See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/229930654

The strength of HR practices in India and their effects on employee career

success, performance, and potential

Article  in  Human Resource Management · May 2010

DOI: 10.1002/hrm.20361

CITATIONS READS
98 15,606

3 authors, including:

Stephen A. Stumpf Jonathan P. Doh

131 PUBLICATIONS   4,385 CITATIONS   

Villanova University
187 PUBLICATIONS   10,667 CITATIONS   
SEE PROFILE
SEE PROFILE

Some of the authors of this publication are also working on these related projects:

An Assessment of the Role of Latin America in the Core International Business Literature View project

Student Evaluations View project

All content following this page was uploaded by Stephen A. Stumpf on 21 December 2017.

The user has requested enhancement of the downloaded file.

 THE STRENGTH OF HR PRACTICES
IN INDIA AND THEIR EFFECTS
ON EMPLOYEE CAREER SUCCESS,
PERFORMANCE, AND POTENTIAL
S T E P H E N A . S T U M P F, J O N AT H A N P. D O H , A N D
W A LT E R G . T Y M O N , J R .

This study explores the role of HR practices for individual and organizational
success via a survey of 4,811 employees from 32 units of 28 companies op-
erating in India. We report on employee perceptions of the effectiveness of
three specific human resource practices within their firms and the relation-
ship of these practices to career success, performance, and potential. Compa-
nies operating in India appear to be creating strong human resource climates
based on structured HR practices in performance management, professional
development, and normalized performance ratings. The perceived effective-
ness of these HR practices influences employees’ perceptions of career suc-
cess and, to a lesser extent, organizationally rated performance and potential.
We report differences in perceptions of HR practices among national, interna-
tional, and global companies and among the industries of information tech-
nology (IT), manufacturing, and services. The relationship to perceived HR
practices and outcomes was partially contingent on firm geographic scope
and industry sector. Implications for research and practice are discussed.
© 2010 Wiley Periodicals, Inc.

Keywords: India, HR practices, employee success, performance, potential,

emerging markets

Introduction contexts. In the realm of HRM, as Western

companies enter and expand in dynamic
s Brazil, Russia, India, and China—

A
the “BRIC” economies—and other
emerging markets grow and inte-
grate into the global marketplace,
management practices from com-
panies in the more developed world are
transferred and adapted to these country
markets, competition is keen for attracting,
developing, and using talent. Companies
often seek competitive advantage by leverag-
ing their understandings of links between
HRM and firm performance (Bowen & Os-
troff, 2004; Burton, Lauridsen, & Obel, 2004;
Corporate Executive Board, 2006; Fulmer,

Correspondence to: Stephen A. Stumpf, Villanova School of Business, 800 Lancaster Avenue, Villanova, PA 19085,
Phone: 610-519-5639, Fax: 610-519-6566, E-mail: steve.stumpf@villanova.edu.

