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International Journal of Hospitality Management 49 (2015) 56–65

Contents lists available at ScienceDirect

International Journal of Hospitality Management

journa l homepage: www.e lsev ier .com/ locate / i jhosman

irect and indirect contribution of HRM practice to hotel companyerformance

arinela Dropulic Ruzic ∗

r t i c l e i n f o

rticle history:eceived 18 December 2014eceived in revised form 1 April 2015ccepted 18 May 2015

eywords:RM practice

a b s t r a c t

The research problem is the measurement of direct and indirect HRM contributions to hotel companyfinancial performance. The theoretical multi-level model developed in this paper is based on ResourceBased View theory, the Motivation–Ability–Opportunity framework and a universalistic, contingency andconfigurational approach to measurement relationships. It investigates whether HRM results measuredat an individual level (employee engagement, skills, attitudes and behaviour) and at an organisationallevel (consequences of employee loyalty) mediate in the link between HRM practice (quantitative and

RM resultsotel company performanceulti-level model

roatia

perceived data) and hotel company financial performance and whether hotel company ownership andsize are moderating the link. Data was obtained from HR managers and employees in hotel companies inall regions of Croatia. The results suggest the key HRM activities which make the largest contribution toemployee engagement, skills, attitudes and behaviour, loyalty and hotel company financial performance.Management implications of the results are discussed and avenues for further research are proposed.

. Introduction

From a positivist point of view, the search for the answers pre-umes determination of variables which the two end points in theink are made up of: (1) HRM practice as an independent vari-ble and (2) organisational/company performance as a dependentariable. Numerous authors also aspired to give answers to whatnfluences the link, as well as how and why. In their attempt tomphasise the complexity of the search for answers, they call it “Theearch for the Holy Grail” (Boselie et al., 2005) and in an attempto set theoretical models and involve various factors they also callt “The black box” (Purcell, 2003). The research, having to explainntermediacy or directness in the link between HRM practice andompany performance as its goal, was conducted in companiesrom one specific industry or companies from different industries,

here a number of variables in the shape of HRM results werencluded, which resulted in various conceptual models (Beer et al.,984; Huselid 1995; Guest, 1997; Appelbaum et al., 2000; Katou008; Haynes and Fryer 2000). Huselid (1995) warns of a serious

ack of theoretical base in which the causes of methodological omis-ions in up to date research can be found (Paauwe, 2009) and Guest

1997) argues that we need better theory about HRM practices, out-omes and the links between them, seventeen years later, continueo be key research guidelines. Although considerable progress has

∗ Tel.: +385 52 408 323/98 973 5468.E-mail address: marinela@iptpo.hr

ttp://dx.doi.org/10.1016/j.ijhm.2015.05.008278-4319/© 2015 Elsevier Ltd. All rights reserved.

© 2015 Elsevier Ltd. All rights reserved.

been made in this field, there are lots of challenges to the theory ofHRM in understanding management processes affecting HRM andchallenges for research methods wherein Guest (2011) explainsthat we are currently in the phase of “growing sophistication”, inwhich, as opposed to the initial research with the question: “Whatimpact does HRM have on performance?” a shift has been madetowards the questions: “Under what conditions does HRM have animpact on performance?” and “What is the process by which HRMaffects performance like?”

The intention of this study is to put focus on the specifics andconditions of the hotel sector and to determine the contributionsthat HRM practice make and could make to company financial per-formance. Discussion was not developed towards “new” theoreticalframeworks, but it was harmonised and explained by the existing“popular” theories to confirm their validation and limitations in thehotel business context.

1.1. Aims and contributions

Several contributions to the existing knowledge base aremade up from the study. First, at the theoretical level, accept-ing the principles of positivism, Resource–Based View theory andAMO framework and three approaches to the measurement ofHRM practice-organisational performance link (universalist, con-

tingency and configurational), a theoretical model suitable for hotelbusiness conditions has been developed. The multi-level modelexplains the nature of the impacts of HRM practice (measuredat organisational level) on HRM results (measured at individual

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nd organisational levels) and on hotel company performanceat organisational level), such as the moderator impacts of size,wnership and location on these links. The aim is to provide annderstanding of in what measure have “popular” theories andpproaches to measurement been at all suitable for the hotel busi-ess. Then, on these grounds, discussion about “new” theoretical

rameworks can be carried out.Secondly, empirical testing of the proposed multi-level model

rovides an understanding about the contributions of HRM prac-ice to employees, organisational outcomes and financial outcomes,uch as the differences in the list of the actual key HRM activi-ies in respect of hotel company size and ownership and, finally,etermination of the mediation effects of HRM results, measured at

ndividual and organisational levels, in the link between HRM prac-ice and hotel company performance. The findings of the research

ay provide useful insights for HR managers in hotel companies.The next section of the paper is theoretical knowledge of

RM practice – company performance link in general and in theotel business context, where research hypotheses and multi-

evel model are explained. There follows a section on the researchethod and the results are given. At the end of the paper, the

mplications for managers and limitations of the research such asuggestions for future research are given.

