Human Resource Management Practices in

Proceedings of the 13th Asia Pacific Management Conference, Melbourne, Australia, 2007, 472-488

Human Resource Management Practices in Insurance Companies Operating in India: A Study a

Subhash C. Kundua, * and Divya Malhanb, ** Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar-125001, Haryana, India. b Institute of Management Studies, Kurukshetra University, Kurukshetra, 132119, Haryana, India.

Abstract Competitive advantage of a company can be generated from human resources (HR) and company performance is influenced by a set of effective HRM practices. In this study, we intended to assess the HR practices in insurance companies. Primary data based on 218 respondents from four insurance companies (two multinational-7 branches and two Indian-7 branches) was analyzed to assess HR practices being practiced by insurance companies in India. Factor analysis brought out six factors those were further analyzed. ‘Training and benefits’ was found highly in practice in the insurance companies. Further, ‘performance appraisal’, ‘selection and socialization of employees’, and ‘HR planning and recruitment’ were moderately practiced in insurance companies. ‘Workforce diversity and contemporary HR practices’ and ‘competitive compensation’ were also practiced but not as high as other practices. ANOVA and mean results showed that Indian companies did not practice workforce diversity. Compensation practices were found competitive or performance based in Multinational insurance companies than Indian ones. The gender effect showed that only competitive compensation was perceived significantly different by male and female employees/executives. Interactive effects were significant on workforce diversity and contemporary issues, training and benefits, and selection and socialization of employees.

Keywords: Human resources; Multinational companies; Insurance companies; Training and benefits; Performance appraisal; Workforce diversity; Competitive compensation; Selection and socialization

Under constant pressure to improve results and stay competitive, contemporary companies must seek ways to become more efficient, productive, flexible and innovative.

1. Introduction1 Insurance is the business of providing protection against financial aspects of risk such as those to property, life, health, and legal liability. Early insurance goes back to the Egyptian times. The concept of insurance is not a very recent phenomenon (Rao, 2005). Around 3000 BC, Chinese merchants dispersed their shipments among several vessels to avoid the possibility of damage or loss. There are some insurance companies around today in the United States that provided insurance back in the mid 1700’s, as well as some that provided relief to banks during the 1930’s and the Great Depression. Today, there is insurance for many aspects of daily living: business, auto, health, life, and travel. Each of these categories includes sub-categories, branching off into numerous divisions. The life of human beings and the assets that they possess during the lifetime are continually exposed to loss or damage. Uncertainty in life and in commerce and industry is a fact. People are aware of this uncertainty and hence, show a strong desire for security both for their lives and possessions. Insurance is a contract whereby insurers pay for the financial losses suffered by the insured because of unforeseen events and as a return for the payment of a premium by the insured (Rao, 2005).

*

Corresponding author. E-mail: [email protected]

**

E-mail: [email protected]

To achieve this, leaner organizational structures are needed which means that, each employee carries more responsibility than in the past and is therefore of greater value to the employing organization (Gubman, 1998). The ways of gaining competitive advantage through focusing on company’s financial, strategic, and technological capabilities have to be supplemented with organizational capability i.e. the firm’s ability to manage people to gain competitive advantage (Ulrich and Lake, 1990). Organizational capability relates to hiring and retaining competent employees and developing competencies through effective human resource management practices (Ulrich and Lake, 1991). According to Pfeffer (1995), for the strategic advantage of a firm it relies not only on technology, patents or strategic position but on how it manages the workforce. High performance work practices provide a number of important sources of enhanced organizational performance (Pfeffer and Veiga, 1999). HR systems have important, practical impacts on the survival and financial performance of firms, and on the productivity and quality of work life of the people in them (Cascio, 2006). In an effort to enhance their competitiveness, some firms have instituted high performance work practices. A substantial amount of research has been conducted on the relationship between

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productivity and high performance work practices, such as the use of valid staffing procedures, organizational cultures that emphasize team orientation and respect for people, employee involvement in decision making, compensation linked to firm or worker performance, and training. 2. Objectives and Importance of the Study The insurance industry forms an integral part of the global financial market, with insurance companies being significant institutional investors. In recent decades, the insurance sector, like other financial services, has grown in economic importance. This growth can be attributed to a number of factors including, but not exclusively, rising income and demand for insurance, rising insurance sector employment, and increasing financial intermediary services for policyholders (Ward and Zurbruegg, 2002). A sound national insurance market is an essential characteristic of economic growth. This is not surprising as the insurance industry forms a major component of an economy by virtue of the amount of premiums it collects, the scale of its investment, and, more fundamentally, the essential social and economic role it plays by covering personal and business risks. By encouraging these factors that promote insurance demand and aid financial development, policymakers possess a strong tool to stimulate economic growth (Hussels, Ward and Zurbruegg, 2005).

To identify selection and socialization practices in insurance companies.

To assess practices of performance appraisal in insurance companies.

5.

To assess the compensation and benefits related practices in insurance companies.

6.

To identify the workforce diversity and contemporary HR practices being practiced in insurance companies.

7.

To assess and compare the HR practices being practiced in Indian and Multinational insurance companies.

8.

To assess the differences of perception of male and female employees regarding HR practices being practiced in insurance companies.

9.

To assess the interactive effects of type of insurance companies and gender on HR practices.

