Int. Journal of Business Science and Applied Management, Volume 17, Issue 3, 2022

Aspects of Human Capital Management and Employee Job

Performance: The Mediation Role of Employee Engagement

Abel Gebremedhn Desta

Business Leadership, School of Commerce, Addis Ababa University

Addis Ababa, PO Box 1176, Addis Ababa University, Ethiopia

Tel: +251913126801

Email: abelgebremedhn30@gmail.com

Work Mekonnen Tadesse

Human Resource Management, School of Commerce, Addis Ababa University

Addis Ababa, PO Box 1176, Addis Ababa University, Ethiopia

Tel: +25191121258

Email: worku.mekonnen@gmail.com

Wubshet Bekalu Mulusew

Commerce and Management, School of Commerce, Addis Ababa University

Addis Ababa, PO Box 1176, Addis Ababa University, Ethiopia

Tel: +251911443639

Email: hermanoyya@gmail.com

Abstract

This study examined the effect of selected aspects of human capital management on employee job

performance and the mediating role of employee engagement in the Ethiopian banking sector. This

study reports the responses of 426 respondents from twelve banking institutions in Addis Ababa,

Ethiopia, drawing on the social exchange theory and the resource-based view theory. This study is

structured using a quantitative approach, with stratified and convenient sampling techniques. Structural

equation modeling with AMOS was used to test the hypothesized relationships. The results revealed

that aspects of human capital management, namely knowledge accessibility, learning capacity,

workforce optimization, leadership practice, and career advancement, positively relate to employee job

performance. Moreover, the results of bias-corrected bootstrapping iteration revealed that employee

engagement partially mediates this relationship between aspects of human capital management and

employee job performance. The limitations and future research implications are discussed.

Keywords: human capital management, employee engagement, employee job performance

Int. Journal of Business Science and Applied Management / Business-and-Management.org

1. INTRODUCTION

For an enterprise, human capital is a key source of long-term competitive advantage (e.g., Wright,

2011). This is especially useful for companies that compete in complex and dynamic contexts, where

being able to quickly acquire and adopt new technology and market capabilities is essential in

maintaining an edge over rivals (Elias & Scarbrough, 2004). It is believed that in a competitive

business environment human capital is crucial for fostering true competition. As the business setting

becomes more competitive, managing the human capital of the enterprise becomes more vital to its

success (Delery & Roumpi, 2017). Managing HC through acquiring and retaining the best employees is

only half the battle (Hatch & Dyer, 2004). The acquisition and alteration of new knowledge in

organizations is an inherently human process (Khan & Chaudhry, 2019), making it imperative to

understand the contribution that human capital management (HCM) practices make to the area of

employee job performance.

Despite the broad literature revolving around human resource management and outcome variables

in the management discourse, there is a lack of research examining the relationship between human

capital management and its outcome variables. Furthermore, of those studies that have examined this

relationship (e.g., Crook et al., 2011; Kuchar et al., 2015; Delery & Roumpi, 2017; Minbaeva & Shell,

2018), none have considered the outcome variables of employee job performance and the effect of the

intervening effect of employee engagement. Although these studies are important first steps, there is a

general dearth of research, especially in developing countries, including Ethiopia, on the interaction of

the area of human capital management, employee engagement, and employee job performance. With

this background in mind, this study was designed to examine the effect of selected aspects of HCM on

employee job performance and the mediating role of employee engagement. HCM is mainly a planned

and strategic approach to managing the most vital of the organization's employees (Kuchar et al., 2015;

Hatch & Dyer, 2004). It deals with obtaining, developing, and retaining employees with a strategic

people management approach (Wright et al., 2014). It is argued that when an organization develops a

better HCM in a way that aligns with its larger system, the better it will be able to harness engagement

and performance for competitive advantage (Khan & Chaudhry, 2019; Jacobson & Sowa, 2015).

Therefore, managers need to devise strategies as well as make better investments in the area of human

capital management and engagement to enhance employee performance.

However, HCM and development practices in Africa are at the lowest stage. For instance, of more

than 1.2 billion people in Africa, around 43% are below the age of 15, but the Human Capital Index

score is 0.40, which puts the region at 40% of its potential (GHCR, 2019). According to the report,

HCM and development in Africa is a structural challenge that deserves serious attention. In academia,

despite the strategic importance of HCM and its outcome variables, little work has tried to incorporate

these streams (Boon et al., 2018; Wright et al., 2014). The lack of a well-defined HCM framework and

issues with aligning the desired HCM with business strategy and performance, particularly in the

Ethiopian banking sector (Boon et al., 2018; Schleicher et al., 2017), is what calls for further research.

This is so in the Ethiopian banking industry, which is being stripped of incompetent HCMP, and less

engaged employees, leaving it ill-fitted to face competition with the globalized world.

The main objective of this study was to examine the effect of selected aspects of human capital

management on employee job performance and the mediating role of employee engagement. As part of

our research model, we also examined the mediating role of employee engagement, which has been

proposed theoretically by Schaufeli et al. (2006) but has not yet been empirically tested for its

moderating role in the stated relationship. To increase and maintain business profitability, leaders of

business organizations need to work hard to engage employees (Anitha, 2013). Employee engagement

(EYE) is a typical construct in work relations and it has received great attention among the academic

community and business consultants in recent years (Bhatnagar & Biswas, 2013). This article proposes

that EYE plays a positive mediating role in the relationship between the selected aspects of HCM and

employee job performance (EMJP). It is contended that HCM practices are the critical antecedents of

employee engagement, which means employees that are engaged care about their jobs, believe that

their efforts matter, and work on enhancing their performance (Gruman & Saks, 2011).

