The Influence of Human Resource Management Practices on Employee Performance: The Mediating Role of Work Environment in the Banking Sector of Bangladesh

This study analyzes the effect of Human Resource Management (HRM) practices on employee performance and the mediation role of work environment in the banking sector of Bangladesh. The study is based on Social Exchange Theory and the Ability–Motivation–Opportunity framework, and consists of four HRM practices: training and development, compensation and rewards, performance appraisal, and employee participation and empowerment. A quantitative, cross-sectional research design was followed and the data was collected from 288 employees of commercial banks in Bangladesh. Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to analyze the proposed relationships. The results showed that training and development, performance appraisal, employee participation and empowerment have positive significance with the employee’s performance, while the effect of compensation and rewards is not significant. The four HRM practices are all positively correlated to work environment, and work environment has significant positive effects on employee performance. The mediation analysis also shows that the work environment plays a significant role in the relationships between the four HRM practices and employee performance. Notably, in addition to the significant indirect effect on employee performance, compensation and rewards have a lesser direct effect on work environment. The study supports HRM literature because it shows that HR practices’ effectiveness is partly related to the conditions of the workplace, through which the employees are exposed to these HR practices. The results emphasize the need for the inclusion of employee development, assessment, remuneration, involvement, empowerment, and provision of a conducive working environment for the activities of the Bangladeshi banks.