Job analysis is the process of obtaining information about jobs i.e. information about the tasks to be done on the job, as well as personal characteristics (education, experience, specialized training) necessary to do the tasks (Cascio, 2006). Job analysis in many ways is the first personnel activity that affects commitment and performance (Dessler, 2003). The process of analyzing and identifying the need for and availability of human resources for organization to meet its objectives is human resource planning (Mathis and Jackson, 2004). It ensures that human resource requirements of an organization are identified and plans are made for satisfying those requirements (Bulla and Scott, 1994). Recruitment is a form of business competition. It demands serious attention from management because any business strategy will falter without the talent to execute it (Cascio, 2006). It is a process of attracting a pool of high quality applicants so as to select the best out of them (Kulik, 2004). Recruitment and selection occupy attention of employers since these activities involve: (a) addition of manpower and hence (b) additional cost (Prasad, 2005). Top performing companies devote considerable resources and energy to creating high-quality selection systems (Pfeffer, 1995). The step immediately succeeding the selection is ‘placement’. Placement refers to the actual procedure wherein an individual is assigned with a job. It also involves assigning a specific rank and responsibility to an employee.

The main objective of the study was to assess the human resource management practices being practiced in insurance companies operating in India. To achieve the main objective, the following sub-objectives were set:

2.

4.

The literature review regarding various HR practices like human resource planning, job analysis, recruitment, selection, placement, socialization, training and development, performance appraisal, compensation and benefits, career management, and other contemporary HR practices (work-life balance, attitude surveys, workforce diversity, and human resource information system) is presented in the following paragraphs.

A number of foreign insurance companies have set up representative offices in India and have also tied up with various asset management companies (Shanker, 2006). What makes a firm best is not just technology, bright ideas, masterly strategy or the use of tools, rather best firms are better organized to meet the needs of their people, so that they attract better people than their competitors do and their people are more motivated to do a superior job, whatever it is they do (Waterman, 1994). In this manner, the management of human resources becomes very crucial. Thus, this study on HRM practices in insurance companies was taken up.

To assess practices regarding human resource planning and recruitment.

To assess the practices regarding training in insurance companies.

3. Literature Review

India has about 300 million people who can afford to buy life, health, and pension plan products. Out of this, only 20% have insurance and that too covers only 25% of their needs and financial capacity. The remaining 80% have no insurance cover. The life insurance market of India, therefore, has tremendous growth potential (Shanker, 2006).

1.

3.

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1999). An effective set of choices about compensation systems plays a major role in determining firm performance (Dreher and Dougherty, 2005). A fringe benefit is an indirect reward given to an employee or group of employees as a part of organizational membership (Mathis and Jackson, 2004), which affect performance and retention of employees. On account of their enormous costs and the financial commitment which is made for the future, benefits planning has become a critical component of HR planning processes (Bernardin and Russell, 1993). The application of skill or competence leads to performance and performance is the criterion for evaluating effectiveness. Therefore, a pay-forcompetence program enhances productivity and product quality, reduces absenteeism, turnover, and accident rates (Jyothi and Venkatesh, 2006).

This decision is taken after matching the requirements of a job with the qualifications of a candidate (Jyothi and Venkatesh, 2006). Socialization is the process of orienting new employees to the organization or the unit in which they will be working. Socialization can make the difference between a new worker’s feeling like an outsider and feeling like the member of the team (Gomez-Mejia, Balkin and Cardy, 2003). A good orientation program can improve productivity and reduce turnover (Garvey, 2001). Companies must develop customer-oriented workforce to deliver service quality. After hiring the right people with the right attitude, companies must train them for the purpose (Kundu, 2000). Service quality is being perceived as a tool to increase value for customer and as a means of positioning in a competitive environment (Kaul, 2007). For providing quality service, employees need ongoing training in the necessary technical skills and knowledge, and interactive skills. Training might take a variety of forms in organizations but all must view it as an important investment for future success (Zeithmal and Bitner, 2004). The strategized training provided to employees is a wise investment of organizational resources (Mello, 2007). Companies need to provide comprehensive training to the agents in the ways to narrow the gap between clients and agents i.e. trust building training. Unlike insurance product knowledge that can be comprehensively taught in lessons, trust-building training is an art and should be learnt through on-the-job training (Law, Wong, and Theresa, 2005).

A Human Resource Information Systems (HRIS) is basically a data base system that offers important information about employees in a central and accessible location that, when needed, could be retrieved and used to facilitate human resources planning decisions (Wolfe, 1998). HRIS is an integrated system designed for providing information used in HR decision making (Mathis and Jackson, 2004). Kovach and Cathcart (1999) noted that HRIS information could be used, first, for administrative purposes which reduce costs and time and, second, for the more analytical decision support. A career is a sequence of positions held by a person during the course of a lifetime. It comprises of series of work related activities that provide continuity, order, and meaning to a person’s life (Schein, 1996). Career planning is a deliberate attempt by an individual to become more aware of his or her, own skills, interests, values, opportunities, constraints, choice, and consequence. It involves identifying career-related goals and establishing plans for achieving those goals (Hall, 1986; Carnazza, 1982). Career management includes both organizational actions and individual efforts aimed at setting career goals, formulating and implementing strategies and monitoring the results (GreenHaus, 1987).

Performance is defined as the record of outcomes produced on a specified job function or activity during a specified time period (Bernardin and Russell, 1993). However, appraisals are done once a year and are based on stereotype, perceptual, and subjective judgments of supervisors (Landy and Farr, 1980; Haunstein, 1998) which make people believe performance appraisal process is unsuccessful (Bernardin, Hagen, Kane and Villanova, 1998). Therefore, effective managers need to incorporate performance review and feedback as part of their day-to-day communications with employees, not just a once-a-year assessment (Webb, 2004). Employee performance appraisal has been practiced by numerous organizations since centuries. Though performance appraisal system has been debated by many, however, overall, it is viewed that performance appraisal is an inseparable part of organizational life (Islam and Rasad, 2006). Wu (2005) mentions performance management as a complex problem and it involves various kinds of judgments about which performance measure to use. Evaluation scores depend upon these criteria heavily. Sidin et al. (2003) have stressed on identification of the relevant and important criteria for any kind of evaluation exercise.

