above definition when he referred to employee performance as the
effective orientation of an employee in regard to his or her work. Sempane et al. (2002)
deliberates that employee performance constitutes an individual’s overall perception and
evaluation of the work environment. This view appears to be supported by Islam and
Siengthai (2009) who assert that employee performance is a positive emotional status that
develops from an individual’s job appraisal and job experiences. Similarly, Mastrangelo
et al. (2014) emphasized that the effectiveness of an organization consists in the efficiency of
each of its individual employees. Based on literature, the following employee performance
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measures were examined: efficiency of work, planning of work, creativity and innovation
and making efforts.
Human resource development practices and employee performance
Kehoe and Wright (2013) contend that human resource development practices were a basic
factor for employees to acquire competencies that in turn significantly improve organizational
functioning. This view appears to be supported by Clardy (2008) who argue that human
resource development practices are used by organizations as an important strategic
mechanism to stimulate positive behaviour in individuals and impact their knowledge, skills
and attitudes which can increase productivity and performance. Along the same lines, Sung
and Choi (2014) proposed that organizations should design and implement human resource
development practices to enable people to work effectively and attain performance expectations
through improved individual competencies. This is consistent with the findings of Swanson
and Holton (2009) who argued that human resource development practices improve employee
competence and enhance organizational effectiveness.
Career development and employee performance
Leibowitz et al. (1986) posited that career development involves an organized,
formalized, planned effort to achieve a balance between the individual’s career needs
and the organization’s work force requirements. Similarly, McGraw (2014) assert that
the effective implementation of individual career management processes significantly
enhances employee competency and improve individual performance. This is
consistent with the study of Milkovich and Boudreau (1998) whoindicatedthatawell-
planned career development system along with internal advancement opportunities
based on merit results in high motivation among employees, which has an impact on
firm performance. The following is hypothesized:
H1. Career development has a significant impact on employee performance.
Training and development and employee performance
The significance of training and development in the enhancement of employee performance
and organizational development has been espoused by several authors (Cho et al.,2006;
Chang et al., 2011;Swanson, 2001;Youndt and Snell, 2004). Mackelprang et al. (2012) argue
that training enhances employees’capabilities which are instrumental in improving overall
organizational performance. This view appears to support the suppositions of the theory of
human capital initially developed by Becker (1964,1993) who regarded training as a form of
investment that leads to higher individual productivity. This is consistent with the finding
of other authors who contend that organizational efforts in training and development are an
investment in assets rather than an expense (Chang et al.,2011;Yamao et al., 2009;Youndt
and Snell, 2004). Therefore, the following hypothesis is proposed:
H2. Training and development has a significant impact on employee performance.
Performance appraisal and employee performance
DeNisi and Pritchard (2006) opined that performance appraisal is an activity which include the
assessment of individual or other level of performance to measure and improve performance that
will help in attaining corporate objectives. Meyer and Kirsten (2005) argue that managing
performance of human resource constitutes an essential fragment of a firm and manifest how
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their human capital is being managed. Similarly, Giles et al. (1997) postulate that an effective
performance appraisal should encompass an overall framework or context that enables the entire
process to operate at an optimal level of performance. This is consistent with the arguments of
several other authors who contend that, an integrated human resource and performance
management strategies has important impact on the commitment and attitude of the workforce
(Caldwell et al.,1990;Kinicki et al., 1992;Ostroff, 1992). The following is hypothesized:
H3. Performance appraisal has a significant impact on employee performance.
Compensation and employee performance
Mayson and Barret (2006) postulate that an organization’s capacity in attracting, motivating
and retaining competent human resource by offering competitive remuneration and
equitable rewards is connected to the organizations efficiency and development. Along the
same lines, Sola and Ajayi (2013) contend that compensation was a primary motivating
factor for employees to continuously strive for greater heights. They further emphasized
that a well-crafted compensation system is imperative to the success of an organization.
This is consistent with several other authors who found that compensation plays an
essential role in firms that rely upon human capital as a stimulus in attracting and retaining
experienced employee (Guthrie, 2001;Iverson and Zatzick, 2007;Teseema and Soeters 2013).
The following hypothesis is proposed:
H4. Compensation has a significant impact on employee performance.
The structural equation model is depicted in Figure 1.
