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Employee Empowerment And Organizational Performance Of Selected Banks In Benue State
- Doosuur Ikima
- 944-954
- May 13, 2023
- Business Administration
Employee Empowerment and Organizational Performance of Selected Banks on Benue State
Doosuur Ikima
Department of Business Management, Faculty of Management Science, Benue State University Makurdi, Benue State, Nigeria
DOI: https://doi.org/10.47772/IJRISS.2023.7479
Received: 25 March 2023; Revised: 12 April 2023; Accepted: 15 April 2023; Published: 13 May 2023
ABSTRACT
The study sought to ascertain the effect of employee empowerment on organizational performance of selected banks in Benue State. Employee empowerment was measured against performance variables of profitability and service quality. The study adopted a cross sectional survey design. Population consisted of all staff of the 3 selected banks in Benue state which came to 1285 from which a sample of 336 was drawn using Taro Yamane’s formula for sample size determination. Simple random sampling was used to administer questionnaire which was the instrument of data collection. Hypotheses formulated were tested using regression. Results showed that employee empowerment has a significant positive effect on profitability and a significant negative effect on service quality of selected banks in Benue state. The study concluded among others that managers should create an environment that provides their employees with certain degree of autonomy and control in their day-to-day activities as this will motivate them to put in their best to help improve the overall performance of the banks.
Keywords: Empowerment, Performance, Profitability, Service Quality
INTRODUCTION
Organizations of today require employees that are knowledgeable and skilled in order to sustain superior performance in the intensely competitive market. Pursuant to this, employee empowerment is an important factor to ensure success for firms. Empowerment enhances employees trust, commitment and productivity (Nwachukwu, 2016). In present economy, due to decentralized roles and regulations there is need for the organizations to empower employees. Empowerment is based on the idea that giving employees skills, resources, authority, opportunity and motivation, in addition to holding them accountable and accountable for the results of their business, will contribute to their efficiency and satisfaction.
The empowered employee becomes “self-directed” and “self-controlled” It means making a person able to manage by himself, it focuses on employees to make use of their full potential (Majed, 2020). Moreover, when employees are empowered they are interested in their work and more motivated to perform better (Gill, Nisar, Azeem, & Nadeem, 2017; Hanaysha & Tahir, 2016). Experts agree that employees who have more control over how, when, and where they do their job will work harder and find their work more engaging and given the chance to show off what they can do, employees will put their best foot forward and feel more satisfied at the end of the day (Wong, 2020). Furthermore, empowerment at the place of work also affects performance.
Core element of empowerment according to Tamunomiebi and Chika-Anyanwu, (2020) involves permitting employees a flexibility or authorization over certain task related activities and inherent responsibility for the outcomes of the employee’s decisions taking on the job or transferring some managerial authority, ability, prerogative and responsibility to the worker regarding his or her assigned task.
Empowerment is the process of authorizing an individual to think, behave, take action, control work and decision making in autonomous ways. Employees are the key players for the organizational success (Yaniv &Farkas 2005). Banks spend a lot of money to hire and train the right employee and to retain that employee becomes the most difficult task of HR department. Therefore, to retain those employees, organizations need tounderstand their needs and a strong sense of affiliation must be created amongst them (Singh 2012). Besides technological improvement, a developed, competent and empowered workforce will give banks intensity over their competitors. Studies on empowerment in other climes have shown that it has a powerful correlation to employee performance in terms of higher productivity, job satisfaction and reduction in staff turnover in organizations (Ongori, 2007). The question now is “Is this correlation appropriate in the Nigerian context; more specifically in the banking sector?”. This paper sought to answer this question and also determine if empowerment can be related to performance of banks in Nigeria specifically selected banks in Benue state
This study is guided by two hypotheses;
H01Employee empowerment does not have significant effect on Profitability of selected Banks in Benue State
H02Employee empowerment does not have significant effect on quality of service in selected Banks in Benue State
REVIEW OF RELATED LITERATURE
Employee Empowerment
Empowerment is one of those concepts that at first thought everyone thinks he understands, but very few people really understand. Empowerment is the process of providing people with the information and tools needed to make informed decisions about the future of their lives. Empowerment involves maximum flexibility and freedom to make work related decisions (Goetsch & Davis, 2014).Employee empowerment is seen as the ways in which organizations provide their employees with a certain degree of autonomy and control in their day-to-day activities. Empowerment enhances beliefs, increases knowledge and skills, improves the psychological characteristics of workers and improves organizational and environmental conditions so people can work as efficiently and effectively as possible in organizations. (Haghighi, Tabarsa & Kameli, 2014).