. Theoretical framework, hypotheses and research model

.1. Approaches to measuring the HRM practice-companyerformance link

There are three approaches to measuring the link betweenRM practice and company performance. First, the universalistr best practice approach emphasised that the proven contribu-ion of HRM activity of one organisation will also contribute tother organisations, regardless of their size, age, structure, type ofusiness activity, industry or branch (Pfeffer, 1995; Huselid, 1995;

chniowski et al., 1995; Delaney and Huselid, 1996; Wood, 1999).t stresses that some HRM activities are always better than othersnd that all organisations should implement those very best activ-ties. The focus of this approach is on quantitative measurement ofhe direct link between specific HRM activities and company per-ormance or between the bundle of HRM activities and companyerformance (Huselid, 1995; MacDuffie, 1995; Becker and Gerhart,996). Second, the contingency approach emphasised the impor-ance of the company’s business strategy, which either increases oreduces HRM influence on its performance within the same indus-ry or sector (Delery and Doty, 1996; Hoque, 1999) and proscribeshat HRM practice should be consistent with other aspects withinhe organisation. Third, the configurational approach emphasisedhat a specific configuration or HRM practice architecture enables

greater contribution to the success of a company (Sheppeck andilitello, 2000; Katou, 2008; Katou and Budhwar, 2010) and bases

tself on holistic principles of the search for determination of con-gurations and unique impacts which are the most efficient for the

ink (Delery and Doty, 1996).

.2. HRM practice-hotel company performance link

Because of industry’s unique feature of labour intensity (Chot al., 2006) and the heterogeneity of the sector (Hoque, 1999),otel companies made up a part of the sample in the research,ncompassing mainly large companies from different industries.

arrower and specific HRM aspects and hotel company perfor-ance were researched in the USA (Ingram, 1996), in the UK

Jameson, 2000; Erras 2002), in Bulgaria (Anastassova and Purcell,995), in Australia (Cheng and Brown, 1998; Jago and Deery, 2004),

ality Management 49 (2015) 56–65 57

in Barbados (Alleyne et al., 2006), in New Zealand (Haynes andFrayer, 2000) in Slovakia (Lucas and Deery, 2004), in India (Singh,2003; Chand and Katou, 2007), in Taiwan (Cheng-Hua et al., 2009)and in Romania (Karatepe, 2013). Hoque’s (1999) pioneering studymakes a starting point for a “deeper” analysis, which is missing fromit; apart from direct and indirect impacts not having been tested,employees’ assessments have also been neglected.

A serious lack of theoretical base concerning the HRM practice-organisational performance link is evident in the hotel businesscontext, where research is generalised and it can be said that theseare “copies” of this phenomenon research from other businesses,limited to proving the statistical connection between specificactivities or an assembly of selected HRM activities and hotel facil-ity performance (not corporate performance), were conducted ascase studies, relying on a single data source (executive directorsor human resource managers), with small samples and a singleobservation aspect (quantitative or qualitative) and were directedtowards the HRM’s narrower and individual segments withoutsystematic or multi-level analysis of HRM contributions. It is, there-fore, necessary to direct towards development of the theories andmodels which are specific and useful for the hotel company set-ting, whilst examining how HRM practice specifically improveshotel company performance. Research within the industry auto-matically controls the factors which differ among industries, whichmeans that measurements of the set variables are more precise(Ichniowski et al., 1995). The hotel sector provides an excellentenvironment in which to explore some of the current issues in orga-nizational studies and human resource management (Guerrier andDeery, 1998) so, the key research question of this study is: howdoes HRM contribute to hotel company performance?

The theoretical model developed in the paper (Fig. 1.) is basedon well-known theories (Resource-Based View, AMO framework)and universalist, contingency and configurational measurementapproaches, all set in a multi-level analysis taking into consider-ation the specifics of hotel business and HRM in the hotel business.According to Dyer and Reeves (1995), HR strategy has impacts atfour levels: (1) employee level, (2) organisational level, (3) financiallevel and (4) market level. Strategic HRM is the pattern of plannedactivities linked to human resources who enable an organisationto reach its goal (Wright and McMahan, 1992), but they do nothave to be the same as the implemented ones. Although the HRMactivities are created in the manner that they transmit the samemessages within an organisation, employees still interpret themin different ways and react differently to them (Guzzo et al., 1994).Using the theoretical model the impact of implemented HRM activ-ities on first three levels have been analysed in the study throughsix research hypotheses. Explanations of concepts on which theyare based, such as variables through which they were measured,are explained in further text. All is empirically tested in the Croat-ian context, which falls into the category of developing countries,whose hotel sector is characterised by a small share of interna-tional brands, by companies with complex business portfolios,whose hotel companies do not have a developed practice of corpo-rate reporting (Dropulic Ruzic, 2011) and whose state-owned hotelcompanies are still going through the process of privatisation.

