THE RELATIONSHIP BETWEEN HUMAN

RESOURCE MANAGEMENT PRACTICES AND

ORGANISATIONAL PERFORMANCE IN THE
MANUFACTURING SECTOR OF THE BEER
INDUSTRY IN SOUTH AFRICA





PRAVEEN BALGOBIND





A research project submitted to the Gordon Institute of Business
Science, University of Pretoria in partial fulfillment of the requirements
for the degree of Masters of Business Administration.








14 November 2007



U Un ni iv ve er rs si it ty y o of f P Pr re et to or ri ia a




ii
ABSTRACT

Human resources can provide a competitive advantage due to the fact
that it is valuable, rare, imperfectly imitable and has no substitutes.
Competitors can duplicate competitive advantage obtained via better
technology and products but it is difficult to duplicate competitive
advantage that is created through improved management of people.

The motivation for the research was to establish whether there was a
casual relationship between HR practices and organisational effectiveness
and between organisational effectiveness and manufacturing
performance. The research also developed a model that could be
implemented to enhance business performance. Secondary data formed
the primary source of information to obtain business performance
indicators and information on the HR practices.
While the results indicated that there was no directional relationship
between HR practices and business performance indicators, findings of
the research provide statistical evidence that investment in HR practices
of the organisation will have a positive relationship with business
performance.
Among the HR practices, performance appraisals and career development
has a direct casual relationship with the customer satisfaction perspective.
The research can be used within the organisation and as a basis for
further academic research.


iii
DECLARATION
I declare that this research project is my own work. It is submitted in partial
fulfilment of the requirements for the degree of Masters of Business
Administration at the Gordon Institute of Business Science, University of
Pretoria. It has not been submitted before for any degree or examination
in any other University.


--------------------------
Praveen Balgobind
14 November 2007






iv
ACKNOWLEDGEMENTS
The research project involved the assistance of numerous people whose
guidance and support has enabled me to complete it. I would therefore
like to recognise and thank all of those individuals and the organisation
who helped to make this research report possible.
I would like to thank The South African Breweries for allowing me access
to the information on their database and all individuals who assisted me
within the organisation to analyse the information.
I would also like to thank my research supervisor Sarah Baab for her
continuous support, guidance and encouragement throughout the
process.
I would also like to thank my wife, Vanisha and daughter, Anashyia for all
their encouragement, support and patience that they have given me over
the past two years. For this, I am extremely grateful.
Lastly, and by no means least I would like to thank GOD for guiding me
through the MBA.







v
TABLE OF CONTENTS PAGE

ABSTRACT ii
DECLARATION iii
ACKNOWLEDGEMENTS iv

CHAPTER 1: INTRODUCTION TO RESEARCH PROBLEM
1.1 Introduction 1
1.1.1 Human Resources as a competitive advantage 1
1.2 Aim of the Research 5
1.3 Purpose of the Research 5
1.4 The Liquor and Beer Industry in South Africa 6
1.4.1 The State of the Industry 6
1.5 Organisational Background 8
1.6 Summary 11

CHAPTER 2: LITERATURE REVIEW
2.1 Human Resource Management (HRM) Practices 12
2.1.1 Theories of HRM 13
2.1.2 HRM and Organisational Fit 16
2.1.3 Identifying HRM Practices 18
2.2 Schools of HRM Practices 23
2.2.1 Universalistic Perspective 24
2.2.2 Contingent Perspective 27
2.3 Performance Theory 29
2.3.1 The Balanced Scorecard 32
2.4 Linking HRM Practices and Performance 35
2.5 Integration of Literature Review 38
2.6 Summary 40


vi
CHAPTER 3: RESEARCH QUESTIONS AND HYPOTHESIS
3.1 Research Questions 41
3.2 Hypotheses 43
3.3 Summary 43

CHAPTER 4: RESEARCH METHODOLOGY
4.1 Research Design 45
4.1.1 Data Collection 46
4.1.2 Organisational Effectiveness 47
4.1.3 HRM Practices 49
4.1.4 Business Performance Indicators 51
4.2 Population and Sample 53
4.3 Analysis 55
4.4 Summary 56

CHAPTER 5: RESEARCH FINDINGS
5.1 Descriptive Analysis 57
5.1.1 Human Resource Management Practices (HRM) 58
5.1.2 Business Performance Indicators 63
5.1.3 Summary of statistics 67
5.2 Statistics used for Analysis 67
5.2.1. Path Analysis 67
5.2.1.1 Correlation Tests 68
5.2.1.2 Correlation Map 70
5.2.2 Statistical Regression Analysis 72
5.2.2.1 General Notation and Definitions 72
5.3 Summary 73




vii
CHAPTER 6: DISCUSSION OF RESULTS
6.1 Descriptive Statistics 74
6.1.1 Human Resource Management Practices 74
6.1.1.1 Competency Acquisition Process 74
6.1.1.2 Training and Development 74
6.1.1.3 Performance Appraisal 75
6.1.1.4 Career Development 75
6.1.2 Business Performance Indicators 77
6.1.2.1 Customer Perspective 77
6.1.2.2 Internal Business Perspective 77
6.1.2.3 Financial Perspective 77
6.1.2.4 Learning and Growth Perspective 78
6.2 Hypothesis Discussion 79
6.2.1 Path Analysis 79
6.2.2 Correlation Tests 80
6.2.3 Correlation Map 81
6.3 Research Questions 84
6.4 Conceptual Model 86
6.5 Summary 88


CHAPTER 7: CONCLUSION
7.1 Recommendations and Limitations 91
7.2 Conclusion 93

REFERENCES 94




viii
LIST OF FIGURES

Figure 1: SAB HRM practices alignment model 10
Figure 2: Model for the HR-shareholder value relationship 22
Figure 3: Model for the balanced scorecard 33
Figure 4: Model for the HRM performance linkage 35
Figure 5: Model for the HRM performance linkage 37
Figure 6: Hypothesised model for the HRM-Performance
Linkage 43
Figure 7: Model of the organisational effectiveness survey 47
Figure 8: Competency Acquisition Process 59
Figure 9: Training and Development 60
Figure 10: Performance Appraisal 61
Figure 11: Career Development 62
Figure 12: Integrated Quality Management System 63
Figure 13: Efficiency 64
Figure 14: Rands per hectolitre 65
Figure 15: Labour Turnover 66
Figure 16: Correlation map 71
Figure 17: Conceptual Model of the relationship between HRM
practices, organisational behaviour and business
performance 86


ix
LIST OF TABLES

Table 1: Linking HRM and Firm Performance 15
Table 2: Forms of HRM fit 16
Table 3: Comparison of generic (literature) measures and
specific measures (research) 40
Table 4: Summary of descriptive statistics 67
Table 5: Summary of correlation test statistics 68
Table 6: Summary of correlation test statistics (p-values) 69
Table 7: Negative associations between HRM practices
and business performance 70
Table 8: Positive associations between HRM practices
and business performance 71
Table 9: Negative associations between HRM practices
and business performance 82
Table 10: Positive associations between HRM practices
and business performance 83


1
CHAPTER 1: INTRODUCTION TO RESEARCH PROBLEM
1.1 Introduction

There is rapid change in the business environment due to political,
economic, technological and environmental factors. This requires
organisations to compete on numerous fronts. Chang and Huang (2005,
p. 434) state that to compete effectively, firms must constantly improve
their performance by reducing costs, enhancing quality and
differentiating their products and services. A consensus has emerged
among scholars and practitioners alike that the business environment
has become more competitive than in the past because of globalisation
(Khatri, 2000). Khatri (2000) goes onto to say that businesses need to
focus even harder on their competitive strengths so as to develop
appropriate long term strategies.

1.1.1 Human Resources as a competitive advantage

Human resources can provide a competitive advantage due to the fact
that it is valuable, rare, imperfectly imitable and has no substitutes.
Competitors can duplicate competitive advantage obtained via better
technology and products but it is difficult to duplicate competitive
advantage that is created through improved management of people.
Khandekar and Sharma (2005) believe that if companies are to survive
and thrive in the global economy they require world class human
2
resource competencies and processes for managing them. A critical
mass of employees needs to be developed who are knowledgeable or
skilled in a particular technology. This can provide a potential source of
competitive advantage.

Huselid (1995) states that human resources management practices can
help to create a source of sustained competitive advantage. It has to
however be linked with the firms competitive strategy. Huselid (1995)
further goes on to say that human resource practices can significantly
contribute to firm performance if they are properly configured. The
rationale behind the argument is that effective HRM practices which
exploit synergies among such practices and help the organisation to
implement its competitive strategy provide a source of sustained
competitive advantage.

Huselid, Jackson and Schuler (1997) further identified strategic human
resources practices which can contribute to organisational objectives.
They emphasise that these should be internally consistent practices.
They also state that a firm can gain competitive advantage if a firm
ensures that its employees add value to its processes and that its
human capital is unique and difficult to replicate. Human resource
practices can comprise many different activities through which the firm
can create human capital that meets these competitive advantages.
Their study has also shown that in order to achieve a competitive
advantage the HRM practices must not merely be institutionalised
3
activities but rather HRM practices that have an increased effectiveness
by making improvements within the domain of strategic HRM activities.
This will lead to a potential source of competitive advantage.

Huselid and Becker (1996) state that due to the changing product market
and organisational structures, HRM practices are increasingly taking on a
strategic role to provide a motivated and flexible workforce that can meet
the new market imperatives. These give the organisation a competitive
advantage as traditional sources of competitive advantage e.g.
technology, quality, economies of scale, become easier to imitate. HRM
practices also play a key role in the development of core competencies
which can ultimately become a potential source of competitive
advantage.

Providing the firm with a competitive advantage is perhaps the first step.
This ultimately needs to lead to improved organisational performance.
Huang (2000) argues that the emphasis is on linking human resources
management practices to strategy, so as to increase organisational
competitiveness and effectiveness. In doing so the assumption is that by
linking HRM practices to strategy it will have a positive impact on
personnel costs, employee productivity and development of management
resources. These will ultimately enhance a firms performance.

Previous studies have examined human resources practices,
organisational climate and organisational effectiveness as a means of
4
enhancing organisational performance (Tzafrir, 2005; Stroh and Caligiuri,
1998; Richard and Johnson, 2001; Neal, West and Patterson, 2005). The
underlying assumption is that human resource management practices
impacts on personnel costs, employee productivity and development of
management resources. These effects subsequently help to enhance a
firms performance (Huang, 2000). Guest (1997) proposes 5 forms of
human resource management fit that leads to superior performance.
These include fit as a strategic interaction, fit as contingency, fit as an
ideal set of practices, fit as gestalt and fit as bundles.