Empowerment primarily denotes a prospect an individual has for choice, autonomy, responsibility, and active participation in deciding the procedures of executing their designated tasks in the organizations (Tamunomiebi & Chika-Anyanwu, 2020). Four empowerment structures often identified includes: opportunity for professional growth, learning and development; information (access to information needed to get one’s job done as well as knowledge and understanding of the organization); support for employee’s responsibility and job performance; resources availability for employee’s to execute their job; formal power and informal power of individuals within the organization (Clavelle, O’Grady & Drenkard, 2013). Empowerment focuses on employees to make use of their full potential. Every organization needs a management practice of sharing information, rewards, and power with employees so that they can take initiative and make decisions to solve problems and improve service and performance (Majed, 2020). The onus rests on the management to create conditions for work effectiveness by ensuring employees have access to the information, support, and resources essential to accomplishment of their work and to provide opportunities for employees to learn, grow and develop. Thus, employees who believe their work environment provides access to these factors aforementioned are said to be empowered (Wong & Laschinger, 2013).Al-Haddad & Kotnour (2015) posit that the application of the empowerment process on a wide range within the organization will amount to success in the long-run, and that it has a direct link and influence on the performance level of the employees, and their quality of fulfilment. This study concludes that empowerment of an employee through decentralization of authority, access to information, autonomy in decision making and provision of learning/improvement opportunities creates a productive individual who is not afraid to put in his best towards the attainment of the goals of the organization as he feels like part and parcel of said organization.
Organizational Performance
At conception of any organization, there is always a purpose for its existence and always a desired future for the organization which it strives to attain. How well the organization fairs with regards to attainment of its goal(s) is considered as the organization’s performance (Stoner, Freeman & Gilbert, 2006). Performance cuts across all activities within the scope of operation of the organization be it within or outside the organization (Oparanma, 2010). In other words, the organization attempts to assess how well it achieves its appropriate objectives. Organizational performance involves the recurring activities to establish organizational goals, monitor progress towards the goals, and make adjustments to achieve those goals more effectively and efficiently (Richard, Devinney, George & Johnson, 2009). According to Richard and Wade (2009) organizational performance comprises three specific areas of firm outcomes; financial performance (profits, return on assets, return on investment, among others.), product market performance (sales, market share, among others.), and shareholder return (total shareholder return, economic value added, among others.). For many organizations, the measurement of performance is a constant, on-going activity.
In the past, performance tended to focus on financial measures of performance, such as profits and economic values. However, placing emphasis on financial measures alone does not provide the full picture of how competitiveness is sustained in organizations. A wider range of performance indicators should be used to measure efficiency and effectiveness in order to reveal the dynamic nature of an organization in the knowledge economy (Hislop, 2003). Delaney and Huselid as cited in Miranda, Nilan and Fernando, (2020) say that organizational performance is concerned with and measured in terms of product or service quality, product or service innovation, employee attraction, employee retention, customer satisfaction, management/employee relation and employee relation. This study measured organizational performance in terms of profitability and service quality to account for both financial and non-financial measures of performance.
