Employee Competencies as Predictors of Organizational Performance: A Study of Public and Private Sector Banks

Abstract

Drawing on the resource-based view, this paper seeks to examine the influence of employee competencies on organizational performance using a sample of 325 managerial and non-managerial employees working in Indian public and private sector banks. The study employed a cross-sectional research design, and the data were collected through a structured questionnaire using convenience sampling. Confirmatory factor analysis was used to check the reliability and validity of the dimensions, and the proposed hypotheses were tested by using structural equation modelling. The results indicated a positive and significant impact of selected employee competencies on organizational performance except for self-competence, which showed an insignificant and negative effect. The study is of immense potential to help policy and decision-makers of the Indian banking industry to develop and implement strategies for improving employee competencies, which, in turn, are instrumental in enhancing organizational performance. This study is a unique attempt to examine the impact of various employee competence dimensions on organizational performance, particularly in the Indian banking industry.

Keywords

Banks employee competencies India organizational performance structural equation modelling

Introduction

The banking industry is considered the backbone of every economy as well as the heart of the financial system of a nation. The banking sector contributes significantly to eradicate poverty, generate employment and in bringing about a progressive reduction in inter-regional and inter-sector disparities through the rapid expansion of banking services. A strong, sound, healthy and profitable banking system always supports the economy during financial distress and contributes to the stability of the financial system. In India, the role of the banking sector changed significantly after the economic liberalization of 1991, which called for restructuring and redesigning traditional practices, procedures, policies and methods of banking and more importantly developing and nurturing the desired competencies of its workforce. Being the most important industry of the service sector, the banks provide different kinds of services to their customers, ranging from opening an account, advancing of loans to consultancy services and foreign currency exchange. Notably, at the heart of every successful service provided by the banks lies their most vital resource—the employee competencies. Besides, being a valuable resource in itself, employee competencies are required for the efficient and effective utilization of other resources of an organization (Nordhaug & Gronhaug, 1994). Moreover, in the modern business world, which is characterized by volatility, uncertainty, complexity and ambiguousness, the competitiveness of banks is largely determined by the competencies of employees and the extent to which the industry can enhance and nurture those competencies. Employee competencies can provide the foundation to develop firm capabilities that can lead to superior performance over time. Therefore, to perform and compete effectively, the Indian banking industry needs a new generation of employees, who are customer centric, technology savvy, dynamic and above all equipped with ample competencies in all functional areas. By employing competent employees, the industry can ensure the delivery of high-quality goods and services which are essential for building customer confidence and goodwill and customer satisfaction, enhancing the reputation and eventually leading to enhanced organizational performance (Nair, 2014, p. 1).

Drawing on the resource-based view (RBV), we argue that employee competencies significantly contribute towards organizational performance, and, therefore, organizations must develop, enhance and nurture the desired competencies of their employees for superior organizational performance. According to RBV, possession of strategic resources provides an organization with a golden opportunity to develop a competitive advantage over its competitors (Barney, 1991; Wernerfelt, 1984). A resource is said to be strategic if it is valuable, rare, inimitable and non-substitutable. Notably, employee competencies by virtue are inherited with all these characteristics and therefore act as the chief source of competitive advantage as well as the principal drivers of improved organizational performance (Ciziuniene et al., 2016). Employee competencies are valuable in the sense that they enable an organization to develop strategies that capitalize on opportunities and ward off threats. They are rare because every employee is equipped with unique knowledge, skills, attitudes and mental capacity. Employee competencies are very hard to imitate since they evolve over time and reflect unique aspects of an organization. Moreover, competitors cannot find alternative ways to obtain the benefits that employee competencies provide to a particular organization, thus making them non-substitutable.

Numerous studies have been conducted to investigate the influence of employee competencies on organizational performance (Elbaz et al., 2018; Kamukama et al., 2017; Mandourah et al., 2017; Otoo, 2019; Otoo & Mishra, 2018; Potnuru & Sahoo, 2016; Scapolan et al., 2017; Zacca & Dayan, 2018; Zaim et al., 2013). Additionally, Osei and Ackah (2015), in their study conducted in the pharmaceutical industry, opined that employee competencies have a significant and positive effect on organizational performance and these immensely contribute towards achieving organizational objectives as well as its vision and mission. Along the same lines, Yu and Ramanathan (2012) argued that highly competent employees enable an organization to offer high-quality goods and services to its customers, reduce the costs and provide a broad range of new products and services in the market, thereby leading to improved organizational performance. Puteh et al. (2016) posit that employee competencies, besides being important for survival and customer satisfaction, play a significant role in enhancing the performance of service-based industries. Most of the studies mentioned above have analysed the combined effect of a cluster of employee competencies on organizational performance. However, no studies have specifically dealt with individual effects of various employee competencies on organizational performance, particularly within banking organizations. To fill this research gap, the present study seeks to investigate and empirically validate the influence of various employee competencies on organizational performance in the context of the Indian banking sector (see Figure 1). Due to the paucity of empirical research, it aims to be a fruitful contribution to the existing body of literature on the dialogue between employee competencies and organizational performance from the competence management perspective.

The remainder of the paper proceeds as follows. First, the literature review and theoretical framework are discussed followed by hypothesis development. Measures and methods are talked about in the next section followed by the analysis of data, and, finally, results and discussions followed by implications, limitations and directions for future research are presented.