Over the years, researchers have focused on the direct effect of HC or HCM on performance

(Abualoush et al., 2018, Cania et a., 2016, Nderitu, et al., 2019) and the interaction of human capital

management practices on employee job performance. However, employee engagement constructs have

been overlooked. To this end, SET and RBVT were used as a basis for this research (Dai & Qin, 2016;

Wilson & Tizikara, 2017; Wright et al., 2014).

Without mentioning these intervening elements, business frameworks are incomplete and unable

to address actual business challenges due to the complexity of organizational problems in business

(Namazi & Namazi, 2016). Therefore, this research is an effort toward providing an insight into the

effect of HC and HCM on job employee performance and employee engagement in the Ethiopian

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

banking sector. Therefore, managers of these sectors need to devise strategies as well as make

investments that are more effective in the areas of human capital management and engagement to

enhance employee performance.

Our work makes the following primary contributions: First, it highlights the importance of

focusing on the intangible assets of an organization (i.e., human capital). Second, this study contributes

to the creation of a new theoretical framework for the relationship between the areas of HCM,

employee engagement, and employee job performance by integrating crucial factors that have not been

previously connected. Third, from the practical point of view, today’s leaner business organizations

need to be more responsible for creating engaged employees to accomplish their desired goals.

Managers need to devise strategies as well as make investments that are more effective in the areas of

human capital management and engagement to enhance employee performance.

2. LITERATURE REVIEW

2.1. Human Capital Management (HCM)

HCM is the planned and strategic approach to managing the most vital of the organization's

employees (Odden, 2011). It is a way of evaluating people as assets whose current value can be

evaluated and whose future value can be enhanced through investment (Wright et al., 2014). HCM

deals with obtaining, developing, and retaining employees in a strategic people management approach

(Baron & Armstrong, 2007). It is also stated that HCM is a system for increasing performance with the

biggest impact on corporate core competencies (Boon et al., 2018; Hossain & Roy, 2016). Delery and

Roumpi (2017) stated that HCM is the total development of human potential expressed as an

organizational value. Simply put, it is the holistic, strategic, organization-wide, and systems-based

approach of an organization towards employees. In identifying the practice of HCM for high employee

engagement and employee job performance in the Ethiopian banking sector, this study is focused on

aspects of HCM such as knowledge accessibility, learning capacity, workforce optimization, leadership

practice, and career advancement, a model tested by some scholars (e.g., Bassi & Mcmurrer, 2008;

Kuchar et al., 2015; Tüzin & Özge, 2013). From scholarly work, it has been realized that these aspects

of HCM are the determinant factors of employee engagement and the overall business organization.

Moreover, these aspects of HCM have been previously identified in the organizational development,

business strategy, and research strategic HR literature. Odden (2011) claimed that these construct

variables are required for the HC function to assume a strategic role within organizations. Research has

also shown that these aspects provide a core set of measures that managers can use to increase the

effectiveness of their investment in people and advance overall performance (Bassi & Mcmurrer, 2008).

Hence, the stated aspects of HCM have been selected and were tested as antecedents of employee

engagement and employee job performance.

2.2 Employee Engagement

Employee engagement (EYE) has emerged as a potentially critical theme of organizational

performance and management (Bhatnagar & Biswas, 2013; Tripathi, 2016). According to Nasomboon

(2014), the concept of EYE has emerged from recent years of the burnout literature and started to

attract the attention of scholars around two decades ago. EYE refers to the cognitive, emotional, and

interactive energy of an employee directed toward positive organizational results (Wollard & Shuck,

2011). Gottman et al. (2016) believe that EYE is about the employees’ psychological presence during

work roles and includes critical components of attention and absorption. Numerous studies have

pointed out that EYE has three dimensions: vigor, dedication, and absorption (Christian, 2011; Mishra

et al., 2014; Schaufeli et al., 2006). According to these authors, vigor indicates power, mental resilience,

making a constant effort, and determination on the job. Vigor also implies high levels of energy and

mental elasticity while working and high levels of persistence even when faced with difficulties.

Dedication concerns being enthusiastic, inspired, and highly concerned about your job. An individual

can obtain a sense of meaning from work, the sentiment of passion, pride, and challenge, while

absorption refers to a sense of detachment from your surroundings, a high level of attentiveness on the

job, and a lack of conscious awareness of the time spent on the job. Therefore, this study aims to

examine the effect of the areas of HCM on employee performance through employee engagement.

2.3 Employee Job Performance

Employee job performance refers to the general financial or non-financial result of the employee

that has a direct relationship with the organization's performance and success (Armstrong, 2010).

According to Chang and Chen (2011), in an organizational context, performance is typically defined as

the degree to which an organizational member (employee) contributes to achieving the goals of the

Int. Journal of Business Science and Applied Management / Business-and-Management.org

organization. Employee performance is the outcome of executing defined responsibilities, meeting

deadlines, employee competency, and effectiveness and efficiency in doing work (Pradhan & Jena,

2017). Researchers point out that employee performance has three dimensions: task performance,

contextual performance, and adaptive performance (e.g., Koopmans, 2014; Pradhan & Jena, 2017;

Ramdani, 2019). Task performance is about the basic job responsibilities of workers and is mostly

called "in-role prescribed behavior" (Koopmans, 2014). Adaptive performance, on the other hand, is

the extent to which an individual employee adapts to changes in the job role or work environment

(Koopmans, 2014; Pradhan & Jena, 2017).