The distinction made in the paper between intended, currentand perceived (implemented) HRM activities is evident in thedetermination of the HRM practice which is composed of a bun-dle of HRM activities, divided into: (a) actual – the ones presentlyimplemented and on which human resources managers have thegreatest influence and (b) perceived – the ones already experi-enced (Purcell et al., 2008). As a dependent variable, hotel company

financial performance includes objective financial indicators, char-acteristic for Croatian hotel companies (Ivandic et al., 2010) forthe previous 5 years (averages are calculated), gathered from anindependent source (FINA- Croatian financial agency), where it

58 M.D. Ruzic / International Journal of Hospitality Management 49 (2015) 56–65

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s necessary to distinguish the objective financial indicators fromhe organisational performance which, in the majority of research

easures, leaned on the subjective estimates obtained from HRanagers. In this way the influence of oscillations in the financial

usiness of hotel companies will be reduced, which are a conse-uence of the financial crisis.

The universalist approach resulted in a list of key HRM activitiesalled “HRM system”, “High Performance Work System, HPWS”,igh-Performance Management, HPM”, “High-Commitment Man-gement, HCM” and High-Involvement Management, HIM”. Theour most frequently observed activities in research, which areignificant for company performance and which most frequentlyppear in a “bundle” of HRM practice (Boselie et al., 2005), are:cquisition and selection, salary system, rewarding and educa-ion and development of employees. According to universalisticerspective, there is strong statistical evidence that these fourctivities are also the most important for hotel companies, whileot presuming any other factors which could affect the said link.fter a huge amount of research in this field, and considering var-

ous impacts to improve the theory, there is still a need to answerhe unresolved question of what combination of practices are likelyo have the greater impact on performance and other outcomesGuest, 2011). Although it is considered that we have moved farway from the universalistic approach, in this study it is first tested

hrough the hypothesis to determine the existence/absence of theirect link, such as the list of current and perceived (implemented)RM activities in the hotel business context:

rces management hotel companies’ performance.

H1. There is a positive link between HRM practice and hotel com-pany performance.

The Croatian hotel industry is marked by the process of privati-sation and it takes place in hotels which have between 100 and 200rooms, mostly constructed in the 60’s and 70’s, intended for a mass,non-differentiated market (Cizmar, 2009). It is not “standardised”,i.e. hotel companies are specific by their versatile and complexportfolio (they have more hotel facilities, but also campsites, andhuman resources related policies and decisions are delivered atthe level of the whole company and not at the level of individualhotel facilities). International hotel brands are present in Croatia ina considerably lesser measure (15% of total hotel capacities) in com-parison with the European hotel market (where approximately 1/3of hotels are branded) and especially with the developed marketsof North America and Asia, which directs focus towards owner-ship structure. Detachment of management from ownership leadsto agency problems as management focuses on longer-term busi-ness performance with the emphasis on relationships with guests,while owners are focused on short-term payments and investmentreturns (Guillet and Mattila 2010), which is the reason why own-ership is an important contingency aspect tested by the secondhypothesis:

H2. HRM key activities in hotel companies vary in relation to thehotel company ownership.

Only large hotel companies can allow themselves to experi-ment with HRM practice (Hoque, 1999) and, if we consider that

M.D. Ruzic / International Journal of Hospitality Management 49 (2015) 56–65 59

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RM practice will not have the same effectiveness in a hotel com-any with fifty, five hundred or five thousand employees, the thirdypothesis is:

3. HRM key activities in hotel companies vary in relation to hotelompany size.

.3. AMO framework and Resource Based View in HRMractice-company performance link

RBV (Barney, 1991) is focused on the competitive advantagef a company in the application of a bundle of valuable, tangibler intangible resources at the firm’s disposal. Identification of theompany’s potential key resources and evaluation of their valuable,are, inimitable and non-substitutable resources are core settingsor the theory. From the HRM point of view, it is an importantheory, because it sees human potentials as a base for companyompetitiveness, but it is necessary to be cautious, because HRMannot be a source of competitiveness until HRM activity can bemitable (Wright et al., 1994). AMO framework is an extension ofBV theory, according to which employees perform well when they) can do the job because they possess the necessary knowledgend skills – they are able to do so – (A = Abilities); (b) will do the jobecause they want to and are adequately incentivised – they havehe motivation to do so – (M = motivation); (c) their work environ-

ent provides the necessary support and avenues for expression (O = opportunity to participate). These theories, by focusing onmployees and identification of their potentials and investment inhem, try to explain mediating variables through which the com-ination of HRM activities shapes employees’ individual and groupharacteristics which influence the organisational performance.

