Exploring Psychological Empowerment and Social Identification as Parallel Mediators Between Well-Being Oriented HRM Practices and Employee Performance

Abstract

This study explores the mediating roles of psychological empowerment and social identification in the relationship between well-being oriented human resource management (WBHRM) practices and employee performance within the banking sector. Based on positive psychology, self-determination theory, and social identity theory, this study posits that well-being-oriented HRM practices enhance employee performance by fostering both individual agency and a collective sense of belonging. By taking reliable and validated measures across 450 employees in multiple locations of banks in Pakistan, data were collected to test the hypotheses regarding well-being-oriented HRM practices and psychological empowerment, social identification, and employee performance as mediators. The PROCESS macro was used to analyze parallel mediation. Results obtained from the parallel mediation reveal that psychological empowerment and social identification significantly mediate HRM practices and employee performance, acting as complementary mechanisms. Psychological empowerment represents how employees view their role as independent and controlled, whereas social identification involves their attachment to the organization's goals and feeling part of it. In conclusion, the two results suggest that there is an interrelated importance in cultivating both psychological and social processes in achieving the performance-based potential of well-being-oriented HRM practices. These results have direct implications for HR practitioners in the banking industry, stressing that strategies that foster the empowerment of employees and organizational identity need to be developed. The paper contributes to the literature on sustainable HRM by providing empirical evidence based on a service-sector context within a developing economy that may offer ways to promote employee well-being and improve organizational performance.