Previous studies have shown that human resources management (HRM)
practices does have a positive influence on organisational performance
(Tzafrir, 2005; Stroh and Caligiuri, 1998; Richard and Johnson, 2001;
Neal et al, 2005). There are numerous HRM practices, however the
difficulty lies in understanding those dimensions that have the most
positive impact on business performance. This research aims to
investigate those HRM practices that have a positive or significant
relation to organisational performance within the manufacturing
departments of the South African Breweries Limited (SAB).






5
1.2 Aim of the Research

The research aims to achieve the following:
1. To identify HRM practices that can influence business
performance.
2. To define business performance and more specifically the
performance indicators that is used in the industry in question.
3. To determine if there is a relationship between HRM practices and
business performance indicators.
4. To formulate recommendations regarding HRM practices and
business performance indicators using a conceptual model.

1.3 Purpose of the Research

There is a growing body of evidence that supports an association
between high performance human resource management and various
organisational performance measures (Guest, 1997). There is growing
belief that for companies to survive and thrive in the global economy,
they require world-class human resource competencies (Khandekar and
Sharma, 2005). The question thus arises as to which HRM practices lead
to enhanced business performance. Marchington and Grugulis (2000)
argue that a particular set of human resource practices can increase
company profits. They further elaborate that the impact is more
pronounced when complimentary groups or bundles of HRM practices
are used together.
6
The following research will be conducted in the manufacturing division of
the South African Breweries Limited. Currently the manufacturing division
consistently lags the sales and distribution division with regards to
business performance indicators and HRM practices, as measured by
the organisation on an annual basis. The motivation for the research is to
develop a model in order to identify groups or bundles of HRM practices
that should be implemented within the manufacturing division to enhance
business performance.

1.4 The Liquor and Beer Industry in South Africa

The liquor industry has changed significantly over the last 2 years, with
mergers and insolvencies taking place and consequently dominance
within the industry has become obvious (Research report on the liquor
industry, 2004). Due to the dominance in the industry by a few
companies, the government wishes to implement a new Liquor Bill to
encourage employment and address the dominance within the industry.

1.4.1 State of the Industry

The liquor industry comprises of three main markets namely spirits, wine
and beer. The beer industry is further made up of the clear beer market
and sorghum beer market. The study focuses on the clear beer market.
The South African liquor industry has experienced a period of
consolidation arising in part from a polarisation in which the larger
7
players become more powerful and the smaller players struggle to
survive. The branded spirits market is dominated by Distell and Guinness
UDV.

The wine sector is much more fragmented and includes companies such
as Winecorp, The Really Great Brand Company, Vinimark, Meridian,
Stellenbosch Vineyards and the New World Wine Agencies. The local
wine farms, many of which have enjoyed good times since the mid
1990s, are now experiencing financial difficulties due to currency
fluctuations and international markets which seek cheaper product.

The beer sector of the industry is dominated by The South African
Breweries. The growth in presence however of Namibian Breweries
brands in the premium sector of the domestic market shows that SABs
virtual monopoly is being eroded. However it is fair to say that there was
little opportunity for other players to threaten SABs domination of the
beer industry. A key development has taken place in March 2007 when
SABs licence to brew a premium brand was terminated. This means that
SAB for the first time will experience competition from a global
competitor.

There are also microbreweries that operate in the current industry
(Research report on the liquor industry, 2004). As at February 2005, 18
microbreweries have been realised in the country, producing beer on a
commercial basis. It is also acknowledged that there are hundreds if not
8
thousands of microbrewers who brew mainly for their own consumption.
The total volume of all the microbreweries is estimated to be 45 000
hectolitres per year. Most microbrewers are owned by individuals.

Competition within the liquor industry has become increasingly
uncompetitive. Mergers and consolidations in the branded spirit market,
the ongoing domination of the beer market by SAB, the financial
pressure on some of the mid-size wine industry players (notably
Winecorp and Stellenbosch Vineyards), and the consolidation within the
small distributor business have all reduced the number of key players
performing adequately in the South African market.

Having described the landscape of the liquor industry, the study focuses
on SAB due to its dominance within the industry.

1.5 Organisational Background

SABMiller plc is an international brewer with deep roots and rich heritage
in South Africa. It is the second largest brewer in the world by volume.
The company has interests in more than 60 countries, producing over
180 different brands. South African Breweries Limited (SAB) is the South
African operations of the group. It employs about 9000 people and
contributes significantly to the development of skills among stakeholders.

9
To ensure international competitiveness, in accordance with the vision of
the company, there are two core issues that come to light. Firstly, cost
effective processes that are continuously being improved and secondly,
the creativeness of the workforce, with a high level of trust. The strive to
being world class holds the advantage of being able to compete globally,
growing market share and expanding operations.

World-class competitiveness is determined by an organisations ability to
satisfy its customers needs better, faster and cheaper than its
competitors. This requires high and continuously improving levels of
quality, speed and cost effectiveness. To achieve high and continuous
improvement of quality, speed and cost effectiveness requires competent
and committed people including competent leaders as well as continuous
analysis and improvement of all processes. Committed and developed
people and the continuous improvement of processes are the results of
good HRM practices.

HRM practices are core to the various business processes e.g. employee
development is a corporate value where the company works to create an
environment for individuals and teams to develop their full potential for
the benefit of themselves and the company. People are seen as a core
theme underpinning the companys vision. It is committed to the
development of people and creating a work culture, which is satisfying
and fulfilling. In order to achieve this sound HRM practices need to be
implemented within the organisation.
10
The company practices what is termed six pack HRM practices as
indicated in Figure 1 below.

Figure 1: SAB HRM practices alignment model













The key aspect of the model is that apart from HR performing its core
function of ensuring that HRM practices, processes and outputs meet
lines needs and international best practices, they also need to provide a
strategic support. This takes the form of proactively supporting the
various lines functions through strategic alignment, forecasting of future
trends and providing a framework that ensures a performance driven
culture.

11
1.6 Summary
Chapter 1 concluded the aim and the purpose of the research as well as
the organisation at which the research will be conducted.
Chapter 2 will focus on the literature review of HRM practices as well as
the linkage with business performance.
Chapter 3 will focus on the research questions and the hypotheses.
Chapter 4 will thereafter include the research methodology and data
collection to be used in the research.
Chapter 5 and 6 will focus on the findings of the research and the
discussion of the results respectively.
Chapter 7 will conclude the research with the recommendations for future
research and limitations of the study.













12
CHAPTER 2: LITERATURE REVIEW

Chapter 2 will focus on the theory with regards to human resources
management (HRM) practices and the literature review thereof.

2.1 Human Resource Management (HRM) Practices

Previous studies have examined the relationship between HRM practices
and firm performance. The underlying assumption is that firm
performance is influenced by human resources practices. The
assumption has been supported by evidence of previous studies
(Huselid, 1995; Chang and Huang, 2003; Khatri, 2000; Park, Mitsuhashi,
Fey and Bjorkman, (2003). Guest (1997) further indicates that good fit
between the HRM practices within the context of the organisation will
lead to superior performance.

The approach to human resource management involves the designing
and implementing of a set of internally consistent policies and practices
that ensure a firms human capital contributes to the achievement of its
business objectives (Huselid, Jackson and Schuler, 1997). Human
capital can be defined as employees collective knowledge, skills and
abilities.



13
2.1.1 Theories of HRM

There are 3 theories of HRM practices namely strategic theories,
descriptive theories and normative theories. The strategic perspective
deals with the relationship between a range of possible external
contingencies and HRM practices (Guest, 1997). The primary aim in this
theory is the impact of environmental influences on HRM practices. The
descriptive theories try to describe HRM practices in a comprehensive
way. The idea is to capture the broad field and address some of the
interrelationships. The normative theory is more prescriptive and reflects
the view that there exists sufficient knowledge to prescribe a set of best
practices. This theory further states that if integrated HRM practices are
applied to achieve goals of high commitment, quality and flexibility, then
higher work performance will be the result. This will have a positive
impact on organisational performance (Guest, 1997).

The strategic and descriptive theories do not provide much insight into
how HRM practices translates into high performance. They view HRM as
part of a system comprising many systems and suggest that, when the
various subsystems including the HRM sub-system are aligned and
supporting each other, superior performance is likely (Guest, 1997).

The normative approach assumes that appropriate HRM practices tap
the motivation and commitment of employees. The factors that constitute
appropriate practices are derived from the specific theories of
14
organisational commitment, job design and goal setting. The key aspects
of the normative approach are that HRM provides a coherent integration
of these behavioural theories and also explain the linkages between
practices and performance. An example is the expectancy theory of
motivation which provides one possible basis for developing the link
between HRM practices and performance. It proposes that high
performance, at the individual level, depends on high motivation plus
possession of the necessary skills and abilities and an appropriate role
and understanding of that role.

The normative approach to HRM practices that encourage high skills and
abilities, for example careful selection and high investment in training;
high motivation, for example employee involvement and possibly
performance-related pay; and an appropriate role structure and role
perception, for example job design and extensive communication and
feedback.

Although the theories that are presented above differ in how they impact
business performance, the end result is that there is a relationship
between HRM practices and business performance be it directly or
indirectly. The literature discussion that follows discusses some of the
studies that used the above mentioned theories to show a link between
HRM practices and business performance.

15
Guest (1997) proposed a model that linked HRM practices to
performance and financial outcomes as indicated in Table 1. Guest
(1997) elaborates that only when all 3 HRM outcomes are achieved can
there be behaviour change which will ultimately lead to higher
performance.
Whereas the model indicates a path of how HRM practices influence firm
performance, however the influence of other variables which could
weaken the impact of HRM outcomes on firm performance needs to be
considered.

Table 1: Linking HRM and Firm Performance (Guest, 1997)

HRM
Strategy
HRM
Practices
HRM
Outcomes
Behaviour
Outcomes
Performance
Outcomes
Financial
Outcomes
Differentiation
(Innovation)

Focus
(Quality)

Cost
(Cost
Reduction)
Selection

Training

Appraisal

Rewards

Job Design

Involvement

Status and
security


Commitment



Quality



Flexibility
Effort/Motivation



Cooperation



Involvement

Organisational
citizenship
High:
Productivity
Quality
Innovation

Low:
Absence
Labour
Turnover
Conflict
Customer
complaints
Profits





ROI


16

2.1.2 HRM and Organisational Fit

The concept of HRM practices and specifically which HRM practices
should be adopted by an organisation brings the concept of fit into
question. Guest (1997) proposed the model as shown in Table 2 which
identifies four types of approaches that an organisation can adopt in
identifying the HRM practices that can be implemented.

Table 2: Forms of HRM fit (Guest, 1997)






Fit as strategic interaction seeks to link HRM practices to the external
context and reflects the standard strategic approach (Guest, 1997). A
key point is that there is a choice about how to respond to and interact
with the environment. Once that choice has been made, then HR
strategy and practice must match it. Those organisations with the
appropriate response and the right match will show superior
performance.