Diverse workforce (diversity) refers to the co-existence of people from various socio-cultural backgrounds within the company. Diversity includes cultural factors such as race, gender, age, colour, physical ability, ethnicity, etc. (Kundu, 2004). Dynamic companies look for people who are different from us because the diverse workforce may bring different talents, interests, and viewpoints (Simmons, 1996). The basic concept of managing diversity accepts that the workforce consists of a diverse population of people. The companies can succeed at diversity if the initiative to create and manage the diverse workforce has the full support from the top management (Hayes, 1999).

Compensation is all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship (Milkovich and Newman,

Work-life balance is a state where an individual manages real or potential conflict between different demands on his/her time and energy in a way that satisfies

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his/her needs for well being and self-fulfillment (Clutterbuck, 2004). Work-life balance policies define how the organization intends to allow employees greater flexibility in their working patterns so that they can balance what they do at work with responsibilities and interests they have outside work (Armstrong, 2005). Today’s married employee is typically part of a dual-career couple. This makes it increasingly difficult for married employees to find the time to fulfill commitments to home, spouse, children, parents, and friends (Robbins, 2004). Today’s progressive workplace is being modified to accommodate the varied needs of a diverse workforce. Balance may become the most sought after benefit for the new millennium. Generation Xers are not that impressed with money as with a balanced lifestyle.

H3b Male and female executives perceive differently the practices of training and benefits. H4

H4a Indian and Multinational insurance companies do differ on performance appraisal. H4b Male and female executives perceive differently the practice of performance appraisal. H5

H5b Male and female executives perceive differently the practice of competitive compensation. H6

H6b Male and female executives perceive differently the practices of workforce diversity and contemporary HR practices 4. Research Methodology This study was based on primary data gathered with the help of questionnaire comprising of three sections. The first section contained 10 background questions and second section contained 20 statements about the human resource management practices. The third section contained 45 statements related to employee service orientation. However, in this study, we covered only second section i.e. related to human resource management practices (20 statements) along with first part i.e. related to general statements. The respondents were asked to rate statements on a five point rating scale where one indicated that respondents strongly disagree, two meant for disagree, three for neutral, four indicated agreeing and five meant strongly agree about what was described in the statement. These 20 statements can be seen through exhibit 1.

Insurance companies operating in India use HR practices like human resource planning and recruitment.

H1a Indian and Multinational insurance companies do differ on human resource planning and recruitment. H1b Male and female executives perceive differently the practices of human resource planning and recruitment. Insurance companies operating in India practice selection and socialization of human resources.

H2a Indian and Multinational insurance companies do differ on selection and socialization of human resources.

The questionnaire was administered to 400 randomly selected respondents of four insurance companies (two multinational and two Indian). Only 218 (54.5%) of the returned questionnaires were found suitable for final analysis and without discrepancies. Out of the sample of 218 respondents, 123 (including 26 females) respondents were from Indian and 95 (including 15 females) from multinational insurance companies. All respondent employees/managers were of Indian origin. Table 1 explains the distribution of the sample.

H2b Male and female executives perceive differently the practices of selection and socialization of human resources. H3

Insurance companies operating in India practice workforce diversity and contemporary HR practices (Equal say of majority and minority employees, flexible work hours, attitude surveys, and new HR practices).

H6a Indian and Multinational insurance companies do differ on workforce diversity and contemporary HR practices

Thus, on the basis of literature review, we propose following hypotheses (H):

H2

Insurance companies operating in India practice competitive compensation.

H5a Indian and Multinational insurance companies do differ on competitive compensation.

Attitude surveys are valuable ways of involving employees by seeking their views on matters that concern them. Attitude surveys can provide information on the preferences of employees, give warning on potential problem areas, diagnose the cause of particular problems, and compare levels of job satisfaction, commitment and morale in different parts of the organization (Armstrong, 2005). Attitude surveys are developed by consulting firms, academicians, or others. They can also be custom-designed to address specific issues and concerns in an organization. But regardless of the type of surveys used, only surveys that are valid and reliable can measure attitudes accurately (Bracken, 2000).

H1

Insurance companies operating in India use practice of performance appraisal.

Insurance companies operating in India use practices regarding training and benefits.

H3a Indian and Multinational insurance companies do differ on training and benefits.

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loadings more than 0.480 were considered. The names and descriptions of the factors are given in following paragraphs.

The data gathered was analyzed with the help of statistical tools like actual counts, percentages, correlations, standard deviations, factor analysis, analysis of variance (ANOVA), and mean and grand mean scores. Actual counts, percentages, and means were used to assess the frequency and percentage extent of certain variables related to general and background information. Correlations were used to assess the relationships of human resource management practices practiced in insurance companies and standard deviations were calculated to understand the variations in data collected through responses. Factor analysis was basically used to reduce the data collected on five-point scale for further analysis. ANOVA was used to assess the significant differences regarding HR practices between Indian and multinational insurance companies and between the perception of male and female employees/executives. Mean and grand means were helpful in explaining the extent and direction of prevalence of HR practices and related factors. Means were also used to see the differences between Indian and Multinational insurance companies.

