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Review of Management, Vol. 2, No. 3/4, December 2012, pp. 23-31 ISSN: 2231-0487

HR Planning and Corporate

Performance in the Nigerian Banking Sector

Michael P. Nnamseh

Department of Business Management, University of Uyo, Nigeria

Abstract

This paper examines the impact of human resource planning (HRP) on enterprise overall performance. Its major objectives are to evaluate the importance of human resource planning in stimulating sustainable organisational success; determining the extent to which employee planning could influence productivity at enterprise level and assess the correlation between its benefits and the cost of achieving effective human resource planning. From a population of 25 registered commercial banks in Nigeria, a simple random sample of 400 respondents was selected for the study. The major instruments for data collection were the structured questionnaire and the interview methods. Data were analysed using the percentage analysis, Pearson moment correlation and the t-test analysis. Findings revealed a strong correlation between HRP and increase in organisational productivity, followed with the fact that the cost of human resource planning is far minimal than the benefits derivable from it. The study recommends, among others, the need for effective HRP which could result in competitive advantage in a manner that competing firms may not be able to imitate. Keywords: HR Planning, Corporate Performance, Banking Sector, Nigeria

Introduction Planning is an essential process of management (Jerome, 2010). Human Resource Planning (HRP) provides the foundation for establishing an effective human resource management functions. It also allows the human resource management functions to position itself to take the best advantage of fluctuations in the economy or labour market. The likely effects of future economic, social and legislative conditions or organisational changes can be converted from constraints and pressure to challenges and opportunities. Lloyd and Rue (2004) defined human resource planning (HRP) as the process of “getting the right number of qualified people into the right job at the right time”. It could also mean the system of matching the supply of people-internally (existing employees) and externally (those to be hired or searched for) with the openings that organisation expects to have over a given time frame. The long-term success of any organisation ultimately depends on having the right people in the right job at the right time. Organisation objectives and the strategies

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for achieving those objectives are meaningful only when people with the appropriate skills, talents, and desire are available to carry out those strategies. The need for human resource planning (HRP) is due to significant lead time that normally exists between the recognition of the need to fill a job and the securing of a qualified person to feel that need. Thus, the success of HRP depends largely on how closely the human resource department can integrate effective people planning with the organisation’s business planning process. Unfortunately, however, HRP is often inadequately tied to overall corporate planning. Although, HRP is seemingly a universally acceptable concept for the sustainable success of contemporary organizations’; there appear to be some doubt and controversy on the role it plays in the achievement of enterprise objectives. Scholars like Ulrich (1997) and Truss (2001) believe that with appropriate human resource planning firms can achieve their goals; hence they justify the huge investment on HRP. To the contrary, Purcel (2003) and Vladimir (2006) believe that given the enormous resources at firm’s disposal, achieving enterprise objective can be feasible without the rigours of human resource planning. Given this controversial opinions, the questions, therefore are, can the investment made by firms on HRP be justified in terms of organizational performance? Does HRP make any positive impact on corporate performance? This paper seeks to find answers to these questions. Objectives of the Study This paper is modeled to achieve the following objectives:-

i. evaluate the importance of HRP in organisation; ii. determine the relationship between HRP and organizational productivity; and

iii. assess the relationship between the benefits derivable from HRP are the cost of HRP.

Theoretical Framework The belief that human resource is the most important resource available to the organisation and that HRP, if carried out properly, has implications on corporate performance has been prevalent among scholars and management practitioners for many years (Almus, 2009). Interest in this area has recently intensified as most scholars favour the opinion that, collectively, a firm’s human resource can provide a unique source of competitive advantage that will be difficult for competitors to replicate, if the human resource is well planned for. For example, Penrose (1995), Russell, Terborg and Powers (1992), Stanger (2000) and Porter and Lawler (2008) drawing on Barney’s (1991) resource-based theory of the firm contend that human resource can provide a source of sustained competitive advantage when:

i. the human resource is properly planned for in terms of the right number, right kind of skills and the right mix that will be required now and in the foreseeable future;

ii. the recruited human resource are trained and developed, according to the training needs and objectives of the organisation so as to be able to add, maximally, to the firm’s production processes because according to Porter and Lawler (2008), levels of individual performance must always matter; and

iii. the combined human capital investment in a firm’s human resource represent cannot be replicated.

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Russell’s, Terborg’s and Powers’ work, mentioned above, points to the importance of human resource in the creation of firm’s competitive advantage and they argue that firms can capitalize on this potential source of profitability if properly planned for. According to Bailey (1993), HRP influences corporate performance through the planned acquisition and development of firm’s human capital; recruitment procedures that provides a large pool of qualified applicants, paired with a reliable and valid selection regimen; and provision of formal and informal training experiences, such as basic skills training, on-the-job experience, coaching, mentoring and management development which can further enhance productivity. Other authors like Gerhart and Milkovich (1992) and Snell and Dean (1994), opine that the effectiveness of even highly skilled employees will be limited if they are not motivated to perform and that HRP can affect employees motivation and encourage them to work harder and smarter. Examples of firm’s efforts to direct and motivate employees’ behaviour, they note, include the use of performance appraisals that assesses individual or work group performance, linking these appraisals tightly with incentive and compensation systems, the use of internal promotion system that focuses on employees merit and other forms of incentives to align the interest of the organisation with the interest of the employees. Thus, the theoretical literature above clearly shows that the behaviour of employees within an organisation has important implications for corporate performance and that HRP can affect, positively, individual employee performance through its influence over employees’ acquisition, skills and motivation, and through the provision of organizational structures that allow employees to improve how their jobs are performed.