Human Resource Management, May–June 2010, Vol. 49, No. 3, Pp. 353– 375
© 2010 Wiley Periodicals, Inc.
Published online in Wiley InterScience (www.interscience.wiley.com).
DOI: 10.1002/hrm.20361
354 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
Gerhart, & Scott, 2003; Gelade & Ivery, 2003).
In a recent non-Western study, Katou and
Budhwar (2007) found support for HRM
“best practices” and concluded that organiza-
tional performance requires decision making
that focuses on HR as a source of competitive
advantage. Many companies use the same HR
practices in different geographic markets be-
lieving that such practices, and the work cli-
mate that these practices partially create,
help attract and retain employees,
The resulting cause employees to have positive
attitudes, and increase employee
landscape performance (Neal, West, & Pat-
terson, 2005; Patterson, Warr, &
of national,
West, 2004; Rogg, Schmidt, Shull,
international, and & Schmitt, 2001).
India is an exemplar among
global organizations emerging markets in its economic
liberalization, dynamic growth,
creates a rich
and integration of foreign and
setting to explore domestic business activity. Yet it
remains the poorest of the BRIC
the “strength of countries with per capita GDP of
$1,000 (Budhwar, 2001a; Eco-
the HRM system,” nomic Intelligence Unit, 2008).
defined by Bowen Fueled by the boom in the service
sector, India has received rapidly
and Ostroff (2004) increasing levels of foreign direct
investment (FDI; Economic Intel-
as the extent to ligence Unit, 2008). The resulting
landscape of national, interna-
which “individuals
tional, and global organizations
share a common creates a rich setting to explore
the “strength of the HRM system,”
interpretation of defined by Bowen and Ostroff
(2004) as the extent to which “in-
what behaviors
dividuals share a common inter-
are expected and pretation of what behaviors are
expected and rewarded” (p. 203).
rewarded” (p. 203). Academic research and practi-
tioner reports have suggested that
HR practices tend to be less insti-
tutionalized, less structured, and less impact-
ful in developing countries (Yeung, Warner,
& Rowley, 2008). Despite institutional pres-
sures to adopt global HRM systems, reasons
exist to expect variation among the national-
ity (e.g., Sparrow & Budhwar, 1997) and
scope of firms regarding the extent to which
they create a strong organizational climate
through HR practices that affects employee
career success, job performance, and poten-
tial for advancement.
To address the strength of the HRM sys-
tem and climate created, we focus on the ex-
tent to which employees commonly interpret
three HR practices: performance manage-
ment, professional development, and nor-
malization of ratings (Bowen & Ostroff, 2004;
Bretz, Milkovich, & Read, 1992; Lado & Wil-
son, 1994; Tsui, Pearce, Porter, & Tripoli,
1997). Performance management includes
setting goals, establishing fair standards and
measures of performance, applying those
standards transparently and objectively, and
providing recognition and timely feedback
for improvement. Professional development
includes opportunities for enabling employ-
ees to develop through training and job as-
signments, linking performance management
to development opportunities, and using
high potential programs for talent develop-
ment and retention. Forced ranking and nor-
malization of employee performance involve
differentiating employees’ relative contribu-
tions to motivate them to excel and to retain
the best talent.
This research explores employee percep-
tions of what behaviors are expected and re-
warded based on the firm’s performance
management, professional development, and
normalization practices. In doing so, we ad-
dress three research questions: (1) To what
extent are these HR practices perceived as ef-
fective, thereby creating a strong HR system?
(2) What impact does a strong HR system
have on employee perceptions of their career
success and on employer ratings of employee
performance and potential for higher-level
positions? (3) Does the strength of the HR
system and its effects vary by firm geographic
scope (national/international/global) or in-
dustry sector?
The Indian Context
India’s Economic Situation
With a population of more than 1.1 billion
and growth rate of 8% per year, India has
been one of the most dynamic economies in
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES
the world.1 This has attracted MNCs to invest
in many industry sectors, from infrastructure
to pharmaceuticals, and from automotive to
financial services. The fact that many Indian
people speak English and are well educated
makes India especially attractive to U.S. and
British firms. Given the high levels of British
and American FDI and colonial influence, it
is reasonable to expect that despite its low per
capita income, India would be relatively ad-
vanced with regard to HRM systems and HR
practices.
India was one of the first large, impover-
ished countries to choose a democratic gov-
ernment and to give priority to developing
technical skills via state-of-the-art education
(Sen, 2007). The Indian government has also
provided funds and incentives for economic
development, adding to the attractiveness of
this market to MNCs. Many firms have re-
sponded to this positive business climate by
increasing their activity in India. For exam-
ple, IBM’s Indian workforce increased from
9,000 in 2004 to nearly 50,000 in 2007. GE
spun off its business process outsourcing
(BPO) to Genpact, India’s largest BPO organi-
zation with nearly 30,000 employees. Accen-
ture expects Indian staffing levels to surpass
its U.S. head count (Mahapatra, 2006).
HRM Challenges in India
This dynamism has created challenges for
HRM. India’s salaries rose rapidly from 2002
to 2007, with increases of more than 15% a
year. Even so, companies have faced attrition
rates of 15% to 30% per year in their labor
force of young professionals. As the demand
for professional talent has increased faster
than supply, the costs of attracting employ-
ees and difficulties in acculturating them
have increased. While long-term growth
should continue, the attrition and accultura-
tion problems may limit the continued suc-
cess of the India model (Rai, 2005).
A growing—but still limited—literature
stream provides insights into the recent evo-
lution of HR in the Indian context. Sparrow
and Budhwar (1997) highlighted the chal-
lenges involved in transferring HR practices
from one country to another. They compared
Human Resource Management DOI: 10.1002/hrm
IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 355
practices in 137 Indian organizations with a
global database of like practices; India emerged
as a “cultural island” in terms of applying
these practices. Budhwar and Sparrow (1997)
also analyzed the levels to which HRM was
integrated into corporate strategy and how
responsibility for HRM devolved to line man-
agers in India. Their analysis revealed that
the integration-development levels of India
were somewhat similar to several European
countries, notably the UK, Italy, and Ger-
many. Budhwar and Khatri (2001) investi-
gated the dominant HRM practices in the In-
dian manufacturing sector using the five
main models of HRM (the “matching model,”
the “Harvard model,” the “contextual model,”
the “5-P model,” and the “European model”).
This research supported that a for-
mal HRM structure exists in the
Indian context. Budhwar (2003) As the demand for
examined employment relations
professional talent
(ER) in Indian organizations, fo-
cusing on the role of manage- has increased faster
ment, unions, and the state. This
study suggested that the competi- than supply, the
tive pressures created by the liber-
costs of attracting
alization of the Indian economy
were causing organizational trans- employees and
formation in general and modern-
ization of human resource prac- difficulties in
tices in particular. Baruch and
acculturating them
Budhwar (2006) found both simi-
larities and differences in the ca- have increased.
reer management systems of firms
operating in both India and Brit-
ain.
Budhwar and Boyne (2004) compared
HRM practices in Indian public- and private-
sector organizations and found somewhat
unexpectedly that many similarities existed
in practices between these two sectors in (1)
the structure of the HR department, (2) the
role of the HR function in corporate change,
(3) recruitment and selection, (4) pay and
benefits, (5) training and development, (6)
employee relations, and (7) emphasis on key
HRM strategies. They also found, however,
that in several HR functional areas (for
example, compensation and training and de-
velopment), Indian private-sector firms have
adopted a more rational approach (e.g., the
356 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
adopting of formal testing of job applicants,
job evaluation, training needs analysis, train-
ing evaluation, and performance-related pay)
than their public-sector counterparts have.
Budhwar, Luthar, and Bhatnagar (2006)
explored the dynamics of business process out-
sourcing (BPO) and its associated HRM prac-
tices. Using a sample of 51 BPO companies in
the New Delhi area, they found that formal
HRM practices were integral to the BPO indus-
try’s success. Saini and Budhwar (2008) ex-
plored how Indian small- and medium-sized
enterprises (SMEs) addressed people manage-
ment issues. They highlighted that indigenous
realities in HRM have surfaced in Indian SMEs
and relate mainly to providing financial, emo-
tional, and social support to the workforce;
employee involvement (EI) practices; recruit-
ing; developing skills; managing employee re-
lations; and managing vis-a-vis labor law. Im-
portant for our analysis of the differences in
global, international, and indigenous compa-
nies, this study indicates that indigenous firms
face unique challenges and must approach
HRM practices accordingly.
Som (2006, 2007) suggested that because
of increasing competition that has resulted
from liberalization, Indian organizations
have adopted HRM practices both critically
and constructively to foster creativity and in-
novation among employees. By way of sum-
mary, Budhwar and Bhatnagar’s (2009) book
provided an overview of HRM practices in
India, including key developments in Indian
HRM, determinants of Indian HRM, sector-
specific HRM, emerging themes, future chal-
lenges, and the way forward.
The challenges of managing talent have
led firms in India to implement HRM systems,
often based on their understanding of the
best practices used in successful MNCs (Bjork-
man & Lu, 2001; Yeung et al., 2008). Local
units of MNCs have been early adopters of
annual performance appraisals, employee de-
velopment programs, and relative (normal-
ized) ranking of performance (Corporate Ex-
ecutive Board, 2006). Large indigenous Indian
organizations are following suit in imple-
menting HRM systems; however, the litera-
ture has suggested that these indigenous firms
often adapt and tailor these practices to the
realities of the Indian context and the chal-
lenging circumstances India faces. This re-
search is designed to understand these prac-
tices and their impact on employee career
success, performance, and potential better.
Employee Perceptions of HR
Practices in India
HR Practices and Performance
Empirical research has suggested that HR
practices have positive effects on employees
and company performance, at least in West-
ern countries (Arthur, 1994; Collins & Clark,
2003; Delaney & Huselid, 1996; Delery &
Doty, 1996; Ferris et al., 1998; Guthrie, 2001;
Huselid, 1995; Ichniowski & Shaw, 1999).
When firms apply HR practices that respond
to their external environment and leverage
internal capabilities, they can achieve supe-
rior performance (Huselid, 1995; Lado & Wil-
son, 1994; Wright & McMahan, 1992).
Devanna, Fombrum, Tichy, and Warren
(1982) argued that HRM is a key element in
implementing strategy. Schuler and Jackson
(1999; Jackson and Schuler, 1995) high-
lighted HR activities, such as performance
appraisals and development programs, as es-
sential to managing people to achieve organi-
zational goals. What is not so clear is whether
these practices yield similar employee and
organizational outcomes in developing and
emerging economies (Parker et al., 2003).
Recent research on BRIC countries has
suggested that differences in HR practices are
significant in their effects on employees.
Gong and Chang (2008) investigated HRM in
the Chinese context, comparing the presence
of HR practices and their impact on perfor-
mance based on ownership and governance
structures. They found that career opportuni-
ties in domestic private firms and Sino-
foreign joint ventures were similar to those in
wholly foreign-owned firms, but greater than
in state-owned firms. Further, they found
that providing for career opportunities was
positively related to employee organizational
commitment, citizenship behaviors, and firm
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES
performance. Additionally, they found that
employment security was greater in state-
owned than in non-state-owned firms. Em-
ployment security was positively related to
employee organizational commitment, but
not to citizenship behaviors or firm perfor-
mance. Similarly, Ngo, Lau, and Foley (2008)
examined HR practices in China to assess
their impact on firm performance and em-
ployee relations. The extent to which HR
practices were adopted was lower in state-
owned enterprises than in foreign-invested
enterprises and privately owned enterprises.
Ngo et al. (2008) also found that HR practices
had positive effects on financial performance,
operational performance, and the employee
relations climate. The moderating effect of
ownership type was significant for financial
performance only.
Singh (2004) surveyed 82 Indian firms
and found a significant relationship between
two HR practices—professional development
and reward systems—and perceived organiza-
tional and market performance. A Corporate
Executive Board (2006) study on HR practices
included 58,000 employees from 90 member
organizations and 10 countries. The study
reported the respondents’ top five ratings of
various practices that enhanced their psycho-
logical commitment to their organization.
Top practices for India were people manage-
ment (14%), recognition (20%), development
opportunities (29%), and meritocracy (10%).
For the United Kingdom top practices were
people management (17%), recognition
(18%), development opportunities (31%),
and meritocracy (16%). For the United States
they were people management (8%), recogni-
tion (7%), development opportunities (18%),
and meritocracy (12%). People management,
recognition, and development opportunities
were more important to employees in India
