THE IMPACT OF EFFECTIVE HUMAN RESOURCE MANAGEMENT PRACTICES ON THE FINANCIAL PERFORMANCE OF BANKING SECTOR OF PAKISTAN

Abstract

PURPOSE: The main objective of the study was to examine and analyze the impact of effective management of human resource on the financial performance of the banking sector in Pakistan. To identify the practices that have strong impact than others. METHODOLGY: There were different HRM practices were taken as independent variables in relation to the financial performance of the bank as dependent variable. Those HRM practices that impact more strongly on the financial performance were identified. The banks operating in Pakistan were taken as sample. 25 different banks were approached out of that the responses were received from 15 banks, which means the model is made with the 60% data. The data type used was primary data that was collected through questionnaire. The questionnaire contained two parts, the first part is about HRM practices whereas the second one is about the financial performance of the bank. The HR and FINANCE managers were contacted to fill the questionnaire. SPSS was used to analyze the data by using regression tool. FINDINGS: The results showed the positive relationship between the independent variables that were recruitment and selection, compensation and rewards, training and development, performance appraisal and management and career planning and development and dependent variable that is financial performance of the bank. The results of regression analysis showed strong impact of recruitment and selection and performance appraisal and management than other HRM practices with higher values of beta coefficient. PRACTICAL IMPLICATIONS: The management of the banking sector therefore should not consider the investment on HRM as just a cost function rather it should be taken with keen interest as it benefits the financial performance of the bank in a positive way. By taking into consideration the that in today’s competitive era, human resource is the competitive edge for the organization and banking sector is one of the most competitive industries of the time. The top management of the banks should therefore should acknowledge the fact and should take prompt measures to develop and manage the human resource effectively.