Conceptual Issues Planning, according to Joseph (2006), is establishing where one wants to go and how to get there. Their view implies that without planning an organisation would have nothing to achieve, because organizational activities would not be goal-directed. In the same vein, HRP refers to the process which entails formulating targets or objectives for an organisation and outlining the strategies or means of achieving these objectives with regards to human resource (Tsui, 2003; Westman & Schuster 2007). As one of the activities in the scope of human resource management, Truss (2001) and Vladimir (2006) consider HRP the most important activity as according to them, HRP either “houses” the other activities of human resource management or serves as a link to them. Peretomode and Peretomode (2001) opine that the importance of HRP has brought about increase emphasis on it as a result of expansion or contraction of an organization; technological changes (new technologies); death; retirement; resignation; withdrawal of service; termination and dismissal; changing economic conditions (boom and depression); changing work force (changing demographic); mobilization of staff through transfer; globalization and environmental uncertainty, internal and external, to the organization; and government policies. HRP, when properly conducted, can provide a number of benefits. The benefits, according to Mathis and Jackson (1982), Klatt (1985) and Pritchard and Jones (2006) are that:

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i. human resource can be deployed in support of basic strategic objectives of the organisation;

ii. management gains an improved understanding of human resource activities and of the influence of business strategies on the human resource of the organisation;

iii. people may be planned for, and use more effectively and efficiently in the daily operations of the organisation;

iv. human resource may be continuously upgraded by the implementation of the plan for recruitment, termination, training, development, career management and reward for performance;

v. employees will be more satisfied with the quality of work life; vi. easier diagnosis and solution to problems involving human resource will be possible

because planning essentially provides a model of the human resource system; vii. equal employment opportunity requirements may be achieved because

objectives and actions are spelt out in plans; viii. it enables management to anticipate the development of plans for avoiding or

scorrecting problems before they become serious; ix. it permits the forecasts of recruitment needs in terms of both the number and types

of skill sought; and x. it provides the identification of replacement or backups for present key managers

from either inside or outside the organisation. Pritchard and Jones (2006) further say that the above benefits can be reaped fully if:

i. the organisation devices a personnel inventory of available knowledge, skills abilities and experience of present employees;

ii. the organisation have a forecast of both the internal and external human resource supply and demand;

iii. the organisation, on the basis of information from the personnel inventory and human resource demand and supply forecast, formulates various action plans and programmes in order to meet predicted staffing need; and

iv. monitoring and evaluation procedures of the programmes are specified in order to provide feedback on the adequacy of the HRP effort and its contribution to corporate performance.

Corporate Performance The outcome of management processes, from strategic planning to implementation of the plan, underpins the measurement of corporate performance. Thus, corporate performance refers to the end result of management processes in relation to corporate goals. Daft (1991) defined corporate performance as the organization’s ability to attain its goals by using resources in an efficient and effective manner. There are different perspectives on the measurement of corporate performance in management literature (Lenz, 1980 & Venktrakaman, 1986). For example, Ventrakaman and Ramanujam (1986) divide corporate performance into operational and financial performances. Operational performance includes: (i) market share, (ii) product quality, and (iii) marketing effectiveness. Financial performance is broken down into two subcategories: (i) market-based performance (e.g., stock price, dividend payout and earnings per share) and (ii) accounting-based performance (e.g., return on assets and return on equity). The concept of corporate performance in accounting literatures refers normally to financial aspects such as profit, return on assets (ROA) and economic value added (EVA), using the nick name of ―the bottom line. Kaplan

