An Empirical Analysis of the Relationship between Human Capital and Organizational Performance in Hospitality Sector in Pakistan

Abstract

Human capital is professed as a critical factor and a special resource that can elevate the firm’s performance, generally, in most of the organizations, and specifically, in labor-intensive organizations. It is considered a special resource in the hotel industry where employees have direct interaction with customers. Although a lot of research has been done, however, the question of how much and what type of human capital is required by the organization to fight in the recent rivalry is still unanswered. This study is an effort to answer the aforesaid question about human capital in the hospitality sector in Pakistan (involving five stars, four-star, and three-star hotels separately). A theoretical framework and a research conceptual model is developed on the bases of in-depth literature. A cross-sectional field survey was conducted through an adopted and valid research instrument. Questionnaires were administered to 300 respondents selected by stratified random sampling, 275 were received and 250 were perfect for further use in SPSS version 22. Statistical analysis shows the results which clearly identify the strong and significant relationship between human capital and organizational performance. Moreover, microanalysis of components of human capital depicts that innovation and creation have the most significant impact among all of the three components, on organizational performance in all types of hotels in Pakistan. Theoretically, the current study added knowledge to the literature about the constructs of human capital, organizational performance, and organization success. Practically, in the hotel industry, it contributes to strategic decision making such as employees’ training, human capital investment, regulatory decisions, developing mechanisms in order to develop human capital as a unique and valuable resource that leads to the competitive advantage of the organizations. The current study is limited to five stars, four-star and three-star hotels in Lahore, Pakistan. It an important and initial step towards establishing a measurable and empirical value of human capital for organizations in the hospitality sector. However, It opens new vistas for researchers to further investigate the phenomenon.