and the UK than in the U.S., with meritoc-
racy least important in India.
A recent survey of executives in India in-
dicated a strong belief that robust HR prac-
tices in employee development were critical
to building and sustaining the workforce
needed to capitalize on business opportunities
(Malkani, Pandey, & Bhagwati, 2007). HR
Human Resource Management DOI: 10.1002/hrm
IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 357
practices that build workforce talent will de-
termine whether companies are successful in
harnessing India’s demographic dividend
(“India’s Corporations Race,” 2008). For HR
practices to yield tangible benefits to the firm
in terms of employee career success, perfor-
mance, and potential, they must be designed,
executed, and perceived to be effective (Del-
ery & Doty, 1996; Sparrow & Budhwar,
1997).
Consistent with this previous literature,
Budhwar and Debrah (2009) suggested that
future research should focus on factors that
contribute to efficiently managing knowledge
workers. Globalization and competitive pres-
sures are pushing organizations in India to
move toward Western systems.
There has been a trend from col-
lectivism to individualism in India. Further, Gong and
With this shift, we hypothesize
Chang (2008) found
that more individualized HR prac-
tices will influence employee and that providing for
employer assessments of individ-
ual employees—particularly for career opportunities
knowledge workers.
was positively
We hypothesize that HR prac-
tices in India will influence three related to employee
important outcomes—career suc-
cess, employee performance, and organizational
employee potential. Consistent
commitment,
with research in the careers litera-
ture (Hall, 2004; Quigley & Tymon, citizenship
2006), we define career success as
a subjective perception on the behaviors, and firm
employees’ part. For example, ca-
reer success could be the degree to performance.
which an employee feels satisfied
with his or her achievements over the past
two years. It is important to note that career
researchers view employee perceptions of ca-
reer success and objective career success as
interdependent (Arthur, Khapova, &
Wilderom, 2005). In this research, we define
both employee performance and employee
potential as assessments made by a supervi-
sor. This is consistent with an increased em-
phasis on Western systems in India, whereby
individual assessment is viewed as critical to
human resource planning and competitive
success.
358 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
Proposition 1 explores this possibility in
the Indian corporate environment.
Proposition 1: The perceived effectiveness of
performance management, professional devel-
opment, and normalization will be positively
associated with higher employee career success,
performance, and potential.
Firms in India
may experience
HR Practices and
tension between
Performance by Geographic
Footprint
the influence of Yeung et al. (2008) argued that HR
managerial ideas practices are most commonly im-
ported from developed countries
and approaches— to developing countries. They sug-
gested that in the case of Asia,
including “many HR practices were imported
from the West through American
HR—of advanced
or European MNCs, Western busi-
industrialized ness media, and Western business
schools and then diffused to local
countries and the firms” (p. 3). They cited other re-
search that suggested that indige-
persistence of
nous firms, especially large firms,
local norms and have a strong tendency to copy
more progressive management
approaches. practices from organizations that
operate under a similar set of en-
vironmental conditions and insti-
tutional constraints (Bjorkman & Lu, 2001).
Yeung et al. (2008) noted that idiosyncrasies
persist due to variations in political systems,
different stages of economic development,
and cultural differences in Asian countries.
Hence, firms in India may experience tension
between the influence of managerial ideas
and approaches—including HR—of advanced
industrialized countries and the persistence
of local norms and approaches. The HR cli-
mate may well vary based on how the HR
practices are implemented and perceived in
each locale.
Based on this rationale, we expect the HR
practices of firms operating in an emerging
market environment to reflect a combination
of practices imported from the home country
of investing firms and local firms. We expect
that local, indigenous firms will be under
some pressure to create a global HR climate
because such a climate may be attractive to
prospective employees and necessary to re-
tain employees. We also predict variation in
the rate and extent to which global HR prac-
tices are adopted, with global firms creating a
stronger HR climate than local firms do. The
latter will move more slowly or adopt only
select practices.
Building on the limited research on the
extent to which HR practices are effective in
emerging markets and the impact of those
practices on performance, we predict differ-
ences will exist among national (indigenous)
Indian companies, international (Indian
companies that also operate outside of India)
companies, and global (non-Indian multina-
tional companies) companies regarding the
degree to which employees perceive HR prac-
tices to be effective.
Proposition 2: Performance management, profes-
sional development, and normalization will be
perceived as more effective in global firms than in
international or national firms, and more effective
in international firms than in national firms.
HR Practices and Performance by
Industry Sector
Budhwar, Varma, Singh, and Dhar (2006)
called attention to the need for more HRM
research on sector specific differences. Budh-
war, Luthar, et al.’s (2006) finding that formal
HRM practices were integral to the success of
the BPO industry lends credence to this rec-
ommendation. Evidence that suggests the
service sector’s adoption of progressive HR
practices comes from NASSCOM, India’s as-
sociation of software and service providers,
which surveys the HR practices of India’s
BPOs. Cutting-edge HR practices that BPO
firms in India follow are setting standards for
even developed nations because small- and
medium-sized outsourcing companies are
constantly looking to adopt best practices in
performance appraisal and career develop-
ment programs. Such practices make these
firms more attractive to employees in a
fiercely competitive labor market. Consistent
with this, we predict that service company
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES
employees are more likely to perceive a cli-
mate of strong HR practices.
Proposition 3: Performance management, profes-
sional development, and normalization will be
perceived as more effective in services firms ver-
sus manufacturing or other firms.
HR Practices and Performance:
Interactions Among Practices,
Geographic Footprint, and Sector
In Proposition 2, we proposed that HR prac-
tices would be perceived as more effective
in global firms than in international or na-
tional firms, and more effective in interna-
tional firms than in national firms. In
Proposition 3, we proposed that HR prac-
tices would be perceived as more effective
in services firms versus manufacturing or
other firms. We expect that global and ser-
vice firms, as early adopters of progressive
HR practices, will demonstrate the stron-
gest effects; that is, the outcomes from
these practices will be most evident in
global and service firms. We expect these
firms to be furthest along the learning
curve in terms of designing and implement-
ing HR practices; thus, they should be reap-
ing tangible benefits in terms of employee
career success, performance, and potential
(Delery & Doty, 1996; Sparrow & Budhwar,
1997). This is consistent with Budhwar,
Luther, et al.’s (2006) BPO industry finding
that formal HRM practices were integral to
success.
Proposition 4a: The perceived effectiveness of
performance management, professional devel-
opment, and normalization will be positively
associated with higher employee career success,
performance, and potential in global firms than
in international or national firms, and in inter-
national firms than in national firms.
Proposition 4b: The perceived effectiveness of
performance management, professional devel-
opment, and normalization will be positively
associated with higher employee career success,
performance, and potential in services firms than
in manufacturing or other firms.
Human Resource Management DOI: 10.1002/hrm
IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 359
Methods
This research is part of a larger study of In-
dian employee perceptions of their compa-
ny’s HR practices; their motivation and sense
of intrinsic reward; their commitment, satis-
faction, and intentions to leave; and their
organizationally assessed performance and
potential.2 This research involved 28 Indian
companies from five industry groupings:
Business Process Outsourcing (BPO), Infor-
mation Technology (IT), Engineering and
Manufacturing (MFG), Pharmaceuticals
(Pharma), and Banking and Financial Services
(BFSI). The companies included Indian sub-
sidiaries of foreign firms and indigenous
firms. Data were collected from employees
and their companies with the help of a global
HRM talent management-consulting firm.
Employees were randomly identified, and
their participation was voluntary.
Survey Design and Administration
Thirty-five companies in India were invited
to participate; 28 companies totaling 32 sepa-
rate operating entities accepted the invita-
tion. Each company identified a senior man-
ager as a sponsor to oversee the study. The
sponsor identified a stratified random sample
of employees and then invited these employ-
ees to participate via a personalized e-mail.
The sponsor determined the size of each
company’s random sample with the goal of
obtaining at least 40 responses for every
“cell” they might want to examine (e.g., line
of business, gender, age groups, length of ser-
vice, educational attainment, responsibility
level). Employees were directed to the survey
Web site by an e-mail from an independent
vendor, LearningBridge.com, a Web-based
survey design firm. Individuals were assured
the confidentiality of their responses.
Completed surveys were obtained from
4,811 individuals out of the 9,301 invited
(54% response rate). Twelve companies had
response rates above 66%; four were below
30%. An additional 220 people provided par-
tial data, and 672 people logged on to the
survey Web site but did not provide any re-
sponses. Employees could indicate “not ap-
360 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
plicable” if normalized ratings were not prac-
ticed in their organization; 3,377 indicated
that they were. Analyses were conducted to
explore for possible response biases and check
on the reliability and factor structure of the
data. Through interaction effects coding
within multiple regression analysis, it was
possible to assess which companies, if any,
had a response bias in respondents based on
performance ratings. Twenty-three compa-
nies separately provided performance ratings
on all those asked to participate (Cohen &
Cohen, 1983). No response bias was observed
in any of these companies. There was no sig-
nificant difference in performance ratings for
survey respondents versus non-respondents.
Sample Characteristics
Table I reports the demographic characteris-
tics of the sample. We controlled for these
variables in our regression analyses as de-
scribed in the next section.
Measures
Items were worded to reflect an effective HR
practice (e.g., performance management, pro-
fessional development, and normalized rat-
ings), and respondents used a 7-point agree-
ment scale (1 = strongly disagree, 4 = neither
agree nor disagree, 7 = strongly agree) to re-
spond. We conceptualized performance man-
agement and normalized ratings as separate
constructs. In other words, performance man-
agement referred to specific elements of the
system (i.e., goal setting, standards, evalua-
tion, and feedback), while normalized ratings
referred to forced ranking and normalization
itself (e.g., “In my organization the system of
forced ranking and normalization of em-
ployee performance motivates performance”).
Factor analysis supported the conceptualiza-
tion of performance management and nor-
malization as separate factors. Items were
analyzed using principal components factor
analysis with varimax rotation. The Appen-
dix presents the construct categories and the
specific questions related to those constructs
along with the factor analysis results (see Ap-
pendix Table I). Items were retained in their
expected factor based on the magnitude of
the factor loadings. Two items initially ex-
pected to load on performance management
did not and were deleted from the study. In
no instance did a retained item load highly
on two or more constructs. Coefficient alpha
estimates of internal consistency were strong
(.85 to .95; see Table III).
Performance and potential data were ob-
tained directly from each company and inde-
pendent of the survey. Each company spon-
sor was responsible for providing an archival
performance rating and potential for ad-
vancement assessment for each randomly
identified employee who was asked to par-
ticipate in the survey. Performance ratings
were collapsed into a 3-point scale, with 1
being development needed or potential lack-
ing, 2 being acceptable performance or po-
tential, and 3 being exceptional performance
or potential. A 3-point scale was used to make
meaningful comparisons across companies.
Company Characteristics and
Demographic Differences
We classified companies based on a detailed
understanding of each company’s size, opera-
tions, and staffing locations. We identified
which companies were foreign MNCs (global),
domestic Indian companies with interna-
tional operations (international), and domes-
tic Indian companies with no international
operations (national). Because we had a large
number of IT companies that were not purely
services or BPO, we created separate catego-
ries for IT, manufacturing, and services (which
included financial services and BPO).
We observed many differences in em-
ployee demographics by both geographic
footprint and industry sector. While not the
focus of this research, these differences could
be germane to the interpretation of results.
The data were collected via fixed response
categories, creating an ordinal, not ratio
scale. Regression results addressing Proposi-
tions 1, 4a, and 4b were conducted including
these demographic variables; the regression
coefficients reported have these differences
held constant. Significant mean demographic
differences at p < .01 are as follows:
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 361