Along with task and adaptive performance, efforts have been made to determine the importance

of non-job performance components to create a better workplace. Scholars defined this as contextual

performance, which refers to employee voluntary actions that benefit businesses intangibly (Crook et

al., 2011; Pradhan & Jena, 2017). According to Koopmans (2014), contextual performance signifies

"discretionary extra-role behavior." It is reflected in actions such as coaching colleagues, consolidating

social networks within an organization, and going into and doing extra jobs for the specified

organization. It is noted that employee job performance can be seen in terms of in-role and extra-role

job performance, where extra-role performance is the practice that is essential for organizational

effectiveness but is discretionary, and role performance behavior is related to formal duties and the

responsibilities of an organization.

With regard to underpinning theories, this paper adapted Resource-Based View Theory (RBVT)

and social exchange theories (SET). RBVT has become the predominant theoretical underpinning used

by scholars studying knowledge-based views of the firm (Bhatnagar & Biswas, 2013; Wilson &

Tizikara, 2017), for instance, strategic HRM, strategic management, human capital, strategic

management, leadership, vigorous capabilities, employee engagement, business strategy, and firm

performance (Colbert, 2004; Crook et al., 2011; Jamal & Saif, 2011; Newbert, 2007).

According to researchers, the core principles of RBVT are resources that are essential, rare,

distinctive, and non-substitutable and provide a competitive advantage (Crook et al., 2011; Wright et al.,

2014). With this in mind, this research proposes that the use of aspects of HCM could improve the

organization’s human capital pool, which in turn leads to better engagement and performance. SET is

among the most influential theoretical paradigms for the conceptualization of workplace behavior

(Cropanzano & Mitchell, 2005). According to Cropanzano et al. (2017), social exchange relationships

involve the exchange of resources between both parties in the relationship, which may comprise

extrinsic benefits, psychosocial support, advice, and information. It is stated that the SET is invoked

wherein the employees, for tangible benefits of the organization, view employment as a trade-off

between effort and faithfulness. Though the exact focus of SETs varies, a common theme is that the

perceived balance between organizational inducements, individual employee contributions, and

interdependence has performance implications.

2.4 The relationship between aspects of HCM and Employee job performance

In this study, we argue that some aspects of HCM, namely knowledge accessibility, learning

capacity, workforce optimization, leadership practices, and career advancement, enhance employee job

performance. Prior empirical and theoretical studies have related aspects of HCM to diverse kinds of

organizational positive work outcomes. In this regard, Jamal and Saif (2011) found that leveraging the

human capital of the organization has a positive impact on performance. A study by Vij and Sharma

(2014) showed that HCM practices, for instance, leadership practice, knowledge accessibility, and

learning capability, have a positive effect on employee positive behavioral outcomes. Iwamoto and

Suzuki (2020) analyzed the relationship between traits of HCM practices and quality administration on

overall performance. They found that human capital indicators, such as learning capacity, accessibility

of knowledge, and career development, had a positive impact on performance. The findings of a study

by Dekoulou and Trivellas (2015) have brought to light that learning-oriented employees are a crucial

predictor of both employee job satisfaction and individual performance, while job satisfaction is shown

to be a partial mediator of the association between learning and job performance.

According to Tüzin and Özge (2013), accessibility to knowledge is correlated to a new firm's

performance and sustainability. A study by Kashif (2018) also found that both knowledge management

practices and dynamic capabilities have a positive, significant impact on employee performance in the

banking sector. The author further claimed that banking managers need to manage knowledge properly

and systematically to make the company more knowledge-based, which leads to improved performance.

Prior research has focused on the importance of HCMPs in providing sustainable advantage and

competitiveness (Minbaeva & Shell, 2018). Birasnav et al. (2010) have shown that efficient leadership

helps employees realize and improve their contributions to the success of the organization. Likewise,

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

Schleicher et al. (2017) found that strategic human resource functions are positively related to the firm's

performance in a business context

According to Subramony et al. (2018) learning capacity has a significant positive effect on

improving the quality and quantity of the organization's production and enhancing profitability. With

better employee learning, they bring unique and innovative ideas to the table because of their

knowledge, which increases the performance of the staff (Luthans & Youssef, 2004). According to

Sturman and Tews (2007), for new employees, the general mental ability was a better predictor of

performance, while conscientiousness was an improved predictor of performance for experienced

workers. Serengil and Ozpinar (2017) conclude that workforce optimization through employee

utilization, employee satisfaction, acknowledgment of accomplishments, and work/life balance for

bank operations is a vital mechanism for enhancing engagement and boosting performance.

Buil et al. (2019) found that leadership behaviors are positively related to employee performance.

Further studies (e.g., Anitha, 2013; Saul et al., 2015) contend that employee job performance occurs

when leaders are inspiring and when leaders are in charge of communicating the point that the

employees’ efforts play a key role in the whole business's success. Put another way, when an

employee’s job role is considered crucial and meaningful, it sparks their interest and enhances their

engagement. Better leadership practices, as one driver of HCM, have a positive impact on employee

performance (Buil et al., 2019).

Research conducted by Hamid et al. (2017) found that the career development prospects of HCM

are positively linked to employee well-being and negatively related to employee deviant behavior.

Career advancement as part of HCM practice within the organization is one of the significant

motivational tools to absorb employees in positive job-related activities (Briggs et al., 2011).

From the Ethiopian business organization's perspective, research conducted by Tessema (2014)

has shown that having better human capital management and investment in the company leads to

improved performance. In contrast, some argue that the relationship between HCM and employee

performance is influenced by context and that HCM practices (e.g., leadership practices such as

communication, inclusiveness, influence, workforce optimization, and learning capacity) do not always

result in better employee performance that benefits the organization (Parker & Griffin, 2011).

Maditinos et al. (2011) stated that HC competence was not found to have a statistically significant

association with positive behavioral and work-related outcomes. However, there is a lack of studies on

the direct relationship between aspects of HCM and EMJP, especially in developing countries

including Ethiopia.