Profitability
According to Hofstrand 2007 in in Nongo, (2011), profitability can be defined as either accounting profits or economic profits. Accounting profits provide the viability of the organization which the consistent losses amount to failure of the organization. The economic profits can be measured by relating output as a proportion of input or matching it with the results of other organizations of the same industry or results attained in the different periods of operations. Economic profits give a long-term perspective of an organization which provides opportunities to owners to make comparisons in terms of their investment and other organizations. Bank profitability is not just a performance measure but a necessary condition for the success of banks under competitive conditions as well as successful implementation of monetary policy (Abel, Hlalefang & Mutandwa 2018) The profitability of banks also gives an indication of the health and stability of banking institutions as well as an important predictor of financial crises (Mbabazize, Turyareeba, Ainomugisha & Rumanzi, 2020) Factors affecting bank profitability may be divided into those which are internal to the bank and those which are external ((Mbabazize, Turyareeba, Ainomugisha & Rumanzi, 2020).
Service Quality
Service has been defined by different scholars and researchers;Rahman (2012) sees service as any intangible offering by a service provider to the consumers for the purpose of meeting the consumers’ needs and wants at a mercantile worth. A service is any process, performance or activity that is intangible (Manusamy, Chelliah & Mun, 2010). Quality on the other hand is seen as the sum total of features and characteristics of a product and/or service that affects its ability to satisfy needs whether stated or implied (Rahman 2012). All service providers need to develop and sustain quality service in order to survive and retain competitive advantage (Kotler & Keller, 2009)
Service quality is a construct that has stimulated significant interest and debate in the service marketing literature due to the complications in both defining and measuring it, with no general consensus emerging from them (Obananya, 2020). As a result, many scholars have labeled service quality as an ‘elusive’ and ‘indistinct’ concept that is problematic to operationalize and measure (Rahim, 2016). There is no agreed definition, but the quality of service can be said to be a comprehensive customer appraisal of a particular service received and the level to which it meets his/her expectations and provides satisfaction (Al-Jazzazi & Sultan, 2017).One common definition considers service quality as the extent to which a service meets consumers’ needs or expectations. Quality service delivery can influence consumers’ preference (Opele, Afolabi & Adetayo, 2020).
Theoretical Framework
Resource Based View Theory by Wernerfelt, (1984)
The Resource Based View (RBV)theory views the firm as a collection of assets or resources which to the firm (Wernerfelt 1984). The central tenets of the RBV are path dependence and firm heterogeneity(Lockett 2005). The theory seeks to explain the extent to which a firm may be able to sustain a position of competitive advantage. Sustainable competitive advantage is based on the ownership of firm specific resource(s) that according to Barney (1991) has the following attributes: (1) it must be valuable; (2) must be rare; (3) must be inimitable; (4) must be non-substitutable. These are termed VRIN- valuable, rare,inimitable and non-substitutable. It is not the resource type per se that matters, it is the functionality of the resource and how the resource is employed (Wernerfelt, 1984). The theory implies an important role for managers to determine the most profitable usage for the resources at their disposal in order to attain competitive advantage and by extension performance of the organization. It says that an organization’s human capital management practices can contribute significantly to sustaining competitive advantage by creating specific knowledge, skills and culture within the firm that are difficult to imitate (Mata, Fuerst, & Barney, 1995; Nason & Wiklund, 2018).
Empirical Review
Shafique and Nadeem (2018) explored the effect of empowerment on organizational performance of the hotel Industry in Pakistan. Convenience sampling was used as the sampling strategy to get a sample size of 150. The study results showed that employee’s empowerment explained a significant relation with organizational performance with motivation as a mediating variable. Findings presented that empowerment positively affects performance within an organization. The results show that employee empowerment is correlated positive with organizational performance in hotel industries. Based on the results of this study, motivation is associated with enhanced organization performance.
Jalil, Shaikl, and Alam, (2015) carried out an empirical study on human resource management practices and operational performance in Bangladesh. This research was done to study human resource management (HRM) practices in the public sector and explore the impact of HRM practices on the operational performance.