The first factor named as ‘performance appraisal’ loaded significantly with HR practices like well defined recruitment policy, regular performance appraisal, due weight to service performance, proper HR information system. This factor explained the importance of due weight to service performance and proper HR information system in insurance companies. Well defined recruitment policy and regular performance appraisal were found to be moderately important. Second factor was described as ‘workforce diversity and contemporary HR practices’. The variables like workforce diversity, flexible work practices, conducting employee attitude surveys, adoption of new HR practices loaded significantly on this factor. ‘Training and benefits’ was found as third factor. HR practices like training and development, providing service orientation to managers, benefits to employees were loaded with high significance level on this factor. ‘HR planning and recruitment’ was the fourth factor. Variables like regular job analysis, regular human resource planning, and emphasis on service employees in HR planning loaded highly on this factor. Further, attracting service oriented employees and career advancement also loaded significantly but low in significance. The fifth factor named as ‘selection and socialization of employees’ loaded significantly and positively with variables like selection on the basis of service attitude and competence and socialization of employees. However, adoption of new HR practices again loaded on this factor significantly (second time). The sixth factor named as ‘competitive compensation’ loaded significantly with variables like pay for service performance and paying competitive salaries. One variable ‘adoption of new HR practices’ loaded significantly on two factors. It loaded poorly on both factors but significantly.

Reliability of the data collected was also calculated by applying Cronbach Alpha. Cronbach’s coefficient alpha is commonly used to measure the reliability for a set of two or more construct indicators. Alpha value of the scale of 20 variables was calculated that was as high as 0.864. Factor wise alpha values were also calculated that were above required level i.e. between 0.743 and 0.612 (see Table 5). All alpha values met the minimum criterion (α > 0.60) (Nunnally, 1978). 5. Results Primary data based on 218 respondents from four insurance companies (two multinational-7 branches and two Indian-7 branches) was analyzed to assess HR practices being practiced by insurance companies in India. Table 2 explains the characteristics of the sample. This sample included both male (81.2%) and female (18.8%) employees and employees from Indian insurance companies (56.4%) and multinational insurance companies (43.6%), out of which 77.5% were married. Average age of the respondents was 35.302 years (SD=±8.667). All employees agreed that there were HR departments in the insurance companies. Average work experience of the employees was 13.272 years (SD=±9.346). The first joiner employees were 56.1% and about 43.8% had the experience of changing two or more insurance companies. 56.4% employees reported that there were unions in the insurance companies and on average 42.9% employees were members of unions.

These factors were further subjected to statistical tools like inter-factor correlations, analysis of variance (ANOVA), means, and grand means. Table 5 explained the inter-factor correlations, overall means, standard deviations, and alpha values. All factors were found highly correlated (r ≤ 0.01). Standard deviations were found varying between ±0.830 and ±1.113. The factor mean scores were found between 3.005 and 3.599. One factor i.e. ‘training and benefits’ ( x =3.599) was found highly in practice in the insurance companies. Further three factors i.e. ‘performance appraisal’ ( x =3.472), ‘selection and socialization of employees’ ( x =3.404) and ‘HR planning and recruitment’ ( x =3.298) were moderately practiced in insurance companies. ‘Workforce diversity and contemporary HR practices’ ( x =3.005) and ‘competitive compensation’ ( x =3.089) were also practiced in insurance companies but not as high as other factors. These factors’ mean scores indicated the acceptance of H1, H2, H3, H4, H5, and H6. Table 6 showed

Further the data was subjected to correlation and factor analysis. Table 3 showed the correlations of 20 variables those were almost significantly correlated. Factor analysis brought out 6 factors in all explaining 65.410% of total variance (see Table 4). The extracted communalities ranged from 0.506 to 0.763. For clarity of the factor definitions,

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perceived equally in case of multinational insurance companies.

the two-way ANOVA results basing upon type effect, gender effect and two-way interactions. According to the type of company effect, performance appraisal (p≤0.002), workforce diversity and contemporary issues (p≤ 0.006), training and benefits (p≤0.000), and competitive compensation (p≤0.005) were found significantly different. So, H3a, H4a, H5a, and H6a, were accepted. Indian insurance companies were found stronger on performance appraisal practice ( x =3.63) than multinational insurance companies ( x =3.26). On workforce diversity and contemporary issues, multinational insurance companies were giving due value to workforce diversity and contemporary issues ( x =3.38) than the Indian insurance companies ( x =2.72). Rather Indian companies did not practice workforce diversity. Training and benefits related practices were comparatively stronger in Indian companies ( x =3.78) than the multinational companies ( x =3.37). Compensation practices were found competitive or performance based in multinational insurance companies ( x =3.33) than Indian insurance companies ( x =2.90). Further, the mean score of Indian insurance companies showed that compensation practices were broadly based on seniority basis rather than competitive basis. However, both types of insurance companies gave equal importance to HR practices related to HR planning and recruitment and selection and socialization of employees. Therefore, H1a and H2a were rejected.