Based on the empirical findings and the underpinning theories discussed above, we, therefore,

expect that the influence of these aspects of HCM on employee job performance in the banking sector

will be positive. Hence, the following hypotheses are proposed:

H1a. There is a positive direct effect of knowledge accessibility practices on employee

performance.

H1b. There is a positive effect of learning capacity on employee performance.

H1c. There is a direct positive effect of workforce optimization on employee performance.

H1d. There is a direct positive effect of leadership practice on employee performance.

H1e. There is a direct positive effect of career advancement on employee performance.

2.5 The Mediating Role of Employee Engagement

Employee engagement mediated the association between high-performance work practices and

employee performance (Song et al., 2014). Witasari and Gustomo (2020) conducted research intended

to examine the mediating role of employee engagement in human capital management, such as

employee training, the accessibility of knowledge, leadership practices, learning capacity, and

performance. The findings revealed that employee engagement positively mediates the relationship

between HCM practices and performance. Moreover, the finding of Kerdpitak and Jermsittiparsert

(2020) indicates that employee engagement positively mediates the association among the practices of

HCM, such as employee learning practices, employee career growth, and competitive advantage. These

results suggest to the managers that they enhance the best practices of HC so that they engage the

employees at work and improve their productivity and competitive advantage. Employee engagement

has been discovered to be a mediator between the organizational working environment, learning and

development, and performance (Chaudhry et al., 2017).

EYE partially mediates the association between human resource management practices and both

employees’ levels of satisfaction and performance outcomes (Sattar et al., 2015). Similarly, EYE

significantly and positively affects employee performance and mediates the effect of human capital on

Int. Journal of Business Science and Applied Management / Business-and-Management.org

employee performance (Ngwenya & Pelser, 2018). A study by Jiang et al. (2012) found that career

advancement, continuous feedback, and job security are associated with employee inspiration and

involvement functions, which in turn affect employees' performance. HCM is a major antecedent of

employee commitment and employee engagement (Wollard & Shuck (2011). Arsalan et al. (2013)

attempted to find the impact of human capital on firm performance with mediating effects of employee

satisfaction in the telecom sector. The authors found that there is a strong relationship between human

capital and firm performance and found that employee satisfaction has a strong mediating effect

between both variables. Buil et al. (2019) determined that employee engagement mediates the

relationship between leadership and employee performance. Employees' work engagement mediates

the positive relationship between leadership practice, helping behavior, and employee job performance

(Lai et al., 2020). Furthermore, research by Wei et al. (2018) found that followers’ work engagement

mediates the main effect of leadership and the collaborating effect of leadership on followers’ task

performance and organizational citizenship behavior. Thus, leaders are more likely to engage followers

in being dedicated to these goals, enthusiastic about making individual sacrifices for the interest of

collective goals, and eventually execute their performance beyond the call of duty.

Gruman and Saks (2011) claimed that enhancing employee engagement improves employee

performance. According to Ruck et al. (2017), employee engagement, commitment, self-efficacy,

passion, and task resources have a beneficial impact on performance and overall organizational

effectiveness. Previous research has found that good leadership increases employee engagement, task

performance, and organizational citizenship behavior (Ruck et al., 2017; Sattar et al., 2015).

A systematic review of previous studies by Bailey et al. (2017) studied the meaning, antecedents,

and results of employee engagement (Bailey et al., 2017). Career advancement and leadership activities

were found to be antecedents of employee engagement and are in turn positively related to work-

related aspects like individual morale, individual task performance, firm performance, and contextual

performance. According to Hari (2020), human capital has a positive impact on performance through

employee engagement. Specifically, the findings also showed that employee engagement partially

mediates the relationship between the study constructs. Although the majority of studies focus on the

effects of some HR practices on EYE and its mediating role (Gruman & Saks, 2011), scholars have

called for future researchers to include employee engagement as a mediator variable between HCM and

performance relationships in a business organizational context (Truss et al., 2013; Shantz & Alfes,

2014). In any case, prominent academics have noted that the HCM–employee engagement–

performance equation is hazy and needs further examination (Boon et al., 2018; Truss et al., 2013).

Taking into account the above discussions and based on the stated underpinning theories, the following

hypotheses are proposed:

H2a. Employee engagement positively mediates the relationship between knowledge accessibility

and employee job performance.

H2b. Employee engagement positively mediates the relationship between learning capacity and

employee job performance.

H2c. Employee engagement positively mediates the relationship between workforce optimization

and employee job performance.

H2d. Employee engagement positively mediates the relationship between leadership practice and

employee job performance.

H2e. Employee engagement positively mediates the relationship between career advancement and

employee job performance.

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

Figure 1. Research framework

3. METHODOLOGY

3.1 Method and Participants

The quantitative research approach was applied to this study. By the end of the 2020/21 fiscal

year, Ethiopia had 18 banks (16 private and 2 public). However, the accessible population for this study

was managerial and non-managerial employees of 12 banks operating in Addis Ababa, Ethiopia. This

study makes use of a stratified and convenient sampling method. The stratified probability sampling

technique is appropriate because it eliminates the bias in selecting respondents for the study (Creswell,

2018; Quick & Hall, 2015). In addition, the researcher selected the respondents based on the

convenience of sampling. During the distribution of questionnaires, respondents were informed about

the agreement, confidentiality, anonymity, and the right to withdraw from participation. Respondents

were provided with a self-addressed envelope into which the completed questionnaire was inserted.