Theory and Hypothesis Development

Employee Competencies

During the past few decades, employee competencies have received a great deal of attention from researchers, practitioners and academicians across the globe for being the major determinant of employee performance (Elbaz et al., 2018; McClelland, 1973; Sanghi, 2016) as well as the performance of the organization (Otoo, 2019; Otoo & Mishra, 2018; Potnuru & Sahoo, 2016). The term competence was coined by White (1959), an eminent American psychologist, in his paper ‘Motivation reconsidered: The concept of competence’. He refers to competence as ‘an organism’s capacity to interact effectively with its environment’. However, McClelland (1973), an American social scientist, popularized and significantly developed the concept through his influential work ‘Testing for competence rather than for intelligence’. He opines that an individual’s behavioural traits and characteristics rather than traditional knowledge and aptitude tests largely determine his/her performance and success in a particular situation/job (for a detailed discussion on the historical development of competence concept, competence vs competency debate and classification of cometencies, see Salman, Ganie & Saleem, 2020). According to Parry (1996), employee competence refers to ‘a cluster of knowledge, skills, and attitudes that affect a major part of one’s job (a role or responsibility), that correlates with performance on the job, that can be measured against well-accepted standards and that can be improved via training and development’. Employee competencies may also be defined as the personality attributes or characteristics such as knowledge, skills, attitudes, abilities, motives and self-concept demonstrated by employees that result in effective and superior performance (Boyatzis, 1982; McClelland, 1973; Spencer & Spencer, 1993). Along the same lines, McKelvey (1983) opines that competencies are found in the knowledge, skills and abilities of employees. Employee competencies such as self-competence, team competence, communicative competence, change competence and ethical competence have been found positively related to organizational performance (Otoo & Mishra, 2018; Potnuru & Sahoo, 2016). Additionally, Ramo et al. (2009) contend that the emotional and social competence of employees significantly influences their performance as well as the effectiveness of organizations. Moreover, from the feedback of banking employees working in various Indian banks and discussions with scholars and professors regarding employee competencies in banking organizations revealed that self-competence, team competence, communicative competence and social competence are the most important competencies required by employees that are essential in determining their overall performance as well as the performance of the organization.

Organizational Performance

The concept of organizational performance is very complex, ambiguous and hard to define and measure. It has been defined differently by different stakeholders, resulting in difficulties in formulating a concrete and concise description of performance. Delarue et al. (2008) argued that the criterion for performance significantly depends on the objectives specific to a particular organization. Kim (2005) defines organizational performance as how efficiently and effectively an organization performs its administrative and operational functions in conformity with the mission and the extent to which it produces the actions and outputs according to the institutional mandate. In the extant literature, the performance of an organization has broadly been measured in two ways: financial performance and non-financial performance. Financial performance includes dimensions such as corporate profitability, market performance, sales growth, performance stability, financial strength, ability to raise capital, operating efficiency (Obeidat et al. 2016; Ogunyomi & Bruning, 2015; Theriou & Chatzoglou, 2014). The non-financial performance has been measured through customer satisfaction, HRM practices, quality of products and services, ability to attract and retain employees, development of new products, relation between managers and employees and relationship among the employees (Akhtar et al., 2014; Miah & Islam, 2017; Singh & Kassa, 2016). However, according to Chahal et al. (2016), there are three broad perspectives of measuring organizational performance, that is, financial perspective that involves measures of profitability, return on investment, sales growth and revenue growth (Liao & Wu, 2009; Venkatraman & Ramanujam, 1986), employee perspective which encompasses measures such as employee satisfaction, employee turnover, employee effectiveness, level of absenteeism and employee participation (Venkatraman & Ramanujam, 1986) and operational perspective, which comprises measures such as the number of product/service defects, number of customer complaints, market share and product service quality (Venkatraman & Ramanujam, 1986; Wright et al., 2003). Moreover, Guest (1997) claims that organizational performance includes measures such as environmental issues, job satisfaction, contribution to the community and so on. Burke and Litwin (1992) claimed that performance involves productivity, customer satisfaction, profit and quality. While Gelade and Ivery (2003) contend that organizational performance reflects the productivity and efficiency of the decision-making units such as bank branches, retail stores or assembly lines in a factory.

To measure organizational performance, researchers came across two types of measures, that is, objective and subjective measures. It is argued that in situations where objective performance data are not available, subjective (perceptual) measures may be used as a reasonable choice (Allen & Helms, 2002; Delaney & Huselid, 1996; Dess & Robinson, 1984; Dollinger & Golden, 1992; McCracken et al., 2001; Venkatraman & Ramanujam, 1986). Moreover, the results obtained through objective measures are consistent and positively correlated with the results obtained through perceptual measures (Dess & Robinson, 1984). Keeping in view the organization in question and based on the extant literature, the following measures of performance were employed for the present study, product and service quality, new product development, customer satisfaction and ability to attract and retain competent employees, employee–management relationship and relations among employees.

Employee Competencies and Organizational Performance

Self-Competence and Organizational Performance

Self-competence, according to Siriwaiprapan (2004), refers to the ‘ability to adjust to change, readiness to learn, readiness to develop oneself, readiness and ability to initiate action, trust, endurance, receptiveness, broad-mindedness, self-discipline, self-esteem, individuality, and self-determination’. It encompasses a cluster of knowledge, skills and abilities to identify one’s strengths and weaknesses, to assess personal and professional objectives, ability to manage oneself in stressful situations, and to understand and act on work motivations and emotions (Elbaz et al., 2018). It is argued that self-competence enhances employees’ abilities, efficiency, performance, success and adaptation during stressful circumstances (Tafarodi & Swann, 1995). Research shows that self-competence has a significant and positive relationship with organizational commitment (Mathieu & Zajac, 1990) and job satisfaction (Bhagat & Allie, 1989), thereby resulting in improved organizational performance. In essence, employee self-competence is a major determinant of employees’ level of performance, which, in turn, facilitates organizations to successfully reach their targets and achieve superior performance (Potnuru & Sahoo, 2016). Accordingly, we propose the following hypothesis:

H₁: There is a significant impact of self-competence on organizational performance.