TABLE I Sample Demographic Characteristics

Variable Scale Percent
Gender Male 83.3
Female 16.7
Age Under 21 .2
21–25 18.1
26–30 33.2
31–40 33.5
41–50 10.3
51–60 4.5
61⫹ .1

Length of service 0–6 months 3.9

7–18 months 17.0
19–35 months 23.6
3–5 years 19.8
5⫹ years 35.5
Education level Upper school .6
Some college/vocational training 3.3
University/college degree (non-technical) 21.6
University/college degree (technical) 40.1
M.B.A. 15.3
Other master’s 16.3
Doctorate 2.7
Responsibility level Administrative support 7.2
Professional/individual contributor 37.7
Supervisor or team leader 28.0
Manager of an area 26.3
Company Director/VP .6
Number of people you None 34.6
supervise 1–12 42.2
13–25 11.1
26–50 5.4
51–150 4.5
150⫹ 2.2

1. Gender. More women were present in the
global firms (22%) than national (15%) or
international (11%) and in services (24%)
and IT firms (20%) than in manufacturing
(9%).
2. Age, Length of Service, and Responsibility
Level. The international and manufactur-
ing company respondents were older, re-
ported a longer length of service, and were
in positions of greater responsibility (e.g.,
professionals, supervisors, managers) than
others were.
3. Number of People Supervised. Global firms
and IT firms indicated a lower number of
people supervised than others did.
4. Education Level. National firms and manu-
facturing firms indicated a higher level of
education than others did.
Results
Table II displays the breakdown of the sam-
ple by company sector (IT, manufacturing,
and services), and geographic footprint (na-
tional, international, and global). Table III
presents the correlations, means, and stan-
dard deviations among the independent
and dependent variables. Employee percep-
tions of HR practices correlate strongly, sug-
gesting that firms that use some of these

Human Resource Management DOI: 10.1002/hrm

362 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

practices use others as well or that employ-
ees perceive these practices as part of the HR
climate. Among all firms in the sample, the
average ratings for performance manage-
ment, professional development, and nor-
malization were 4.98, 4.52, and 4.33, re-
spectively, on a 7-point scale, suggesting
these practices contribute to the HR climate
as generally perceived and that the practices
may be institutionalized to a reasonable de-
gree in some companies. Career success cor-
related weakly with performance (r = .06 ns)
and potential (r = .12, p < .001). Perfor-
mance and potential correlated strongly
(.60, p < .001).
The simple correlations in Table III among
the perceived effectiveness of HR practices
and three dependent variables (career suc-
cess, performance, and potential) provide
some support for Proposition 1. Each prac-
tice was significantly related to career suc-
cess, and performance management was sig-
nificantly related to performance. Additional
analyses controlling for demographic factors
that relate to Proposition 1 are noted in the
next section.
To control for the observed differences
in sample demographic characteristics, we
included six demographic variables in the
regression analyses. As shown in Tables IV
and V, many demographic factors helped
predict career success, performance, and po-
tential. In the geographic footprint analyses
shown in Table IV, career success was re-

TABLE II Number of Respondents with Number of Responding Companies by Industry and Geographic Footprint
Industry National International Global Total
IT 328 (2) 593 (3) 908 (7) 1,829 (12)
Manufacturing 823 (5) 561 (4) 327 (2) 1,711 (11)
Services (BPO and FS) 377 (3) 228 (3) 496 (3) 1,101 (9)
Total 1,528 (10) 1,382 (10) 1,731 (12) 4,641 (32)
Ave # of employees 2,073 16,921 38,030
[# employees in India] [1,923] [14,874] [15,860]
Note: Number of responding companies is listed in parentheses.

Correlations, Coefficient Alphas, Means, and Standard Deviations Among the Independent and
TABLE III
Dependent Variables
Variables Perf Mgt Prof Dev Norm Career Performance Potential
Ratings Success
Performance management .91
Professional development .78* .91
Normalized ratings .60* .69* .95
Career success .49* .49* .38* .85
Performance .07* .04 ⫺.01 .06 Employer
assessment
Potential ⫺.03 ⫺.06 ⫺.03 .12* .60* Employer
assessment
Mean 4.98 4.67 4.33 1.97 2.26 2.38
Standard deviation 1.44 1.61 1.63 .57 .60 .59
Sample size 4,544 4,263 3,322 4,809 4,340 2,326

*p < .001; coefficient alphas along main diagonal.

Human Resource Management DOI: 10.1002/hrm

 HR PRACTICES IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 363

Regression Summary of Interactions of HRM Practices with Geographic Footprint for Career Success,
TABLE IV
Performance, and Potential
Career Success Performance Potential
Regression Equation Beta t Beta t Beta t
Global .079 1.27 ⫺.387 ⫺4.37*** .127 .99
National .004 .06 ⫺.221 ⫺1.99* ⫺.298 ⫺2.20*
Perf Mgt .284 6.71*** .120 2.15* .103 1.47
Prof Dev .290 6.01*** ⫺.151 ⫺2.37* ⫺.068 ⫺.86
Norm Ratings ⫺.010 ⫺.03 ⫺.010 ⫺.19 ⫺.032 ⫺.52

Global * Perf Mgt .029 .28 .058 .37 ⫺.208 ⫺.95

National * Perf Mgt ⫺.157 ⫺1.38 ⫺.107 –.62 ⫺.129 ⫺.59
Global * Prof Dev ⫺.218 ⫺2.24* .222 1.47 ⫺.013 ⫺.06
National * Prof Dev .131 1.20 .419 2.72** .120 .69
Global * Norm .150 1.96* .065 .57 .095 .61
Ratings
National * Norm .067 .89 ⫺.159 ⫺1.50 ⫺.165 ⫺1.22
Ratings
Gender ⫺.039 ⫺2.44* ⫺.018 ⫺.66 ⫺.013 ⫺.37
Age ⫺.094 ⫺4.91*** ⫺.122 ⫺3.76*** ⫺.293 ⫺6.85***
Length of Service ⫺.065 ⫺3.55*** .039 1.25 ⫺.041 ⫺.99
Education Level .026 1.66 ⫺.041 ⫺1.61 ⫺.014 ⫺.43
Responsibility Level .079 4.29*** .086 2.82** .041 1.04
Number Supervised .081 4.55*** .075 2.54* .153 4.24***
Regression Summary R2 F R2 F R2 F
.309 79.1*** .053 5.03*** .166 10.33***
*p < .05
**p < .01
***p < .001.

ported to be higher for men, for those
younger in age, for those with fewer years of
service, for those with greater job responsi-
bility, and for those who supervised more
people. Performance was rated higher for
younger employees, for those with greater
job responsibility, and for those supervising
more people. Potential assessments were
highest for younger employees and for those
supervising more people. Similar results,
shown in Table V, were observed in the in-
dustry analyses for career success and perfor-
mance, with two additions: Those who had
attained a higher educational level reported
more career success, and those with a greater
length of service received higher perfor-
mance ratings. In the industry analysis, po-
tential was rated higher for those with a
greater length of service and those who su-
pervised more people.
HR Practice Links to Career Success,
Performance, and Potential
To more thoroughly address the links of per-
formance management, professional devel-
opment, and normalization to career success,
performance, and potential, we controlled
for geographic footprint, industry, and six
demographic variables relevant to our sam-
ple: gender, age, length of service, education
level, responsibility level, and number of em-
ployees supervised. Tables IV and V report
these results.
We found continued support for the
prediction that performance management

Human Resource Management DOI: 10.1002/hrm

364 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

Regression Summary of Interactions of HRM Practices by Industry Sector for Career Success, Perform-
TABLE V
ance, and Potential
Career Success Performance Potential
Beta t Beta t Beta t
Manufacturing ⫺.084 ⫺1.38 ⫺.359 ⫺3.69*** ⫺.357 ⫺3.02**
Services ⫺.117 ⫺1.80 ⫺.256 ⫺1.95 ⫺.427 ⫺2.61*
Perf Mgt .241 6.47*** .113 1.72 ⫺.046 ⫺.56
Prof Dev .257 5.92*** ⫺.217 ⫺2.80** ⫺.051 ⫺.55
Norm Ratings .038 1.05 .069 ⫺2.80** .054 .73

Manufacturing * Perf Mgt ⫺.029 ⫺.29 .051 .32 .395 2.15*

Services* Perf Mgt .215 2.06* ⫺.064 ⫺.32 .427 1.67
Manufacturing .145 1.56 .343 2.27* ⫺.297 ⫺1.86
* Prof Dev
Services * Prof Dev ⫺.166 ⫺1.74 .606 3.53*** .135 .58
Mfg * Norm Ratings ⫺.039 ⫺.59 ⫺.190 ⫺1.76 ⫺.274 ⫺2.35*
Services * Norm Ratings .091 1.18 ⫺.370 ⫺2.71** ⫺.387 ⫺2.29*