Fit as contingency. This is the more traditional contingency approach,
suggesting that those organisations whose HR policies and practice is
more responsive to external factors will report superior performance
Criterion specific Criterion free
Internal Fit to an ideal set of practices Fit as gestalt
Fit as bundles
External Fit as strategic interaction Fit as contingency
17
(Guest, 1997). These external factors may include the nature of the
market, legislative changes or features of the specific sector. This
approach tends to assume that a particular response will always be
superior, but it does not specify the type of response or any class of
responses.

Fit as an ideal set of practices implies that there exists a set of best
HRM practices (Guest, 1997). An example of this might be the list
presented by Pfeffers (1995) where he described 14 practices. This
approach assumes that organisations who are closer to the ideal type of
practices will report higher performance.

Fit as gestalt implies that the key to effective HRM lies in finding an
appropriate combination of practices (Guest, 1997). This may be due to
the synergies gained from a combination of practices or it may be the
specific design or culture which builds and brings them together. This
element can provide organisations with an HR-based source of
competitive advantage. When measuring the impact of HRM practices on
performance one needs to take into account all HRM practices and not
specific practices as the measurement of a single HRM practice against
firm performance may distort results.

Fit as bundles implies the existence of distinctive patterns or
configurations referred to as bundles of practices and the key is to
determine which are the most effective (Guest, 1997). There may be a
18
number of possible combinations or configurations of practices which will
lead to high performance. Some organisations may emphasize job
security as the building block; others prefer training and development.
The other practices fit around these.

The above model provides a good framework to classify HRM practices
and their impact on organisational performance however the type of fit
used in an organisation needs to be identified prior to the measurement
of performance indicators.

2.1.3 Identifying HRM Practices

The resource based view of the firm indicates that the firm could develop
sustained competitive advantage through creating value that is rare and
difficult for competitors to imitate. These resources must meet four
requirements in order to provide a competitive advantage. They need to
firstly, add value to the production processes through individual
performance and secondly, the skills that the organisation requires must
be rare.

The third requirement is for the combined human capital that the firms
employees represent cannot be easily imitated and finally the firms
human resources must not be subject to replacement by technology or
other substitutes if they are to provide a competitive advantage. Human
resource practices play an important role in achieving these
19
requirements through their influence over employee skills, motivation,
and organisational structures that provide employees with the ability to
control how their roles are performed (Huselid, 1995).

Huselid (1995) further explains how HRM practices can influence firm
performance. HRM practices influence employee skills through the
development of human capital. Recruitment procedures together with
valid and reliable selection procedures provide a pool of talented new
employees who possess different skills. Training and development can
further improve employee skills.

Coupled with ensuring that employees have the required skills, they need
to be motivated to perform. HRM practices can affect employee
motivation by encouraging them to work harder and smarter. Examples
of such practices include performance appraisals that assess individual
and group performance and then linking these performances to
compensation systems and promotions. These practices can ensure that
employees perform above their maximum effort thus providing returns in
excess of any relevant costs thus leading to enhanced firm performance.
If HRM practices increase employee discretionary effort one can expect
an influence on turnover, productivity and corporate financial
performance (Huselid, 1995).

Employee participation, empowerment and job redesign coupled with
extensive training, performance appraisals and compensation systems
20
can improve organisation performance (Delaney and Huselid, 1996).
They propose that HRM practices should be focussed on improving the
skills of current and new employees, ensuring that only the best are
recruited and providing comprehensive training. This coupled with HRM
practices that motivate employees via remuneration and compensation
will lead to beneficial organisational performance. The results of their
study showed that HRM practices of selectivity in staffing, training and
incentive compensation are positively related to organisational
performance.

HR forms an invisible asset that creates value when it is embedded in
the operational system that enables the organisation to deal with
changes in the environment (Chang and Huang, 2003). Neal et al (2005)
argues that traditional sources of competitive advantage namely
technology and capital are becoming less effective as they are more
readily available and easier to imitate. Human capital provides an asset
that can be used as a competitive advantage as it is much more difficult
to copy. Organisations use HRM practices and systems to acquire and
develop this capital (Neal et al 2005).

Pfeffer in Marchington and Grugulis (2000) identifies seven practices of
successful organisations. These include employment security, selective
hiring, self-managed teams/teamworking, high compensation contingent
on organisational performance, extensive training, reduction of status
differences and sharing information. He argues that these practices can
21
increase company profits. These were reduced from his original 14
practices which included selective hiring, high pay, pay-performance
linkages, employees ownership, information sharing, empowerment,
team structures, internal promotion.

Park et al (2003) proposed a bundle of HRM practices that lead to higher
levels of employee skills, attitudes and motivation. This in turn leads to
higher organisational performance. Some of the practices that they
identified were performance-based compensation, task preparation,
training and development as well as employee socialising systems. They
further indicated that there needs to be a strategic fit between the HRM
practices and business strategy in order to ensure improved
performance.

In describing the impact of high performance work systems on firm
performance, Huselid and Becker (1998) identified HRM practices that
could be internally consistent but externally aligned with the firms
strategy. These include rigorous recruitment and selection, performance
contingent incentive compensation systems, management development
and training linked to business needs and significant employee
involvement. In doing so Huselid and Becker (1998) developed a model
that linked HR to shareholder value as shown in Figure 2.



22
Business
and
Strategic
Initiatives
Design of
Human
resource
management
system
Market
Value
Profits
and
Growth
Improved
Operating
Performance
Productivity

Creativity

Discretionary
Effort
Employee
Skills

Employee
motivation

Job Design
and Work
Structure
Figure 2: Model for the HR-shareholder value relationship
(Becker and Huselid, 1998)










While the model shows a clear relationship between HRM practices, firm
performance and shareholder value, it is simplistic in that it does not
show the effects of other intervening variables.

Paul and Anantharaman (2003) identified 9 HRM practices that impacted
on organisational performance indirectly through one or more intervening
variables. The HRM practices that they identified were selection,
induction, training, job design, work environment, performance appraisal,
compensation, career development and incentives. Apart from just
identifying HRM practices one has to ensure the processes in
implementing them are effective.

Huang (2000) showed in his study of Taiwanese firms that companies
that performed better than others were more likely to formulate their HR
policies through explicit and formal planning procedures and tend to look
at long term issues. The HRM practices that he identified were staffing
23
(recruitment), performance appraisal, compensation and training and
development. Huang (2000) concluded that there was a positive
relationship between firms that performed well and the above mentioned
HRM practices.

The literature above indicates that studies have identified numerous
HRM practices that can be used by organisations to ensure improved
business performance, however there has to be an organisational fit of
these practices.

2.2 Schools of HRM Practices

Chang and Huang (2005, p. 435) state A critical unresolved debate
involved whether a universally superior approach existed for managing
human resources. While some believed that a universal approach is
possible, others argue that the effectiveness of HRM practices are
dependant on the organisational environment and environmental context.
The relationship between HRM practices and organisational performance
is dominated by the two different schools of thought namely universal or
contingent.

Stroh and Caligiuri (1998) argued that those who favour the best
practices approach believe that there are a distinct set of practices that,
when implemented will lead to greater organisational effectiveness. The
contingency theorists on the other hand argue that HRM practices should
24
be designed in response to such organisational and environmental
factors as the economic status of the industry, maturity of the market and
technological considerations.

There are clearly two dominant schools of thought with regards to HRM
practices. It is possible that the universalistic approach maybe more
valuable in explaining guiding principles of HRM practices while specific
policies and procedures supporting the guiding principles maybe
dependant on the specific situation. These will be dealt with in greater
details in the next sections.

2.2.1 Universalistic Perspective

The researchers and scholars of the universalistic school are micro
analytical and believe that some HRM practices are always better than
others and that it should be adopted by all organisations (Khatri, 2000).
The universal perspective implies that there is a direct relationship
between several HRM practices and organisational performance (Delery
and Doty, 1996). Huselid (1995) proposes the best practices view and
proposes that certain types of HRM practices are more effective that
others.

The universal resources management practice would influence
organisational performance irrespective of other external and internal
organisational factors (Tzafrir, 2005). The underlying assumption in the
25
universalistic perspective is that HRM practices directly or indirectly
benefits companies because it changes the passivity into initiative,
transmits organisational goals and encourages the involvement of
employees. Tzafrir (2005) identified 8 HRM practices which included
grievance procedure, incentive compensation, participation, promotion
from within, recruitment, selection, internal labour market and training
Marchington and Grugulis (2000) state that best practice HRM practices
is capable of being used in any organisation, irrespective of product-
market situation, industry or workforce. The seven best practices that
were presented and used by Pfeffer (1998) in Marchington and Grugulis
(2000) are elaborated below:

Employment Security. This is fundamental to underpinning the
remainder of the HRM practices due to the fact that in order to get
employees to offer their ideas, hard work and commitment, the
organisation needs to offer them some security.

Selective Hiring. This involves the effective way in which an
organisation achieves human capital advantage. It means that the
organisation must recruit and retain a pool of talented individuals.
The key attributes are trainability and commitment.

Self-managed teams/teamworking. This practice involves ways of
pooling ideas and improving work processes. It can lead to better
decision making and the achievement of more creative solutions.
26

High compensation contingent on organisational performance.
This comprises higher than average compensation and
performance related reward. These should send the message to
employees that they should be rewarded for superior
performance. This means that the organisation needs to reward
employees at a rate that is comparably higher than the market in
order to attract and retain high-quality employees.

Extensive training. This practice involves ensuring that current
employees as well as new recruits are trained so that they can not
only perform their tasks but also ensure that they remain at the
forefront of professional expertise and product knowledge.
Training and development has been one of the most common
HRM practices that have been identified in most studies that have
been done on HRM practices and firm performance.

Reduction in status differences. This aspect refers to the
organisation sending a message to all employees, blue collar and
knowledge workers that they are all valuable assets who deserve
to be treated in a similar way. This also allows employees to bring
ideas forward and discuss them in open forums.

Sharing information. This allows employees to understand and
discuss issues pertaining to the business. This includes strategic,
27
financial and operational issues which ensure that employees
hear the information from managers and not the grapevine. If
teamwork is to succeed and be encouraged, employees should
have information at their disposal.

Tzafrir (2005) showed that training and employee participation were
HRM practices that contributed to organisational performance. Huang
(2000) showed that staffing, performance appraisal, compensation and
training and development had a positive impact on firm performance.

The difficulty with the universal approach is that there is no consensus on
what practices constitute best practices. Looking at the above short
survey it is obvious that there is no consensus regarding universal best
practices. The literature reveals some examples which include
employment security, self-managed teams, sharing of information,
grievance procedure, incentive compensation, participation, promotion
from within, recruitment, selection and training.