The majority of the set models are based on the presumptionhat “better” HRM activities result in more skilled, motivated, sat-sfied, loyal and more productive employees who contribute to therganisation’s efficiency. Among the mediating variables, whichresume the mental and emotional states of employees, particu-

arly significant are the ones which relate to: employee wellbeing,fficient hierarchical relationship, estimated organisational sup-ort, fairness, motivation, work satisfaction, work dedication andrganisational climate (Patterson et al., 2007). The combination ofmployee satisfaction and their competency form a base for the

uality of service. When employees are immersed in their work and

ocused on their customers (i.e. engagement), they have a higherrobability to bring in profit (Xanthopoulou et al., 2009). Engagedmployees who are in direct contact with guests contribute to a

lation in the research.

better perception of guest service quality (Salanova et al., 2005)and have (fully mediated) effects of HPWPs on job performance andextra-role customer service of hotel frontline employees (Karatepe,2013). They have a high level of energy during their work perfor-mance, have a desire to put additional effort into work performanceand are fully involved in the work, feeling importance, euphoria andinspiration (Schaufeli et al., 2002) which is the reason why engage-ment in this study is treated as an important segment of HRMresults in the hotel business environment, along with employeeskills, behaviour and attitudes. Employee skills include employeecompetency for work, cooperation between the management andemployees and cooperation among employees and, although com-petencies are a basis for performance, they are not sufficient foradvancement of organisational performance if employees do notcooperate among themselves. (Lopez et al., 2005, according toKatou, 2008). Employee attitudesin research include the grades foremployee motivation, loyalty and their satisfaction with their work,while behaviour includes their willingness to give extra effort andto work in other positions in the company. Considering that, inHRM research, motives and commitment of the workforce havebeen under-theorised (Guest, 2011); the fourth hypothesis is set todetermine whether HRM activities contribute to development atan individual level and in what measure:

H4. HRM practice influences HRM results measured at the individ-ual level (employee engagement, skills, behaviour, and attitude).

The hotel business labour market is marked by employmentinstability, evidenced by the high rate of voluntary turnover.Employees are mainly of a younger age and they are paid 75% lesscompared to all industry average (Lee-Ross and Pryce, 2010). Thedifficulties of HRM in the hotel business are related to the poorinternal labour market which is particularly important for an opti-mal recruitment of the seasonal work force and the challenge ofemployee career development, as the system is based more on workpositions rather than on a career, large fluctuations, negative imageof working in tourism, insufficient investment in employee trainingand insufficient care of the employees. The problem is also in slowemployee recruitment and a relatively fast “loss” of employees. Inthat context, employee loyalty is taken to objectively measure HRMperformance at the company level. It is presumed that, with suc-

cessful HRM practice, greater employee loyalty will be achieved, i.e.,lower rates of absence, larger number of years of employees’ stay-ing in the company and lower rates of deliberate turnover, whichare tested by the fifth hypothesis:

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5. There is a positive link between HRM results measured atndividual level and HRM results measured at organisational level.

As a core model in the service sector, “service profit chain”Heskett et al., 1994) is considered and partially integrated into theheoretical model of this study. It emphasises that profit and growthre stimulated primarily by customer loyalty, which is seen as airect result of customer satisfaction. Satisfaction is influenced byhe value of services provided to customers and value is created byatisfied, loyal and productive employees. Employee satisfaction, inurn, results primarily from high-quality support services and poli-ies that enable employees to deliver results to customers. Yee et al.2010) empirically tested “service profit chain” and reached theonclusion that, employee loyalty is linked with quality of service,hich in turn impacts customer satisfaction and loyalty, ultimately

eading to company profitability. Employee loyalty is driven bynthusiasm and satisfaction which are, according to the theoret-cal model of this research, direct results of HRM practice. The sixthypothesis is set to test whether employee loyalty driven by enthu-iasm and satisfaction mediates in the relationship between HRMractice and hotel companies’ financial performance:

6. HRM results measured at individual and organisational levelositively mediates in the relationship between HRM practice andotel companies’ financial performance.

. Method

.1. Sample and procedure

This is confirmation – descriptive research in which a universal-stic, contingency and configurational approach and principles ofBV and AMO framework are tested in the hotel business context.he purpose of empirical research is to collect data on the func-ioning of HR practice in hotel companies and the satisfaction ofts end-users (employees). In the segment of HRM results (perfor-

ance) measurement, triangulation was carried out (Chow et al.,008., Jabbour et al., 2010) which combines different methods (sur-ey, interview and secondary data) and different sources of dataollection (HR managers and hotel company employees), which iseen in Fig. 2.

Statistical units of research are hotel companies in Croatia withver 5 employees. In 2012, there were 93 active hotel companiesRegister of legal entities of the Croatian Economic Chamber).

The first step refers to interviews with employees and HR man-gers of the hotel companies about their perceptions of HRM withinheir hotel organisation. The second step was the implementationf a pilot project aimed at testing the questionnaire intended formployees of hotel companies, which was carried out in the secondargest (by income) hotel company situated in Istria (north Adriaticegion). The 682 collected questionnaires were used to assess thealidity of the questionnaires themselves.

The final questionnaire sample for HRM managers is 32, whichepresents a return rate of 34.4%. Considering the complexity of theesearch, hotel business seasonality and that, in surveys by postnd Internet, the return rate is usually 30% (Tkalac Vercic et al.,010), in the field of HRM practice – organisational performance

ink in general is 43.3% (Erras, 2002) and in the hotel sector is 37.1%Hoque, 1999), the return rate of this survey is acceptable.