Team Competence and Organizational Performance

Potnuru and Sahoo (2016) defined ‘team competence’ as the ‘knowledge, skills and abilities of an individual to develop, support and lead a team to achieve goals’. It is the manifestation of required behaviours and optimistic attitude by the individuals within a team necessary for the achievement of both individual and organizational goals. Eby and Dobbins (1997) argued that team competence conveys shared efforts and information and better resource allocation which improves performance. It produces cooperative and productive teams, the achievement of group goals, quality improvement, increased team participation as well as improved organizational effectiveness. During the past few years, teamwork has received a great deal of attention across organizations, forcing them to develop strategies to enhance and nurture employees’ team competence that eventually will lead to enhanced and sustained organizational growth. Therefore, the following hypothesis is proposed:

H₂: There is a significant impact of team competence on organizational performance.

Communication Competence and Organizational Performance

Communication competence refers to ‘the ability to choose among available communicative behaviors to accomplish one’s own interpersonal goals during an encounter while maintaining the face and line of fellow interactants within the constraints of the situation’ (Potnuru & Sahoo, 2016). Communication competence incorporates characteristics encompassing knowledge, skills and abilities (KSAs) of individuals to be effective in sharing information, ideas, thoughts and feelings with others (Hellriegel & Slocum, 2011). For an individual to be communicatively competent, he/she must make use of communicative resources such as language, voice and gestures in an appropriate manner (Stohl, 1986), keenly listen to others, communicate clearly and succinctly, and share and respond to information promptly (Shaw, 2005). Communication competence facilitates productive and cooperative team building, improved employee performance and lessening conflicts in the organizations, encourages the participation of employees (Elbaz et al., 2018) and enhances employee productivity, job satisfaction and loyalty to the organization (Femi, 2014), thereby leading to improved organizational performance. Therefore, researchers propose the following hypothesis:

H₃: There is a significant impact of communication competence on organizational performance.

Social Competence and Organizational Performance

In a general sense, social competence refers to the ability of an individual to handle social interactions effectively. It involves developing and maintaining close relationships with others and being able to get along well with others. ‘Given the complexity of social interactions, social competence is the product of a wide range of cognitive abilities, emotional processes, behavioral skills, social awareness, and personal and cultural values related to interpersonal relationships’ (Orpinas, 2010). Additionally, Orpinas and Horne (2006) define ‘social competence’ as ‘a person’s age-appropriate knowledge and skills for functioning peacefully and creatively in his or her community or social environment’ (p. 108). Socially competent employees are characterized by the ability to build and strengthen their networks, develop skills and perform remarkably well in a team setting (Sucher & Cheung, 2015), thereby leading to the accomplishment of both individual and group goals and eventually enhanced organizational performance. Hence, the researchers propose the following hypothesis:

H₄: There is a significant impact of social competence on organizational performance.

Figure 1.

Source: The authors.

Research Methodology

Research Design, Sampling and Data Collection

The study, primarily cross-sectional in nature, focused on managerial and non-managerial employees of two public sector banks, State Bank of India (SBI) and Bank of Baroda (BOB), and two private sector banks, Industrial Credit and Investment Corporation of India (ICICI) and Housing Development Finance Corporation (HDFC), in India. The banks were selected based on their market capitalization, as the top performers in their respective sectors. Data were collected from various bank branches selected through convenience sampling method, across four Indian cities comprising Aligarh, Agra, Lucknow and Delhi using a structured questionnaire encompassing three distinct sections, that is, demographic information, self-perceptions regarding employee competencies and organizational performance. A total of 400 questionnaires distributed among employees were administered personally by the researchers, of which 350 were reverted by the respondents while only 325 responses, complete in all respects, were used for the final analysis. This yielded a response rate of 81.25 per cent. Table 1 illustrates the frequency and percentage of respondents in sampled banks. The majority of the respondents (27.69 per cent) belong to ICICI Bank followed by SBI (25.85 per cent), HDFC (24 per cent) and BOB (22.46 per cent).

Table 1.

Sample Respondents

Bank Type	Bank Name	Frequency	Percentage	Cumulative
Public	SBI	84	25.85	25.85
	BOB	73	22.46	48.31
Private	HDFC	78	24.00	72.31
	ICICI	90	27.69	100

Source: The authors.

Table 2 indicates that the majority of the respondents (64%) were male. Most of the respondents (48%) were below 30 years of age. More than half of the respondents (56%) were postgraduate. The majority of the respondents (48%) had five years of work experience in their respective banks while 43% had total work experience of 5 to 10 years.

Table 2.

Demographic Profile of Respondents

Item	Contents	Frequency	Percentage
Age	Below 30 30–40 40–50 50 and above	156 123 20 26	48 38 6 8
Gender	Male Female	208 117	64 36
Educational qualification	Undergraduate Postgraduate	142 183	44 56
Organizational tenure	Below 5 5–10 10–15 15 and above	157 126 14 28	48 39 4 9
Total work experience	Below 5 5–10 10–15 15 and above	121 138 26 40	37 43 8 12

Source: The authors.

Measures

The variables employed by the present study were measured using multiple items developed and tested in previous studies. The questionnaire items regarding employee competencies were measured on a seven-point Likert-type scale ranging from 1 = strongly disagree to 7 = strongly agree, and for organizational performance, the scale ranged from 1 = worst to 7 = best, where the respondents indicated their level of conformity with the different statements.

