THE IMPACT OF HRM PRACTICES ON THE PERFORMANCE OF MUNICIPALITIES. THE CASE OF SLOVENIA.

• Author: Biscak, Mojca

1. Introduction

   Effectiveness and performance of organizations rests with their staff: their capacities and skills, as well as the ability of the leadership to motivate staff to do their best in achieving organizational objectives. In this respect, an increasing importance is given to human resource management, since it manages the capacities, skills and knowledge of employees and affects their individual performance (Alagaraja, 2013; Drucker, 2003). By transferring the knowledge, motivation and performance of employees to the functioning of the organization, human resource management also affects the performance of the organization as a whole (Rousseau and Barends, 2011; Vanhala and Stavrou, 2013). HRM practices are positively linked with the operational measures of performance, such as productivity, product quality and operating costs (Alagaraja, 2013; Akhtar, Ding and Ge, 2008; Baptiste, 2008; Giauque, Anderfuhren-Biget and Varone, 2013; Den Hartog et al., 2012; Jiang et al., 2012; Ko and Smith-Walter, 2013; Kooij et al., 2013; Subramony, 2009; Tzabbar, Tzafrir and Baruch, 2017).

   Due to fiscal constraints and high expectations of citizens, the public sector also aims at maximizing performance while delivering high-quality and accessible public services (Andrews and Van de Walle, 2013). Some studies have already confirmed a positive association between the use of HRM practices and organizational performance in the public sector (Giauque, Anderfuhren-Biget and Varone, 2013; Walker and Andrews, 2013). Therefore, to add further clarity through either new research methods, new samples, or within new settings, authors call for further research of the situation concerning the use of HRM practices and their impact on the functioning of public sector organizations (Giauque, Anderfuhren-Biget and Varone, 2013; Gould-Williams, 2003; Ko and Smith-Walter, 2013; Walker and Andrews, 2013).

   The main aim of the research is to create a model for analyzing the impact of the use of HRM practices on achieving organizational performance of municipalities, and to use this model for Slovenian municipalities. The hypotheses considering the impact of human resource management practices for individual performance on the performance of Slovenian municipalities are formulated in section 2.3.

   Three methodological approaches were used within the model. Survey research based on a relevant questionnaire was used to determine the presence of HRM practices in Slovenian municipalities. The results of the survey research were processed by using the principal components analysis. The DEA methodology was used to determine the performance of business decision-making units (municipalities), and a relevant linear regression model was used to analyze the impacts.

   The next section deals with the theoretical bases of the research and thus presents the frameworks of the use of HRM practices for individual and organizational performance. The methodological section presents three methodological segments, i.e. a survey research to determine the level of use of HRM practices, a model to determine the performance of local communities and a regression model to analyze the impacts. The fourth section presents the results of the research carried out, i.e. the main findings of the research. The paper ends with the conclusion which summarizes the main findings.

2. HRM practices and organizational performance

   Firstly, this section presents a six-dimensional construct of HRM practices. This is followed by the discussion on performance, focusing on the problem of measuring the performance of public sector units with emphasis on local communities. The section is concluded with a review of research addressing the impact of HRM practices on organizational performance.

   2.1. Multi-dimensional structure of the construct of HRM practices

   The appropriate use and combination of various HRM practices affects the individual performance of employees, since it deals with the capacities, abilities, skills and knowledge of employees (Giauque, Anderfuhren-Biget and Varone, 2013; Kehoe and Wright, 2013; Wallace Ingraham, Coleman Selden and Moynihan, 2000), and thereby also affects the organizational performance (Boxall, 2013; Crouse, Doyle and Young, 2011; Ko and Smith-Walter, 2013).

   Several authors classified HRM practices boosting operational outcomes into three categories: empowerment-enhancing bundles, motivation enhancing bundles and skill enhancing bundles (Subramony, 2009). Jiang et al. (2012) categorized 14 HRM practices into three dimensions: skill enhancing, motivation enhancing and the opportunity enhancing dimension. In their research, Aycan et al. (2000) discuss three dimensions of HRM practices, i.e. job design, supervisory practice and reward allocation; other authors defined from five to eight dimensions, as shown in Table 1. To put more stress on performance-related rewards, following Tzabbar, Tzafrir and Baruch (2017) and Aycan et. al. (2000), we pointed out a five-dimensional general construct which covers all other definitions with: training, job design, supervisory practices, reward allocation and job security.