In the sample, companies which employ between 101 and 200ersons dominate (30% of them) followed by hotel companieshich employ between 50 and 100 persons (22% of them), whose

ajority ownership is domestic and private (46%) and which form a

art of the Adriatic region (80.7%). Women dominate in HRM posi-ions, making up 67% of the sample. The average age of this groupf HRM managers is 42 years.

ality Management 49 (2015) 56–65

Leading to the conclusion that it is more important whoresponded to the questionnaire, than how many responded(Huselid and Becker, 2000), this study included employee assess-ments. HR managers were asked to share the questionnaire withinthe hotel company in order to determine the functioning of HRMby employees and the study encountered “obstacles on the ground”because HR in Croatian hotel companies did not accept well the factthat employees evaluate their work, they did not accept that thebest research is driven by an “outsider” and they insisted that theirworkers do not “bother” with questionnaires during the season.The intention was to include in the sample even those employeeswho are employed for a specific summer period who “justified”themselves by saying that they do not know much about the hotelcompany.

The final sample of hotel company employees is 424, of whichhalf is made up of women. Despite the given choice related to thecompletion of personal data, the majority of workers who make upthe sample, have offered such data. Operating level staff dominate(31.4%) and a significantly smaller proportion is of employees ofmedium (7.8%) and senior management (0.7%). The average age ofemployees in the sample is around 40 years, and the average lengthof services is 14 years. By educational level the sample is dominatedby workers with secondary vocational education (33.9%).

3.2. Measures

The first research instrument intended for HRM managers isused for collection of: (1) quantitative and qualitative data on HRMactivities (according to Phillips, 1996; Poloski 2003; Katou, 2008;Tadic 2011), (2) HRM results at an individual level ((skills, attitudesand behaviour) (according to Katou, 2008)) and (3) HRM results atan organisational level ((consequences of employees’ loyalty to thehotel organisation) (according to Phillips, 1996)). It is divided intoeight parts:

The first part – 12 nominal questions related to HRM in generalwithin the hotel company (role, importance, position). The secondpart – 38 questions of interval character embodied in Likert-typescale with five levels of agreement with statements (1 = stronglydisagree, 5 = strongly agree) about the quality/performance of HRMpractice. The third part – 11 questions of interval character embod-ied in Likert-type scale with five levels of expression about the set ofskills, attitudes and behaviour. The fourth part – 23 open questionsabout quantitative indicators of HRM activities, which are accord-ing to Philips (1996), adjusted to the Croatian hotel sector. The fifthpart – 5 questions of interval character of agreement with state-ments (1 = never, 5 = always) about the reasons for turnover. Thesixth part – 5 open questions about gender, education and totalnumber of employees in the hotel company. The seventh part – 6questions about ownership, legal status, business portfolio, loca-tion, existence of unions and ISO standards. The eighth part – 6questions about the socio-demographic data of HR managers.

The second research instrument intended for hotel companies’employees is used for collection of: (1) performance grade for HRMactivities at individual level and (2) data for assessment of theirengagement at work. Employees are generally not familiar with thework of HRM and therefore they are not competent to evaluate thesuccess of HRM, so it was thought to be more appropriate to assesstheir satisfaction with the way HRM performance measurementactivities were carried out. All questions (38) from this group areof interval character shaped in Likert-type scale with five levels ofexpression of satisfaction (1 = very dissatisfied, 5 = very satisfied),adjusted to employees’ questionnaires by Poloski (2003), Katou

(2008) and Ghebregiorgis and Karsten (2007) and represent the firstpart of the questionnaire. The second part consists of 23 questionsof interval character embodied in Likert-type scale with five lev-els of expression about the degree of engagement in the workplace

M.D. Ruzic / International Journal of Hospitality Management 49 (2015) 56–65 61

Table 1Statistical method used for hypothesis testing.

Hp Statistical methods

H1 1) Calculation of five year average of financial indicators for each hotel company in sample2) Pearson and Spearman correlation between independent and dependent variables3) Factor analysis for dependent and independent variable, in which the method of principal components was applied, and to obtain final factors withVarimax rotation4) Hierarchical multiple regression analysis where variable location represents control variable

H2 1) The method of analysis of the variance of control variable significance (location),H3 2) Determination of existence of connection between independent and dependent variables, with the control variable of hotel companies’ locations,

using the regression analysis,3) Determination of moderator effect of variables ownership and hotel company size on the link of HRM key activities and the hotel companyperformance factors, using the interaction method (by determination of main effects of relationships between independent and dependent variable,separately at different levels of the moderator variable)

H4 1) Spearman correlation between independent and dependent variableH5 2) Factor analysis for dependent and independent variable, in which the method of principal components was applied, and to obtain final factors

Varimax rotation3) Hierarchical multiple regression analysis where variable location represents control variable

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H6 1) Determination of path diagram to represent assumed theory2) Development of causal scheme (selection of variable prioriti3) Determination of direct and indirect effects

1 = strongly disagree, 5 = strongly agree), all according to Schaufelind Bakker (2003) and UWES – Utrecht Work Engagement Scale.he third part consisted of 5 questions on the socio-demographicata of respondents that is indicated they were not required to fillut, or they could fill out as desired.