Findings revealed that, there is a positive and significant relationship between effective HRM practices (especially recruitment and selection, performance appraisal, involvement and communication and employee relationship) and the operational performance of KSML.
Ueno (2010) found that employee empowerment has a significant role in achieving and enhancing service quality. The study was carried out througha review of literature related to total quality management implementation and its impact of on service quality. In the same vein, Singh (2011) reviewed literature on total quality management practices and implementation. He came up with a total of 11 factors and concluded that empowerment is one of the four most important factors thataffect total quality management implementation and process.
Another study based on empowerment is by Raquib, Anantharaman, Eze and Murad, (2010) from the Multimedia University. This study on “Empowerment 4 Practices and Performance in Malaysia-an Empirical Study” in the education, information technology and telecommunication service sectors in Malaysia, found that Malaysian firms have to focus on certain fundamental perspectives in (1) relinquishing the authoritarian way of treating the employees in the workplace; (2) giving them respectful power and authority to make their own decisions; (3) valuing their individualistic talents, ideologies and philosophies and (4) training them to achieve innovative ways, to teach their talents, technological knowledge, entrepreneurship and leadership skills.
METHODOLOGY
This study is a descriptive research set out to examine employee empowerment and its effects on organizational performance of selected banks in Benue state. The study adopted a cross sectional survey design.
The target population for this study comprised all the employees of the 3 selected banks in Benue state; First Bank with 10 branches (Makurdi -4, Gboko-1, Naka-1, Otukpo-2, Katsina-Ala –1, Vandeikya-1) and five hundred and six (506) employees, Access Bank with 7 branches (Makurdi -3, Gboko- 2, Otukpo- 1, Zaki-Biam- 1) and three hundred and one(301) employees; and lastly United Bank for Africa (UBA) with 10 branches( Makurdi -4, Zaki Biam-1,Igumale -1, Ado -1, Oju-1,Gboko 1,Otukpo 1)and has 478 employees
Table 1: Population of Employees of the Banks under study in Benue state
S/No | Banks | Number of Branches | Number of Employees |
1 | First Bank | 10 | 506 |
2 | Access Bank | 7 | 301 |
3 | United Bank for Africa (UBA) | 10 | 478 |
Total | 27 | 1285 |
Source: Field Survey, (2023)
To determine the sample size;
n = N/(1+N (e)2 )
Where:
n = Sample Size
N = the total population
l = Constant
e = level of significance (5%)
The study assumes a confidence level of 95% and sampling error of 5%.
Therefore:
n = 1285/(1+1285(0.05)2 )
= 1285/(1+1285(0.0025))
1285/(1+3.2125 )
= 1285/4.2125
= 305.044
n = 305 (approx.)
Taro Yamane’s (1967) formula as seen above was applied to draw out a sample size of 305 for the study from the population. However, this sample size of 305 was adjusted to 336 (10% of the sample size of 305 added to the original sample) to take into account non-response bias.The Bowley (1964) formula was used in determining the individual sample of the three (3) selected banks in Benue State. The simple random sampling technique was adopted for this study and used in selecting the respondents from the selected banks in Benue state.
The major instrument of data collection for this work was self-administered questionnaire. The questionnaire used for this work was multiple choice close- ended and was divided into two sections (A and B). Section A sought to obtain the demographic data of the respondents while section B featured questions on employee empowerment and organizational performance variables of profitability and service quality.
Technique of Data Analysis
Descriptive statistics of percentage were used to answer research questions while linear regression was used to test null hypotheses. The decision rule is that if the significant value of 0.05 is greater than the probability value (P=value) of no significant the null hypothesis is rejected but if the probability (P=value) is greater than the significant value of 0.05 the null hypothesis is accepted.
DATA PRESENTATION AND ANALYSIS
In this section, the data generated from the population sampled were presented, analyzed and interpreted. Three hundred and thirty-six (336) questionnaire were administered, However, three hundred and twenty-three (323) questionnaire were retrieved, twelve were unusable bringing total returned usable questionnaire to 311 which presents as 92.6% response rate. The first section covers the demographic features of the respondents. The second section analyzed the data relevant to research questions.
