SHRM Practices and Firm Performance in the Banking Industry: An Aspirational Research Framework

Abstract

This paper aims to develop a theoretical framework on the link between Strategic Human Resource Management (SHRM) and firm performance, with special attention given to the banking industry. This paper adopts the systematic review method to review the existing frameworks and constructs a new one for the banking sector. Amongst the major theories considered include the resource-based view and meta-theory to delineate the relationships between SHRM practices and bank performance. The review suggests fourteen SHRM practices that are relevant to the banking sector. They include recruitment and selection, training and development, work design, performance appraisal, compensation and benefits, promotion, encouragement, high commitment, high performance, strategic communication, participation in management, grievance handling, facilitating teamwork and  enhancing quality. These practices are argued to be especially relevant to bank performance.The development of knowledge on SHRM has been focusing mainly on traditional manufacturing organisations, with little attention rendered to service-based organisations. A better understanding of how the SHRM practices relate to the performance of the banking sector allows banks to compete in this competitive environment through appropriate utilisation of the practices. The results also provide a guide to banking practitioners in evaluating their performance from the lens of the SHRM practices.

This is amongst the first study that examines the SHRM practices and their relations to performance of banks. An empirical
analysis will further provide support to which practices that the banking industry should focus on to drive performance.