Out of the 601 paper questionnaire surveys distributed, 461 were returned. This signifies an

overall response rate of 78.3%. After eliminating missing values and outlier cases, 426 responses

remained for the data analysis, with a response rate of 70.89%, which can be considered a very good

rate (Corbetta, 2013). Multivariate outliers were detected through running Mahalanobis Distance using

IBM SPSS v.25. A large Mahalanobis distance value signifies the case as having extreme values for

one or more variables. It is suggested that a statistical test of significance at 0.001 is the threshold rule

(Morgan & Rubin, 2017). Accordingly, a total of 21 of the response items were cleared because their

Mahalanobis distance measure was less than the accepted threshold probability of p a = 0.001 (Morgan

& Rubin, 2017).

3.2 Measures

The 75 questionnaire items used in this study were drawn and modified from previous studies. A

six-point Likert scale was used to measure all the items, where 1 showed strongly disagree and 6

specified strongly agree. To measure knowledge accessibility as an aspect of HCM, eight-item scale

items were adapted from Bassi and Mcmurrer (2008). Sample questionnaire items include: "Employees

have the necessary information they need to do their jobs" and "best practices are shared across the

departments". Nine items measuring learning capacity were adapted from Bassi and Mcmurrer (2008).

The scale encompassed statements such as "Employees are encouraged to find new ways to do work"

and "Employees’ input is sought in solving problems". Ten items measure workforce optimization

adapted from Bassi and Mcmurrer (2008). Examples of items include "Employees have access to the

technologies they need to be effective" and "Working conditions contribute to good performance."

To measure leadership practice as a component of HCM, twelve items were adapted from Bassi

and Mcmurrer (2008). A sample item includes "managers are open in their communication" and

"managers provide constructive feedback." Five items measuring the level of career advancement were

adapted from Gong and Chang (2008) and Marineau (2017). Examples of the items include:

"Individual employees in this job have a clear career path within this institution" and "Employees'

career aspirations within the company are known by their immediate supervisors".

Employee engagement was assessed with 9-item scales adapted from Schaufeli et al. (2006). The

sample measurement items are: "At my work, I feel bursting with energy" and "When I get up in the

morning, I feel like going to work." Finally, twenty-four items were measured as employee job

Knowledge Accessibility

Learning Capacity

Workforce Optimization

Leadership Practice

Career Advancement

Employee job

performance

Employee

engagement

Int. Journal of Business Science and Applied Management / Business-and-Management.org

performance, adapted from Koopmans (2014) and Pradhan and Jena (2017). Sample questions were

phrased as: "I usually maintain a high standard of work," "I perform well to mobilize collective

intelligence for effective teamwork," and "I extend help to my co-workers when needed."

4. RESULTS

The data were analyzed using SPSS (25

version) and Amos (23

version). To test common

method bias (CMB), both procedural and statistical remedies proposed by Mackenzie and Podsakoff

(2012) were applied. From procedural remedies, techniques that include temporal separation, a time

lag, and random ordering of respective scales were used. Thus, questions related to the predictor

variables were handled first, proceeding with the criterion and mediating variable after two weeks.

Podsakoff et al. (2003) and Mackenzie and Podsakoff (2012) recommended Harman’s single-factor test

as a statistical remedy for CMB.

With Harman’s single-factor test, principal component factor analysis with an un-rotated solution

has been applied. The factor of multiple eigenvalues explains 24.72 percent of the variance. A single

factor extracted 24.762% of the total variance. Thus, it is far less than 50% (Podsakoff et al., 2003), so

it is concluded the common method of variance is unlikely to be a serious problem.

Correlation analysis specifies that there is a positive and significant relationship among factor

variables. This shows that the study variables correlate with each other sufficiently and they can be

reviewed adequately. Multicollinearity does not exist in the study variables because the correlation

levels are less than 0.7 (Hair et al., 2010).

Table 1. Means, Standard Deviations, Correlations, and Reliability Variables

**p < .05. Scale reliabilities (coefficient alpha) are on the main diagonal.

Control Variables: the researcher aims at controlling demographic characteristics (gender, age,

education, and experience). A control variable was aimed at examining the relationships in the model

while controlling for the influence of demographic variables (Collier, 2020). After putting the control

variables in the structural model using AMOS, the results are found and stated in table 2.

Table 2: Results of Control Variables

Estimate

S.E.

C.R.

Label

EMJP

<---

Gender

1304

.1429

.9128

.3614

EMJP

<---

Age

-.0248

.0546

-.4548

.6493

EMJP

<---

Educ.

.0855

.1123

.7612

.4465

EMJP

<---

Expr.

-.0111

.0453

-.2459

.8058

EMJP

<---

Gender

-.0659

.1209

-.5454

.5855

EMJP

<---

Age

.0000

.0462

.0004

.9997

EMJP

<---

Educ.

.0279

.0951

.2930

.7696

EMJP

<---

Expr.

-.0139

.0383

-.3640

.7159

As we can see in table 2 the P-value of the demographic characteristics (i.e. gender, age,

education, and experience) are above 0.05 and they are found to be non-significant (Kline, 2011). This

means these variables do not confound the relationship that is specified in the full structural model.

Thus, these variables are excluded from the subsequent analysis.

Mean

Std.

dev.