Gender ⫺.035 ⫺2.16* ⫺.016 ⫺.60 ⫺.019 ⫺.57

Age ⫺.090 ⫺4.53*** ⫺.078 ⫺2.23* ⫺.066 ⫺1.41
Length of Service ⫺.060 ⫺3.26*** .087 2.68** .127 2.92**
Education Level .031 2.00* ⫺.043 ⫺1.67 ⫺.021 ⫺.68
Responsibility Level .076 4.16*** .094 3.09** .056 1.48
Number Supervised .074 4.14*** .075 2.22* .095 2.70**
Regression Summary R2 F R2 F R2 F
.307 78.6*** .062 5.9*** .223 14.9***
Note: The IT * Performance Management interaction yielded a significant beta for predicting Potential (–.668, t = –2.82**).
*p < .05
**p < .01
***p < .001

and professional development were posi-
tively and significantly associated with
career success even when demographic fac-
tors were held constant and geographic and
industry sector were introduced. Perfor-
mance management was positively associ-
ated with performance independent of
geographic footprint, consistent with our
prediction, but unrelated to potential. Pro-
fessional development was negatively
related to performance, contrary to our
expectations. Normalized ratings were not
significantly related to any of the dependent
variables once the variances associated with
demographic variables, geographic foot-
print, and industry sector were taken into
account. Overall, we found mixed support
for Proposition 1.
Differences by Geographic Footprint
and Sector
To explore Propositions 2 and 3, we under-
took a one-way ANOVA to compare the per-
ceived effectiveness of HR practices among
national, international, and global firms, and
among IT, manufacturing, and services firms.
In each analysis, our results support signifi-
cant differences in the perceived effectiveness
of HR practices by geographic footprint and
sector, with the mean differences ranging
from .3 to .8 on a 7-point scale.

Human Resource Management DOI: 10.1002/hrm

 HR PRACTICES IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 365

TABLE VI ANOVA Comparisons of HRM Practices in National, International, and Global Companies
Geographic
HRM Practice Sum of Squares df F Footprint Mean
Performance Between 218 2 53.9* National 5.3
management 4,381 International 4.7
Within 8,877
4,383 Global 5.1
Total 9,095
Professional Between 395 2 77.8* National 4.9
development 4,118 International 4.2
Within 9,833
4,120 Global 4.6
Tota 10,228
Normalized Between 318 2 62.5* National 4.7
ratings 3,185 International 3.9
Within 9,833
3,187 Global 4.5
Total 10,228
*p ⱕ .001.

TABLE VII ANOVA Comparisons of HRM Practices in Companies by Industry

Geographic
HRM Practice Sum of Squares df F Footprint Mean
Performance Between 131 2 32.0* IT 4.8
management 4,381 Manufacturing 5.0
Within 8,964
4,383 Services 5.3
Total 9,095
Professional Between 92 2 17.8* IT 4.4
development 4,118 Manufacturing 4.6
Within 10,200
4,120 Services 4.8
Total 10,292
Normalized rat- Between 192 2 37.2* IT 4.2
ings 3,185 Manufacturing 3.2
Within 8,241
3,187 Services 4.8
Total 8,433
*p < .001.

Contrary to our expectations, perfor-
mance management, professional develop-
ment, and normalization were perceived to
be most effective among the national firms,
least effective among international firms,
with global firms falling in the middle (see
Table VI). When separate t-tests were per-
formed, we found partial support for Proposi-
tion 2. There were no significant differences
between national and global firms for perfor-
mance management and normalized ratings,
and international firms were significantly
lower in each HRM practice.
Generally consistent with Proposition 3,
our results indicate performance manage-
ment, professional development, and normal-
ization are perceived to be most effective
among services firms, least so among IT firms,
with manufacturing firms falling in the middle
(see Table VII). When separate t-tests were per-
formed, there was no significant difference
between IT and manufact-uring firms for per-
formance management and normalized
ratings, and no significant difference between
manufacturing and services firms with respect
to professional development. All other paired
comparisons were significant.
Regarding Proposition 4a (geographic foot-
print) we found three significant interactions,
two related to career success and one related to
performance (see Table IV). A stronger rela-
tionship exists between professional develop-
ment practices and career success in national
and international firms than global firms
(t = ⫺2.24*), which is opposite to our predic-
tion. A stronger relationship exists between
normalized ratings and career success in global
firms than international (t = 1.96*). A stronger