Employee competence: There is no single specific scale in the available literature for measuring employees’ competence. Researchers have used different measures in different settings/organizations across the countries to measure the construct (Bjornali & Storen, 2012; Kamukama et al., 2017; Kasekende et al., 2016; Otoo, 2019; Puteh et al., 2016; Urtasun & Nunez, 2012; van Esch et al., 2018). However, there is no consensus regarding the dimensions/items of the scale. For the present study, employee competence was measured using four dimensions, that is, self-competence, team competence, social competence and communication competence that are considered necessary for organizational performance (Elbaz et al., 2018; Osei & Ackah, 2015; Otoo & Mishra, 2018). To select the above-mentioned dimensions, a list of competencies along with their descriptions was prepared from the available literature and distributed among a panel of experts including four professors, ten non-managerial and five managerial bank employees and six doctoral candidates. The members were asked to choose five competencies essential for the banking employees and give their reasons for the same. After collecting the responses from the members, the researchers came up with five competencies that most of the members had opted for, that is, self-competence, team competence, communication competence, social competence and job competence. However, job competence was removed from the final analysis as the factor loadings for the items were below the threshold level. Moreover, certain items from other dimensions were also removed where factor loadings were below the recommended criterion.

Self-competence: The self-competence/self-liking scale developed by Tafarodi and Swann (1995) was adapted to measure employees’ self-competence. The original scale encompassing 20 items was modified as per the current research settings and generated six items having Cronbach alpha (reliability) of 0.897.

Team competence: We adapted Eby and Dobbins’ (1997) teamwork scale for measuring employees’ team competence. After modifying the original scale having eight items for the present study, four items were generated having Cronbach alpha of 0.869.

Communication competence: Employees’ communication competence was measured by adapting Weimann’s communication competency scale and after modifying the original scale as per the present study, three items with Cronbach alpha of 0.836 were generated.

Social competence: For measuring employees’ social competence, we adapted the scales developed by Anderson-Butcher et al. (2008) and Anderson-Butcher et al. (2016). A seven-item scale with a Cronbach alpha of 0.908 was generated after modifying the scales as per the current research scenario.

Organizational performance: To measure organizational performance, we adapted Delaney and Huselid (1996) perceived organizational performance scale.The scale consists of seven items and has a Cronbach alpha of 0.903.

Handling Common Method Bias

Common method bias (CMB) has received a great deal of attention in behavioural sciences and is a common concern among researchers dealing with studies that involve self-reports and cross-sectional designs. It refers to the variations in responses caused by the instrument rather than the actual predispositions of respondents that the instrument attempts to measure (Podsakoff et al., 2003). It influences the item validities, item reliabilities and the relationship between latent constructs. Therefore, to handle CMB, we took into consideration the techniques proposed by Conway and Lance (2010). We involved both managerial and non-managerial bank employees in the study, who were assured anonymity and confidentiality regarding their responses, which reduced evaluation apprehension (Podsakoff et al., 2012). Measurement instruments employed by the study were borrowed from recognized sources, and their validity was established through CFA. Results confirmed that all variables qualified for the construct, convergent and discriminant validity. Furthermore, the experts, scholars and professors ensured that no item in the questionnaire was overlapping. These considerations confirmed that CMB consequences were insignificant. Also, no threat of CMB was found in the present study according to Harman’s criterion (1976).

Data Analysis

A two-step approach was employed to analyse the efficacy of the proposed model and hypothesis using SPSS 20.0 and AMOS 20.0 software. The first step involved testing of a measurement model by examining unidimensionality, convergent validity, construct validity, discriminant validity and reliability through confirmatory factor analysis (CFA). In the next step, we tested a structural model by examining the relationships between variables through path estimates.

Measurement Model

In this step, the researchers examined both reliability and validity for all the latent variables. The internal reliability of the constructs was confirmed through Cronbach alpha and composite reliability. The convergent validity was established by examining two important indicators, that is, factor loadings and average variance extracted (AVE). As illustrated in Table 3, the Cronbach alpha values for all constructs ranged between 0.836 and 0.908, and composite reliability of constructs ranged from 0.839 to 0.909, which is greater than the 0.70 threshold (Fornell & Larcker, 1981; Kline, 2011), indicating adequate internal reliability. The factor loadings of all latent variables ranged from 0.70 to 0.86, which is greater than the recommended value of 0.60 or higher (Bagozzi & Yi, 1988; Kline, 2011), indicating sufficient convergent validity. AVE of constructs ranged from 0.571 to 0.635, which exceeds the acceptable value of 0.50 (Fornell & Larcker, 1981; Hair et al., 2011), indicating a good convergent validity. Discriminant validity was established by comparing the squared root of the AVEs of each construct with its corresponding correlations (Fornell & Larcker, 1981; Henseler et al., 2009). As indicated in Table 4, the squared root of the AVEs of each construct is greater than the inter-construct correlations, indicating good discriminant validity. Moreover, the assumption of multivariate normality was confirmed through skewness where all values ranged between +1.50 and −1.50 (Tabachnick & Fidell, 2013).

Table 3.

Reliability and Convergent Validity

Constructs	Items	Item loading	Cronbach’s alpha	CR	AVE
Self-competence	6	0.71–0.86	0.897	0.897	0.592
Team competence	4	0.70–0.83	0.869	0.871	0.628
Communicative competence	3	0.76–0.85	0.836	0.839	0.635
Social competence	7	0.70–0.83	0.908	0.909	0.589
Organizational performance	7	0.71–0.81	0.903	0.903	0.571

Source: The authors.

Table 4.