6. Discussion In most insurance transactions, there is an intermediary, usually an insurance agent or broker, between the buyer and the insurer (Cummins and Doherty, 2006). The studies suggest that the insurance industry through risk transfer, financial intermediation, and employment can generate positive externalities and economic growth. HR plays a crucial role in service companies (Schneider and Bowen, 1993). In the present study, to assess HR practices of Indian and Multinational companies, derived six factors have been further used. These six factors were performance appraisal, workforce diversity and contemporary HR practices, training and benefits, HR planning and recruitment, selection and socialization of employees, and competitive compensation. It was found that three factors i.e. ‘performance appraisal’, ‘selection and socialization of employees’ and ‘HR planning and recruitment’ were moderately practiced in insurance companies. ‘Performance appraisal’ loaded significantly with HR practices like well defined recruitment policy, regular performance appraisal, due weight to service performance, proper HR information system. This factor brought out the importance of due weight to service performance and proper HR information system in insurance companies. The factor ‘selection and socialization of employees’ loaded significantly and positively with variables like selection on the basis of service attitude and competence and socialization of employees. Variables like regular job analysis, regular human resource planning, and emphasis on service employees in HR planning loaded highly on the factor ‘HR planning and recruitment’. Indian insurance companies were found stronger on performance appraisal practice than multinational insurance companies. It was also found that both types of insurance companies gave equal importance to HR practices related to HR planning and recruitment, and selection and socialization of employees. Performance management is a vehicle for the continuous improvement of business performance via a coordinate program of people management interventions (Walters, 1995). Since 1990’s, with the rise of Windows, the normalization of PC based office work, client server architecture and the affordable HRIS, the HRIS market has grown significantly across the spectrum of organizational types (Ball, 2001). An up-to-date and sophisticated global HRIS enables identification, grooming of and equitable career opportunities for high potential global managers (Thite, 2004). Atkinson (1984) described the fluid nature of employment implying that selection process requires greater emphasis and thought because although employees may be with organizations for shorter and shorter periods of time, the quantity and quality of output required will be greater

According to the gender effect, only competitive compensation (p≤0.028) was found significantly different as between male and female employees/ executives. So, H5b was accepted. Male executives ( x =3.19) were more accepting the practice of competitive compensation than the female executives ( x =2.67). Further, male and female executives did not differ significantly on other HR practices i.e. performance appraisal, workforce diversity and contemporary issues, training and benefits, HR planning and recruitment, and selection and socialization of employees. These results caused the rejection of H1b, H2b, H3b, H4b, and H6b. Interactive effects were significant on workforce diversity and contemporary issues (p≤0.010), training and benefits (p≤0.034), selection and socialization of employees (p≤0.045). Cell means of the Table 7 showed that male executives ( x =2.63) did not favor workforce diversity and contemporary issues as compared to female executives ( x =3.06) in Indian insurance companies, whereas male executives highly favored this practice in multinational insurance companies ( x =3.46). In case of training and benefits, both males ( x =3.44) and females ( x =3.00) received less training and benefits in multinational insurance companies as compared to Indian insurance companies. In case of selection and socialization of employees, female executives ( x =3.82) perceived stronger than the males ( x =3.25) in Indian insurance companies, whereas both

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Further it was found that ‘training and benefits’ was high in practice in the insurance companies. HR practices like training and development, providing service orientation to managers, benefits to employees were loaded with high significance level on this factor. ‘Training and benefits’ related practices were comparatively stronger in Indian companies than the Multinational companies. Firm investments in employee training have shown to benefit companies through enhanced product and service quality, reduced production waste, higher employee retention and better labor-management relations (Bloom and LaFleur, 1999). The main benefits of training and development are morale booster, enhanced knowledge, skill, attitude and experience, and reduction of scraps, accidents and wastes (Kundu and Kumar, 2006). Besides augmenting knowledge of various financial products and marketing approaches, Fan and Cheng (2006) suggest that life insurance companies need to train their sales representatives to an adequate standard in competencies of problem solving, communication, information technology utilization, culture compatibility, emotional intelligence, collective competence and ethics (Fan and Cheng, 2006). Issues like natural disasters, ever-changing state and regulations, rapid industrial changes through mergers and acquisitions, and the introduction of complex products, challenge the companies to not only keep abreast of changes but to invest in staff training to prepare them to better respond to the shifting environment (Jarventaus, 2007). As the world gets smaller, more and more people are spending time living and working away from their home country, giving rise to greater faceto-face contact among people from very different cultural background (Brislin, 1981). Globalization not only requires the adoption of a cross-cultural perspective in order to successfully accomplish goals in the context of global economy, but also needs a new and higher standard of selection, training, and motivation of people (Bhagat and Prien, 1996). According to Kealey and Protheroe (1996), training in general can be defined as any intervention aimed at increasing the knowledge or skills of the individual. This can help them cope better personally, work more effectively with others, and perform better professionally. Money spent on training, when blended with a robust sales methodology, measurement of the business impact, strategic sourcing of the development process, and a business model to support funding decisions, does influence a company’s bottom line (Blair and Sisakhti, 2007).

and greater. Campbell and Baldwin (1993) suggest that in many industrialized countries there is a concern that skills shortages and mismatches are appearing in the labor market and that policy makers are aware that recruitment difficulties and skill shortages may reduce the competitiveness of small and large firms. ‘Workforce diversity and contemporary HR practices’ and ‘competitive compensation’ were also practiced in insurance companies but not as high as other factors (practices). Workforce diversity here includes variables like workforce diversity, flexible work practices, conducting employee attitude surveys, adoption of new HR practices. Competitive compensation includes variables like pay for service performance and paying competitive salaries. On workforce diversity and contemporary issues, multinational insurance companies were giving due value to workforce diversity and contemporary issues than the Indian insurance companies. Rather Indian companies were weak on practice of workforce diversity. Compensation practices were found competitive or performance based in multinational insurance companies than Indian insurance companies. Further, Indian insurance companies tuned to seniority basis of compensation rather than competitive basis. Research on flexi-time has shown that absenteeism and turnover are reduced and job satisfaction is improved when flexi-time programs are implemented (Narayanan and Nath, 1982; Pierce and Newstrom, 1983). Comparatively high compensation contingent on organizational performance is one of the key practices of companies that produce profit through people (Pfeffer and Veiga, 1999). It plays a key role in recruitment, job performance, and job satisfaction (Jyothi and Venkatesh, 2006). Employers must balance compensation costs at a level that both ensures organizational competitiveness and provides sufficient rewards to employees for their knowledge, skills, abilities, and performance accomplishments (Mathis and Jackson, 2004). Compensation needs to be internally consistent and externally competitive. High-performing employees are scarce, in great demand and do not come cheap (Thite, 2004). There is general agreement among scholars and practitioners about the need for pay for performance but the main challenge lies in its implementation (Thite, 2004). Kundu (2003; 2004), gave favourable arguments for creating a diverse workforce like diverse workforce provides superior services, helps to tap niche markets, helps to enter the international arena, enhances creativity and innovation, produces competitive advantages, and enhances rapid responsiveness and adaptation to change. Further, as the economies are shifting from manufacturing to service economies, diversity issues will gain importance because in a service economy effective interactions and communications between people are essential to business success (Kundu, 2003). By managing and valuing diversity, the organization can justify itself as a true representative of the society (Kundu, 2001).