1. Knowledge Accessibility

(0.811)

3.92

1.113

2. Learning Capacity

.0.456

(0.819)

3.42

1.080

3. Workforce Optimization

.0.586

0.489

(0.921)

4.25

1.230

4. Leadership Practice

.0.667

0.503

0.661

(0.730)

3.83

1.168

5. Career Advancement

0.421

0.476

0.592

0.539

(825)

3.32

1.101

6. Employee Engagement

0.662

0.701

0.232

0.426

0.228

(0.821)

4.33

.996

7. Employee Job Per.

0.407

0.296

0.551

0.584

0.392

0.332

(0.791)

4.62

.945

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

Exploratory Factor Analysis (EFA) is applied to explore data and offers information about how

many factors are needed to best represent the data (Hair et al., 2010). EFA was conducted using the

principal component analysis extraction approach and promax rotation. Before extracting the variables,

the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy and Bartlett's Test of Sphericity were

applied. The result of the KMO index was .92, and Bartlett's test was significant at the .05 level,

indicating that the data can be used for factor analysis (Williams et al., 2010). In EFA,

commonalities have been used to show the amount of variance in each variable that is accounted for

(Hair et al., 2010). Communalities above 0.3 have been suggested as suitable cutoff values, with ideal

commonalities being 0.6 (Collier, 2020). Factor loadings of .50 or above were considered significant

(Hair et al., 2010). Accordingly, thirty-one items were deleted, either because of low loading or

because of unfavorable cross loading on their intended construct and the other constructs.

Measurement Model. Confirmatory factor analysis (CFA) was performed for each construct, and

then an overall CFA was assessed by examining standardized factor loadings and modification indices.

In doing so, seventeen items having the standard loading of less than 0.5 has been excluded, and an

overall twenty-six items have been retained. The overall CFA measurement model included knowledge

accessibility, learning capacity, workforce optimization, leadership practice, and career advancement as

aspects of human capital management, employee engagement, and employee job performance.

In the test of the measurement model, the chi-square (CMIN/DF) value is 2.471, which is less

than the generally suggested value of 3 (Hair et al., 2014), which strongly indicates a good fit for the

model. The GFI, CFI, and TLI values are 0.910, 0.945, and 0.914, which are above the universal cutoff

for the goodness of fit (0.90) (Kline, 2011; Hair et al., 2014). Further, the RMSEA is 0.0516, indicating

an acceptable model fit (Kline, 2011). Hence, the measurement model appears to represent the data

quite well.

Structural models or causal models are developed after the re-specified measurement models

have been checked for their goodness of fit, especially the Chi-square, GFI, CFI, TLI, and RMSEA.

Hence, the RMSEA is 0.0514, indicating an acceptable model fit (Kline, 2011). The measurement

model, therefore, seems to represent the data quite well. The other fit indices include a chi-square

(CMIN/DF) value = 2.69, which is less than the generally suggested value of 3 (Hair et al., 2014),

which strongly indicates a good fit for the model. The GFI, CFI, and TLI values are 0.911, 0.944, and

0.919, which are above the universal cutoff for the goodness of fit (0.90) (Kline, 2011; Hair et al.,

2014). Further, the RMSEA is 0.0514, indicating an acceptable model fit (Kline, 2011). As a result, it

appears that the measurement model accurately represents the data.

4.1. Convergent and Discriminant Validity

After achieving a good measurement model fit, the reliability and validity of the measures were

then assessed. The convergent validity was tested by assessing the degree of factor loadings of the

observed variables on the proposed latent constructs. In convergent validity, the average variance

extracted (AVE) was used and evaluated with a threshold of above 0.5 (Kline, 2011). Table 3 shows

that the AVE exceeded 0.5 and the factor loadings for all the items were above 0.5, as recommended by

Hair et al. (2010). The degree of factor loadings of the observed variables on the suggested latent

variables or constructs was used to examine convergent validity. In convergent validity, the average

variance extracted (AVE) must be greater than 0.5 and above 0.5 (Hair et al., 2010). Table 3 shows that

the Average Variance Extracted (AVE) exceeded 0.5 and the factor loadings for all the items were

above 0.5, as recommended by Hair et al. (2010). The square root of each variable's average variance

should be larger than the correlations between the latent constructs, indicating sufficient discriminant

validity (Byrne, 2010). The square root of AVE is depicted in table 3. The values are larger than the

correlations between the latent constructs, confirming the discriminant validity of the model (Kline,

2011).

Table 3. Convergent and Discriminate validity test

Latent

Variables

Indicators

Sta.

load.

Square

of SL

The Sum

of the

STL

No.

Ind.

AVE

The

squ.

r.AVE

Knowledge

Accessibility

-->

Employees have the necessary information

they need to do their jobs

0.909

0.825

Knowledge

Accessibility

-->

Time is set to share from one another.

0.954

0.910

Knowledge

Accessibility

-->

Best practices are shared across departments

0.734

0.539

2.275

0.758

0.871

Learning

Capacity

-->

Employees are encouraged to find new

methods with better ways to do work

0.688

0.473

Int. Journal of Business Science and Applied Management / Business-and-Management.org

Learning

Capacity

-->

Employees’ input is sought in solving

problems

0.774

0.599

Learning

Capacity

-->

Managers consistently make learning a

priority

0.754

0.569

1.642

0.547

0.740

Workforce

Optimization

-->

Employees have access to the technologies

they need to be effective

0.772

0.595

Workforce

Optimization

-->

Employees are held accountable for

producing quality work

0.652

0.425

Workforce

Optimization

-->

Working conditions contribute to good

performance.

0.815

0.664

1.684

0.561

0.749

Leadership

Practice

-->

Managers are open in their communication

0.814

0.662

Leadership

Practice

-->

Leaders treat employees with respect

0.833

0.693

Leadership

Practice

-->

There are Systems for developing the next

generation of leaders for ensuring smooth

leadership transitions

0.691

0.478

1.833

0.611

0.782

Career

Advancement

-->

Individual employees in this job have a clear

career path within this institution

0.821

0.674

Career

Advancement

-->

Employees' career aspirations within the

company are known by their immediate

supervisors

0.713

0.508

1.182

0.591

0.769

Employee

Engagement

-->

At my work, I feel bursting with energy

0.926

0.858

Employee

Engagement

-->

I am enthusiastic about my job

0.936

0.876

Employee

Engagement

-->

When I work, I forget everything else

around me

0.866

0.750

Employee

Engagement

-->

I find the job that I do is purposeful

0.882

0.777

Employee

Engagement

-->

I am proud of the work that I do

0.842

0.709

Employee

Engagement

-->

When I get up in the morning, I feel like

going to work

0.646

0.417

4.387

0.731

0.855

Employee Job

Performance

-->

I used to maintain a high standard of work.