Discriminant Validity and Correlation

	Communication Competence	Self-competence	Social Competence	Organizational Performance	Team Competence
Communication competence	0.797
Self-competence	0.642	0.769
Social competence	0.661	0.658	0.767
Organizational performance	0.538	0.424	0.507	0.756
Team competence	0.766	0.758	0.731	0.516	0.792

Source: The authors.

Note: The bold values represent the squared root of average variance extracted (AVEs) which are greater than inter construct correlations and thus confirm the discriminant validity.

Structural Model

To assess the model fit, the researchers employed several model fit indices: relative/normed chi-square (CMIN/DF), the goodness of fit index (GFI), comparative fit index (CFI) and root mean square error of approximation (RMSEA). The acceptable values recommended for these estimates are greater than 0.90 for GFI (Joreskog & Sorbom, 1989), greater than 0.90 for CFI (Hu & Bentler, 1999), less than 0.08 for RMSEA (Browne & Cudeck, 1992) and less than 3 for CMIN/DF (Browne & Cudek, 1992; Wheaton et al., 1977). As reported in Table 5, the overall fit of the model was found reasonable on all indices (CMIN/DF = 2.170, GFI = 0.871, CFI = 0.936 and RMSEA = 0.060).

Table 5.

Model Fit Indices

	CMIN/DF	GFI	CFI	RMSEA
Study model	2.170	0.910	0.936	0.060
	Acceptable value (1–3)	Greater than 0.90	Greater than 0.90	Less than 0.080

Source: The authors.

Results and Discussion

The hypotheses proposed in the present study were tested using structural equation modelling. As reported in Table 6, the results confirmed H1 by showing that team competence has a significant and positive influence on organizational performance. The result supports the findings of other researchers (Elbaz et al., 2018; Nzewi et al., 2015). During the past few decades, team culture has been introduced and is flourishing on a large scale in public as well as private sector organizations. Since teams are equipped with more expertise and resources and offer different perspectives on various matters than individuals, they are more advantageous and promising. Because of these features, teams generally outperform individuals while dealing with challenging decision-making and problem-solving tasks, which eventually lead to the accomplishment of organizational goals more effectively. Therefore, organizations must develop teams and encourage teamwork in all their departments and enhance and nurture the desired competencies of their team members by implementing team-oriented HR practices. Results also revealed that social competence has a significant and positive influence on organizational performance, thus supporting H2. The results are in line with the previous studies (Araujo & Taylor, 2012) who contend that employees’ emotional and social competencies positively influence workplace performance, which in turn are instrumental in enhancing organizational performance. The results also support the findings of Ramo et al. (2009) who argued that emotional and social competencies are valuable predictors of job performance, which ultimately lead to superior organizational performance. Socially competent employees have a natural ability to get along well with others, create a healthy and positive working environment within the organization and have been found effective in all areas of performance. They are more supportive, more encouraging, more approachable as well as more connected to their fellow employees, thus making them more effective in their dealings with others. They possess the ability to develop and maintain good relationships with customers, managers, peers and other stakeholders, thereby leading to a strong network of relationships which ultimately results in improved organizational performance. Results of H3 indicate that communication competence has a significant and positive impact on organizational performance, thus supporting the findings of other studies (Elbaz et al., 2018; Papa, 1989; Payne, 2005), which observed that communication competence is the potential contributor of employees’ job performance, which in turn influences organizational performance. Communication competence is regarded as the most vital attribute of an individual for occupational success and an important instrument for sharing thoughts, ideas and feelings within a team. More specifically, in banks where employees have to deal with their customers and solving their problems day in and day out, employees are required to be communicatively competent in order to satisfy the needs and demands of their customers. Having the knowledge to solve the problems of customers is not enough unless and until an employee possesses the appropriate communication skills to satisfy their customers. Likewise, employees can perform their jobs more effectively if they communicate well with their customers and do not undermine the impact which their non-verbal means make on customers. Moreover, the above-discussed results of our study are also in conformity with the findings of other previous studies (Otoo, 2019; Otoo & Mishra, 2018; Potnuru & Sahoo, 2016). Surprisingly, the results of H4 indicate that self-competence does not have any significant influence on organizational performance, which is inconsistent with the findings of Elbaz et al. (2018), who found a positive and significant relationship between self-competence and organizational performance. There may be several reasons for this insignificant relationship. For example, the lack of commitment and dedication by the employees and the poor support from the management. Moreover, employees may be intending to leave the organization and feel that the organization lacks a good career management system, which in turn influences their performance and ultimately the performance of the organization

Table 6.

Results of Path Analysis

Employee Competencies	Organizational Performance
Employee Competencies	Path Coefficient	P value
Team competence	0.162	0.025
Social competence	0.207	0.002
Communication competence	0.229	***
Self-competence	–0.050	0.438
Adjusted R ²	0.310

Source: The authors.

Theoretical and Practical Implications

The study offers several useful theoretical and practical contributions. It empirically validated the relationships between employee competencies and organizational performance, particularly within the Indian banking industry, which has not been examined so far by the researchers. More specifically, it studied the relationships between various employee competence dimensions, that is, self-competence, team competence, communication competence and social competence and organizational performance. It contributes to the existing body of literature on the dialogue between employee competencies and organizational performance from the RBV of the firm, which is a unique attempt by the researchers. This study also offers some practical implications for the banking industry. Our findings suggest that organizations that manage to hire employees with higher levels of communication competence, social competence and team competence are likely to enjoy better performance than their competitors. This is because employees who are equipped with higher levels of communication competence, social competence and team competence are more likely to develop and maintain healthy interpersonal as well as high-quality customer relationships. Moreover, employees feel more satisfied and committed and have a greater inclination to stay for longer periods in the organization. The study also suggests the policymakers and management of banks to encourage the adoption of properly designed and well-articulated HRM practices in their organizations for enhancing such employee competencies for improved organizational performance.