Employee benefits are often used to attract new employees, and can become an important factor in retaining employees in the latter stages of their careers (White and Becker, 1980). By offering flexible benefit plans, employers are becoming facilitators rather than providers of benefits (Charles, 1995). Thus flexible benefit plans are consistent with the trend toward empowerment and more employee involvement in organizational decision-making (Kauk, 1996; Lawler, 1990). Research results suggest that employee

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by the multinational companies especially with regard to workforce diversity practices, competitive compensation, and selection and socialization of employees. Gone are the days when experience was the basis for deciding seniority which in turn was the basis for deciding compensation. The HR practices now need to incorporate global and multicultural perspectives and performance management needs to be embedded in the changing nature of work (Thite, 2004).

motivation is enhanced in the presence of a flexible benefit plan (Werther, 1986; White and Becker, 1980). In this study, significant differences of perceptions have been found among male and female employees/executives only on competitive compensation. Male executives were more accepting the practice of competitive compensation than the female executives. Further, male and female executives did not differ significantly on other HR practices i.e. performance appraisal, workforce diversity and contemporary issues, training and benefits, HR planning and recruitment, and selection and socialization of employees. The career experiences of women and men have been shown to differ to some degree (Betz and Fitzgerald, 1987; Gutek and Larwood, 1987; Larwood, Stromberg and Gutek, 1985). For example, marital and parental roles have a different impact on the career progress of women versus men (e.g., women more often make career choices to accommodate their spouse’s careers). Women and men experience differences in the career preparation they receive, societal opportunities and constraints, and childcare concerns. Hence, women employees/executives accept less pay than their male counterparts. In many cases they have the tendency to shift to part-time jobs and also depend on flexi time options on job. Further, a study on Indian organizations clearly indicated the prevalence of gender discrimination in organizations (Kundu, 2003).

Diversity of human resources has become a demographic reality. Indian organizations have to learn how to manage diverse workforce to get maximum benefit and competitive advantage in the changed scenario. Managers in organizations should learn how to respect the cultural differences at work and how to work with them to maximize the contribution of each employee (Kundu, 2004). All employees, no matter who, no matter at what level, want to be treated with respect. This is the most basic thing one must do in managing diversity (Cascio, 2006). Managing it well is an essential part of HR strategy. The results indicated that both multinational companies and Indian companies have to significantly improve their practices regarding performance appraisal, training and financial benefits, and HR planning and recruitment. Though the Indian companies scored better on these aspects, yet there still has to be more emphasis on these aspects. The organizations may feel complacent regarding these practices due to labor surplus economy of India. Organizations must enrich the HR practices like performance appraisal in terms of service delivery, service oriented training programs, and service performance based financial and other benefits. Service organizations should plan and attract employees having service attitude and orientation.

Interactive effects were significant on workforce diversity and contemporary issues, training and benefits, and selection and socialization of employees in the present study. Male executives did not favor workforce diversity and contemporary issues as compared to female executives in Indian insurance companies, whereas male executives highly favored in multinational insurance companies. In case of training and benefits both males and females received less training and benefits in multinational insurance companies as compared to Indian insurance companies. In case of selection and socialization of employees, female executives perceived stronger than the males in Indian insurance companies, whereas both perceived equally in case of multinational insurance companies.

There has been a phenomenal growth in service industries (Bateson and Hoffman, 1999). Services are human resource intensive businesses. To gain competitive advantage, service organizations ought to lay greater emphasis on human resource management practices as has been indicated in the results of this study on insurance companies (service organizations). People are a major component of every business and the HRM system is responsible for maximizing productivity, quality of work life, and profits through better management of people (Cascio, 2006).

7. Managerial Implications, Limitations, and Future Direction It needs no emphasis that it is the people, people and people that make an organization achieve competitive advantage. The people (human resources) in an organization when looked after and provided with, will certainly pay back in terms of better results, better performance, and enhanced productivity. So, this study has practical and policy implications for the organizations. Organizations can certainly make significant improvements to their performance by emphasizing excellent HR practices.

HR policies of an organization benefit the employee by providing better opportunities for growth in terms of better compensation, benefits, training and development opportunities, career management in turn leading to jobsatisfaction and self-fulfillment. Further, this study will be helpful for the organizations to develop intrapreneurship/corporate entrepreneurship. Organizations can cultivate corporate entrepreneurship to enhance corporate innovation and performance (Chen, Zhu and Anquan, 2005). The reasons for the pursuit of corporate

Globalization has become one of the buzz-words in business and academia (Joynt and Morton, 2005). The Indian companies need to learn from the practices adopted

479


entrepreneurship are innovations, avoiding stagnation, and reducing turnover of employees (Pinchot, 1985).