Methods
Research setting and data structure
To test the proposed model, an empirical study was conducted in SMEs in the trade and
manufacturing sectors in Ghana. SMEs are the engine of growth and catalysts for socio-
economic transformation of any country (Basil, 2005). Information on the SMEs was taken
from the National Board for Small Scale Industries Directory (2017). A cross-sectional study
design was applied using a structured questionnaire developed for the collection of primary
data. Purposive sampling was applied in the selection of SME’s. Neuman (2005) assert that
purposive sampling technique offers the researcher the chance of choosing cases that have
sufficient information to help achieve the aims and objectives of the research. Employees
were chosen as key informants for the study. Schein (2004) emphasizes the importance of
getting employee of an organization involved in a research process, when he contends that,
employees are the actual people who implement the changes established in an organization.
The Yamane (1967) sample size technique was applied in determining the sample size. A
total of 800 respondents were identified and reached in the selected SMEs and 500
respondents reverted back with full required information corresponding to a response rate
of (62.5 per cent). From Table I, the majority of respondents (53 per cent) were males. More
than half (52 per cent) of respondents were in the age group 26-35 years. The majority of the
firms (62.5 per cent) were medium scale enterprises.
Measures
The variables used in this study were assessed using multiple items from different studies
in the extant literature. All the items were measured using a five-point Likert-type scale,
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where the respondents had to indicate their level of conformity with the different statements
(1: strongly disagree to 5: strongly agree).
Career development: career development was measured by adapting Sturges et al.’s
(2002) scale of organizational support and Denison’s (2007) Organizational Culture Survey.
The scale which consists of 12 items was modified according to the current study and
generated four items with a reliability of 0.82.
Training and development: the effectiveness of training scale by Santos and Stuart (2003)
and Singh (2004) was adopted in measuring training and development. The scale which
consists of ten items was modified according to the current study. The five-item scale has
the reliability of 0.83.
Performance appraisal: the scale of performance appraisal by Walker et al. (2011) and
Amin et al. (2013) was adopted in measuring performance appraisal. The scale which
consists of nine items was modified according to the current study and generated four items
with a reliability of 0.76.
Compensation: Compensation was measured by adapting Teseema and Soeters (2013)
and Singh’s (2004) compensation scale. The scale which consists of seven items was
modified according to the current study. The four-item scale has the reliability of 0.77.
Employee performance: Four dimensions of employee performance were
measured: efficiency of work, planning of work, creativity and innovation and making
efforts.
Figure 1.
Structural model
Impact of
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Efficiency of work: The efficiency of work scale developed by Mathis and Jackson (2009)
was adopted in measuring efficiency of work. The scale which consists of six items was
modified according to the current study and generated three items with a reliability of 0.80.
Planning of work: Sempane et al.’s (2002) planning of work scale was adopted in
measuring planning of work. The scale which consists of five items was modified according
to the current study. The three-item scale has the reliability of 0.79.
Creativity and innovation: Creativity and innovation was measured by adapting Price’s
(2001) creativity and innovation scale. The scale which consists of eight items was modified
according to the current study and generated four itemswith a reliability of 0.78.
Making efforts: the efforts making scale by Bernardin and Russell (1993) was adopted in
measuring efforts making. The scale which consists of seven items was modified according
to the current study and generated four items with a reliability of 0.75.
Analytic approach
The efficacy of the proposed model and hypotheses were analyzed using the Statistical
Package for Social Science (SPSS) 20.0 and the Analysis of Moment Structure (AMOS) 20.0.
In the first step, the researcher tested the measurement model. To establish construct
validity, the researcher examined: the relationship between the observable indicators and
their latent constructs, and correlations among sub-dimensions. The second step was to test
the overall model.
Handling common method bias
Podsakoff et al. (2003) define common method bias as “a bias which can be attributed to a
measurement technique as oppose the construct the measures denote”(p. 879). Craighead et al.
(2011) emphasize that the unchecked presence of common method bias can dent the
contribution to knowledge of a study. This study adapted the techniques in handling common
method bias as suggested by Conway and Lance (2010), namely, confirmation of pragmatic
Table I.