Limitations and Directions for Future Research

The present study acknowledges certain limitations that offer important avenues for future research. This study examines only a few dimensions of employees’ competence, future research may extend the number of dimensions in our model. Additional dimensions such as emotional competence, leadership competence, cultural competence, job competence and so on may also be taken into account for future research. We have used subjective measures to assess the organizational performance. Future studies can be conducted by employing objective measures. The results may not be applied to other sectors given the specific characteristics of the banking industry. Further studies may be carried out in other sectors and geographical regions. The study is confined to the Indian context; researchers may undertake a cross-cultural study to investigate the variations, if any, in other cultural settings. A comparative study among public and private sector banks involving employee competencies may be conducted by future researchers. Moreover, comparative studies, between public and private sector banks, maybe a valuable contribution to the literature.

Conclusion

The present research work attempted to investigate the impact of various employee competencies on organizational performance within the Indian banking industry using structural equation modelling. The study established that social competence, team competence and communication competence have a significant and positive impact on organizational performance. Therefore, organizations need to professionally design, develop and implement well-articulated competence development strategies and practices for nurturing and enhancing employee competencies. An organizational culture that encourages and motivates employees towards performance improvement through competence development as well as facilitates better interpersonal relationships between employees and management need to be developed and nurtured within organizations for better organizational performance and sustained growth. Teamwork, which has gained a great deal of attention in the past few years, needs to be facilitated and encouraged within the organizations for better employee and organizational performance. Moreover, professionally designed training programmes for enhancing employee competencies should be properly implemented taking into consideration the present and future employee competencies needed by the organization. In a nutshell, employees should be motivated, encouraged and felicitated for their every contribution and their competencies should be developed, nurtured and exploited for better organizational performance.

Footnotes

Acknowledgements

We are highly indebted to Mrs. Salma Khan, research scholar, Aligarh Muslim University for her invaluable support.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

References

Akhtar

, Azeem

S. M.

, & Mir

G. M.

(2014). Impact of HRM practices on perceived organizational performance. International Journal of Academic Research, 6(5), 23–30.

Allen

R. S.

, & Helms

M. M.

(2002). Employee perceptions of the relationship between strategy, rewards and organizational performance. Journal of Business Strategies, 19(2), 115–139.

Anderson-Butcher

, Amorose

A. J.

, Lower

L. M.

, Riley

, Gibson

, & Ruch

(2016). The case for the perceived social competence scale II. Research on Social Work Practice, 26(4), 419–428.

Anderson-Butcher

, Iachini

A. L.

, & Amorose

A. J.

(2008). Initial reliability and validity of the perceived social competence scale. Research on Social Work Practice, 18(1), 47–54.

Araujo

V. A. S.

, & Taylor

S. N.

(2012). The influence of emotional and social competencies on the performance of Peruvian refinery staff. Cross Cultural Management: An International Journal, 19(1), 19–29.

Bagozzi

R. P.

, & Yi

(1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science, 16(1), 74–94.

Barney

(1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

Bhagat

R. S.

, & Allie

S. M.

(1989). Organizational stress, personal life stress, and symptoms of life strains: An examination of the moderating role of sense of competence. Journal of Vocational Behavior, 35(3), 231–253.

Bjornali

E. S.

, & Storen

L. A.

(2012). Examining competence factors that encourage innovative behaviour by European higher education graduate professionals. Journal of Small Business and Enterprise Development, 19(3), 402–423.

10.

Boyatzis

R. E.

(1982). The competent manager: A model for effective performance. John Wiley and Sons.

11.

Browne

M. W.

, & Cudeck

(1992). Alternative ways of assessing model fit. Sociological Methods and Research, 21(2), 230–258.

12.

Burke

W. W.

, & Litwin

G. H.

(1992). A causal model of organizational performance and change. Journal of Management, 18(3), 523–545.

13.

Chahal

, Jyoti

, & Rani

(2016). The effect of perceived high-performance human resource practices on business performance: Role of organizational learning. Global Business Review, 17(3), 107S–132S.

14.

Ciziuniene

, Vaiciute

, & Batarliene

(2016). Research on competencies of human resources in transport sector: Lithuanian case study. Procedia Engineering, 134, 336–343.

15.

Conway

J. M.

, & Lance

C. E.

(2010). What reviewers should expect from authors regarding common method bias in organizational research. Journal of Business and Psychology, 25(3), 325–334.

16.

Delaney

J. T.

, & Huselid

M. A.

(1996). The impact of human resource management practices on perceptions of organizational performance. Academy of Management Journal, 39(4), 949–969.

17.

Delarue

, Van Hootegem

, Procter

, & Burridge

(2008). Team working and organizational performance: A review of survey-based research. International Journal of Management Reviews, 10(2), 127–148.

18.

Dess

G. G.

, & Robinson

R. B.

Jr. (1984). Measuring organizational performance in the absence of objective measures: The case of the privately-held firm and conglomerate business unit. Strategic Management Journal, 5(3), 265–273.

19.

Dollinger

M. J.

, & Golden

P. A.

(1992). Interorganizational and collective strategies in small firms: Environmental effects and performance. Journal of Management, 18(4), 695–715.

20.

Eby

L. T.

, & Dobbins

G. H.

(1997). Collectivistic orientation in teams: An individual and group level analysis. Journal of Organizational Behaviour, 18(3), 275–295.

21.