.3. Data analysis

Pearson correlation coefficients for quantitative variables andpearman coefficients for qualitative variables and multivariatenalysis (factor analysis, hierarchical multiple regression and pathnalysis) are statistical methods used by the Statistical Packageor the Social Science (SPSS 17.0) and LISREL 8.8. for data analysis.actor analysis is used for reduction of huge numbers of variableso a smaller number of key variables (factors), while hierarchical

ultiple regression is used to determine the impact of factorisedndependent variables on dependent variables at the two levels; onhe first one is a control variable and on the second level is an inde-endent variable. For testing configurational approach, the methodf Structural Equation Modelling (SEM) is usually used (Katou,008; Katou and Budhwar, 2010), but here the crucial prerequi-ite concerning ratio of variables and size sample (Loncaric, 2009)or using SEM is not satisfied so, for testing the mediating effectsn the model, the path analysis was used. Path analysis is a sim-le extension of regression analysis which includes theory drivenodelling of direct and indirect impacts (Halmi, 2003). Steps of

tatistical analysis for hypothesis testing are summarised in Table 1.

. Results

Empirical testing of the theoretical model resulted in 9 multi-riteria models which show key HRM activities for hotel companies’nancial performance, employee engagement, employee motiva-

ion and cooperation with management, their loyalty and skills andverage rate of absenteeism. Testing the first hypothesis resultedn four models:

Contribution of HRM actual activities to profit margins accord-ing to the equation: y = 0.355–1.51 × 10−5x1–0.056x2, wherey = profit margin, x1 = total recruitment costs and x2 = staff growthrate.Contribution of HRM actual activities to high profit and low

indebtedness: y = −0.391 + 0.082x1, where y = high profit and lowindebtedness and x1 = benefit cost share in total salaries.Contribution of HRM perceived activities by hotel com-pany employees to high profit and low indebtedness:

y = 0.626 + 0.161x1, where y = high profit and low indebtednessand x1 = satisfaction with development and recruitment.

• Impact of HRM perceived activities by hotel company staff onprofit margin: y = 0.195–0.227x1, where y = profit margin andx1 = satisfaction with rewarding and retention.

Given that, in direct relationships of HRM practice (actual andperceived) and hotel company financial performance, negativelinks dominate (of which there are three as opposed to two positivelinks), H1 is not accepted, but universalist approach is confirmed.

For testing the second and third hypotheses, ownership andhotel company size were taken into consideration as moderatorvariables. Neither hypotheses (H2 and H3) are accepted, becauseHRM key activities do not differ in respect of whether a hotel com-pany is in domestic private ownership, domestic state ownership orforeign private ownership (F = 0.435, p = 0.651, F = 0.170, p = 0.983,F = 0.830, p = 0.446) and HRM key activities do not differ by the cri-terion of hotel company size. In other words, in both middle sizeand large hotel companies, the activities of: (1) total cost of staffrecruitment, (2) growth rate, (3) average annual number of hourswhich professional support employees spend in further educationand (4) share of cost of benefits in total salaries equally contribute tohotel company financial performance (F = 2.141, p = 0.154, F = 0.056,p = 0.815; F = 0.302, p = 0.587). The quoted factor does not even havea moderator effect on the link between HRM activities and hotelcompany performance, but ownership structure has a moderat-ing effect on the relationship between two actual HRM activitiesand hotel company performance ((average annual number of hoursemployees spend in further education in order to provide profes-sional support and profit margin and growth rate and profit margin)(B = 0.112, t = 4.088, p = 0.003)), namely in privately owned foreigncompanies, which confirms the contingency approach to measure-ment.

Testing the fourth hypothesis, where HRM practice (actual andperceived) is an independent variable and HRM results (employeeengagement, skills, attitudes and behaviour) is a dependent vari-able, resulted in four models:

• Impact of HRM perceived activities by hotel companyemployees and HR managers on employee engage-ment: y = 0.26–0.228x1 + 0.161x2 + 0.365x3 + 0.308x4, where

y = employee engagement, x1 = recruitment performance,x2 = development performance, x3 = satisfaction with reward-ing and retention, x4 = satisfaction with development andrecruitment.

62 M.D. Ruzic / International Journal of Hospitality Management 49 (2015) 56–65

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Fig. 3. Whole m

Impact of HRM actual and perceived activities byhotel company employees and HR managers onemployee motivation and cooperation with management:y = 0.534–2.69 × 10−6x1–0.035x2 + 0.01x3 + 0.614x4 + 0.404x5,where y = employee motivation and cooperation with manage-ment, x1 = total recruitment costs, x2 = benefit cost share in totalsalaries, x3 = average annual number of hours of professionalsupport employee spent in further education, x4 = developmentperformance and x5 = rewarding performance.Impact of HRM actual and perceived activities by hotel com-pany employees and HR managers on employee loyalty:y = −0.453–5.74 × 10−6x1–0.017x + 0.577x3–0.353x4–0.078x5,where y = employee loyalty, x1 = total recruitment costs,x2 = benefit cost share in total salaries, x3 = recruitment per-formance, x4 = rewarding performance and x5 = satisfaction withrewarding and retention.Impact of HRM actual and perceived activities by hotelcompany employees and HR managers on staff skills:y = 0.901 + 7.71 × 10−6x1–0.04x2 + 0.413x3–0.019 x4 wherey = staff skills, x1 = total recruitment costs, x2 = growth rate,x3 = recruitment performance and x4 = satisfaction withrewarding and retention.

