HRD climate & customer satisfaction in Indian private banks.

AuthorMittal, Shweta

The present study examines the relationship between HRD climate and customer satisfaction. The HRD climate is conceptualized as comprising three components: general climate, OCTAPAC and HRD mechanisms. A survey based study was conducted in the Indian private banks and collected dyad level data. The data was collected from the employees and customers who were served directly by the bank employees. Data analysis was performed using a SEM technique, which showed that all the three components of HRD climate have a positive impact on customer satisfaction. Implications for research and practice are discussed.


In today's complex business environment, there is continuous and intimate exchange of not only information but also intense emotions between employees and customers (Kellogg & Chase, 1995; Parasuraman, 1985). Employees are the face of organizations, and the quality of their interactions with customers determines customer satisfaction, which, in turn, affects repeat purchase and, thus, ultimately determines companies' profitability (Brown & Lam, 2008). A customer's experience of services is dependent on his/her interaction with employees (Chase, 1977). Schmit and Allscheid (1995) suggested that it is impossible for the organization to achieve customer satisfaction without satisfied and loyal employees. Several empirical studies have found a positive relationship between employee satisfaction and customer satisfaction (Bernhardt et al., 2000; Harter et al., 2002; Koys, 2003; Wangenheim & Bayon, 2007).

Given this positive relationship, it is important to examine the factors that may affect employee satisfaction. An important determinant of employee-related outcomes is organizational climate. Previous studies have suggested that organizational climate is related to an organization's profitability, productivity, customer loyalty and employee retention (Pattanayak, 1998). Organizational climate can propel employee performance (Carlopio & Gardner, 1995; Davis, 1984; Fried & Slowik, 2001; Parish et al., 2008; Steele, 1986; Sundstrom & Altman, 1989) and their interactions with the customers (Bitner, 1992).

There is considerable debate in literature on whether organizational climate should be conceptualized as a broad, generalized construct or there is a need for a specific construct (Schneider, 2000). A more focused sub-set of broad organizational climate is Human Resource Development (HRD) climate. HRD climate implies the perception that employees have about the policies, procedures, practices and conditions that exist in the working environment (Chaudhary, 2012). The difference between HRD climate and organizational climate is that the former is more development-oriented (Mishra & Bhardwaj, 2002). The climate in which employees work is, to some extent, affected by the HRD practices of the organization thus, introducing the 'HRD climate'.

Previous studies show that there is a link between organizational climate and performance (Burke & Litwin, 1992; Denison, 1990; Kangis et al., 2000; West & Smith, 1998). Solkhe and Chaudhary (2011) found that if an organization scores high on various elements of HRD climate, then it definitely positively impacts job satisfaction of employees. Employees who are well motivated, well trained and highly competent are more likely to perform their jobs better and satisfy both internal and external customers.

To our knowledge, there is no empirical study that has investigated the HRD climate-customer satisfaction link. The present study provides useful insights into this and makes contributions to theory and practice. The study empirically tests the relation between HRD climate and customer satisfaction. Based on the data collected from employees working in the Indian banking industry and their respective customers, the study found evidence of a strong positive relationship between employee perceptions of HRD climate and customer satisfaction.

Organizational Climate & HRD Climate

Organizational climate can be defined as a manifestation of the values, feelings, attitudes, interactions and group norms of the members (Brown & Harvey, 2006). It is reflected in an organization's internal communication, organizational structure, professional development and regard for personal concerns. Schneider (2000) argued that organizational climate ought to be studied with situational referents as 'climates for something' or 'strategic climates' because these climates served as referents for specific behaviors (Schneider & Bowen, 1992). In today's competitive landscape, the scope of human resource management functions has shifted from routine HR activities towards more strategic roles (Budhwar, 2000). HRD practices and policies not only determine the strategic direction of firms but also play an important role in determining employee perception about organizational climate (Kopeland et al., 1990). Hence, it is essential to understand organizational climate from the perspective of HRD.

According to Swanson (1995) "HRD is a process for developing and unleashing human expertise through organization development and personnel training and development for the purpose of improving performance". HRD climate is defined as the perceptions that employees have about the policies, procedures, practices, and conditions which exist in the working environment (Chaudhary, 2012). HRD systems and practices play a significant role in initiating, facilitating and promoting HRD climate (Athreya,1988). Mufeed and Gurkoo (2006) argued that in order to gain from HRD practices, it is important that these practices are adopted as a company-wide philosophy in an integrated manner indicating a need for proper HRD climate. HRD climate is essential to sustain HRD efforts by focusing on the creation of organizational culture congenial for development.

Pareek (1988) suggested that HRD climate facilitates sustains and helps in the successful implementation of HRD practices and efforts. Thus, both HRD practices and HRD climate are complementary and interdependent (Agarwala, 2002).

Rao and Abraham (1986) listed the important characteristics of developmental climate. These include: (1) a tendency at all levels starting from top management to the lowest level to treat the people as the most important resource; (2) a perception that developing the competencies in the employees is the job of every manager/supervisor; (3) faith in the capability of employees to change and acquire new competencies at any stage of life;(4) a tendency to be open in communications and discussions rather than being secretive (fairly free expression of feelings); (5) encouraging risk taking and experimentation, making efforts to help employees recognize their strengths and weaknesses through feedback; (6) a general climate of trust; (7) a tendency on the part of employees to be generally helpful to each other and collaborate with each other; (8) team spirit; (9) tendency to discourage stereotypes and favoritism; (10) supportive personnel policies; and (11) supportive HRD practices including performance appraisal, training, reward management, potential development, job-rotation and career planning. Organizations differ in the extent of having these tendencies. In the present-day +competitive environment, where the initial stress is to harness the potential of employees, making them innovative, creative and...

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