Bloom, M.R. and LaFleur, B. (1999). Turning Skills into Profits: Economic Benefits of Workplace Education Programs, New York, NY: The Conference Board.

Despite being different sources, different timing of data collection, and high alpha values of data, a potential limitation of this study was that the data was collected by using same construct (using self-completion questionnaires) with same method. The relationships among the variables and sub-scales could be influenced by common method variance. Podsakoff and Organ (1986) recommend that researchers should at least report results from a test of single-factor hypothesis as an explanation of intercorrelation of the variables. Harman’s one-factor test on HR practices construct showed that the first factor accounted for only 29.096% of the covariance among measures (Podsakoff, MacKenzie, Lee, and Podsakoff, 2003; Podsakoff and Organ, 1986), suggesting that common method variance is not a severe issue.

Bracken, D.W. (2000). Designing and using organizational surveys. Personnel Psychology, 53, 206-209. Brislin, R.W. (1981). Cross-cultural Encounters: Face-to-Face Interaction, New York, NY: Pergamon. Bulla, D.N. and Scott, P.M. (1994). Manpower requirements forecasting: a case example. In Ward, D., Bechet, P. and Tripp, R. (eds.), Human Resource Forecasting and Modeling, New York: Human Resource Planning Society. Campbell, M., and Baldwin, S. (1993). Recruitment difficulties and skill shortages: an analysis of labour market information in Yorkshire and Humberside. Regional Studies, 27, 271-80. Carnazza, J. (1982). Succession/Replacement Planning: Programs and Practices, New York: Center for Research in Career development, Columbia University Graduate School of Business. Cascio, W.F. (2006). Managing Human Resources: Productivity, Quality of

Another limitation was that the data was collected from Indian bases, which could have been collected from the wider area. Rather it can be extended cross culturally that may give more generalized conclusions. Researches may be taken up to cover wider area and more respondents with cross cultural extensions. The data was analyzed by using only two independent variables. Further, researchers can increase independent variables to analyze the data more effectively. Finally, the variables incorporated in the questionnaire were strictly related to HR practices and could not establish relationship of HR practices with the performance. Future researchers may take up studies on human resources with these aspects.

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Exhibit 1. Description of Variables Variables V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15 V16 V17 V18 V19 V20

Description The organization conducts job analysis regularly The organization conducts human resource planning on a regular basis The organization gives special emphasis on service employees while doing HR planning The organization has a well defined recruitment policy The organization attracts service oriented employees towards organization The organization selects individuals on the basis of service attitude and competence The organization socializes its employees with service orientation The organization has special training and development programs for service employees The organization provides service orientation to leaders from top management Performance appraisal is done regularly in the organization Service performance is given due weight in the performance appraisal of employees The organization has a system of pay for service performance ( pay for performance) The organization pays competitive salaries to the employees The benefits offered to employees are in line with other organizations All groups whether majority or minorities have equal say in the organization The organization has flexible work hours for special groups like women or physically challenged employees The organization has proper HR information system. The organization provides sufficient opportunities for career advancement of service employees The organization regularly conducts employee attitude surveys The organization tries to lead with development and adoption of new HR practices

Table 1. Distribution of Sample

Gender Male Female Total

Indian 97 26 123

Background Multinational 80 15 95

483

Total 177 41 218


Table 2. Characteristics of Sample Variables 1. Gender 2. Marital status

Categories Male Female Total Married Unmarried Total

Average

3. Age 4. Type of insurance company and No. of employees 5. No. of branches of insurance companies

6. HRM Dept

10. Employee union

% 81.2 18.8 100 77.5 22.5 100

123 95 218 4 3 4 3 14 218 0 218

56.4 43.6 100

100 0 100

116 79 23 218 123 95 218

56.1 30.1 13.7 100 56.4 43.6 100

35.302 ( SD 8.667) Indian (2) Multinational (2) Total LIC OIC Tata AIG AVIVA Total Yes No Total

7. Work experience 8. Work experience in this organization 9. Organizations changed

Number 177 41 218 169 49 218

13.272 (SD 9.346) 11.355 ( SD 9.598) First joiner Up to two change More than two change Total Union exists Does not exist Total

11. Average percent union membership

42.894 (SD 37.866)

484


485


Table 3. V V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15 V16 V17 V18 V19 V20 M SD

V1 0.470** 0.290** 0.221** 0.363** 0.364** 0.304** 0.236** 0.151* 0.219** 0.327** 0.147* 0.353** 0.087 0.174** 0.032 0.359** 0.211** 0.006 0.217** 3.279 1.295

Correlations, Means and SDs for 20 HR Variables

V2

V3

V4

V5

V6

V7

V8

V9

V10

V11

V12

V13

V14

V15

V16

V17

V18

V19

V20

0.035** 0.389** 0.344** 0.380** 0.111 0.203** 0.188** 0.255** 0.266** 0.299** 0.405** 0.187** 0.309** 0.369** 0.257** 0.389** 0.315** 0.295** 3.307 1.160

0.326** 0.381** 0.003 0.164** 0.219** 0.236** 0.358** 0.112 0.197** 0.207** 0.059 0.334** 0.120 0.184** 0.450** 0.221** 0.174** 3.160 1.217

0.503** 0.461** 0.226** 0.364** 0.146* 0.417** 0.404** 0.035 0.350** 0.330** 0.289** 0.113 0.357** 0.198** 0.092 0.196** 3.564 1.186

0.382** 0.381** 0.370** 0.319** 0.375** 0.170* 0.242** 0.379** 0.308** 0.226** 0.056 0.234** 0.364** 0.151** 0.282** 3.394 1.115