Elbaz

A. M.

, Haddoud

M. Y.

, & Shehawy

Y. M.

(2018). Nepotism, employees’ competencies and firm performance in the tourism sector: A dual multivariate and qualitative comparative analysis approach. Tourism Management, 67, 3–16.

22.

Femi

A. F.

(2014). The impact of communication on workers’ performance in selected organisations in Lagos State, Nigeria. IOSR Journal of Humanities and Social Science, 19(8), 75–82.

23.

Fornell

, & Larcker

D. F.

(1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.

24.

Gelade

G. A.

, & Ivery

(2003). The impact of human resource management and work climate on organizational performance. Personnel Psychology, 56(2), 383–404.

25.

Guest

D. E.

(1997). Human resource management and performance: A review and research agenda. International Journal of Human Resource Management, 8(3), 263–276.

26.

Hair

J. F.

, Ringle

C. M.

, & Sarstedt

(2011). PLS-SEM: Indeed a silver bullet. Journal of Marketing Theory and Practice, 19(2), 139–152.

27.

Harman

H. H.

(1976). Modern factor analysis (3rd ed.). University of Chicago Press.

28.

Hellriegel

, & Slocum

(2011). Organizational behavior (13th ed.). Cengage South-Western.

29.

Henseler

, Ringle

C. M.

, & Sinkovics

R. R.

(2009). The use of partial least squares path modelling in international marketing. Advances in International Marketing, 20, 277–320.

30.

L. T.

, & Bentler

P. M.

(1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural Equation Modeling: A Multidisciplinary Journal, 6(1), 1–55.

31.

Joreskog

K. G.

, & Sorborm

(1989). LISREL-7 users reference guide. Scientific Software. http://nt.org/pubs/Proceedings/confproceedingsdetail.cfm?&ItemNumber=5191

32.

Kamukama

, Kyomuhangi

D. S.

, Akisimire

, & Orobia

L. A.

(2017). Competitive advantage: Mediator of managerial competence and financial performance of commercial banks in Uganda. African Journal of Economic and Management Studies, 8(2), 221–234.

33.

Kasekende

, Munene

J. C.

, Otengei

S. O.

, & Ntayi

J. M.

(2016). Linking teacher competences to organizational citizenship behaviour: The role of empowerment. International Journal of Educational Management, 30(2), 252–270.

34.

Kim

(2005). Individual-level factors and organizational performance in government organizations. Journal of Public Administration Research and Theory, 15(2), 245–261.

35.

Kline

R. B.

(2011). Principles and practice of structural equation modeling. Guilford Press.

36.

Liao

S. H.

, & Wu

C. C.

(2009). The relationship among knowledge management, organizational learning, and organizational performance. International Journal of Business and Management, 4(4), 64–76.

37.

Mandourah

, Samad

, & Isaac

(2017). Contribution of employee competency and teamwork on organisational performance within private sector organisations in Saudi Arabia. Research Journal of Applied Sciences, 12(1), 55–66.

38.

Mathieu

J. E.

, & Zajac

D. M.

(1990). A review and meta-analysis of the antecedents, correlates, and consequences of organizational commitment. Psychological Bulletin, 108(2), 171–194.

39.

McClelland

D. C.

(1973). Testing for competence rather than for intelligence. American Psychologist, 28, 1–14.

40.

McCracken

M. J.

, McIlwain

T. F.

, & Fottler

M. D.

(2001). Measuring organizational performance in the hospital industry: An exploratory comparison of objective and subjective methods. Health Services Management Research, 14(4), 211–219.

41.

McKelvey

(1983). Organizational systematics: Taxonomy, evolution, and classification. University of California Press.

42.

Miah

M. K.

, & Islam

M. M.

(2017). Human resource management practices and organizational performance: Evidence from Japanese and US subsidiaries/joint venture in Bangladesh. Journal of Human Resource Management, 20(1), 54–67.

43.

Nair

V. V.

(2014). Behavioural competency management with special reference to commercial banks headquartered in Kerala (Doctoral dissertation). https://shodhganga.inflibnet.ac.in/handle/10603/55411

44.

Nordhaug

, & Gronhaug

(1994). Competencies as resources in firms. International Journal of Human Resource Management, 5(1), 89–106.

45.

Nzewi

, Chiekezie

, & Nnesochi

(2015). Teamwork and performance of selected transport companies in Anambra State. International Journal of Managerial Studies and Research, 3, 124–132.

46.

Obeidat

, Al-Sarayrah

, Tarhini

, Al-Dmour

R. H.

, Al-Salti

, & Sweis

(2016). Cultural influence on strategic human resource management practices: A Jordanian case study. International Business Research, 9(10), 94–114.

47.

Ogunyomi

, & Bruning

N. S.

(2015). Human resource management and orxganizational performance of small and medium, enterprises (SMEs) in Nigeria. The International Journal of Human Resource Management, 27(6), 612–634.

48.

Orpinas

(2010). Social competence. In Weiner

I. B.

& Craighead

W. E.

(Eds.), The Corsini encyclopedia of psychology (Vol. 4, 4th ed., pp. 1623–1625). Wiley.

49.

Orpinas

, & Horne

A. M.

(2006). Bullying prevention: Creating a positive school climate and developing social competence. American Psychological Association.

50.

Osei

A. J.

, & Ackah

(2015). Employee’s competency and organizational performance in the pharmaceutical industry: An empirical study of pharmaceutical firms in Ghana. International Journal of Economics, Commerce and Management, United Kingdom, 3(3), 1–9.

51.