Profile of
respondents
Variables Frequency (s) Percentage of totals (%)
Gender
Male 265 53.0
Female 235 47.0
Age
18-25 149 29.8
26-35 260 52.0
36-45 69 13.8
46-55 22 4.4
Size of firm
Small (9-15 employees) 15 37.5
Medium (20-99 employees) 25 62.5
Education
Junior High 73 14.6
Senior High 146 29.2
Diploma 110 22.0
HND 74 14.8
Bachelor’s degree 84 16.8
Master’s degree 13 2.6
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strides in assuaging the dangers of method effects, construct validity evidence, contention for
the appropriateness of self-reports and paucity of overlay in items of distinct constructs. The
scales used in the study were adapted from recognized sources and a confirmatory factor
analysis was performed for validity testing. The results indicate that the established
benchmarks were adequate (Andersson and Bateman,1997;Mossholder et al., 1998).
Throughout the process, respondents were assured of the protections of their anonymity, thus
reducing evaluation apprehension (Conway and Lance,2010;Podsakoff et al.,2012). These
approaches warranted common method bias consequences remained insignificant.
Results
Descriptive statistics
The descriptive statistics estimates are provided in Table II. The results show that each of
the constructs is positively and significantly correlated.
Measurement model
The overall fit of the measurement model as reported in Table III was found to be
reasonable. The chi-square/df ratios (4.11) were within suggested threshold (i.e. less than 5.0)
indicating a reasonable fit(Bentler and Bonnet, 1980;Wheaton et al., 1977). The root mean
square error of approximation (RMSEA) value (0.068) and standardized root mean residual
(SRMR) value (0.059) were lower than 0.08, indicating adequate fit(Hoe, 2008;Sharma et al.,
2005). In addition, all other indices (i.e. TLI and CFI estimates) were greater than the
recommended 0.90, indicating adequate fit(MacCallum and Hong 1997;Tanaka, 1993).
Reliability and validity of the scales. To study the validity and reliability of the
measurement scales used, a confirmatory factor analysis was carried out. To establish
convergent validity, the three important indicators were examined; factor loadings
(standardized estimates), average variance extracted (AVE) and composite reliability (CR).
The results are depicted in Table IV. Cronbach’scoefficient alpha estimates for the
Table III.
Results of the
measurement and
structural model
tests
Items x
2
dF x
2
/df p-value RMSEA SRMR TLI CFI
Measurement model 238.566 62 4.11 0.000 0.068 0.590 0.932 0.923
Structural model –overall model 138.096 48 2.89 0.000 0.058 0.044 0.965 0.978
Notes: RMSEA = Root mean square of approximation; SRMR = Standardized Root Mean Residual; TLI =
Tucker–Lewis index; CFI = Comparative fit index; p<0.00
Table II.
Correlation matrix
Items Mean SD 1 2 3 4 5
1. Career development 10.31 3.22 1
2. Training and development 6.99 2.35 0.474** 1
3. Performance appraisal 7.45 2.14 0.291** 0.335**
4. Compensation 13.80 3.64 0.367** 0.595** 1
5. Employee performance 30.71 6.87 0.353** 0.205** 0.237** 0.185** 1
Notes: **Correlation is significant at the 0.01 level (two-tailed).
*
Correlation is significant at the 0.05 level
(two-tailed)
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Factor names, factor loadings and Cronbach’s alpha
Factor Items (
l
) AVE CR
Career
development
(
a
= 0.82)
Organization provides coaching to enhance
my career
0.638
Organization supports my individual
development strategy
0.802 0.56 0.83
Organization provides unprejudiced career
guidance whenever required
0.713
Organization provides coaching to enhance
my career
0.818
Training and
development
(
a
= 0.83)
Adequate and relevant knowledge and
skills are acquired through training
program
0.708
The knowledge and skills associated aids
used in the training programs are available
for use
0.676
Training programs are conducted for
employees in all facets of quality
0.709 0.59 0.88
The activities of the training programs meet
the needs of employees
0.857
Employees are sponsored to training
programs on the basis of relevant training
needs
0.877
Performance
appraisal
(
a
= 0.76)
Appraisal system in this organizations is
growth and developmental oriented
0.694
Organization provides a written and
operational performance appraisal system
0.811
Performance is assessed on established
objective and measurable outcomes
0.728 0.57 0.80
Performance review discussions conducted
with the highest quality and care
0.779
Compensation
(
a
= 0.77)
Remuneration and related allowances are
commensurate to current market trends
0.713
Job performance is an essential determinant
factor in determining stimuluses and
compensations
0.700
Compensation practice connected to the
organization goals and objectives
0.831 0.52 0.81
Organizations compensation system is
closely connected with its financial results
0.627
Efficiency of
the work
(
a
= 0.80)
Employees exhibit a sense of earnestness,
dedication and ability to take responsibility
0.865
Employees possess the requisite
professional and technical knowledge
required for the efficient execution of their
duties
0.812
Employees carry out the responsibilities in
accordance to specified policies and
procedures
0.713 0.64 0.84
(continued)
Table IV.