   Based on the above mentioned five-dimensional general construct of HRM practices, and considering the construct defined for the public sector by Giauque, Anderfuhren-Biget and Varone (2013), we defined a six-dimensional construct of HRM practices to achieve higher individual and organizational performance (as shown in Table 2); as the model is focused on operational managerial practices, it does not include the skill enhancing dimension. For the same reason, it includes the empowerment practices as a single dimension of job design according to Aycan et al. (2000). Otherwise, the definition is consistent with most other definitions of the construct for the public sector presented in Table 1 (Baptiste, 2008; Gould-Williams, 2003; Ko and Smith-Walter, 2013).

   However, we added a new dimension dedicated to the quality of services as public organizations, as well as local governments, need to deliver Best Value for their service users. This requires the development of new attitudes to service users and creating a commitment to quality and efficiency. Despite the clear demand for the development of HRM practices for the quality of public services, only a few authors discuss this question (Boxall, 2013; Gould-Williams, 2003; Ko and Smith-Walter, 2013) and nobody considers quality as a dimension of HR practices. Following the authors mentioned above, we have defined an additional dimension of focus on the quality of services provided which covers HRM practices aimed at ensuring that employees provide high-quality services, providing user satisfaction with the functioning and efficient use of resources, and improving the qualifications of employees.

   2.2. The performance of public sector organizations

   In recent years, the public sector has aimed at maximizing its performance, while providing the public services of appropriate quality and accessibility, which is due to increasing fiscal constraints and pressure exerted by citizens (Andrews and Van de Walle, 2013). Andrews and Van de Walle (2013) provided a sound review of different theoretical bases and approaches to study the performance of local governments and pointed out three basic groups of theories: classic economic theory, contingency theory and resource based theories. The most frequently used economic performance measure is efficiency, while the studies based on resource theories mostly employ effectiveness as the measure of performance. More diverse performance measures are used in studies based on contingency theory; besides efficiency and effectiveness also quality, quantity and user satisfaction are employed (Andrews and Van de Walle, 2013, pp. 10-12).

   The studies of performance as efficiency use different approaches to the measurement of efficiency. Nonparametric and semiparametric approaches include Data Envelopment Analysis (DEA), Free Disposal Hull (FHD), Order-m and Conditional efficiency, while parametric approaches include Stochastic Frontier Analysis (SFA) and different regression analysis (COLS, OLS, fixed effects regressions). The most frequently used methods are DEA and SFA (Narbon-Perpina and De Witte, 2018).

   A significant number of studies use DEA as the central measure of local government performance studying efficiency from the economic viewpoint with the aim to determine what might contribute to higher performance (Afonso, Schuknecht and Tanzi, 2010; Afonso and Scaglioni, 2006; Balaguer-Coll, Prior-Jimenez and Vela-Bargues, 2002; Boetti, Piacenza and Turati, 2010; Geys, Heinemann and Kalb, 2012; Loikkanen and Susiluoto, 2005; Pevcin, 2014a, 2014b). Many other authors search for factors of efficiency measured by DEA. They analyze impacts of competition in the political arena (Ashworth et al., 2014; Sorensen, 2014), incomes, expenditures and taxes (Balaguer-Coll, Prior and Tortosa-Ausina, 2007), natural, citizen-related, institutional and legacy determinants (da Cruz and Marques, 2014), voter involvement and fiscal autonomy (Geys, Heinemann and Kalb, 2010), financial and political determinants (Kalb, 2014), and IT development (Seol et al., 2008).

   The study of impact of HRM practices is a segment of resource based studies of the determinants of organizational performance, where effectiveness, equity and quality are the mostly used measures of performance (Walker and Andrews, 2013). However, some authors find efficiency as the measure of performance in resource based studies very useful. In his study on the impact of managerial skills on performance of municipal organizations, Carmeli (2006) demonstrates that the structural context plays an important role, especially for performance measures that are potentially less changeable in the short term. With a similar exposure, Andrews and Entwistle (2015) study the impact of management capacity on public service efficiency, and...