2.2.2 Contingent Perspective

The contingency view suggests that some organisations will gain greater
benefit than others from HRM practices. Richard and Johnson (2001)
suggest that contingency theories posit that the relationship between the
relevant independent variable and the dependant variable varies for
different levels of a critical contingency variable. They established that
28
while some HRM practices worked directly to influence performance,
other performance effects were moderated through the strategy variable.

Khatri (2000) indicated that contingency scholars believe that in order for
HRM practices to be effective it needs to be consistent with other
aspects of the organisation. Business strategy was identified as a
common factor. His study found that strategy moderates the relationship
between HRM practices and organisational performance. HR strategy
would be more effective only when appropriately integrated with specific
organisational and environmental context (Chang and Huang, 2005).
Whereas the universalistic approach implies a direct relationship
between HRM practices and firm performance, the contingency
perspective implies interactions between variables, hence it can be more
complex.

The implication of this is that the relationship between HRM practices
and firm performance differs when a contingency variable is added. Paul
and Anantharaman (2003) showed that organisational performance
namely financial, employee retention, productivity, quality and speed of
delivery were influenced by HRM practices via the intervening variables
of competence, teamwork, organisational commitment and customer
orientation.

The organisations strategy is seen as the primary contingency variable.
An example of this is also suggested by Neal et al (2005). It was argued
29
that HRM practices that enhance the knowledge, skill, ability and
motivation of employees would have greater impact on productivity if the
organisation is using a strategy that requires highly skilled and motivated
employees. They also found that apart from strategy the relationship
between HRM practices and productivity is contingent on organisational
climate and effectiveness.

According to this argument, HRM practices does enhance organisational
performance however, organisational effectiveness is seen as a
moderating variable. The research will use the contingency theory
perspective, in order to establish the relationship between HRM practices
and business performance while using organisational effectiveness
(inspirational leadership, corporate reputation and work environment) as
the contingency variable within the South African Breweries Limited.

2.3 Performance Theory

Performance can be defined as the outcomes that indicate or reflect the
organisations efficiencies or inefficiencies in terms of corporate image,
competencies and financial performance (Khandekar and Sharma,
2005). They used a wide range of variables in their study of global Indian
firms. These included product quality, customer satisfaction, new product
development, ability to attract and retain employees and relations
between management and employees. They found that HRM practices
30
are positively correlated to the above organisational performance
indicators.

In his study of companies in Singapore, Khatri (2000) used financial
indicators namely sales growth, and non financial indicators namely
public image and goodwill, quality of services, efficiency of operations.
Tzafrir (2005) used subjective and objective measures in measuring
organisational performance. The indicators that he used were quality of
product/service, new product development, customer satisfaction, sales
increase and profitability.

Performance can be measured through objective or subjective means.
Sousa, Aspinwall and Rodrigues (2006) has defined performance
measurement as the process of quantifying the efficiency and
effectiveness of action and performance measure as the metric used to
quantify that action. Sousa et al (2006) also states that the traditional
methods of measuring a companys performance by financial indices
alone have virtually disappeared from large organisations.

Clark (1998) indicates that while individual case studies cannot be
generalised because the human resource specific strategies will be
sector specific, the direct financial contribution of HRM to economic
performance can only be measured at the level of the case. The reason
being that one can gather information on firm performance and market
pressures. He further goes onto to explain that generic measures such
31
as motivation, training, reduced turnover and improved productivity can
be viewed as three economic measures of improved output, improved
time measures and improved financial indicators. In defining
organisational performance, Neal et al (2005), used productivity based
on labour productivity as an indicator.

Richard and Johnson (2001, p.302) stated that research testing
hypotheses should include multiple performance measures to avoid
misleading descriptive and normative theory building. They included
intermediate and bottom-line measures of firm effectiveness. They used
employee turnover, employee productivity and return on equity in their
study of human resource management effectiveness and firm
performance. In their study of examining the link between human
resource management orientation and firm performance of Greek firms
Panayotopoulou and Papalexandris, (2003) measured performance
using financial measures of profitability and market share as well as
operational and organisational performance measures of sales growth,
product quality and industrial relations.

In determining the performance measures of the organisation, the
studies mentioned above used a combination of financial and non-
financial measures. This was to done to obtain a balanced view of the
firm performance.


32
2.3.1 The Balanced Scorecard

The balance scorecard which was developed by Kaplan and Norton
(1996) is a way of translating an organisations mission and strategy into
a comprehensive set of performance measures that provides the
framework for a strategic measurement and management system. The
scorecard provides a set of measures that gives a comprehensive view
of the business. The scorecard brings together the diverse elements of
the companys competitive agenda.

The scorecard comprises of four balanced perspectives namely:
financial, customers, internal business processes and learning & growth
as shown in figure 3. Non-financial measures are at the heart of
describing strategy and of developing a unique set of performance
measures that clearly communicate strategy (Kaplan and Norton, 1996).
It also highlights the importance of including all four aspects of the
balanced scorecard.








33
Figure 3: Model for the Balanced Scorecard
(Kaplan and Norton, 1996)




The financial perspective: This perspective traditionally focuses on
profitability, growth and shareholder value (Kaplan and Norton, 1996).

The customer perspective: This dimension measures performance
against criteria that are important to the organisations customers and
consumers. Kaplan and Norton (1996) indicate that quality falls within
this criteria.

The internal business perspective: This dimension focuses on the
critical internal operations that will ensure that customer expectations are
met. This perspective stems directly from the internal processes and
systems needed to ensure that the rest of the perspectives can be met
34
and that the smooth running of the organisation can be ensured (Kaplan
and Norton, 1996).
The learning and growth perspective: Kaplan and Norton (1996)
define this perspective as the organisations ability to learn and adapt to
the changing environment. This includes learning, training and
development of employees.

Guest (1997) indicates that performance is an internal criterion used by
the company while outcomes are much broader. These might include
environmental issues, job satisfaction, contribution to the community, etc.
Guest (1997) also makes reference to the balanced scorecard indicating
that one should not concentrate on one view of performance at the
expense of the others. This means that each dimension of performance
should be optimised rather than maximising one at the expense of
others.

The financial perspective in the case of the research will be rands per
hectolitre of product packaged (R/hl). The integrated quality management
scores (IQMS) will be used in the research as the customer satisfaction
dimension. The efficiency numbers of various plants will be used as a
measure in the internal business dimension. The labour turnover of each
plant will be used as the performance indicator in the learning and growth
dimension.

35
The balanced scorecard therefore provides the framework in which the
performance of the organisation can be effectively measured.

2.4 Linking HRM Practices and Performance

Paul and Anantharaman (2003) used the balanced scorecard in
identifying intervening variables between HRM practices and firm
performance. The balanced scorecard provided the framework that
defined what the companies should focus on while the HRM practices
framework offered the specific tools and paths to obtain the business
goals. The model that they proposed is shown in figure 4.

Figure 4: Model for the HRM-Performance Linkage
(Paul and Anantharaman, 2003)



HRM Practices Intervening Variables Operating Performance












Selection
Induction
Training
Job Design
Work Environment
Performance
appraisal
Compensation
Career
development
Incentives
Employee
retention

Employee
productivity

Product
quality

Speed of
delivery

Operating
cost
Financial
Performance
Employee
Competence

Team Work

Organisational
commitment

Customer
Orientation
36
Paul and Anantharaman (2003) separated firm performance into
operating and financial performance as they identified financial
performance as the chief strategic goal of any organisation. Operational
performance was defined in terms of employee retention, employee
productivity, product quality, speed of delivery and operating cost.
Financial performance was measured in terms of growth in sales, net
profit and return on investment. They found that not a single HRM
practice had a casual relationship to financial performance but every
HRM practice influences financial performance indirectly through one or
more intervening variables and operational performance dimensions.

In their study of Japanese Multi National Companies, Park et al (2003),
found that employee skills, attitudes and behaviour played a mediating
role between HR systems and firm performance in multinational
corporations. They examined the effect of synergistic bundles of HRM
practices on firm performance and found that besides positively affecting
firm performance, the results did not depend on location of the company.

Hence the results imply that the casual relationship could be universal,
neither national boundaries nor differences in national culture change the
casual relationship. While they do not prescribe the type of HRM
practices that they measured, they specify that they need to consist of
three aspects namely performance orientated practices, strategic
alignment of practices and employee skills enhancing practices. The
model that Park et al (2003) developed is shown in Figure 5.
37

Figure 5: Model for the HRM-Performance Linkage (Park et al, 2003)















Park et al (2003) describes the moderating variables of employee skills,
employee attitude and employee motivation as the black box that
generates firm competitiveness from HRM practices. Thus changes in
employee skills, attitudes and motivation that are caused by HRM
practices precede increase in firm performance.

In their study of the impact of high performance work systems on firm
performance, Huselid and Becker (1998) proposed that intervening
variables of employee skills, employee motivation and job design and
work structure link operating performance which in turn influences profits
and market and shareholder value as shown in Figure 3.

Synergistic
system of
HR Practices
Firm
Performance
Employee
Skills
Employee
Attitude
Employee
Motivation
38
The concept of the balanced scorecard, conceptual models and HRM
outcomes identified by prior research, it is possible to develop an
integrated HRM practices-firm performance model which is discussed as
a hypothesised model in chapter 3.

2.5 Integration of Literature Review

An examination of the literature available and presented above indicates
that human resources can provide a competitive advantage to
companies. HRM practices also play and important role in ensuring that
organisations are able to achieve their business objectives. The literature
also indicates that in order for organisations to be able to maximise the
impact of their HRM practices, they need to understand the fit between
their organisation and the external environment as elaborated by Guest
(1997).

The literature review has shown that there are numerous HRM practices
that can be implemented by organisations. These include performance
appraisals, training and development, recruitment, compensation, work
environment, career development, etc. While the various studies tested
different HRM practices and firm performance, there seems to be very
little agreement on which HRM practices are regarded as best practices.
Training and development, career development and performance
appraisals were the most common practices that were tested albeit as
part of different bundles.
39

The balanced view with regards to performance was definitely the
preferred tool that was utilised in the literature. While some authors
directly alluded to the balance scorecard as the tool to identify
performance indicators, others used the concept in identifying the
relevant performance indicators. An analysis of the literature with regards
to the business performance indicators is shown in table 3.

The performance indicators specific to this research is also shown in
table 3. These performance indicators describe the industry in which the
study is conducted and tries to incorporate and link all relevant
stakeholders. These include shareholders, employees and customers.

