Human Resource Management DOI: 10.1002/hrm

366 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
professional development relationship with
performance exists in national firms com-
pared to international firms (t = 2.72**). No
HR practice–geographic footprint interactions
were observed with respect to po-
tential. While these differences
The stronger were small, the efficacy of an HR
professional
practice on career success and per-
formance in global firms should
development not be generalized without investi-
gating the typically smaller inter-
relationship with national and national firms.
Regarding Proposition 4b, we
performance in
found many significant interac-
national firms tions (see Table V). A stronger
relationship exists between perfor-
compared to global mance management and career
success in service firms than in
firms suggests that
manufacturing firms (t = 2.06*).
national firms are Professional development was
more strongly related to perfor-
using professional mance in manufacturing (t = 2.27*)
and service firms (t = 3.53***) than
development more in IT firms. The normalized ratings
as a “carrot” to with performance relationship
were weakest in service firms
support employee (t = –2.71**). Performance manage-
ment was more strongly related to
performance than potential in manufacturing firms
are international or
than IT firms (t = 2.15*), while nor-
malization was more strongly re-
global firms. lated to potential in IT firms than
manufacturing (t = ⫺2.35*) or ser-
vices (t = ⫺2.29*). Because indus-
tries attract people with different interests and
talents, the efficacy of HR practices needs to be
considered within the industry segments.
Discussion, Limitations, and
Implications
Our research indicates that the HR practices of
performance management, professional devel-
opment, and normalization are common in
India. Although we found differences among
national, international, and global companies
and by industry sector in terms of the strength
of these practices, the patterns observed were
not always as predicted. In particular, we found
that employees of national and global firms
were more likely to perceive performance
management, professional development, and
normalized ratings as more effective than in
international firms. This finding may reflect
idiosyncrasies of our sample or may under-
score the more rapid diffusion of such practices
in India than might otherwise be expected.
Our findings relating to the strength of HR
practices by industry were more consistent
with our predictions; that is, employees of ser-
vice firms reported the highest level of per-
ceived effectiveness of HR practices in these
areas, followed by manufacturing and IT.
In terms of the impact of these practices
on career success, performance, and poten-
tial, we found that performance management
and professional development practices were
each positively related to career success. We
also found performance management was
related to performance when controlling for
geographic footprint and that professional
development was negatively related to perfor-
mance when controlling for geographic foot-
print or industry sector. One explanation for
this effect is that professional development is
being used as a remedial rather than develop-
mental HR practice in these cases.
In terms of the proposed differences in
relationships by geographic footprint or in-
dustry, some findings were consistent with
our predictions and others were not. Clearly,
more research is needed to understand these
patterns better. We found a stronger relation-
ship between professional development prac-
tices and career success in international firms
than in global firms, which was opposite to
our prediction. We found a stronger relation-
ship between normalized ratings and career
success in global firms, which is consistent
with our prediction. These findings suggest
that in international firms, professional de-
velopment has a stronger influence in bol-
stering employee career success, while in
global firms these practices may be viewed as
necessary, but not sufficient, to influence ca-
reer success. The relationship between nor-
malized rating and career success in global
firms may reflect a climate in those firms that
values merit-based, forced distribution of em-
ployee ratings as a means to demonstrate su-
perior performance. In national and interna-
tional firms, such a connection may not be
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES
well established. The stronger professional
development relationship with performance
in national firms compared to global firms
suggests that national firms are using profes-
sional development more as a “carrot” to
support employee performance than are in-
ternational or global firms.
With respect to industry differences, we
found a stronger relationship between per-
formance management and career success
in service firms than in manufacturing or
IT, perhaps reflecting that services firms are
more sophisticated in their use of HR prac-
tices. Professional development was more
strongly related to performance in manu-
facturing and service firms than IT firms,
suggesting that in services firms the ex-
pected link between professional develop-
ment and performance outcomes is better
established. Contrary to these findings sup-
porting stronger HR practices in services
firms, the normalization with performance
relationship was weakest in service firms,
performance management was most
strongly related to potential in manufactur-
ing firms, and normalization was most
strongly related to potential in IT firms.
Importantly, our research suggests that
there is not a consistent, simple pattern of
effects of HR practices across geographic
footprints or industry sectors. Both qualita-
tive and quantitative research is needed to
understand these patterns better.
Limitations
One limitation of this study is the potential
bias resulting from a common source (single
survey instrument) to gather data that was
used to derive all independent variables and
one of the dependent variables. The potential
for inflated empirical relationships can occur
when data have been collected using the
same method or have been provided by a
single source (Crampton & Wagner, 1994).
Either situation may introduce a response
bias that would exaggerate the magnitude of
the empirical relationships. We took several
measures to reduce the potential error result-
ing from this condition. First, we constructed
the survey such that key questions within a
Human Resource Management DOI: 10.1002/hrm
IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 367
given construct appeared in different parts of
the survey and were validated externally.
Moreover, two of our dependent variables
were not derived from the survey, but were
separate measures the employer provided.
Despite these efforts, and Crampton and
Wagner’s (1994) finding that percept-percept
inflation has not had the broad effects critics
envisioned, some caution is in order in inter-
preting our results.
A second limitation is that of non-
response bias. While we did manage to
obtain true random samples of invited par-
ticipants, not all chose to respond. With re-
sponse rates above 40% for most companies,
and 54% overall, if a non-response bias
should exist, it would likely be small. More-
over, no response bias with respect to perfor-
mance was observed for the 23 companies for
which such analysis was possible.
A third limitation is the size of our
sample of companies. While our sample of
employees was large, the number of compa-
nies participating was moderate (28 compa-
nies). As such, we cannot be certain that
these companies are representative of firms
operating in India, or representative of
firms within the industry sectors and geo-
graphic categories examined. Because of
this modest number of companies, no two-
way interactions of geographic footprint
and industry sector were considered. None-
theless, this survey and sample may be one
of the most comprehensive to be conducted
on the perceived effectiveness of HR prac-
tices in India to date.
Implications for Research and Practice
We are in the early days of global diffusion of
HR practices. In the case of India, Indian aca-
demics’ anticipated liberalization policies
would have wide-ranging consequences for
business policies, practices, and procedures
(Kalra & Gupta, 1999). In the first part of this
decade, research showed that a majority of
Indian managers believed the HR function
would be under severe pressure to improve
productivity. With India’s prominent role in
the global competitive landscape, organiza-
tions understand the need to develop the
368 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
workforce into well-trained, motivated, and
productive employees (Budhwar, 2001b). In-
deed, researchers (Debrah & Budhwar, 2001)
have observed that HRM was playing a no-
ticeable role in affecting changes in Indian
organizations. More recently, researchers have
noted that human resource management
continues to be a key to success for organiza-
tions located in India (Saini & Budhwar,
2007). Despite the contribution of human re-
source practices, however, the relevant litera-
ture on Indian HRM continues to be scarce.
Our research helps address this need and
found that companies operating in India
have adopted relatively sophisticated systems
that reflect global best practices. This is con-
sistent with Budhwar’s (2009) recent conclu-
sion that most foreign firms and
an increasing number of local
There has been firms are adopting formal, struc-
tured, and rational approaches to
an explosion of
talent management in India. He
management noted that the present economic
context has forced changes in
institutes and traditional Indian employment
practices. Much like their Western
graduate business
counterparts, employees expect to
programs in India, be treated fairly, rewarded equita-
bly, provided with growth oppor-
most of which tunities and to know what is ex-
pected of them and be given fair
have adopted the
and constructive feedback on their
Western education performance. This is a move away
from previous traditional Indian
system (Budhwar, work systems, which were known
to be based on social connections
2001b). with those belonging to a particu-
lar caste, religion, or group, chang-
ing to work systems based on formalization,
professionalism, and a systematic approach
(Budhwar, Varma, et al., 2006).
Our research indicates that knowledge
workers are, for the most part, reacting posi-
tively in their attitudes to more rationalized
HRM systems in India. Budhwar (2009) noted
the need for more rationalized systems across
sectors in India, and our research suggests
this is happening. Progress continues to be
unevenly distributed among different types
of firms and different sectors, however, and
not in a necessarily predictable way.
Additional research is needed to better under-
stand these patterns and whether or not they
will (or should) converge over time (Budh-
war, 2009). Moreover, the performance ben-
efits that the HRM literature has suggested
appear to be only partially realized in the In-
dian context currently. Our research suggests
substantial challenges exist in adapting HR
practices to various institutional contexts.
This research also underscores the need for
more academic research on the efficacy of HR
practices in India in general and in different
firm types and sectors specifically. In addi-
tion to more quantitative research approaches,
there also is a need for more qualitative re-
search to explore the mental models and be-
havioral dynamics at work in implementing
HR systems in India more fully.
Future research should also explore
other differences among firms operating in
India in addition to those investigated
here. For example, do firms located in the
North have different traditions and prac-
tices from those in the South? Or among
the global contingent, are Indian firms
more likely to adopt practices such as nor-
malization that are associated with a strong
Anglo-American tradition than those of
continental Europe? These are several of
the questions that could be explored to
inform management on HRM in India and
other emerging markets.
India’s integration into the global econ-
omy, including adopting Western manage-
ment practices, is in process and will continue.
There has been an explosion of management
institutes and graduate business programs in
India, most of which have adopted the
Western education system (Budhwar, 2001b).
The number of executive education pro-
grams is also increasing, suggesting leaders of
companies operating in India seek the bene-
fits of management education at multiple
levels. We expect that the penetration of HR
practices common in the U.S. and Europe
will continue. The degree to which their in-
troduction and implementation generate the
desired results needs to be the subject of on-
going study.
We believe HR practices are critical aspects
of effective business management in emerg-
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES
ing markets and that HR practices from West-
ern developed countries such as the U.S. and
UK will continue to be adapted to the Indian
national context. At the same time, while
English is widely spoken in India, at least
among certain educational and socioeco-
nomic classes, this apparent similarity to the
business environment of the U.S. and UK may
be deceptive. Managers in India attempting to
adopt Western management theories and
techniques can unwittingly produce resent-
ment and other negative feelings in the work-
force, contributing to inefficiency and lack of
organizational effectiveness (Jaeger, 1990;
Kanungo & Jaeger, 1990). This is most likely
to occur when employees feel they are being
forced to adopt and accept practices that run
counter to deeply held values and assump-
tions of the Indian culture (Jaeger, 1990).
Trouble can occur when managers attempt to
implement HR systems with a mind-set of
“‘managing people’” instead of “‘assisting’
them” (Khare, 1999, p. 125). For example, in
implementing HR practices in India, an effec-
tive manager would be wise to develop skills
as a nurturing task leader. The leader cares for
employees and takes a personal interest in
their well-being, while making nurturance
contingent on the employees’ accomplishing
tasks (Jaeger, 1990; Mendonca & Kanungo,
1990). In doing so, successful managers will
be blending the indigenous cultural ethos of
India with the requirements of techno-eco-
nomic systems (Khare, 1999). How best to
manage employees in the various sectors of
the developing Indian economy will remain a
critical area of investigation for academic re-
searchers, with important practical implica-
tions for managers and organizations.
A recent survey from McKinsey suggested
“companies that can satisfy their global talent
needs and overcome cultural and other silo-
based barriers tend to outperform those that
don’t” (Guthridge & Komm, 2008, p. 10).
While we fundamentally agree with this assess-
ment, we would also emphasize the challenges
involved. As Mendonca and Kanungo (1990)
noted, performance management is not a set
of simple, easy, and uncomplicated routines.
Instead, performance management is a set of
challenging tasks that demand considerable
Human Resource Management DOI: 10.1002/hrm
IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 369
intellectual, emotional, and physical energy as
managers and employees complete tasks lever-
aging their time, talent, and skills. The same
can be said about HR practices in general in
addition to performance management specifi-
cally. When managed well, the outcomes de-
rived from skillfully implementing HR systems
should make a significant positive difference
for employees and their organizations. To
achieve this, more work needs to be done to
understand the effects of evolving HR systems
in India and in other developing and emerging
regions of the world.
Notes
1. According to the Indian Central Statistical Organiza-
tion (CSO), the real gross domestic product (GDP)
growth accelerated from 9.0% in 2005–2006 to 9.2%
in 2006–2007. According to the India Brand Equity
Foundation (IBEF), the growth rate has been spurred
by the industrial and services sectors, which logged
a 10.9% and 11% rise in 2006 and 2007, respectively,
against 9.6% and 9.8% percent in 2005 and 2006,
respectively.
2. The project constituted a two-year collaboration
among the authors and Right Management on
workplace practices and employee attitudes in
India. The purpose of the project was to better
understand retention challenges and talent man-
agement practices within India as the “war for
talent” was beginning to cripple profitable growth.
In addition to the demographic questions (noted
within), the workplace survey included 24 intrinsic
rewards items (four constructs: progress, compe-
tence, meaningfulness, and choice), 22 employee
attitude items (six constructs: manager support,
personal commitment, satisfaction with the orga-
nization, social responsibility, pride in the organi-
zation, and intention to leave), 10 satisfaction
items (three constructs: career success, intrinsic
satisfaction, and satisfaction with hygiene fac-
tors), and 13 HR practice items (three constructs:
performance management, professional develop-
ment, and normalization of ratings). A confirma-
tory factor analysis was run on the intrinsic re-
ward, employee attitude, and satisfaction
items—providing support for the continued use of
these items and scales with Indian employees.
The project secured data from companies on the
performance rating and potential for advance-
370 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

ment on the randomly identified employees
invited to participate in the study. Participation
was voluntary and anonymous. Two descriptive
reports stem from the project, one titled “Stem-
ming the Tide of Attrition in India: Keys to Increas-
ing Retention” (Right Management, 2008) and the
second, “Company X: Retention Study Report”
(Right Management, 2008). Both reports are
descriptive and proprietary, comparing study vari-
ables among participating firms. A two-page sum-
mary of the project has been reported: “How to
Manage Talent in Fast-Moving Labor Markets:
Some Findings From India” (published in a practi-
tioner-focused business publication).
The academic investigations driving the collabo-
ration had three streams of inquiry, of which the
theory, analyses, and results reported herein are
one (i.e., a focus on employee perceptions of HR
practices as they relate to career success, perfor-
mance, and potential across geographic and in-
dustry boundaries). The second stream focuses
on “Managing Talent in High Velocity Environ-
ments: Recent Insights From India,” exploring the
descriptive findings noted by the consulting firm
for an academic audience. The third stream is an
employee attitude study focusing on intrinsic re-
wards, “Exploring Talent Management in India:
The Neglected Role of Intrinsic Rewards.”