0.816

0.666

Employee Job

Performance

-->

I managed to plan my work so that it is done

on time

0.895

0.802

Employee Job

Performance

-->

I used to perform well to mobilize collective

intelligence for effective teamwork.

0.927

0.860

Employee Job

Performance

-->

I manage to change my job very well

whenever the situation demands

0.936

0.876

Employee Job

Performance

-->

I love to handle extra responsibilities.

0.848

0.719

Employee Job

Performance

-->

I derive a lot of satisfaction from nurturing

others in the organization.

0.681

0.464

4.386

0.731

0.855

4.2. Hypothesis Testing

The square multiple correlation coefficient was 0.32 for employee engagement. This shows that

the aspects of HCM practices account for 31% of the variance in employee engagement. Moreover, the

square multiple correlations were 0.52 for employee job performance, which means the model accounts

for 56% of the variance in employee job performance. The first hypothesis posits that there is a positive

direct effect of the perceived system of knowledge accessibility practices on employee job

performance. The structural model shows that the effect of knowledge accessibility on employee

performance was significant (standardized path coefficient =.1377, t = 5.3715, P < 0.001). Hence, this

H1a was supported.

Hypothesis 1b suggests a positive direct effect of learning capacity on employee performance. The

results confirmed that learning capacity has a marginally significant positive effect on employee job

performance (standardized path coefficient =.1124, t =3.0820, P =.059). Collier (2020) suggested that if

a p-value is a little larger than 0.05, it is possible to report the result as "marginally significant",

signifying that there could still be some kind of real effect going on. This leads to the acceptance of

hypothesis H1b as almost significant. Hypothesis 1c posits that the practice of workforce optimization

positively affects employee job performance. The results demonstrated that workforce optimization has

a significant positive effect on employee job performance (standardized path coefficient β= .1736, t =

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

3.0820, P =.0014), hence providing support for the hypothesis. Hypothesis 1d proposed a positive

direct effect of the perceived system of leadership practices on employee job performance, and

hypothesis 1e predicted the positive effect of employee career advancement on employee job

performance. The model demonstrated that the level of leadership practices has a significant positive

effect on employee job performance (standardized path coefficient β = .0907; t = 9.2237, p < 0.001);

and career advancement has a significant positive effect on employee performance (standardized path

coefficient β = .0849; t = 11.4237, p < 0.001), providing support for Hypotheses 1d and 1e.

Overall, the results from this section are shown in table 4 below, and they reveal that, as predicted,

all of the five proposed hypotheses are supported.

Table 4: Summary of Hypotheses on the direct effect

Standardize

d Estimate

t-Value

Decision

Employee Job Performance

<--

Knowledge

Accessibility

.1377

10.4517

***

Accepted

Employee Job Performance

<--

Learning Capacity

.1124

3.0820

. 061

Accepted

Employee Job Performance

<--

Workforce

Optimization

.1736

3.0820

.0014

Accepted

Employee Job Performance

<--

Leadership Practice

.0907

9.2237

***

Accepted

Employee Job Performance

<--

Career Advancement

.0849

11.4237

***

Accepted

**** p <.000

The mediation effects were analyzed by using an AMOS bootstrapping iteration (n = 5000), as

suggested by Preacher and Hayes (2008). According to Collier (2020), a bootstrap technique treats the

data sample as if it were a pseudo-population, then takes a random sample with a replacement to see if

the indirect effect is within a confidence interval.

This study assessed the mediating role of employee engagement in the relationship between

knowledge accessibility and employee job performance. The results from the bias-corrected percentile

method show that the lower bound confidence interval via the bootstrap is .0243 and the upper bound is

.0692. According to Collier (2020), if the range for the upper and lower bound estimates does not cross

over zero, then the indirect effect is considered significant (p. 176). Thus, we have a significant indirect

effect. Furthermore, from the findings, the indirect effect of knowledge accessibility on employee job

performance was positive and significant, supporting H2a, and the direct effect of knowledge

accessibility on employee engagement in the presence of the mediator was also significant.

Furthermore, the hypotheses on the mediating role of employee engagement in the relationship

between the dependent variables (learning capacity, workforce optimization, leadership practice, and

career advancement) and employee job performance were found to be supported. The mediation

analysis summary is presented in Table 5 below.

Table 5: Summary of Hypotheses on the mediation effects

Relationship

Direct

effect

Indirect

effect

Confidence Interval

P-value

Conclusion

Lower Bound

Upper bound

KA→ EYE → EMJP

.1004 (5.372)

.0442

.0243

.0692

< .001

***

Partial

Mediation

LC→ EYE → EMJP

.1019 (5.363)

.0451

.0233

.1039

< .001

***

Partial

Mediation

WO→ EYE→ EMJP

.1526 (3.4385)

.0681

.1431

.1992

< .001

***

Partial

Mediation

LP→ EYE → EMJP

.0919 (5.269)

.0406

.0232

.3711

< .001

***

Partial

Mediation

CA→ EYE → EMJP

.1029 (5.371)

.0432

.0749

.1872

< .001

***

Partial

Mediation

Note: Unstandardized coefficients reported. Values in parentheses are t-values.

Bootstrap sample = 5,000 with replacement.

