The Effect of HR Policies on CSR: The Complementary Role of HRM Effectiveness.

Abstract

HRM plays a significant role in how CSR is understood, developed, and enacted. This study aimed to investigate the relationship between human resource management (HRM) policies, Corporate Social Responsibilities (CSR), and the complementary role of HRM Effectiveness in the Financial industry of Pakistan. For this, we proposed a theoretical framework, hypothesizing a positive effect on HR policies on CSR in the presence of effective HRM implementation as HRM practices do not necessarily lead to effective HRM implementation. HRM policies included Recruitment & Selection, Performance Appraisal, and Compensation & Reward. Empirical validity was established by conducting a survey using a close-ended questionnaire. Data was collected from 400 employees working in the financial sector of Pakistan and analyzed using confirmatory factor analysis and structured equation modeling. The result shows that there is a significant effect of Recruitment & Selection and Performance Appraisal & Management on CSR, but showing the insignificant effect of Reward & Pay Systems on CSR. Finding has also suggested that there is the insignificant moderate effect of HR policies (Recruitment & Selection, Performance Appraisal & Management and Reward & Pay Systems) on CSR, but result indicates that there is a positive effect of HRM Effectiveness on CSR. We found a limited knowledge among organizations and employees regarding HRM Effectiveness in Pakistan, which can be easily overcome by the learning process.