STEPHEN A. STUMPF is professor of management and Fred J. Springer Chair in Busi-

ness Leadership at Villanova School of Business, where he has also served as interim
dean and Management Department chair. Dr. Stumpf has been chief learning officer of
professional development at Booz & Co. and is a frequent speaker, consultant, and facili-
tator on leadership and relationship building. Dr. Stumpf earned a BS degree in chemi-
cal engineering from Rensselaer Polytechnic Institute, an MBA from the University of
Rochester, and an M Phil and Ph.D. in organizational behavior and industrial psychology
from New York University.

JONATHAN P. DOH is the Herbert G. Rammrath Endowed Chair in International Business,

founding director of the Center for Global Leadership, and professor of management at
the Villanova School of Business. His research on international strategy and corporate
responsibility has been published in Academy of Management Review, Journal of Inter-
national Business Studies, Organization Science, and Strategic Management Journal,
among others. His most recent books are Multinationals and Development (with Alan
Rugman, Yale University Press, 2008) and NGOs and Corporations (with Michael Yaziji,
Cambridge University Press, 2009). He received his Ph.D. from George Washington Uni-
versity in strategic and international management.

WALTER G. TYMON, JR., is an associate professor of management at the Villanova School

of Business and a faculty associate of the Center for Global Leadership. Dr. Tymon has also
served as the Management Department chair at Villanova School of Business. Dr. Tymon’s
research interests include employee practices in emerging economies, strategic human re-
source management, career development, and employee engagement. Dr. Tymon earned
a BS in psychology from St. Joseph’s University (Philadelphia), an MBA from the College
of William and Mary, and a Ph.D. in business administration from Temple University.