0.550** 0.273** 0.221** 0.262** 0.439** 0.200** 0.464** 0.298** 0.195** 0.070 0.365** 0.283** 0.138** 0.358** 3.399 1.120

0.144** 0.182** 0.246** 0.180** 0.066 0.322** 0.204** 0.243** -0.082 0.253** 0.266** 0.017 0.301** 3.412 0.981

0.351** 0.388** 0.262** 0.027 0.330** 0.368** 0.247** -0.023 0.323** 0.221** 0.051 0.085 3.692 1.065

0.432** 0.109 -0.017 0.054 0.405** 0.251** 0.082 0.065 0.429** 0.211** 0.164* 3.614 1.050

0.482** 0.088 0.171* 0.335** 0.366** -0.005 0.395** 0.334** 0.127 0.272** 3.633 1.129

0.083 0.223** 0.212** 0.273** -0.058 0.448** 0.102 0.052 0.158* 3.550 1.135

0.441** 0.066 0.149* 0.348** 0.104 0.156* 0.299** 0.250** 2.986 1.300

0.362** 0.155* 0.118 0.477** 0.196** 0.089 0.299** 3.192 1.323

0.234** 0.048 0.310** 0.165* 0.110 0.124 3.490 1.149

0.387** 0.334** 0.387** 0.288** 0.233** 3.133 1.489

0.127 0.212** 0.464** 0.221** 2.568 1.269

0.175** 0.005 0.246** 3.142 1.211

0.440** 0.340** 3.348 1.159

0.440** 2.917 1.230

3.399 1.107

Cronbach Alpha (20 Variables) = 0.865 Kaiser-Meyer-Olkin Measure of Sampling Adequacy = 0.775 Barlett’s test of Sphericity Approx. Chi-Square = 1648.724 df = 190 Significance = 0.000 Notes: * Correlation is significant at the 0.05 level ** Correlation is significant at the 0.01 level M = Mean SD = Standard Deviation V1 to V20 = Definitions of variables may be seen through Exhibit 1

486


Table 4. Factor Loadings of Varimax rotated Principal Components Factors

Loadings

F1 Performance appraisal Well defined recruitment policy Regular performance appraisal Due weight to service performance Proper HR information system F2 Workforce Diversity and Contemporary HR practices Equal say of majority or minority employees Flexible work hours Conducting employee attitude surveys Lead with development and adoption of new HR practices F3 Training and Benefits Training and development programs Providing service orientation to managers Benefits to employees F4 HR Planning and Recruitment Regular job analysis Regular human resource planning Emphasis on service employees in HR planning Attracting service oriented employees Opportunities for career advancement F5 Selection and Socialization of employees Selection on the basis of service attitude and competence Socialization of employees Lead with development and adoption of new HR practices F6 Competitive Compensation Pay for performance (service) Paying competitive salaries

Eigen Value 5.819

% of Variance 29.096

2.119

10.595

1.620

8.102

1.237

6.185

1.194

5.970

1.092

5.462

0.512 0.524 0.818 0.716 0.522 0.749 0.807 0.493 0.649 0.691 0.766 0.526 0.523 0.837 0.488 0.492 0.680 0.809 0.558 0.667 0.750

Table 5. Inter Factor Correlations, Means, SDs and Alpha Values Factors

F1

F2

F3

F4

F5

F6

F1 F2 F3 F4 F5 F6 No. of Variables Mean SD Alpha value

0.314** 0.477** 0.508** 0.478** 0.305** 4 3.472 0.874 0.740

0.252** 0.464** 0.464** 0.346** 4 3.005 0.906 0.666

0.410** 0.320** 0.216** 3 3.599 0.831 0.642

0.481** 0.431** 5 3.298 0.837 0.743

0.411** 3 3.404 0.830 0.666

2 3.089 1.113 0.612

** Correlation is significant at the 0.01 level

487


Table 6. Summary Results of ANOVA Factors/ Variable F1 Performance Appraisal F2 Workforce Diversity and Contemporary issues F3 Training and Benefits F4 H R Planning and Recruitment F5 Selection and Socialization of Employees F6 Competitive Compensation Note: Significance levels are indicated in parentheses

Type Effect (F-Value) 10.223 (0.002) 7.725 (0.006) 17.626 (0.000) 1.495 (0.223) 0.502 (0.480) 8.151 (0.005)

Effects Gender Effect (F-Value) 0.001 (0.973) 0.078 (0.780) 0.883 (0.348) 0.145 (0.704) 3.455 (0.064) 4.866 (0.028)

Two-way interactions 1.513(0.220) 6.801 (0.010) 4.545 (0.034) 2.210 (0.139) 4.083 (0.045) 1.422 (0.234)

Table 7. Summary of Means and Grand Means for Main Scales (factors)

Factors/ Variables F1 Performance Appraisal

M F GM F2 Workforce Diversity and M Contemporary issues F GM F3 Training and Benefits M F GM F4 HR Planning and Recruitment M F GM F5 Selection and Socialization of M Employees F GM F6 Competitive Compensation M F GM Notes: M=Male, F=female, GM=Grand Mean

Type of Insurance Company Indian Multinational 3.60 3.29 3.78 3.10 3.63 3.26 2.63 3.43 3.06 3.08 2.72 3.38 3.74 3.44 3.91 3.00 3.78 3.37 3.28 3.32 3.45 3.04 3.32 3.28 3.25 3.45 3.42 3.82 3.44 3.37 3.04 3.36 2.38 3.17 2.90 3.33

488

Grand Mean 3.46 3.53 3.47 2.99 3.07 3.00 3.60 3.58 3.60 3.30 3.30 3.30 3.34 3.67 3.40 3.19 2.67 3.09