As many as 18 statistically important links were determinedetween HRM practice and HRM results at the individual level, dueo which it can be concluded that HRM practice considerably affects

f path analysis.

HRM results, measured at the individual level, which represents anargument that H4 be accepted and which confirms the resourcebased view theory.

Testing the fifth hypothesis where HRM results at individuallevel (employee engagement, skills, attitudes and behaviour) is adependent variable and HRM results at organisational level (con-sequence of employee loyalty) is a dependent variable resulted inone model:

• Impact of employee engagement on average absenteeism rate:y = 2428.071–370.771x1, where y = average absenteeism rate andx1 = employee engagement.

Out of 12 tested relationships between HRM at the individuallevel and HRM at the organisational level, there is only one, statis-tically significant, negative relationship, so H5 is not accepted, butthis model confirms the AMO framework.

The sixth hypothesis was testing mediating links in the theoret-ical model. First, the validity of the set theoretical model (Fig. 1)confirmed positive matrix coefficients (Fig. 3)

Mediating links were tested within the set model (a full medi-

ating model was created), where the outcome is equal to the one intesting of the first empirical model → negative values of covariancematrix structures, which additionally confirmed the non-existenceof mediating links in this theoretical model. Mediating effects were

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ot determined using the path analysis, so H6 is not accepted andonfigurational approach is not confirmed.

. Discussion

.1. Assessment of findings

Three HRM indicators (total cost of employee recruitment,rowth rate and share of cost of benefits in total salaries), forhich the statistical link with hotel company financial performance

as been determined, have the same effect (positive or negative),egardless of hotel company ownership and size, which confirmshe universalist approach. Increasing cost of employee recruitmentnd number of new employees will not resulted with profit mar-in increasing, which should be taken as a signal that recruitmenthould be systematic and planned, especially in hotel companieshat have ad hoc recruitment process before opening some hotelswhich is case in Croatia). On the other hand, if a benefit costhare in salaries increases (outlays for meals, annual leave contri-utions, Christmas bonuses, travel expenses, separation allowance,tc., on top of employee basic salary) and if employees become moreatisfied with development and recruitment activities, the hotelompany will record higher profits and lower indebtedness. Givenhat employees in Croatian hotel companies are moderately satis-ed (average grade = 2.62) with investment in their education andevelopment (Poloski Vokic, 2008), the focus should be on thoseery HRM activities.

According to Li et al., (2012), the work engagement medi-ted relationship between leader–member exchange (LMX) andmployee job performance and HRM consistency strengthened thenfluence of LMX on work engagement. In this study, a direct impactf the quality of HRM activities on employee engagement is con-rmed, which is in line with a part of the JD-R model (Bakkernd Demerouti, 2007), according to which positive working condi-ions (e.g. career opportunities, supervisory support, skill variety)re job resources that influence on reduction of job demands andoster work engagement. The better quality implementation ofevelopmental activities by HR managers, i.e. the better organ-

sed educational system and the more satisfied hotel companymployees with the implemented rewarding and retention activi-ies and with development and recruitment activities, the greaterheir engagement. The results of impacts on engagement are impor-ant in this hotel context if we take into account that Karatepend Olugbade (2009) results point to the fact that supervisor sup-ort had significant effects on work engagement and that empiricaltudies about employee engagement conducted in the developed

estern countries cannot be fully generalised for other culturalettings/developing countries. Retention activities need to be paiddditional attention; also if we consider that employees of youngerenerations have a lower level of work engagement than do olderenerations and that the effects of work engagement on turnoverere significantly moderated by generational differences (Park andursoy, 2012) and that, according to this study, by the increase inmployee engagement, a reduction in the average absenteeism rateill occur at the hotel company level, which is in line with AMO

ramework.Furthermore, the cost of staff recruitment and benefits in the

otel business is not a guarantee of greater employee satisfac-ion and motivation, nor is it a guarantee of better collaborationith superiors and management. At the same time, this points

o the fact that costs associated with people should be system-

tically planned and that there is a need to give consideration toeward strategies. These results point to the need to, in future anal-ses, research which reward strategies are more important for theotel business – material or non-material? Additionally, it has been

ality Management 49 (2015) 56–65 63

evidenced that the increase in the number of annual hours spentin supplementary education of professional support employeesand a better quality implementation of the employee developmentand rewarding activities by HR managers (e.g. matching of salarieswith work demands and responsibilities, equality in the system ofemployee participation in the ownership, rewarding based on indi-vidual performance and fairness) has a positive effect on employeemotivation and their collaboration with the management, which isin line with RBV theory.