Regression Analysis
Table 2: Model Coefficients
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig. | ||
B | Std. Error | Beta | ||||
1 | (Constant) | -.491 | .346 | -1.419 | .157 | |
EE | .109 | .044 | .122 | 2.491 | .013 | |
- Dependent Variable: PROF
Source: Researcher’s Computation using SPSS, Version 20
The regression result as presented in Table 2 to determine the effect of employee empowerment on profitability of selected Banks in Benue State. Table 2 revealed that when employee empowerment (EE) is not a factor to be considered; the profitability variable is estimated at -0.491. This result simply implies that at stationary point, there is an insignificant decrease in profitability of selected Banks in Benue State up to the tune of 0.491 units occasioned by factors not incorporated in this study.
However, the independent variable: employee empowerment (EE) reflects a beta coefficient of 0.109, with a corresponding p-value of 0.013. This result implies that a unit change in employee empowerment will lead to a significant increase in profitability by 0.109 units. This result implies that employee empowerment significantly improves profitability of selected Banks in Benue State.
Table 3: Model Coefficientsa
Model | Unstandardized Coefficients | Standardized Coefficients | T | Sig. | 95.0% Confidence Interval for B | |||
B | Std. Error | Beta | Lower Bound | Upper Bound | ||||
1 | (Constant) | -.434 | .556 | -.780 | .436 | -1.529 | .660 | |
EE | -.520 | .071 | -.327 | -7.370 | .000 | -.659 | -.381 | |
a. Dependent Variable: SQ |
Source: Researcher’s Computation using SPSS, Version 20
The regression result presented on table 3 revealed that when employee empowerment (EE) is not a factor to be considered, Service quality is estimated at -0.434. This result simply implies that at stationary point, there is an insignificant decrease in Service quality of selected Banks in Benue State up to the tune of -0.434 units occasioned by factors not incorporated in this study.
However, the independent variable: employee empowerment (EE) reflects a beta coefficient of -0.520 with a corresponding p-value of 0.000. This result implies that a unit change in employee empowerment will lead to a significant decrease in Service quality by -0.520 units. This result implies that employee empowerment significantly decreases service quality of selected Banks in Benue State. When empowerment is increased, it reduced the quality of service provided by the bank.
FINDINGS
From the test of hypotheses one and two which were raised to establish the effect of employee empowerment on performance measured in terms of profitability and quality of service of selected Banks in Benue State, the regression analysis result revealed beta coefficients at significant p-values of 0.000 in respect to employee empowerment, in the two models respectively. These p-values lie below the 5% level of significance (P-value 0.000 < α = 0.05). The study therefore concludes that employee empowerment has a significant effect on performance of selected banks in Benue State. The positive and negative coefficients in respect to employee empowerment in the first and second models respectively imply that employee empowerment significantly improves performance in terms profitability and significantly decreases service quality of selected banks in Benue State. This result could be interpreted to mean that when organizations provide their employees with a certain degree of autonomy and control in their day-to-day activities, it will help to improve the output and thus enhance performance in terms of profitability. However, this degree of autonomy may also adversely lead to decrease in the service quality of these banks based on the finding in the second model. This finding agree with findings of Shafique and Nadeem (2018)who in their study of effect empowerment on organizational performance found that employees’ empowerment explained a significant relation with organizational performance. Similarly, Rodjam, Thanasrisuebwong, Suphuan, & Charoenboon (2020) studied the effect of human resource management practices on employee performance mediated by employee satisfaction and found that employee empowerment among other practices showed a significant relationship with performance.
SUMMARY
This paper investigated the effect of Employee empowerment on the performance of selected Banks in Benue State. Employee empowerment was and regressed against two measures of Performance (profitability and Service Quality). The following are the summary findings emanating from this study. The paper found that:
- Employee empowerment showed a significant positive relationship with profitability of selected banks in Benue State (b=0.491, p=0.000). This means an increase in empowerment of the employees will lead to an increase in profitability of the banks.
