The Effect of Human Capital Management Drivers on Organizational Performance in Banking Industry in Ethiopia: The Case of Selected Commercial Banks in Addis Ababa.

Abstract

This research attempted to see the effect of human capital management practices, i.e., leadership practices (LP), work-force optimization (WOP), knowledge accessibility (KA), learning capacity (LC), employees engagement (EE) on organizational performance in the case of selected commercial banks in Addis Ababa. The study employed quantitative research approach with both descriptive and causal research types. Data were collected from 162 branches of six different commercial banks in Addis Ababa. The study was anchored on theory of resource-based view and human capital theory and adopted a case study research design with stratified random sampling. Descriptive and inferential statistics were used for data analysis. Multiple linear regressions was employed to analyze the effect of HCM practices on the performance of the commercial banks' branches and Pearson Bivariate correlation was applied to test the relationship among HCM derivers and performance of the commercial banks. The reliability of the constructs is validated by Cronbach’s Alpha value. The regression results showed that firm’s HCM has a significant positive impact on organizational performance. Furthermore, a significant positive relationship among HCM indicators was exhibited. Finally, the study concluded that it is possible to use human capital management drivers to benchmark organizational capabilities, identify human capital management strengths and weakness, and link improvements in specific human capital management practices with improvements in organizational performance and obtain sustainable competitive edge.