Otoo

F. N. K.

, & Mishra

(2018). Influence of human resource development (HRD) practices on hotel industry’s performance: The role of employee competencies. European Journal of Training and Development, 42(7/8), 435–454.

52.

Otoo

F. N. K.

(2019). Human resource development (HRD) practices and banking industry effectiveness: The mediating role of employee competencies. European Journal of Training and Development, 43(3/4), 250–271.

53.

Papa

M. J.

(1989). Communicator competence and employee performance with new technology: A case study. Southern Communication Journal, 55(1), 87–101.

54.

Parry

S. B.

(1996). Just what is a competency? (and why should you care?). Training, 35(6), 58–64.

55.

Payne

H. J.

(2005). Reconceptualizing social skills in organizations: Exploring the relationship between communication competence, job performance, and supervisory roles. Journal of Leadership & Organizational Studies, 11(2), 63–77.

56.

Podsakoff

P. M.

, MacKenzie

S. B.

, Lee

J. Y.

, & Podsakoff

N. P.

(2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903.

57.

Podsakoff

P. M.

, MacKenzie

S. B.

, & Podsakoff

N. P.

(2012). Sources of method bias in social science research and recommendations on how to control it. Annual Review of Psychology, 63, 539–569.

58.

Potnuru

R. K. G.

, & Sahoo

C. K.

(2016). HRD interventions, employee competencies and organizational effectiveness: An empirical study. European Journal of Training and Development, 40(5), 345–365.

59.

Puteh

, Kaliannan

, & Alam

(2016). Employee core competencies and organisational excellence: An interpretative analysis. Australian Journal of Business and Economic Studies, 2(1), 45–55.

60.

Ramo

G. L.

, Saris

W. E.

, & Boyatzis

R. E.

(2009). The impact of social and emotional competencies on effectiveness of Spanish executives. Journal of Management Development, 28(9), 771–793.

61.

Salman

, Ganie

S. A.

, & Saleem

(2020). The concept of competence: A thematic review and discussion. European Journal of Training and Development. https://doi.org/10.1108/EJTD-10-2019-0171

62.

Sanghi

(2016). The handbook of competency mapping: Understanding, designing and implementing competency models in organizations. SAGE Publications.

63.

Scapolan

, Montanari

, Bonesso

, Gerli

, & Mizzau

(2017). Behavioural competencies and organizational performance in Italian performing arts: An exploratory study. Academia Revista Latinoamericana de Administración, 30(2), 192–214.

64.

Shaw

(2005). Getting leaders involved in communication strategy. Strategic Communication Management, 9(6), 14–17.

65.

Singh

N. R.

, & Kassa

(2016). The impact of human resource management practice on organizational performance: A study on Debre Brehan University. International Journal of Recent Advances in Organizational Behaviour and Decision Sciences, 1(1), 643–662.

66.

Siriwaiprapan

(2004). A working model of employee competence in the Thai Workplace: What constitutes employee competence? Thai Journal of Public Administration, 2(1), 123–135.

67.

Spencer

L. M.

, & Spencer

P. S. M.

(1993). Competence at work: Models for superior performance. John Wiley & Sons.

68.

Stohl

(1986). Quality circles and changing patterns of communication. Annals of the International Communication Association, 9(1), 511–531.

69.

Sucher

, & Cheung

(2015). The relationship between hotel employees’ cross-cultural competency and team performance in multi-national hotel companies. International Journal of Hospitality Management, 49, 93–104.

70.

Tabachnick

B. G.

, & Fidell

L. S.

(2013). Using Multivariate Statistics (6th ed.). Pearson.

71.

Tafarodi

R. W.

, & Swann

W. B.

Jr. (1995). Self-linking and self-competence as dimensions of global self-esteem: Initial validation of a measure. Journal of Personality Assessment, 65(2), 322–342.

72.

Theriou

G. N.

, & Chatzoglou

(2014). The impact of best HRM practices on performance—Identifying enabling factors. Employee Relations, 36(5), 535–561.

73.

van Esch

, Wei

L. Q.

, & Chiang

F. F.

(2018). High-performance human resource practices and firm performance: The mediating role of employees’ competencies and the moderating role of climate for creativity. The International Journal of Human Resource Management, 29(10), 1683–1708.

74.

Venkatraman

, & Ramanujam

(1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801–814.

75.

Urtasun

, & Nunez

(2012). Work-based competences and careers prospects: A study of Spanish employees. Personnel Review, 41(4), 428–449.

76.

Wernerfelt

(1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171–180.

77.

Wheaton

, Muthen

, Alwin

D. F.

, & Summers

G. F.

(1977). Assessing reliability and stability in panel models. Sociological Methodology, 8, 84–136.

78.

White

R. W.

(1959). Motivation reconsidered: The concept of competence. Psychological Review, 66(5), 297–333.

79.

Wiemann

J. M.

(1977). Explication and test of a model of communicative competence. Human Communication Research, 3(3), 195–213.

80.

Wright

P. M.

, Gardner

T. M.

, & Moynihan

L. M.

(2003). The impact of HR practices on the performance of business units. Human Resource Management Journal, 13(3), 21–36.

81.

, & Ramanathan

(2012). Effects of business environment on international retail operations: Case study evidence from China. International Journal of Retail & Distribution Management, 40(3), 218–234.

82.

Zacca

, & Dayan

(2018). Linking managerial competence to small enterprise performance within the dynamic capability logic. Journal of Small Business and Enterprise Development, 25(2), 256–276.

83.

Zaim

, Yaşar

M. F.

, & Ünal

Ö. F.

(2013). Analyzing the effects of individual competencies on performance: A field study in services industries in Turkey. Journal of Global Strategic Management, 7(2), 67–77.