Impact of Strategic Human Resource Management Practices on Performance: Study on Employees in the Sri Lankan Banking Sector

Abstract

This work explores the effect of strategic human resource management (SHRM) activities on organizational performance, mediated by employee retention in the Sri Lankan banking sector. The data consisted of 238 workers using a selfgoverning survey and analyzed using structural equation modeling.The results suggest that the three SHRM practices of capacity enhancement, skill enhancement and motivation enhancement have a significant indirect impact on organizational performance. The relationship between SHRM activities and organizational success is often influenced by employee retention. This study provides SHRM specialists in the banking sector with a useful guide on which SHRM practices are significant to employee retention and organisational performance and hence, should be given consideration. SHRM theory has been largely developed in traditional functional manufacturing organisations but not in service-oriented organisations. This study fills the gap by examining the causal relationship between the SHRM practices and organisational performance through the mediating effect of employee retention in a service-oriented industry, i.e. the banking sector. A model that incorporates SHRM strategies is being used in the study to provide a realistic image of its relationship with employee retention and organizational performance.