5. DISCUSSION AND IMPLICATIONS

The findings show that there is a positive relationship between knowledge of accessibility and

employee job performance, meaning that where knowledge of accessibility practices is good, their

Int. Journal of Business Science and Applied Management / Business-and-Management.org

performance will be more likely to be enhanced. Hence, it is clear that if an organization makes

information more accessible, "collaborative," and capable of making knowledge and ideas widely

available to employees, their performance will likely be enhanced. This result supports the findings of

previous empirical studies, which discovered knowledge accessibility to be a critical predictor of job

performance (Tüzin & Özge, 2013). Further, this study is in congruence with previous research

findings (e.g., Salau et al., 2016; Wright et al., 2014) that reveal the worker's ability to adapt to new

ideas, training, development making learning a priority, and overall ability to learn and innovate

(learning capacity) have a direct effect on employee job performance. This shows that investments in

the training and development of human capital positively affect the performance of employees and the

organization at large.

The study findings revealed a significant positive relationship between workforce optimization

and employee job performance in a sample of banking sector employees in Ethiopia. This suggests that

the more banking institutions work to optimize their workforce through establishing key processes for

getting work done, establishing accountability, providing acceptable working conditions, and making

good hiring decisions, the better the employee performance. This finding is in line with that of Delery

and Roumpi (2017), who showed that the business's success in maximizing employee performance is

determined by optimizing and retaining talent (skills, competencies, abilities, and so on), as well as

leading and managing the ongoing practices within the actual job. In this regard, social exchange

theory proposes that individuals who receive favorable treatment from others are expected to pay back

the other party’s favor based on the norm of reciprocity.

Consistent with previous pieces of literature (Vij & Sharma, 2014; Wright et al., 2014; Walumbwa

et al., 2011), it is found that managers' and leaders' communication, inclusivity, performance feedback,

supervisory abilities, presentation of core organizational principles, and capacity to build confidence

(leadership practice) have a positive significant effect on employee job performance. Leaders do not

create performance; rather, they facilitate it by influencing others positively (Armstrong, 2010).

Perception of career advancement opportunities was found to have a significant positive effect on

employee performance. This finding suggests that organizations that provide employees with

opportunities to extend their potential and build up their capabilities, and which help meet employees’

needs for personal advancement, are likely to be regarded as the best and lead to better employee job

performance. This result is related to Bal et al. (2013), who conclude that an opportunity for career

advancement is positively related to employee well-being and negatively related to employee

unacceptable behavior. Similarly, Briggs et al. (2011) found that career advancement as an aspect of

HCM within the organization is one important motivational strategy to engage employees in positive

job-related activities and better performance.

Further, the study revealed that employee engagement partially mediates the relationship between

the selected aspects of human capital management (knowledge accessibility, learning capacity,

workforce optimization, leadership practice, and career advancement) and employee job performance.

This suggests not only a significant relationship between employee engagement and job performance

but also a direct relationship between HCM and job performance. In other words, the better the

employee engagement level, the greater the relationship between the aspects of HCM practices and

employee job performance.

6. THEORETICAL AND PRACTICAL IMPLICATIONS

This research adds to the relevant study literature in several ways. First, it highlights the

importance of focusing on the intangible assets of an organization (i.e., human capital), because

treating human capital in academic research is a relatively new phenomenon. Second, this study

extends HR, HCM, and employee engagement literature with contributions to creating a new

theoretical framework on the relationship between HCM practices (knowledge accessibility, learning

capacity, workforce optimization, leadership practice, and career advancement), employee engagement,

and employee job performance, by integrating seven crucial factors that have not been previously

connected. Third, previous research has indicated that HCM practices as a bundle affected employee

performance. This study highlights the specific HCM practices towards employee job performance, and

this study proposed the role of employee engagement as a mediating role. The results of this study also

provide evidence for using the resource-based view, social exchange theory, and human capital theory

to understand the relationship between the HCM, EYE, and EMJP.

In general, this research tried to fill knowledge gaps that were uncovered by the previous studies

or the contradicting issues in prior research, uncover the overlooked issues, and serve as input for

academicians who want to pursue related construct variables.

From a practical point of view, today’s leaner business organizations need to have more

responsible and engaged employees to accomplish their desired goals. Technology development,

Abel Gebremedhn Desta, Work Mekonnen Tadesse and Wubshet Bekalu Mulusew

deregulation, and globalization make it difficult for managers to enhance their subordinates'

performance. To do so, they need to focus on implementing the HCM practices effectively. Moreover,

it is found in this research that HCM practices enhance employee engagement, which in turn

contributes to boosting employee job performance. Therefore, managers, by encouraging employee

engagement, may focus more on performance facilitation. As only change is permanent, the manager

should develop strategies to help employees to deal with the ever-changing environment through better

HCM practices. Engaged employees are proactive; thus, when they find themselves fit with the existing

environment, they try to redesign themselves to cope with the changing environments. Hence,

managers should foster HCM practices to have more engaged employees, and improve employee job

performance. In addition, managers should consider the tenet of human capital management, which

signifies an approach whereby people in an organization need to be seen as intangible assets creating a

part of an organization's value, not as a cost item.

7. LIMITATIONS AND FUTURE RESEARCH

Despite contributing to the existing literature on human capital, human capital management,

employee engagement, and employee job performance, our study is not free from limitations. Firstly,

the data for this study were collected at a single point in time. As a result, future researchers are

encouraged to conduct a longitudinal study. Second, the results of this study are limited to the

Ethiopian banking sector; future studies should replicate the model in other industries. Finally, future

researchers could extend the model by taking into account other aspects of HCM like knowledge

management, talent management, and compensation and incorporating variables like organizational

identification and firm performance.

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