How human resource management practices translate into sustainable organizational performance: the mediating role of product, process and knowledge innovation

Abstract

Background: This study examined how human resource management (HRM) can directly and indirectly influence sustainable organizational performance (SOP), with organizational innovation (OI) as a mediator. Research methods: For this quantitative study, a 31-item questionnaire was used to collect data on HRM and SOP from 20 Shanghai branches of five Chinese banks. HRM was defined as multidimensional, consisting of employee staffing, staff development, performance management, and compensation and benefits. Partial least squares structural equation modeling (PLS-SEM 3.2) was used to estimate the effects. Results: The HRM practices of performance management and compensation and benefits showed a direct and positive influence on SOP. Looking at indirect relationships, all four dimensions of HRM practices were positively related to OI (product, process, and knowledge innovation), which, in turn, was positively related to SOP. Organizational innovation was thus shown to play a mediating role between HRM and SOP. Conclusion: The study emphasizes that the banking sector of China consists of many employees who maintain old styles of working, alongside some who attempt to take on the new innovative working mechanisms and engage with staff development programs. This latter group of personnel make a valuable contribution to SOP. Moreover, the effect on organizational dynamics of implementing HRM practices aids in bringing about innovations in processes, products, and knowledge.