Confirmatory factor
analysis
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constructs ranged between 0.75 and 0.83, exceeding the minimum value of 0.70, as
recommended by (Nunnally and Bernstein, 1994;Kline, 2010). Constructs standard
estimates ranged between 0.63 and 0.88, exceeding the recommended criterion of 0.60 or
higher (Byrne 2013;Hair et al.,2010;Kline, 2011), and statistically significant (p<0.05).
Constructs average variance extracted ranged between 0.52 and 0.64, which exceeds
suggested threshold of 0.50 indicating higher reliability of a construct (Fornell and Larcker,
1981;Hair et al.,2006;Wu et al.,2008). Constructs composite reliability ranged between 0.79
and 0.88, which exceeds the recommended criterion 0.70, indicating consistency adequacy
(Fornell and Larcker, 1981;Hair et al.,2006;Wu et al., 2008).
Test of hypotheses
The proposed hypotheses were tested using structural equation modeling (SEM). The
results of the structural model test depicted in Table III, indicate a good fit to the data. The
Factor names, factor loadings and Cronbach’s alpha
Factor Items (
l
) AVE CR
Planning of
work (
a
= 0.79)
Effective work planning contributes to the
setting and attainment of organizational
goals
0.718
Employee of the organization possesses the
ability to plan and execute the
responsibilities in accordance to planned
scheduled
0.744
Effective work planning increases
employee’s ability to focus to focus on the
completion of their assigned responsibilities
automatically
0.78 0.56 0.79
Creativity and
innovation
(
a
= 0.78)
Employees of the organization are keen on
making changes in their working
techniques
0.638
Employees desist from imitating others in
solving work-related problems
0.802 0.56 0.83
Employees of the organization possess the
ability in putting forward ideas and profess
solutions to work-related problems
0.713
Employees of the organization possess the
ability in expressing their thoughts fluently
and without cohesion
0.818
Making efforts
(
a
= 0.75)
A feeling of pride in employee’s assigned
duties motives them in making extra efforts
0.713
Employees are desirous and express a sense
of willingness in working beyond official
working hours
0.700 0.52 0.81
The organizations offer extra benefits to
employees for them to put in more efforts
0.831
Salary increments are offered to employees
who diligently accomplish assigned
responsibilities
0.627
Notes: AVE represents average variance extracted; CR represents composite reliability. All factor loadings
are significant at p<0.0 Table IV.
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chi-square/df ratios of (2.89) were within the suggested threshold (i.e. 3.0) indicating a
good fit(Byrne, 2013;Carmines and McIver, 1981). The root mean square error of
approximation (RMSEA) value of (0.058) and standardized root mean residual (SRMR) value
(0.044) were lower than the suggested thresholds (i.e. less than 0.60 and 0.05) indicating a
good fit(Fan and Sivo 2005;Miles and Shevlin, 1998). In addition, all other indices (i.e. TLI
and CFI estimates) were greater than the recommended cut off value of (0.95) indicating a
good fit(Bentler, 1990;Hu and Bentler, 1999). Thus, the overall structural model reflects
desirable psychometric properties. Table V, which reports the results of the hypotheses,
shows that three out of the four hypotheses were supported and acceptedin data set.
Discussion
This study reveals important empirical results that make a significant contribution to
clarifying the question of the impact of HRD practices on employee performance.