40
Table 3: Comparison of Generic (literature) measures and Specific
measures (research)

Perspective Generic
Measures
Specific Measures
Customer
Perspective
! Customer
Satisfaction
! Customer
Retention
! Quality
Integrated quality
management system
(Quality)
Financial Perspective ! Profitability
! Shareholder
Value
! Growth
! EVA
Rands per hectolitre
(Profitability)
Internal Business
Perspective
! Internal
processes
! New product
development
! Response
times
! System usage
Line production
efficiencies
(Response times)
Learning and Growth
Perspective
! Staff retention
! Training
opportunities
! Productivity
levels
Labour turnover
(Staff retention)



2.6 Summary
Chapter 2 outlined the theory and literature review and the integration
thereof. Chapter 3 will focus on the research questions and the
motivation for the research.





41
CHAPTER 3: RESEARCH QUESTIONS AND HYPOTHESIS

Chapter 3 will focus primarily on the motivation for the research.
The motivation for the research was to establish whether there was a
casual relationship between the HRM practices used in the
manufacturing departments and organisational effectiveness and
between organisational effectiveness and manufacturing performance.
The final aim of the research is to develop a model in order to identify
groups or bundles of HRM practices that should be implemented within
the manufacturing division to enhance business performance.

3.1 Research Questions

Research Question 1: Is there a relationship between the human
resource management practices and performance indicators of the
production lines and what is the nature of the relationship?

This question seeks to determine whether a relationship exists between
HRM practices and business performance. In addition to this the nature
of the relationship namely positive or negative will also be tested. The
company that was researched used specific HRM practices which
formed part of the hypothesis testing and the proposed model.

42
Research Question 2: Is there a relationship between human
resources practices and organisational effectiveness and what is
the nature of the relationship?

This question sought to establish whether there is a relationship between
human resource practices and organisational effectiveness. In addition to
this the nature of the relationship namely positive or negative will also be
tested.

Research Question 3: Is there a relationship between organisational
effectiveness and performance indicators?

This question sought to establish whether there is a relationship between
organisational effectiveness and performance indicators. In addition to
this the nature of the relationship namely positive or negative will also be
tested. In doing so the relationship or relationships between HRM
practices, organisational effectiveness and performance indicators will be
established.







43
3.2 Hypotheses

The following hypothesised model will be tested:

Figure 6: Hypothesised model for the HRM-Performance Linkage













3.3 Summary
Chapter 3 outlined the research questions to be tested during the research as
well as the hypothesized model that will be tested.
Chapter 4 will focus on the research methods to be used.




Business
Performance
Organisational
Effectiveness
HR Practices
Organisational
Effectiveness
Cost Rands per hectolitre
Quality Integrated Quality
Management System
Manufacturing Efficiencies
Labour turnover
Competency
Training and
Development
Performance
Appraisal
Career
Development
44
CHAPTER 4: RESEARCH METHODOLOGY

Chapter 4 will comprise the research methodology used in the research.

Sellitz (as cited in Mouton and Marais, 1990, p32), research design is
defined as the arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the research
purpose with economy in procedure. According to Mouton and Marais
(1990, p33), the aim of a research design is to plan and structure a
given research project in such a manner that the eventual validity of the
research findings is maximized.

Research design is therefore synonymous with rational decision-making
during the research process. Irrespective of how structured or
unstructured the research project is likely to be, it is the duty of the
researcher to ascertain which general nuisance variables may render the
results invalid and to take every possible step to ensure that these
factors are either minimized or eliminated (Mouton and Marais, 1990).

In order to understand the dynamics of the study, it is imperative to
establish research variables. The independent variable is defined as the
variable that influences the dependent variable in either a positive or
negative way (Sekaran, 1992). For the purpose of the study the
independent variable was HRM practices.

45
The dependent variable is defined as a variable of primary interest to the
researcher. The researchers goal is to predict or explain the variability
in the dependent variable (Sekaran, 1992). For the purpose of the study
the dependent variable was business performance. The study was
exploratory. The use of quantitative data is most appropriate for
exploratory research (Sekaran, 1992).

The study and measurement of performance in a specific industry
conveys more meaningful results than cross-industry studies because
industry economic conditions are constant for all firms in the same
industry (Paul and Anatharaman 2003, p.1249). Hence the study of a
single industry and single dominant company should provide more
meaningful results. There has not been a study to determine the
relationship between HRM practices and business performance in this
industry.

4.1 Research Design

The research tried to identify the HRM practices that had an impact on
business performance. There has been much work done on the
relationship between HRM practices and business performance, however
there has been little work done on industry specific relationships. The
research aimed to build on the theories and findings of previous research
and see whether it applied to the South African Breweries Limited. The
study was exploratory in that it tried to build a picture of the relationship,
46
if any, that exists between HRM practices, organisational effectiveness
and business performance.

4.1.1 Data Collection

Secondary data formed the primary source of information to obtain
business performance indicators and information on the HRM practices
that were used in the South African Breweries. The company
organisational effectiveness (OE) survey questionnaire was the primary
source of information to obtain data on the dimensions of organisational
effectiveness.

The company stored information on two levels. The first level of
information pertains to regional information which consists of indicators
that affect the specific region in question. The second level of information
pertains to divisional information and comprises of indicators that affect
the entire company. In most cases the indicators that were measured
were exactly the same except for the targets which were different.

Information on the business performance indicators and organisational
effectiveness scores for the past 3 years was obtained from the company
and regional databases. Information on the HRM practices scores was
also obtained from the divisional database.


47
4.1.2 Organisational Effectiveness
Figure 7: Model of the organisational effectiveness survey

New Organisational Effectiveness Dimensions
Growth
Outlook
BEE
Corporate
Image &
Governance
Employee
Relations
Org.
Health
Human
Capital
Competiti
veness
High
Performance
Culture
OE
SURVEY
W
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r
k

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v
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t C
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R
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p
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tio
n
Inspirational
Leadership
Business outcomes
1. Inspirational
Leadership
2. Corporate
Reputation
3. Work
Environment
C
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p
a
n
y
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th
ic
s
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Headcount
Targets
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The organisational effectiveness score was obtained from the company
data base and was based on the survey questionnaire. The survey has
been conducted within the organisation for the past 4 years. The scores
for each production line were obtained and consisted of an overall score
as well as department specific score. The OE Survey consisted of 107
questions which were organised in a hierarchical structure. Figure 7 is an
illustration of the dimensions measured at different levels of the survey
(The South African Breweries Portal, 2007).

At the highest level (Level 3) is the total OE Score which represents a
global summary of how an employee perceives the effectiveness of the
48
organisation. The next level (level 2) divides this broad view into 3
business outcomes. These examined employees perceptions of the
leadership (inside looking up), their perception of how the corporation
looks to outside stakeholders (outside looking in) and how they
perceive the work environment around them (inside looking around).

Each of these broad outcomes is then broken into two or three scores
(level 1) which provides the simplest clearest overview of how the
company (or division) is perceived by its employees. Level 1 has 7
scores, each of which reflects a core aspect of the organisations
functioning. Finally, these broad outcomes are again split into 25 more
specific scores (Level 0) which outlines particular aspects of perception.

The organisational effectiveness survey questionnaire was done on an
annual basis. It was a census study with every employee being
encouraged to participate. It was a self administered questionnaire that
was done manually by shift workers while those staff members that have
access to computers did a web based version of the questionnaire. The
questionnaire comprises 3 dimensions that test organisational
effectiveness. These include leadership, corporate reputation and work
environment.

Each dimension comprised a series of questions as outlined above. The
questions were measured using a 5-point Likert scale ranging from 1
(strongly disagree) to 5 (strongly agree). Thus, a dimension obtaining an
49
average score of 3.5 is shown as 70%. The company has internal targets
for OE scores. A score of 70% is deemed acceptable and scores below
70% are areas of concern.

4.1.3 HRM Practices

The organisation had a predetermined set of HRM practices that it
measures on an annual basis throughout the organisation including
manufacturing. The HRM practices that were identified from literature
were identified on the database and those measures and scores were
extracted from the system. They included the amount of training and
development that has been given to employees within the organisation,
the competency of individuals to do their jobs and integrated
performance management which included career discussions and
performance reviews.

Competency
Competency of employees was measured using the Competency
Acquisition Process (CAP). CAP is an outcomes-based education (OBE)
learning framework used to define and develop competence within the
organisation. Its objective was to provide an easily accessible, simple-to-
use learning platform aimed at defining specific role competencies and
encouraging individual ownership for learning and the achievement of
competence.

50
It involved specifying the competence for a job and then aligning learning
to meet competence required for that job. CAP gives every employee an
opportunity to access learning solutions and develop competence in line
with organisational needs and their own capability and aspirations. This
HRM practice was measured on an annual basis against a set of
prescribed list of targeted jobs. The prescribed list was referred to as the
CAP index and contained jobs that were viewed as having the most
impact on the business.

Training and Development
Training and development occurred at all levels in the organisation. The
organisation was consistently regarded as a leader in training and
development in South Africa and had received numerous awards from
the American Society for Training and Development. The amount of
training delivered in a particular manufacturing facility was measured as
the number of training days per employee. This comprised of the total
number of training days recorded by the manufacturing region divided by
the total number of employees employed at that particular region.

Performance Appraisal
The company had an integrated performance management system that
incorporated monthly one on one discussion and bi annual performance
reviews. The documents that formed the basis of these discussions were
the annual goals that were developed at the beginning of the financial
year. Every employee in the organisation was expected to go through
51
the integrated performance management system. Performance appraisal
obtained from the secondary data was in the form of the number of
performance appraisals done per manufacturing region per year.

Career Development
The information on career development was obtained from regional data
bases. The organisation performed career development discussions
annually in all the different departments. The information that was
contained in the discussions comprised of individual development needs,
business development needs and developmental plans that ensured that
individuals developed themselves in order to meet business and
personal needs.

4.1.4 Business Performance Indicators

The business performance indicators that were measured were outlined
in chapter 3. The balanced scorecard was used as the framework to
measure business performance indicators. The organisation had a
predetermined set of business performance indicators that were
measured on an annual basis throughout the organisation including
manufacturing. These were either accessible through the centralised
database or from the various manufacturing regions. They were used to
measure the performance of each manufacturing region.


52
Financial Perspective Rands per hectolitre
This business indicator measured the performance of the department
with regards to cost. The total actual cost of the operation and the
volume of beer produced by each operation were obtained from regional
databases. Rands per hectolitre (r/hl) was then calculated for each
region as follows:

produced beer of volume
cost) (total
hl
r
=


Customer Perspective IQMS
The integrated quality management system (IQMS) measured the
performance of the department with regards to quality. This was
measured using six sigma methodology and critical to quality
parameters. Each packaging department had divisional targets which
they had to be measured against. A score of 2.5 sigma was deemed to
be satisfactory. Hence the research used this target as the benchmark
score. Scores above 2.5 were deemed to be good to the consumer, while
those below 2.5 were deemed to be unacceptable to the consumer.