It was shown that the increase in the costs associated withemployee recruitment and their benefits, as well as of those of rais-ing the performance levels of rewarding and retention activitiesnegatively affect employee loyalty, while the factor of recruitmentperformance proved to be the only one which contributes to animprovement in the level of loyalty. Long-term employment in ahotel company is perhaps a consequence of the situation in thelabour market (unemployment rate), generation dominance (theaverage age of the employees from the sample is 40 years), as wellas the degree of education (secondary vocational education), due towhich employees are somewhat reluctant to change the organisa-tion. All of this points to the need to research the reasons for hotelcompany employee loyalty and motivation in greater detail.

The hotel company location by sample showed as a significantcontrol variable, where it was determined that hotel companies inthe Adriatic region have lower results related to profits and higherinvestment results, lower profit margins, a higher employee growthrate, lower values concerning motivation factors and cooperationbetween employees and management, a higher fluctuation rate andtheir employees have a higher level of loyalty to the company anda higher level of engagement. In the hotel companies in the con-tinental region, a higher level of competence of employees, whoare prepared to cooperate with their colleagues, can be expected,which confirms the contingency approach.

5.2. Limitations and avenue for future research

There are several theoretical and empirical limitations in thisstudy. The first limitation refers to the research width that includesextensive and complex concepts of HRM and hotel company per-formance. There are various factors that influence hotel companyperformance, so this study represents a narrower segment ofresearch. Resource based view and AMO framework are tested atindividual levels where the impact on hotel company competi-tiveness was not an issue and it could be said that testing thistheory in the hotel business context “fell into the trap” of a pos-itivism frame. Employee behaviour and the HRM impact on it areanalysed in a quantitative sense, without understanding the mean-ing and consequences of that behaviour (Truss, 2002). For furtherresearch, the recommendation is to set different research con-figuration, e.g., from a critical realism philosophy point of view,while testing elements of the theory of organisational citizenshipbehaviour and attribution theory. Research of HRM practice-hotelcompany performance link should be focused on “depth” ratherthan “(quantitative) width” like this study. The recommendation isto repeat this research and, for gathering of data, carry out moreinterviews and focus groups with HR managers and employees. InCroatian hotel companies HRM does not have a strategic role, so it isreduced to four key activities, which is second theoretical limitingfactor for full HRM profile analysis in a hotel company. The recom-mendation is to cover the full range of HRM activities in furtherresearch.

The third limitation refers to an absence of vertical integration,which includes the impact on business strategy and the impactof HRM strategies and policies as an important factor of contin-gency theory. For further quantitative study, the recommendation

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s to apply multi-level analysis, which will include the corporateevel (strategic perspective), the organisation level (HRM results)nd the individual level (line managers, employees and guests). Fornderstanding the contributions of HRM results to hotel companyerformance, further theoretical models should also incorporateervice-profit chain element and employees’ engagement modellements with a special focus on employees’ motives, values andehaviour.

The fourth, methodological limitations refer to: (a) cross-ectional research design where there is no possibility to makeonclusions in terms of causality, (b) sample size of HR managershich was a limiting factor for some statistical methods and (c)

he method of data collection. The recommendation is, in furthertudies, to use longitudinal data for testing the relationships andathering data directly from hotel company employees. Finally,esting the theoretical model of this study with large sample sizesn different hotel business sectors (e.g. with more internationalhains, where HRM departments are developed and have an impor-ant role) would bring new insights for further discussion on theonfigurational approach to measurement and “black box” in theotel sector context.

. Conclusion

The key conclusion is that, in a hotel environment, HRM directlyontributes to the HRM result performance, both at individual andrganisational levels, as well as to hotel company financial per-ormance. The validity of the set multi-level theoretical model isested and confirmed at the level of direct links, which confirmedhe universalist approach to measurement and the moderator effectf ownership structure, as well as the results obtained by testingf hotel company location, as a control variable, which confirmedhe contingency approach. The mediating effects in the link areot determined and the validity of the configurational approacho measurement is not confirmed by this study, which cannot beeneralised and it should be tested on a larger sample. Differentctual (increase of average number of hours of further educa-ion of professional support staff) and perceived HRM activitiesquality implementation of employee development activities anduality system of employee rewarding) affect the factors calledotivation and cooperation between employees and management,

mployee loyalty and their skills, by which the RBV postulates areonfirmed. The direct effects of HRM practice (successfully imple-ented development activities, employees’ satisfaction with the

ctivities of rewarding and development and employees’ satisfac-ion with development and recruitment) on individual employeeerformance are confirmed, as well as the fact that employeengagement affects the aggregate absenteeism rate, by which theMO framework is confirmed. After hundreds of researches of HRMractice-organisational performance link, we still have to go backo basic questions, especially if we do research in the hotel busi-ess environment, as was done in this study. The development ofhe “new” theories is like stacking an academic puzzle picture – its a complex and time-consuming process. This study might help intacking the pieces of the complex “black box” picture in the hotelector.

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