Results confirmed H1 by showing that career development has a significant impact on
employee performance. This result is consistent with the empirical findings of Gilley
et al. (2009) who argue that, career development interventions assist in building a
partnership between the organization and its employees, enriching their knowledge,
skills, abilities and improving individual competencies. H2 confirms a significant
impact of training and development on employee performance. The findings support
the suppositions of the theory of human capital initially developed by Becker (1964,
1993) who regarded training as a form of investment that leads to higher individual
productivity. Results of the third hypothesis indicate that performance appraisal does
not make any significant impact on employee performance. This result supports the
findings by Osman et al. (2011b) who contend that, an ineffectual appraisal procedure
results in numerous undesirable challenges comprising stalled employee efficiency, less
morale, less enthusiasm in supporting organizational values and objectives,
consequently stalling the effectiveness of the organization. Results of H4 show that
compensation has a significant impact on employee performance. This results support
the contention of Mayson and Barret (2006) who assert that, a firm’s ability to attract,
motivate and retain employees by offering competitive salaries and appropriate
rewards is linked to firm performance and growth.
Theoretical implications
The finding of this study support the contention in literature on the subject of enhancements
of employee performance suggested by Leopold and Harris (2009) and Scheel et al. (2014)
about which further research is needed in SMEs. HRD plays an important role in all sectors
of the economy; however, it is especially important in SMEs where their significance is even
Table V.
Inferences drawn on
hypotheses
Hypothesis Beta coefficient p-value Result
H1. Career development has a significant impact on employee
performance
0.599 0.000 Accepted
H2. Training and development has a significant impact on
employee performance
0.210 0.015 Accepted
H3. Performance appraisal has a significant impact on
employee performance
0.008 0.143 Rejected
H4. Compensation has a significant impact on employee
performance
0.153 0.031 Accepted
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greater. This industry is characterized as lacking human capital and managerial capabilities
(Carroll, 2011;Decker et al., 2006). The finding of this study addresses the recommendation
to further investigate the relationship between human resource development practices and
employee performance based on the premise that investment in human resource
development practices are important strategic mechanism to stimulate positive behaviour in
individuals and impact their knowledge, skills and attitudes which can increase
productivity and performance (Clardy, 2008). Relatively few studies exist on human
resource development in the SMEs (Hill, 2004;Iles and Yolles, 2004;Pajo et al.,2010).
Similarly, relatively few studies exited on employee performance in this organizations
(Cardon and Stevens, 2004;Kitching, 2007;Sadler-Smith et al.,1999). The finding of the
study also assists in clarifying the ambiguity in literature in relation to human resource
development practices and employee performance (Arag
on-Sánchez et al.,2003;Shih et al.,
2006). The findings of the study indicate that human resource development practices impact
employee performance through career development intervention which is the total
constellation of psychological, sociological, educational, physical, economic and chance
factors that combine to shape the career of any given individual over the life span
(McDaniels and Gysbers,1992), training and development interventions which is as a set of
formal organizational and individual practices that are designed to enhance the potential
contribution of human resources to the organization (Noe 2005;Wentland, 2003;O’Dwyer
and Ryan, 2002) and compensation strategies which are a reward system that a company
provide to individuals in turn for their willingness to perform various jobs and tasks within
organizations (DeNisi and Griffin, 2001). The findings support the contention of McGraw
(2014) who argue that the effective implementation of individual career management
processes significantly enhances employee competency and improve individual
performance. They are also consistent with the empirical findings of Kapel and Shepherd
(2004) and Kaye (2005) who contend that a well-designed career development system
enables organizations to tap their wealth of in house talent for staffing and promotion by
matching the skills, experience and aspirations of individuals to the needs of the
organizations. Similarly, the findings support the arguments of Harrison (2000) and Appiah
(2010) who assert that training and development generates performance improvement-
related benefits for the employee as well as for the organization by positively influencing
employee performance through the development of employee knowledge, skills, ability,
competencies and behaviour. They are also consistent with the study by Zumrah et al. (2013)
who postulate that employees who participated in training apply the new learned skills,
knowledge and attitude in their everyday work and demonstrate better abilities and
competencies in performing their job. Furthermore, these findings support the arguments by
Frye (2004) who posited that compensation plays an essential role in firms that rely upon
human capital as a stimulus in attracting and retaining experienced employee. They are also
consistent with empirical findings of Sola and Ajayi (2013) who indicate that compensation
was a primary motivating factor for employees to continuously strive for greater heights.
They further emphasized that a well-structured compensation system is imperative to the
success of an organization. Previous empirical and theoretical study on human resource
development and employee performance linkage focused on strategy and design, whereas
this current study focused on employees. This study contributes to the scarce number of
previous studies that have focused on the important function of employee performance in
the human resource development and employee performance linkage literature in the SMEs.