Internal Business Perspective Production Efficiencies
The internal business perspective was measured using production
efficiencies. This measured how efficient a packaging department was in
delivering the product to the consumer. A high efficiency number
indicated that the department was able to produce a packaged product
53
with relatively few production stoppages while the converse was true for
a low efficiency number. The divisional target was used as the
benchmark for this indicator. Efficiencies above 85% were deemed to be
good, while those below 85% were deemed to be unacceptable.

Learning and Growth Perspective Labour Turnover
Labour turnover was used as the indicator to measure the performance
of the manufacturing regions against the learning and growth
perspective. Each region had their own targets with regards to labour
turnover. The divisional target of 5% was used as the benchmark for this
perspective. A measure of less than 5% was viewed as good labour
turnover while that above 5% was viewed as poor labour turnover.

4.2 Population and Sample

There are 7 breweries in South Africa located in 5 different provinces.
These are regarded as the manufacturing sites. Each brewery has a
single packaging department and each packaging department in turn has
between 1 and 6 production lines. In total there are 25 production lines.
Each production line consists of 3 shift based teams and a dayshift
support team. The shift teams vary between 8 to 17 people depending on
the size and complexity of the production line. The dayshift teams vary
between 4 and 8 people. In total each production line has a staff
compliment of between 10 and 60 people. The employees on the
54
production lines consist of operators, artisans, technicians and
engineers.

The population was all packaging departments within the different
breweries which are 7 in total. The unit of analysis refers to the level of
aggregation of the data during subsequent analysis (Sekaran, 1992).
Sekaran (1992) indicates, when comparing different departments in the
organisation then the data analysis will be done at department level. This
implies that the individuals in the department will be treated as one unit
and comparisons will be made treating the department as the unit of
analysis.

The study tried to analyse the data from different production regions and
in particular use the data from the various packaging departments. The
packaging departments were the primary contributors and controllers of
the business performance indicators as outlined in chapter 3. Hence, the
unit of analysis for the study was the manufacturing packaging
departments of the South African Breweries limited. Due to the small
population, all 7 packaging departments were analysed during the study
in order to obtain all relevant secondary data.





55
4.3 Analysis

The business performance measures which were defined according to
the dimensions of the balance scorecard needed to be properly analysed
and presented to ensure that they were measuring what they should.
Descriptive statistics was done to understand the performance of the
various regions on a year on year basis.

Neal et al (2005) used the multiple regression analyses to test
organisational climate as a moderator variable between HRM practices
and productivity. Paul and Anantharaman (2003) used bivariate
correlation analysis between HRM practices, intervening variables,
operational performance parameters and financial performance to see if
there was significant correlation between HRM practices and the
intervening variables as well as HRM practices and performance.

Path analysis can be viewed as an extension of multiple regression.
Whereas in multiple regression, the researcher is interested in predicting
to a single variable, path analysis involves more than one variable. Path
analysis allows the testing of a theory of casual order among a set of
variables. In trying to establish a casual link between HRM practices and
organisational performance Paul and Anantharaman (2003) executed a
path analysis using multiple regression method due to the small sample
size and exploratory nature of their study.
56
The same techniques were used to do the analysis using organisational
effectiveness as the moderator/intervening variable. Means, standard
deviations and intercorrelations between the moderator variable,
independent and dependant variables were obtained.

4.4 Summary
Chapter 4 outlined the research methods as well as the population and
sample and analysis of the research. Chapter 5 will focus on the
research results.
















57
CHAPTER 5: RESEARCH FINDINGS

This chapter focused on the results of the research. The research
findings have been aligned to the phases that were involved in the
gathering of the data. The initial phase involved the gathering of the
secondary data. The data that was obtained for the relevant variables
was then used to extrapolate descriptive statistics in the form of trend
analysis. The next phase involved the detailed statistic analysis to
establish whether there are any relationships between the variables.

The results were interpreted by using the means and standard deviations
of the HRM practices and business performance indicators. The results
of the correlation analysis, correlation map and regression analysis
between HRM practices and business performance indicators are also
discussed.

5.1 Descriptive Analysis
Descriptive statistics are used to describe the basic features of the data
in a study. They provide simple summaries about the sample and the
measures. Together with simple graphics analysis, they form the basis of
virtually every quantitative analysis of data. Various techniques that are
commonly used are classified as:
1. Graphical description in which we use graphs to summarise data.
2. Tabular description in which we use tables to summarise data.
58
3. Summary statistics in which we calculate certain values to
summarise data.
In general, statistical data can be described as a list of subjects or units
and the data associated with each of them. Although most research uses
many data types for each unit, the research used just one data item each
for this simple introduction.

5.1.1 Human Resource Management Practices
The following HRM practices will be discussed, namely, competency
acquisition processes, training and development, performance appraisals
and career development.



























59
a. Competency Acquisition Process
The figure below indicates that the majority of breweries reached their
target of 75% in terms of competency acquisition processes with a mean
of 79%. Most of the breweries with the exception of Rosslyn and Ibhayi
have shown a decline in the CAP scores in 2006.

Figure 8: Competency Acquisition Process

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b. Training and Development
It can be seen from the figure below that the average number of days
allocated for training and development per year were as follows:
2004 (7.5 days)
2005 (8 days)
2006 (7.8 days)
All the breweries showed sustained commitment to training and
development over the past 3 years. The average of 7.7 days also
indicates that SAB as an organisation is committed to the development of
their employees.

Figure 9: Training and Development

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c. Performance Appraisal
The figure below indicates that the performance appraisal in 2004 was
low across all breweries, however there was a year on year improvement
from 2004 to 2006 with an average of 94.98%. Only one of the breweries
managed to achieve the target of 100% in 2005.

Figure 10: Performance Appraisal

94.5
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d. Career Development
As can be seen from the figure below, the scores that were achieved
were significantly lower than the target in 2004. In 2005, this improved
for the majority of breweries, except Polokwane where a significant
decline was noted. In 2006, only Ibhayi exceeded the target of 90%. The
average that was achieved was 66.195 which is very low.

Figure 11: Career Development

71.01
61.93
65.66
45.64
46.55
53.19
42.86
79.27
74.38
64.15
20.97
79.41
77.83
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87.39
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5.1.2 Business Performance Indicators
The following business performance indicators will be discussed, namely,
integrated quality management system (IQMS), efficiency, rands per
hectolitre and labour turnover.

a. Integrated Quality Management System
There was a year-on-year improvement with regards to this variable, as
can be seen from the figure below. All breweries initially struggled to
reach their target during 2004 and 2005, however all breweries managed
to exceed the target in 2006. The average IQMS obtained was 2.77
which was below the target of 2.8.

Figure 12: Integrated Quality Management System
2.35
2.28
2.18
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2.36 2.35
2.42
2.53
2.61
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2.69
2.97
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Alrode Rosslyn Prospecton Chamdor Polokwane Ibhayi Newlands
2004
2005
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Target

64
b. Efficiency
As can be seen from the figure below, the analysis of efficiencies in 2004
indicated that three breweries exceeded the target of 85% while in 2005
only 1 brewery achieved a score higher than the target.
In 2006, there was a significant decline amongst the majority of the
breweries with only Ibhayi being able to exceed the target of 85%. The
average that was obtained was 82.9 which is below the target of 85%.

Figure 13: Efficiency

85.57
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c. Rands per hectolitre
Rosslyn brewery was the only one to consistently maintain costs to below
R 40.00 per hectoliter, as can be seen from the figure below. Costs were
highest at the Chamdor brewery, where there was a year-on-year
escalation. The average cost was found to be R51.18.

Figure 14: Rands per hectolitre

41.44
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d. Labour Turnover
As indicative of the figure below, all the breweries exceeded the target of
5%. Polokwane showed a consistently high degree of labour turnover.
The results clearly show that there is a concern with labour turnover. The
average turnover was found to be 10.8% which is double the target of
5%.

Figure 15: Labour Turnover

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5.1.3 Summary of statistics
The summary of the descriptive statistics which include maximum, minimum,
means and standard deviations is shown in Table 5 below.

Table 4: Summary of descriptive statistics

VARIABLE MINIMUM MAXIMUM MEAN STD. DEVIATION
CAP 53.000 92.000 79.143 9.614
Training and Development 5.000 10.900 7.781 1.786
Performance Appraisal 85.000 100.000 94.981 3.523
Career Development 20.970 96.510 66.165 18.225
IQMS 2.180 3.700 2.774 0.453
Efficiency 79.270 88.370 82.920 2.388
Rands/hectolitre 5.700 87.940 51.188 17.946
Turnover 6.000 26.000 10.810 5.354


5.2 Statistics used for Analysis
5.2.1. Path Analysis
Path analysis is a straightforward extension of multiple regressions. Its
aim is to provide estimates of the magnitude and significance of
hypothesised causal connections between sets of variables (Everitt and
Dunn, 1991). For the purposes of this study, the causal connections of
HRM practices on business performance were measured.


68
5.2.1.1. Correlation Tests
Correlation tests were done to determine if there are any relationships as
defined by the above definition of path analysis. Correlational analysis
determines the relationship between the independent and dependent
variables, to indicate whether there is a significant relationship between
the two groups (Calder, 1996).

The inclusion of the correlational analysis in the study provided
information regarding the relationship between HRM practices and
business performance indicators.

Table 5: Summary of correlation test statistics

TRAINING & PERFORMANCE CAREER RANDS/
CAP DEVELOPMENT APPRAISAL DEVELOPMENT IQMS EFFICIENCY HECTOLITRE TURNOVER
CAP 1 0.386 -0.086 -0.090 -0.052 0.277 -0.141 0.121
Training and Development 0.386 1 -0.165 -0.072 0.004 -0.014 -0.014 0.041
Performance Appraisal -0.086 -0.165 1 0.770 0.628 0.112 0.288 -0.189
Career Development -0.090 -0.072 0.770 1 0.696 0.051 0.288 -0.328
IQMS -0.052 0.004 0.628 0.696 1 0.114 0.216 -0.285
Efficiency 0.277 -0.014 0.112 0.051 0.114 1 -0.334 0.192
Rands/hectoliter -0.141 -0.014 0.288 0.288 0.216 -0.334 1 -0.114
Turnover 0.121 0.041 -0.189 -0.328 -0.285 0.192 -0.114 1
Values in bold are significantly different from 0 with a significance level alpha=0.05

69
Values displayed in bold are significant at 0.05 significance level. This
implies that the risk of being wrong when rejecting the null hypothesis
that the correlations are not significantly different from 0 is less than 5%.
The corresponding p-values (the estimated risk) are displayed in the
table below. The lower the p-value, the more different from 0 the
correlation. These tests are two-sided.