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and Norton (1992) coined the extended measurement of corporate performance as balanced scorecard, where the core idea is to balance the domination of financial and non- financial aspects in corporate performance. Kaplan and Norton’s extended corporate performance is in line with the measurement of corporate performance by Ventakraman and Ramanujam (1986). Simons (1995) and Simons (2000) define corporate performance using an approach of market mechanism by which the company actively interacts with the financial, factor and customer product markets. In the financial market, the corporate performance strives to satisfy shareholders and creditors in the form of financial indicators. In the factor market, such as suppliers and other production owners, the corporate ability to pay in time and in agreed amount are important in evaluating corporate performance. From the perspective of customer product market, corporate performance is evaluated by parties in the market based on the ability of the corporation to deliver value to customers with affordable price which the net effect, in turn, will be indicated in the corporate revenue. The banking sector in Nigeria fits into this last group as they operators constantly seek to deliver value to customers using different marketing strategies with the aim of increasing corporate revenue while guaranteeing customers satisfaction. Overall, Simons’ (1995) and Simons’ (2000) view of corporate performance parallels the input-output view of an organisation, suggesting that the existence of an organisation is due to mere contributions by stockholders (most importantly employees) with the hope of return for each party through market mechanism (Donaldson, 1995). Methodology A study of this nature present a number of data collection challenges. It requires as broad a sample as possible and at the same time requires each data point provide comprehensive information on both the organizational HRP system and firm-level performance. Thus, the entire staff of the 25 commercial banks in Nigeria formed the population for this study. In drawing the sample from the case study, a simple random sampling method was employ to eliminate bias and priority was given to the senior and middle level staff. In all, a total of 400 randomly selected respondents participated in the study. The choice of the banking sector was due to the leading role it plays in the Nigerian economy. The instruments for data collection were structured questionnaire and interview method. The study relied on both qualitative and quantitative analysis of data in establishing the relationship between the different variables involved in the study.

Based on the objectives of this study, 3 hypotheses were tested thus: H0.1: HRP is not important in organisation; H0.2: There is no significant relationship between HRP and organisational productivity; and H0.3: The benefits derivable from HRP are not commensurate with the cost of HRP. Data gathered from the questionnaire were analysed using the percentage analysis, Pearson moment correlation analysis and the t-test analysis.

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Sample Profile Table 1: Distribution of respondents according to banks and rate of return of administered

questionnaire

Banks

Copies of questionnaire administered

Copies of questionnaire returned

Percentage returned

Afribank * 60 54 13.5

Diamond Bank 40 38 9.5 First Bank

* 60 50 12.5

Finland Bank 40 35 8.8 Intercontinental Bank 40 37 9.3 Oceanic Bank 40 34 8.5 UBA

* 60 53 13.3

Union Bank * 60 56 14.0

Total 400 357 89.4

Source: Field survey, 2010 *

Old generation banks Data for this analysis was collected from 8 commercial banks by administering 400 copies of questionnaire out of which 357 representing 89.4% were completed and returned in useable form. Table 2: Distribution of respondents according to rank

Rank Number of respondents Percentage

Top level management 33 9.2 Middle level management 214 60.0 Supervisor 84 23.5 Others 26 7.3

Total 357 100

Source: Field survey, 2010 Table 2 shows that out of 357 respondents that participated in the research, 33 (9.2%) belong to top level management, 214 (60%) belong to middle level management. Supervisors were 84 or 23.5% and others were 26 or 7.3%. Results Results of the test of hypotheses are as presented in Tables 3, 4 and 5 Table 3: Responses to the importance of HRP in organisation

Responses Number of respondents Percentage

Strongly Agree 96 26.9 Agree 257 72.0 Undecided 4 1.1 Disagree 0 0 Strongly Disagree 0 0

Total 357 100

Source: Field survey, 2010

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Table 4: Testing the relationship between HRP and organisational productivity

Source: Field survey, 2010

Table 5: Testing the relationship between cost and benefits of HRP

Source: Field survey, 2010 Discussion of Results Considering the result in Table 3, H0.1 is rejected as 26.9% and 70% strongly agreed and agreed respectively that HRP is important in an organisation. The null hypothesis in the case of HRP and organizational productivity, H0.2 is rejected as the correlation coefficient (r) is 0.89 according to the result of the Pearson moment correlation test. From Table 4, it can be seen that the t-cal value (279.48) is greater than the t-tab values (1.96 and 1.64) at 5% and 10% levels of significance respectively. This implies that there is significant relationship between HRP and organizational productivity. In the case of cost and benefit of HRP, the null hypothesis, H0.3 is rejected as the correlation coefficient (r) is 0.76 and further data analysis using the t-test gives a t-cal value of 110.14 which is greater than the t-tab values of 1.96 and 1.64 at 5% and 10% levels of significance respectively. Thus, it can be said that the benefits derivable from HRP is commensurate with cost of HRP in the Nigerian banking sector. The significant relationships shown by this study support the earlier theoretical notions and are consistent with institutional theory and the resource-based view of the firm (Barney, 1991; Wright, McMahan & McWilliams 1994). HRP is found to show a positive impact on corporate performance.

Conclusion The main function of HRP is to ensure that organizations’ determine their human capital requirement, obtain and retain same, and employ them productively. To do this, organizations’ make colossal investment in HRP. Therefore, this study was designed to determine the effect of HRP on corporate performance by looking at its importance in organization, its relationship with organizational productivity and also examine if the benefits derivable from HRP is commensurate with the cost of HRP. Based on the findings of the study, it is concluded that HRP is important in the organization, that there exist significant relationship between HRP and organizational productivity and that the benefit derivable from HRP is commensurate with the cost of HRP. The managerial

Variables α r t-cal t-tab

HRP and organizational productivity 0.01 0.05

0.89 279.48 1.64 1.96

Variables α R t-cal t-tab

Benefits and cost HRP 0.01 0.05

0.76 110.14 1.64 1.96

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