The findings of this study emphasize the relevance of human resource development
practices in enhancing employee performance in SMEs. Accordingly, this current study
finding has not been previously established empirically in literature. Specifically, this
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current study extends the literature by adducing evidence empirically that, human resource
development practices impacts employee performance of SMEs in Ghana.
Managerial implications
The results of this study leads to theconsideration of a series of implications for the SMEs. It
is recommended for policy makers, stakeholders and management of SME’s in encourage
the espousing of appropriate and well-articulated HRD practices in SME’s. HRD practices
the study revealed are the basic factor for employees to acquire competencies that in turn
significantly improve organizational functioning (Kehoe and Wright, 2013). Along the same
lines, Shih et al. (2006) contend that human resource development practices help improve the
skills and abilities of employees to generate returns through increased productivity and
business performance. Arag
on-Sánchez et al. (2003) and Scheel et al. (2014) deliberate that
human resource development practices enhance the quality of human capital and create
sustainable competitive advantage. The findings of the study indicated that HRD practices
impacts employee performance through career development interventions, training and
development interventions and compensation strategies. Storey (1978) opined that career
development is a key component of human resource development practices. Management of
the SME’s must support career development in the organization, as it provides positive
influence on the enhancement of the essential competencies for an establishment. Also,
management should ensure employee career development plans by assisting employees on
how to draw up action plans regarding their career development. Moreover, the
management of the SME’s should provide coaching to enhance the career of its employees
by supporting employees action plans. Furthermore, management should assign task which
will improve the skills of its employees by providing performance feedback-related
feedback. Mondy and Noe (1981) posited that training and development interventions are
designed to maintain and improve effectiveness and efficiency of individuals and groups in
an organization. Management of the SMEs should ensure that employees are sponsored to
training programs on the basis of relevant training needs. Training needs assessment
should be established on a cogent performance appraisal mechanism. Additionally, the
training needs identified should be valuable, realistic and established on the business
strategy of the organization. Management of the SMEs should also ensure, training
programs are conducted for employees in all facets of quality as well as see to it that the
activities of the training program meets the needs of the employees. Also management
should ensure that, adequate and relevant knowledge and skills are acquired through
training programs. Armstrong (2009) emphasized that compensation is an integral approach
to productivity improvements in organizations. Management of the SMEs should ensure
that remuneration and related allowances are commensurate to current market trends.
Management should ensure that compensation practices are connected to the goals and
objectives of the organization goals and objectives. Also, management of the SME’s should
ensure that the organizations compensation system is closely connected with its financial
results. Moreover, the management of the SMEs should ensure that job performance is an
essential determinant factor in determining stimuluses and compensations.
SMEs should encourage the improvements of the performance of its employee, as the
effectiveness of an organization consists in the efficiency of each of its individual employees
(Mastrangelo et al.,2014). Furthermore, the study suggests that human resource
development practices should be configured in a way that employees can perform effectively
and meet performance expectation which will increased productivity and business
performance.
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Limitations and suggestions for future study
There are certain limitations that offer important avenues for future research. Data were
collected using a cross-sectional research design; however, the adoption of a longitudinal
research design would have assisted in testing the casual relationship among variables.
Moreover, quantitative research design was used in analyzing data collected through
structured questionnaires. A profound qualitative data are encouraged in future studies. The
adoption of both qualitative and quantitative approaches would have provided a more in-depth
and valuable clarifications. Furthermore, the data used in this study are extensively subjective
opinions of employees. Adoption of objective measures is encouraged in future studies. This
area could be improved by receiving feedback from multiple source and cross validating
the responses to identify personal biases from individual respondents. Another limitation is the
generalizability of the study. The results of this study cannot be generalized because they come
from a sample of SMEs in a specific context. We should also be careful when applying the
results obtained to other sectors, given the specific characteristics of the SMEs. The mediating
role of other variables such employee competencies was not analyzed. Also, the possible
mediating role of employee competencies on the association between human resource
development practices and employee performance was not analyzed. In view of the outlined
limitations, future studies could investigate how employee competencies mediate the
association between human resource development practices and employee performance. Future
research is encouraged to examine the possible mediating effect of employee competencies on
employee performance using distinct human resource development practices.
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Corresponding author
Frank Nana Kweku Otoo can be contacted at: frank_otoo@yahoo.com
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