Table 6: Summary of correlation test statistics (p-values)

TRAINING & PERFORMANCE CAREER RANDS/
CAP DEVELOPMENT APPRAISAL DEVELOPMENT IQMS EFFICIENCY HECTOLITRE TURNOVER
CAP 0 0.084 0.711 0.697 0.824 0.222 0.541 0.597
Training and Development 0.084 0 0.473 0.756 0.984 0.955 0.955 0.859
Performance Appraisal 0.711 0.473 0 < 0.0001 0.003 0.625 0.204 0.410
Career Development 0.697 0.756 < 0.0001 0 0.001 0.826 0.203 0.148
IQMS 0.824 0.984 0.003 0.001 0 0.619 0.343 0.211
Efficiency 0.222 0.955 0.625 0.826 0.619 0 0.139 0.402
Rands/hectolitre 0.541 0.955 0.204 0.203 0.343 0.139 0 0.623
Turnover 0.597 0.859 0.410 0.148 0.211 0.402 0.623 0
Values in bold are significantly different from 0 with a significance level alpha=0.05



70
5.2.1.2 Correlation Map
Correlation maps are a visual representation of the results that are
obtained from the correlation tests. Correlation maps allow one to
visually identify patterns in correlations. These maps are more
meaningful when there are many dimensions included in the data.

The results showed that negative associations exist between (no causal
connections exist between these variables):

Table 7: Negative associations between HRM practices and
business performance
HRM Practices Business Performance
Competency Acquisition Process Rands/hectolitre and IQMS
Training& Development Rands/hectolitre and Efficiency
Performance Appraisal Turnover
Career Development Turnover

The results showed that positive associations exist between (illustrations
of causal connections) in Table 8 on the following page:






71
Table 8: Positive associations between HRM practices and business
performance
HRM Practices Business Performance
CAP Efficiency and Turnover
Training& Development IQMS and Turnover
Performance Appraisal IQMS, Efficiency & Rands/hectolitre
Career Development IQMS, Efficiency & Rands/hectolitre

The correlation map below uses black and white to respectively identify
positive and negative correlations. The diagonal is displayed in grey
color.

Figure 16: Correlation map
















Brewery
CAP
Training and Development
Performance Appraisal
Career Development
IQMS
Efficiency
Rands/hectolitre
Turnover
Correlation map
72
5.2.2 Statistical Regression Analysis
Regression is a generic term for all methods attempting to fit a model to
observed data in order to quantify the relationship between two groups of
variables (Sekaran, 1992). The fitted model may then be used either to
merely describe the relationship between the two groups of variables, i.e.
HRM practices and Business Performance.

5.2.2.1 General Notation and Definitions
The two data matrices involved in regression are usually denoted X and
Y, and the purpose of regression is to build a model Y = f(X). Such a
model tries to explain, or predict, the variations in the Y-variable(s) from
the variations in the X-variable(s). The link between X and Y is achieved
through a common set of samples for which both X- and Y-values have
been collected (Sekaran, 1992).

Single and multiple linear regressions were applied to the data without
any meaningful or significant results. The coefficient of determination - R
- that indicates the % of variability of the dependent variable for all
business performance variables was closer to 0. In order for the data to
be a good fit statistically, the R has to be closer to 1 (Sekaran, 1992).
The only variable matching this requirement was the IQMS variable.
Therefore, it can be deduced that this variable would have the most
significant causal connection with HRM practices. In other words, an
increase in satisfaction with service delivery will be seen when certain
HRM practices are applied, mainly performance appraisals and career
73
development.

5.3 Summary
This chapter concludes the research finding and the results thereof.
Chapter 6 will focus on the discussion and integration of the results.




















74
CHAPTER 6: DISCUSSION OF RESULTS

This chapter will focus on the discussion and integration of the results.

6.1 Descriptive Statistics
The results presented by the time analysis trends showed the ability of
the various breweries to meet their targets. These are discussed in detail
in the following sections.

6.1.1 Human Resource Management Practices
There has been year on year improvement by the various breweries in
order to reach the HRM practices targets.

6.1.1.1 Competency Acquisition Process
CAP which is defined as an outcomes-based education learning
framework and used to define and develop competence within the
organisation has showed year on year improvement. All breweries
showed considerable improvement on achieving their CAP targets, with
the exception of Polokwane and Newlands breweries, all other breweries
were able to achieve and exceed their targets during 2005 and 2006.

6.1.1.2 Training and Development
Training and development programs are designed to help an
organisation satisfy its skill requirements and to ensure that employees
continuously develop themselves (Huang, 2000). With regards to training
and development the study revealed that the organisation continues to
75
show commitment to the development of employees. The average
training days ranged between 7.5 days to 8 days. Although the specific
breweries varied in their number of training days, there was a noticeable
increase among all breweries in 2005 and 2006.

6.1.1.3 Performance Appraisal
Performance appraisal is the formal, systematic assessment of how well
employees perform their jobs in relation to established standards
(Huang, 2000). This was also identified in the literature as one of the
most common HRM practices implemented by organisations. With
regards to this HRM practice, the study found that the performance
appraisal in 2004 was low across all breweries, however there was a
year on year improvement from 2004 to 2006, with an average of
94.98%. Only one of the breweries managed to achieve the target of
100% in 2005.

6.1.1.4 Career Development
Career discussions and career programs are designed to help the
employees of an organisation realise and reach their maximum potential.
Internal career development and internal labour markets also affect firm
performance (Delaney and Huselid, 1996). The scores that were
achieved for career discussions were significantly lower than the target in
2004. In 2005, this improved for the majority of breweries, except
Polokwane where a significant decline was noted. In 2006, only Ibhayi
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exceeded the target of 90%. The average that was achieved was 66.195
which is very low.

Overall all breweries seem to have struggled to achieve their
performance appraisal and career discussion targets while they have
shown improvement in achieving their CAP and training and
development targets. These are confirmed by the summary shown in
Table 5. The mean offers a general overview of the data concerned and
the standard deviation provides a dispersion of the data according to the
variability of the data (Sekaran, 1992). The means and standard
deviation of the HRM practices and business performance indicators
were included in the empirical study because it provided information
regarding the different dimensions and the ability or inability of the
organisation to reach its targets.

The means for CAP, performance appraisal and career discussions were
79.14, 94.98 and 66.16 respectively. This indicates that the organisation
is unable to achieve its HRM practices indicators various production
regions vary in their ability to achieve their targets. The results show that
the standard deviation with regards to CAP and career development was
large with figures of 9.6 and 18.2 respectively which indicate a large
variability in the results.



77
6.1.2 Business Performance Indicators
6.1.2.1 Customer Perspective
This dimension measures performance against criteria that are important
to the organisations customers and consumers (Kaplan and Norton,
1996). There was a year-on-year improvement with regards to the
breweries trying to achieve the customer satisfaction variable of
integrated quality management. All breweries initially struggled to reach
their target during 2004 and 2005, however all breweries managed to
exceed the target in 2006. The average IQMS obtained was 2.77 which
was below the target of 2.8.

6.1.2.2 Internal Business Perspective
The analysis of efficiencies indicated that in 2004, three breweries
exceeded the target of 85% while in 2005 only 1 brewery achieved a
score higher than the target. In 2006, there was a significant decline
amongst the majority of the breweries with only Ibhayi being able to
exceed the target of 85%. The average that was obtained was 82.9
which is below the target of 85%. As this is the key indicator with regards
to the internal business perspective as shown on the balanced scorecard
(Kaplan and Norton, 1996), it is a concern that no production facility can
achieve their targets.

6.1.2.3 Financial Perspective
This perspective which traditionally focuses on profitability, growth and
shareholder value (Kaplan and Norton, 1996) measured the cost of each
production facility. The financial perspective analysis showed that only
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one brewery was able to consistently maintain costs to below R40.00 per
hectolitre. Costs were highest at the Chamdor brewery, where there was
a year-on-year escalation. The average cost was found to be R51.18.

6.1.2.4 Learning and Growth Perspective
Kaplan and Norton (1996) defined this perspective as the organisations
ability to learn and adapt to the changing environment and included
labour turnover. All the breweries exceeded the target of 5% with regard
to the learning and growth perspective. Polokwane showed a consistently
high degree of labour turnover. The results clearly show that there is a
concern with labour turnover. The average turnover was found to be
10.8% which is double the target of 5%.

Overall all breweries seem to have struggled to achieve the targets set
for the business performance indicators. These are confirmed by the
summary shown in Table 5. The means and standard deviation of the
HRM practices and business performance indicators were included in the
empirical study because it provided information regarding the different
dimensions and the ability or inability of the organisation to reach its
targets.

The means for IQMS, efficiency, rands/hectolitre and turnover were 2.77,
82.92, 51.18 and 10.81 respectively. This indicates that the organisation
is unable to achieve its business performance indicators. The results
show that the standard deviation with regards to IQMS, rands/hectolitre
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and turnover were relatively large with figures of 0.45, 17.94 and 5.35
respectively which indicate a large variability in the results.

6.2 Hypothesis Discussion

6.2.1 Path Analysis
Path analysis is a straightforward extension of multiple regressions. Its
aim is to provide estimates of the magnitude and significance of
hypothesised causal connections between sets of variables. For the
purposes of this study, the causal connections of HRM practices on
business performance were measured.

Although path analysis is a very popular analysis, it is important to bear
in mind a cautionary note from Everitt and Dunn (1991): However
convincing, respectable and reasonable a path diagram... may appear,
any causal inferences extracted are rarely more than a form of statistical
fantasy. Basically, correlational data are still correlational. Within a given
path diagram, path analysis can indicate which are the more important
(and significant) paths, and this may have implications for the plausibility
of pre-specified causal hypotheses.

Path analysis cannot indicate which of two distinct path diagrams is to be
preferred, nor can it tell us whether the correlation between HRM
practices and business performance represents a causal effect of HRM
practices on business performance, a causal effect of business
performance on HRM practices, mutual dependence on other variables
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for the sake of the study defined as organisational effectiveness, or some
mixture of these.

6.2.2 Correlation Tests
Correlation tests were done to determine if there are any relationships as
defined by the above definition of path analysis. The correlation is 1 in
the case of an increasing linear relationship, !1 in the case of a
decreasing linear relationship, and some value in between in all other
cases, indicating the degree of linear dependence between the variables.
The closer the coefficient is to either !1 or 1, the stronger the correlation
between the variables. If the variables are independent then the
correlation is 0, but the converse is not true because the correlation
coefficient detects only linear dependencies between two variables.