Human Resource Management DOI: 10.1002/hrm

 HR PRACTICES IN INDIA AND
References
Arthur, J. B. (1994). Effects of human resource systems
on manufacturing performance and turnover. Acad-
emy of Management Journal, 37(3), 670–687.
Arthur, M. B., Khapova, S. N., & Wilderom, C. P. M.
(2005). Career success in a boundaryless career
world. Journal of Organizational Behavior, 26(2),
177–202.
Baruch, Y., & Budhwar, P. (2006). A comparative study
of career practices for management staff in Britain
and India. International Business Review, 15(1),
84–101.
Bjorkman, I., & Lu, Y. (2001). Institutionalization and
bargaining power explanations of HR practices in
international joint ventures: The case of Chinese-
Western joint ventures. Organization Studies, 22(3),
491–512.
Bowen, D. E., & Ostroff, C. (2004). Understanding
HRM-firm performance linkages: The role of the
“strength” of the HRM system. Academy of Man-
agement Review, 29(2), 203–221.
Bretz, R. D., Jr., Milkovich, G. T., & Read, W. (1992). The
current state of performance appraisal research
and practice: Concerns, directions, and implica-
tions. Journal of Management, 18(2), 331–352.
Budhwar, P. S. (2001a). Doing business in … India.
Thunderbird International Business Review, 43(4),
549–568.
Budhwar, P. S. (2001b). Human resource management
in India. In P. S. Budhwar & Y. A. Debrah (Eds.), Hu-
man resource management in developing coun-
tries (pp. 75–90). London: Routledge.
Budhwar, P. S. (2003). Employment relations in India.
Employee Relations, 25(1/2), 132–148.
Budhwar, P. S. (2009). Challenges facing Indian HRM
and the way forward. In P. S. Budhwar & J. Bhat-
nagar (Eds.), The changing face of people manage-
ment in India (pp. 288–301). London: Routledge.
Budhwar, P. S., & Bhatnagar, J. (Eds.). (2009). The
changing face of people management in India.
London: Routledge.
Budhwar, P., & Boyne, G. (2004). Human resource
management in the Indian public and private
sectors: An empirical comparison. International
Journal of Human Resource Management, 15(2),
346–370.
Budhwar, P., & Debrah, Y. A. (2009). Future research
on human resource management systems in
Asia. Asia Pacific Journal of Management, 26(2),
197–218.
Human Resource Management DOI: 10.1002/hrm
EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 371
Budhwar, P., & Khatri, P. (2001). HRM in context: Appli-
cability of HRM models in India. International Jour-
nal of Cross Cultural Management, 1(3), 333–356.
Budhwar, P., Luthar, H., & Bhatnagar, J. (2006). The
dynamics of HRM systems in Indian BPO firms.
Journal of Labor Research, 27(3), 339–360.
Budhwar, P., & Sparrow, P. (1997). Evaluating levels
of strategic integration and development of hu-
man resource management in India. International
Journal of Human Resource Management, 8(4),
476–494.
Budhwar, P. S., Varma, A., Singh, V., & Dhar, R. (2006).
HRM systems of Indian call centres: An exploratory
study. International Journal of Human Resource
Management, 17(5), 881–897.
Burton, R. M., Lauridsen, J., & Obel, B. (2004). The
impact of organizational climate and strategic fit on
firm performance. Human Resource Management,
43(1), 67–82.
Cohen, J., & Cohen, P. (1983). Applied multiple
regression/correlation analysis for the behavioral
sciences (2nd ed.). Hillsdale, NJ: Lawrence Erlbaum
Associates.
Collins, C. J., & Clark, K. D. (2003). Strategic human
resource practices, top management team social
networks, and firm performance: The role of hu-
man resource practices in creating organizational
competitive advantage. Academy of Management
Journal, 46(6), 740–751.
Corporate Executive Board. (2006). Attracting and re-
taining critical talent segments: Identifying drivers
of attraction and commitment in the global labor
market. Washington, DC: Author.
Crampton, S. M., & Wagner, J. A. (1994). Percept–per-
cept inflation in micro-organizational research: An
investigation of prevalence and effect. Journal of
Applied Psychology, 79(1), 67–76.
Debrah, Y. A., & Budhwar, P. S. (2001). Conclusion:
International competitive pressures and the chal-
lenges for HRM in developing countries. In P. S.
Budhwar & Y. A. Debrah (Eds.), Human resource
management in developing countries (pp. 238–
254). London: Routledge.
Delaney, J. T., & Huselid, M. A. (1996). The impact of
human resource management practices on percep-
tions of organizational performance. Academy of
Management Journal, 39(4), 949–969.
Delery, J. E., & Doty, D. H. (1996). Modes of theorizing
in strategic human resource management: Tests
of universalistic, contingency, and configurational
performance predictions. Academy of Management
Journal, 39(4), 802–835.
372 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010
Devanna, M. A., Fombrum, C., Tichy, N., & Warren,
L. (1982). Strategic planning and human resource
management. Human Resource Management,
21(1), 11–17.
Economist Intelligence Unit. (2008). India: Country
Profile 2008. London: Author.
Ferris, G. R., Arthur, M. M., Berkson, H. M., Kaplan, D.
M., Harrell-Cook, G., & Frink, D. D. (1998). Toward a
social context theory of human resource manage-
ment–organizational effectiveness relationship. Hu-
man Resource Management Review, 8(3), 235–264.
Fulmer, I. S., Gerhart, B., & Scott, K. S. (2003). Are the
100 best better? An empirical investigation of the
relationship between being a “great place to work”
and firm performance. Personnel Psychology,
56(4), 965–993.
Gelade, G. A., & Ivery, M. (2003). The impact of hu-
man resource management and work climate on
organizational performance. Personnel Psychology,
56(2), 383–404.
Gong, Y., & Chang, S. (2008). Institutional antecedents
and performance consequences of employment
security and career advancement practices: Evi-
dence from the People’s Republic of China. Human
Resources Management, 47(1), 33–48.
Guthridge, M., & Komm, A. B. (2008, May). Why mul-
tinationals struggle to manage talent. McKinsey
Quarterly. Retrieved June 15, 2008, from http://
www.mckinseyquarterly.com
Guthrie, J. P. (2001). High-involvement work practices,
turnover, and productivity: Evidence from New
Zealand. Academy of Management Journal, 44(1),
180–190.
Hall, D. T. (2004). The protean career: A quarter-century
journey. Journal of Vocational Behavior, 65(1), 1–13.
Huselid, M. A. (1995). The impact of human resource
management practices on turnover, productivity,
and corporate financial performance. Academy of
Management Journal, 38(3), 635–672.
Ichniowski, C., & Shaw, K. (1999). The effects of hu-
man resource management systems on economic
performance: An international comparison of U.S.
and Japanese plants. Management Science, 45(5),
704–721.
India’s corporations race to train workers and avoid
being left in the dust (2008, September 18). Re-
trieved September 29, 2008, from http://knowledge
.wharton.upenn/india
Jackson, S. E., & Schuler, R. S. (1995). Understanding
human resource management in the context of or-
ganizations and their environments. Annual Review
of Psychology, 46(1), 237–264.
Jaeger, A. J. (1990). The applicability of Western man-
agement techniques in developing countries: A cul-
tural perspective. In A. M. Jaeger & R. N. Kanungo
(Eds.), Management in developing countries (pp.
131–145). London: Routledge.
Kalra, S. K., & Gupta, R. K. (1999). Some behavioral
dimensions of effective managerial style in the In-
dian context. In H. S. R. Kao, D. Sinha, & B. Wilpert
(Eds.), Management and cultural values: The indi-
genization of organizations in Asia (pp. 287–296).
New Delhi, India: Sage.
Kanungo, R. N., & Jaeger, A. M. (1990). Introduction:
The need for indigenous management in develop-
ing countries. In A. M. Jaeger & R. N. Kanungo
(Eds.), Management in developing countries (pp.
1–19). London: Routledge.
Katou, A. A., & Budhwar, P. S. (2007). The effects of hu-
man resource management policies on organizational
performance in Greek manufacturing firms. Thunder-
bird International Business Review, 49(1), 1–35.
Khare, A. (1999). Japanese and Indian work patterns:
A study of contrasts. In H. S. R. Kao, D. Sinha, & B.
Wilpert (Eds.), Management and cultural values:
The indigenization of organizations in Asia (pp.
121–136). New Delhi, India: Sage.
Lado, A. A., & Wilson, M. C. (1994). Human resource
systems and sustained competitive advantage: A
competency-based perspective. Academy of Man-
agement Review, 19(4), 699–727.
Mahapatra, R. (2006, December 6). Cisco to set up
center in India. Associated Press Online, retrieved
September 7, 2008, from http://www.lexisnexis.com
Malkani, D., Pandey, J., & Bhagwati, A. B. (2007). The
high-performance workforce study 2007: India.
Mumbai, India: Accenture.
Mendonca, M., & Kanungo, R.N. (1990). Perform-
ance management in developing countries. In A.
M. Jaeger & R. N. Kanungo (Eds.), Management
in developing countries (pp. 223–251). London:
Routledge.
Neal, A., West, M. A., & Patterson, M. G. (2005). Do
organizational climate and competitive strategy
moderate the relationship between human re-
source management and productivity? Journal of
Management, 31(4), 495–512.
Ngo, H.-Y., Lau, C.-M., & Foley, S. (2008). Strategic
human resource management, firm performance,
and employee relations climate in China. Human
Resource Management, 47(1), 73–90.
Parker, C. P., Baltes, B. B., Young, S. A., Huff, J. W.,
Altmann, R. A., Lacost, H. A., et al. (2003). Relation-
ships between psychological climate perceptions
Human Resource Management DOI: 10.1002/hrm
 HR PRACTICES IN INDIA AND
and work outcomes: A meta-analytic review. Jour-
nal of Organizational Behavior, 24(4), 389–416.
Patterson, M., Warr, P., & West, M. (2004). Organiza-
tional climate and company productivity: The role
of employee affect and employee level. Journal of
Occupational and Organizational Psychology, 77
(Part 2), 193–216.
Quigley, N. R., & Tymon, W. G., Jr. (2006). Toward an
integrated model of intrinsic motivation and career
self-management. Career Development Interna-
tional, 11(6), 522–543.
Rai, S. (2005, November 2). Outsourcers in India fight
for skilled labor. International Herald Tribune, p. 11.
Rogg, K. L., Schmidt, D. B., Shull, C., & Schmitt, N.
(2001). Human resource practices, organizational
climate, and customer satisfaction. Journal of Man-
agement, 27(4), 431–449.
Saini, D. S., & Budhwar, P. S. (2007). Human resource
management in India. In R. Schuler & S. Jackson
(Eds.), Strategic human resource management (pp.
287–312). Oxford: Blackwell.
Saini, D. S., & Budhwar, P. S. (2008). Managing
the human resource in Indian SMEs: The role
of indigenous realities. Journal of World Busi-
ness, 43(4), 417–434.
Schuler, R. S., & Jackson, S. E. (1999). Strategic human
resource management: A reader. London: Blackwell.
Sen, A. (2007, February 7). I.T. and India: Keynote
address at the NASSCOM 2007 India Leadership
Forum in Mumbai, India. The Hindu. Retrieved July
12, 2008, from http://www.hindu.com/nic/itindia.htm
Human Resource Management DOI: 10.1002/hrm
EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 373
Singh, K. (2004). Impact of HR practices on perceived
firm performance in India. Asia Pacific Journal of
Human Resources, 42(3), 301–317.
Sinha, J. B. P. (1980). The nurturant-task leader. New
Delhi, India: Concept.
Som, A. (2006). Bracing for MNC competition through
innovative HRM practices: The way ahead for
Indian firms. Thunderbird International Business
Review, 48(2), 207–237.
Som, A. (2007). What drives adoption of innovative
SHRM practices in Indian organizations? Interna-
tional Journal of Human Resource Management,
18(5), 808–828.
Sparrow, P. R., & Budhwar, P. S. (1997). Competi-
tion and change: Mapping the Indian HRM recipe
against world-wide patterns. Journal of World Busi-
ness, 32(3), 224–242.
Tsui, A. S., Pearce, J. L., Porter, L. W., & Tripoli, A. M.
(1997). Alternative approaches to the employee-
organization relationship: Does investment in em-
ployees pay off? Academy of Management Journal,
40(5), 1089–1121.
Wright, P. M., & McMahan, G. C. (1992). Theoreti-
cal perspectives for strategic human resource
management. Journal of Management, 18(2),
295–320.
Yeung, A., Warner, M., & Rowley, C. (2008). Guest
editors’ introduction growth and globalization:
Evolution of human resource management
practices in Asia. Human Resource Management,
47(1), 1–13.
374 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

APPENDIX Workplace Study Survey Dimensions, Items, and Factor Analysis *

Career Success
CS 1: My career success in the last two years.
CS 2: My career progress in the last two years.
CS 3: My personal success in the last two years.

Performance Management
PM 1: The process of goal setting brings the best out of me.
PM 2: The standards used for measuring performance are fair and clearly understood.
PM 3: The evaluation of performance is done in a transparent and objective manner.
PM 4: Feedback on performance is given in a way that helps me to “grow” and feel inspired
to give my best.

Professional Development
PD 1: Our organization believes that all employees deserve to be actively managed as
talent.
PD 2: Our organization’s program for high potentials helps in talent retention.
PD 3: The company has a formal “high potential” program—people know what they need
to do to get into it and to advance within it.

Normalized Ratings
NR 1: In my organization the system of forced ranking and normalization of employee
performance motivates performance.
NR 2: Forced ranking and normalization of employee performance has improved organiza-
tion performance.
NR 3: Forced ranking and normalization of performance has helped in retention of talent
in my organization.

Performance (provided by employer)

Potential (provided by employer)

* Career success was measured using a 3-point scale: not satisfied, satisfied, very satisfied. Performance management, professional
development, and normalized ratings were measured using a 7-point scale ranging from strongly disagree to strongly agree. Two items
expected to load on performance management had complex loadings with professional development; they were deleted from this study.

Human Resource Management DOI: 10.1002/hrm

 HR PRACTICES IN INDIA AND EFFECTS ON CAREER SUCCESS, PERFORMANCE, AND POTENTIAL 375

TABLE AI Factor Analysis of Study Variables With Varimax Rotation and Kaiser Normalization
Scale Item Component
1 2 3 4
PM 1 .67 .23 .09 .17
PM 2 .80 .24 .31 .16
PM 3 .80 .20 .34 .18
PM 4 .75 .23 .36 .20

PD 1 .32 .27 .78 .18

PD 2 .32 .33 .80 .18
PD 3 .31 .33 .78 .16

NR 1 .28 .86 .25 .14

NR 2 .27 .88 .26 .13
NR 3 .23 .84 .32 .13

CS 1 .18 .11 .11 .87

CS 2 .20 .13 .15 .85
CS 3 .12 .08 .12 .82
Eigenvalue 2.87 2.73 2.49 2.42
Variance explained 22.1% 21.0% 19.1% 18.6%
Note: Bold numbers identify the items used to construct the variable noted in Column 1.

Human Resource Management DOI: 10.1002/hrm

View publication stats