This implies that when employees are presented with or afforded opportunities for independent decision making, opportunities to learn new things, adequate knowledge sharing, employee participation in meetings among others, there will be an increase in the profitability of the bank(s). This may be extended to other industries as well, as empowerment of the employee presents an avenue for intrinsic motivation. When a person feels he/she matters to an organization and is involved in the day to day running and decisions of the organization, he/she will under put in more and this leads to an overall rise in the performance portfolio of the organization as a whole which is often reflected as increased profits for the organization. Ergo, to improve profitability, banks ought to improve the empowerment practices they have on ground for example by opening doors of communication and encouraging employee feedback, suggestions, etc.
- Employee empowerment showed a significant negative relationship with quality of service of selected banks in Benue State (-0.520, p=0.000). This translates from the results that an increase in empowerment will lower the quality of service provided by the bank.
Contrary to (i), the implication here is that autonomy on the choice of how to work, consideration of every opinion in decision making, allowing employees to make independent decisions among others will decrease the quality of service of the bank(s). The ability to replicate the performance and accuracy of performance of a service over and over again makes up the reliability component of the SERVQUAL metric by which serve quality is measured. This means that there are set ways perfected over time of performing the service that leads to the satisfaction of the customer. “If it is not broken, do not fix it” applies here. If employees are allowed to decided when and how they will offer these services or to make independent decisions as to the best way of carrying out the service, there will be a free fall of the quality of service as each employee may have his/her own best way of doing it thereby inhibiting service harmony and eradicating reliability as a whole. The banks in empowering employees must be conscious of this and device ways by which the empowering of their staff does not erode their quality of service being as it is a service industry.
RECOMMENDATIONS
Sequel to the findings above, the study recommends that managers of the selected banks in Benue state should create an environment that provides their employees with certain degree of autonomy and control in their day-to-day activities as this will motivate them to put in their best to the organization to help improve the overall performance of the banks. However, there should be a check on the level of autonomy afforded the employees as in some cases confidence and self assurance levels can be taken too far and end up crossing into arrogance which can lead to insubordination negatively impacting on the performance of the banks.
Furthermore, managers should provide employees with the right mix of information, knowledge, power and rewards to energize them for better performance. Organizations should also adopt a participative management style where employees responsible for tasks are involved in the decision making process.
LIMITATIONS OF THE STUDY
This study presents some limitations and points to some future research areas;
First, the sample was limited to selected banks in Benue state only. A larger sample of respondents from banks across Nigeria as a whole would have presented a better picture of the banking industry in general.
Secondly this study only focused on the psychological empowerment construct (autonomy, information sharing, team accountability etc) which focuses on the individuals’ emotions and the work environment. Further research in this area could be more extensive to cover the demographic variable perspective of empowerment (gender, ethnicity, age, disability etc) as well.
Third, the study used subjective measures of profitability and service quality. Although financial measures of firm performance are more desirable, perceptual measures are regularly used in research, and our results are generally consistent with the findings of studies that used objective performance measures ( Huselid, 1995; Shafique & Nadeem, 2018; Rodjam, Thanasrisuebwong, Suphuan, & Charoenboon, 2020 ). The use of subjective measures of profitability allowed the study to assess the firm-level impact of empowerment in firms for which financial measures of performance are generally unavailable (e.g., nonprofit firms).
Fourth, common method variance is a potential problem whenever data are collected from a single source. The issue is magnified by the perceptual nature of our dependent variables because managers who report the use of progressive empowerment practices (which are said to improve performance) may also report good organizational performance. We believe that the extent of this problem was reduced by the careful way that the data were collected. For example, most of the empowerment measures employed were based on informants’ responses to factual questions, and the dependent variables were highly reliable indexes of their perceptions of organizational performance on two different dimensions.
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