The results showed that the correlations between the HRM practices and
the business performance are relatively low. The correlation between
IQMS and performance appraisal and career development was found to
be higher than average with 0.628 and 0.696, respectively. This suggests
that the criterion for improving or ensuring customer satisfaction is career
development and performance appraisal. This also implies that there is
a relatively strong increasing linear relationship between the HRM
practices of performance review and IQMS and as well as career
discussion and IQMS.
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These values obtained were found to be significant at the 0.05
significance level. That means that the risk of being wrong when rejecting
the null hypothesis that the correlations are not significantly different from
0 is less than 5%. The corresponding p-values (the estimated risk) for
performance appraisal and IQMS and career discussion and IQMS were
0.03 and 0.01 respectively. The lower p-values imply that the correlation
is more different from 0. These tests are two-sided.
6.2.3 Correlation Map
The diagonal of a correlation map (i.e., the numbers that go from the
upper left corner to the lower right) always consists of ones. Thats
because these are the correlations between each variable and itself (and
a variable is always perfectly correlated with itself).

In every correlation map there are two triangles that are the values below
and to the left of the diagonal (lower triangle) and above and to the right
of the diagonal (upper triangle). The two triangles of a correlation map
are always mirror images of each other. The correlation of variable x for
the purposes of this study, HRM practices with variable y, business
performance indicators is always equal to the correlation of variable y
with variable x. When a map has this mirror-image quality above and
below the diagonal we refer to it as a symmetric matrix. A correlation
map is always a symmetric matrix.

Correlation maps allow to one visually identify patterns in correlations.
This has a lot more meaning when there are many dimensions. The
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research data was limited to 2 dimensions namely HRM practices and
business performance thus providing limited dimensions on the
correlation map.

The correlation map showed that there were negative associations, i.e.
no casual connections exist between the variables, between the following
HRM practices and business performance indicators:

Table 9: Negative associations between HRM practices and
business performance

HRM PRACTICES BUSINESS PERFORMANCE
Competency Acquisition
Process
Rands/hectolitre and IQMS
Training & Development Rands/hectolitre and Efficiency
Performance Appraisal Turnover
Career Development Turnover

The above results are indicative of the negative association between
performance appraisal and turnover, career development and turnover,
as well as, training and development and efficiency. Intuitively one would
expect that performance appraisals and career discussions would
positively impact on labour turnover. The literature also provided
evidence to support the view that HRM practices increase employee
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discretionary effort. An influence on turnover, productivity and corporate
financial performance can be expected (Huselid, 1995; Tzafrir, 2005).

The correlation map showed that there were positive associations, i.e.
illustration of casual connections exists between the variables, between
the following HRM practices and business performance indicators:

Table 10: Positive associations between HRM practices and
business performance

HRM PRACTICES BUSINESS PERFORMANCE
CAP Efficiency and Turnover
Training & Development IQMS and Turnover
Performance Appraisal IQMS, Efficiency &
Rands/hectolitre
Career Development IQMS, Efficiency &
Rands/hectolitre

The results obtained above are consistent with the literature, has shown
that HRM practices such as performance appraisals, career discussions,
training and development, can ensure that employees perform above
their maximum effort thus providing returns in excess of any relevant
costs thus leading to enhanced firm performance. If HRM practices
increase employee discretionary effort, one can expect an influence on
turnover, productivity and corporate financial performance (Huselid,
1995; Delaney and Huselid, 1996; Paul and Anantharaman, 2003).

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6.3 Research Questions
The initial question of the research sought to establish if there was a
relationship between the human resource management practices and
performance indicators of the production lines and what was the nature
of the relationship? The results that were obtained indicated that there
was indeed a relationship between certain HRM practices and business
performance indicators. As shown in the above table, the HRM practices
include competency acquisition process, training and development,
performance appraisal and career development.

The performance indicators included IQMS, efficiency, rands per
hectolitre and labour turnover. Although the study did establish that a
positive relationship between HRM practices and business performance
indicators does exist, it could not establish the direction of the
relationship. The reason for this could be attributed to the limited amount
of data.

The next question of the research sought to establish whether there is a
relationship between human resources practices and organisational
effectiveness and what was the nature of the relationship. The study
found that no relationship exists between HRM practices and
organisational effectiveness. According to the contingency theory
perspective, HRM practices does enhance organisational performance
however, organisational effectiveness is seen as a moderating variable
(Paul and Anantharaman, 2003; Neal et al, 2005). Hence, the findings of
85
the research varied when compared to that of the literature. It would have
been more effective in further breaking down the dimensions of
organisational effectiveness and using these dimensions in the analysis.

The final question of the research sought to establish whether there was
a relationship between organisational effectiveness and performance
indicators. The study found that no relationship exists between
organisational effectiveness and performance indicators. Paul and
Anantharaman (2003) and Neal et al (2005) showed that organisational
performance namely financial, employee retention, productivity, quality
and speed of delivery were influenced by HRM practices via the
intervening variables, however the research failed to establish such a
relationship.












86
6.4 Conceptual Model
The research sought to develop a conceptual model that illustrated the
relationship between HRM practices, organisational effectiveness and
business performance. The model in chapter 3 assumed that such a
relationship did in fact exist and it was directional. The results that were
obtained illustrate a different relationship which is shown in Figure 18
below.

Figure 17: Conceptual Model of the relationship between HRM
practices, organisational behaviour and business performance

Training and
Development
Performance
Review and Career
Discussion
CAP
Labour Turnover
Efficiency
Rands per
hectolitre
IQMS
HR Practices
Business Performance
Indicators

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The results showed that the correlation between IQMS and performance
appraisal and career development was found to be higher than average
and that a casual relationship does exist. This suggests that the criterion
for improving or ensuring customer satisfaction is career development
and performance appraisals. This also implies that there is a relatively
strong increasing linear relationship between the HRM practices of
performance review and IQMS, as well as, career discussion and IQMS.
The study found no other casual relationships but it did find positive
associations between HRM practices and business performance
indicators as shown in the above model. The model attempts to link the
relevant HRM practices with the associated business performance
indicators but fails to show the direction of the relationship.
Whereas the assumed model as outlined in figure 6 showed that
organisational effectiveness played a moderator role between HRM
practices and business performance indicators, the conceptual model
has excluded this variable. The primary reason for this was the lack of
evidence to support the moderator role of organisational effectiveness in
the relationship. However it must be stressed that this does not mean
that organisational effectiveness does not have an influence in such a
relationship and a different study might be able to establish such a
relationship, provided that the sufficient number of data is available.


88
6.5 Summary
This chapter concludes the discussion and integration on the results as
well as the conceptual model that has been derived from the results.
Chapter 7 will focus on the recommendations, conclusions and
limitations for the study.













89
CHAPTER 7: CONCLUSION

Prior work has argued that there is a relationship between HRM practices
and better business performance (Huselid, 1995; Chang and Huang,
2003; Khatri, 2000; Park et al, 2003). The literature identified the different
schools and theories of HRM practices that can be implemented in an
organisation. It emphasises the different types of HRM practices that
organisations can implement namely best practices or bundles of HRM
practices. The key success factor is to ensure that the HRM practices are
aligned to business strategy and that it forms an integral part of the
business.

The research found that while the organisation utilised the best practices
approach, organisations should firstly understand their goals and then
assess their HRM needs for the future proactively and decide which
approach to implement.

The balanced view with regards to performance was definitely the
preferred tool that was utilised in the literature. While some authors
directly alluded to the balance scorecard as the tool to identify
performance indicators, others used the concept in identifying the
relevant performance indicators. The balanced scorecard (Kaplan and
Norton, 1996) therefore provided the framework in which the
performance of organisations can be effectively measured.
90
The research provided broad evidence in support of the literature that
there is a relationship between HRM practices and improved business
performance. The correlation map showed that there were positive
associations between the independent and dependant variables. The
moderator variable was shown to have no effect on the relationship
between the independent and dependant variables. The primary reason
for this could be the limited data that was available.

Overall the results suggested that HRM practices do have a relationship
with business performance indicators. The research found that HRM
practices which included CAP, training and development, career
discussions and performance appraisals do have a relationship with
business performance indicators namely cost, efficiency, labour turnover
and quality however there was not enough evidence to support the
direction of the relationship.

It is interesting to find that most HRM practices had not had a direct
casual relationship to business performance indicators. The analysis
shows that definite connections (both positive and negative) exist
between the independent (HRM Practices) and dependent (Business
Performance) variables. Among the HRM practices performance
appraisal and career development has a direct casual relationship with
the customer satisfaction perspective.

91
While the results indicated that there was no directional relationship
between HRM practices and business performance indicators, findings of
the research provide statistical evidence that investment in HRM
practices of the firm will have a positive relationship with business
performance. In conclusion although there were nine paths originating
from HRM practices to the organisational performance indicators, only 2
HRM practices directly affects a single business performance indicator.

7.1. Recommendations and Limitations
It is recommended that additional inputs should be included to further
investigate the causal connections between HRM Practices,
Organisational Effectiveness and Business Performance as this was not
possible with the existing data. This could take the form of either
extending the research to include more organisations or in the case of
this specific organisation, extend the study to its global operations.

In addition to this it is also recommended that the moderating variable of
organisational effectiveness be broken down to its core dimensions of
inspirational leadership, corporate reputation and work environment.
These dimensions should then be viewed as separate moderating
variables. This will provide for the larger data that was required for the
analysis as well as help in understanding which dimensions have the
most impact.
92
The research had the following limitations which can be looked at in
future studies

1. The research was conducted in the manufacturing sector of the
organisation and can not be generalised to other sectors of the
organisation. This makes the research very focussed and difficult
to extrapolate.

2. It is also limited to the organisation and cannot be generalised to
either the fast moving consumer goods industry or other industries
in South Africa. Hence future research could look at including
other sectors so that a more generalised conclusion can be
obtained.

3. The research did not establish causality among the variables that
were measured. The results merely indicated that a relationship
did exist but the direction of the relationship was not measured. As
previously stated the primary reason for this could be the limited
number of data. Future research would want to expand the current
research to global plants within the current organisation or include
different sectors from the South African economy.

4. There could be the subjectivity in of some of the measures. The
measures may be company specific hence may enhance
subjectivity. The particular measure in question is that of
93
organisational effectiveness which could The administering of the
questionnaire can have self selection bias because people who
feel strongly about the dimensions in the organisational
effectiveness survey are more likely to fill in the survey. There
could also be non response error and interviewer bias especially
on the part of shift workers who maybe influenced by line
managers.

7.3 Conclusion
Although there were limitations to the research, it can still be used in
various different scenarios. The research can firstly be used by the
organisation to understand how it is performing with regards to the
various measures it has in place. The comparison can be made between
production facilities over different financial years. Secondly and from an
academic point of view the research established that there is in fact a
relationship between HRM practices and business performance
indicators which can be used for further research. Finally, the research
provides a base from which further research can be performed on South
African organisations.





94
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