Education + Training

Organizational learning and performance: Understanding Indian scenario in present

global context
Aradhana Khandekar Anuradha Sharma
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48,8/9 Organizational learning and
performance
Understanding Indian scenario in present
682 global context
Aradhana Khandekar and Anuradha Sharma
Indian Institute of Technology, Hauz Khas, New Delhi, India
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Abstract
Purpose – The purpose of this paper is to show that the role of organizational learning is
increasingly becoming crucial for organizational performance. Based on the study of three Indian
global firms operating in National Capital Region of Delhi, India, this study explores the correlation of
organizational learning with organizational performance in the Indian scenario.
Design/methodology/approach – The sample of the study comprised of three Indian global
organizations chosen through purposive sampling technique. A total of 100 senior managers were
interviewed from these firms, out of which 72 were HR and 28 were line managers. The data collected
from these managers were analyzed using SPSS 12 version.
Findings – The paper finds that the organizational learning, which largely gets reflected through
HRM activities, has a positive correlation with organizational performance.
Research limitations/implications – The paper shows more samples from private, public and
governmental Indian organizations could have made the study more interesting and would have
presented Indian scenario better.
Originality/value – This paper will be useful to MNCs/global business organizations looking for
investing and expanding in India, besides contributing to the understanding of organizational learning
and organizational performance in Indian firms in present day global economic context.
Keywords Organizational performance, Learning organizations, Human resource management,
Performance management, India
Paper type Research paper

Introduction
In the current global economic landscape, India has emerged as a fastest growing
economy in the world after china. After the economic liberalization in 1991, Indian
economy witnessed an upsurge in competition by overseas firms and continuous rush
by foreign direct Institutions (FDIs) to invest in India. As a result, Indian organizations
are under great pressure to prepare and develop their human resources according to
the global standards in skills, efficiency and performance for survival, sustenance and
successful existence. Successful Indian organizations in this scenario have emerged to
be those that have institutionalized the necessary infrastructures and processes for
encouraging the generation of innovative ideas and knowledge by their people (Sharma
and Khandekar, 2004). They are now realizing that new learning requirements for the
workforce development are to bridge the gap between what they already know and
Education þ Training what they need to know for continuous improvement. Developing a critical mass of
Vol. 48 No. 8/9, 2006
pp. 682-692 employees who are knowledgeable or skilled in a particular technology may constitute
q Emerald Group Publishing Limited
0040-0912
a potential source of competitive advantage in the long run for them (Sharma and
DOI 10.1108/00400910610710092 Khandekar, 2005). The interest of the business community in India is clearly evident
 from the growth in number of business organizations adopting organizational learning Organizational
techniques and strategies to maintain and improve their competitiveness. learning and
Organizational learning prioritizes the creation and acquisition of new knowledge,
and emphasizes the role of people in the creation and utilization of that knowledge performance
(Denton, 1998). In this way, organizational learning presents an important route to
performance, success and competitive advantage for the organizations (Dunphy and
Griffths, 1998; and Lei et al., 1999). On the academic front, most of the scholars are 683
agreeing with Drucker (1993) assertion that “value is created by productivity and
innovation” and organizations must acquire knowledge as a source of sustainable
competitive advantage. Yet, this a recurring theme with little or no agreement as to
how organizations can establish link between organizational learning, on the one hand,
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and organizational performance on the other. Many studies on the issue offer very little
empirical evidences to substantiate this. In this study, we first present the argument
that organizational learning, which largely gets reflected through HRM activities, is
positively correlated to organizational performance. Then to study this relationship,
we examined three widely diversified Indian global organizations. Finally, we consider
two important methodological issues i.e. managerial assessment of the organizational
learning and potential endogeneity of the firm’s financial performance, which could
have biased our results.

Theoretical background and hypothesis

Organizational learning and organizational performance
The need for the organizations to learn as holistic entities became more pronounced
with the onslaught of globalization, favouring organizational learning as a means of
creating competitive advantage (Senge, 1990; Heracleous, 1995; Jackson et al., 2004).
Even though the concept of learning, organizational learning and learning organization
(e.g. Shrivastava, 1983; Levitt and March, 1988; Huber, 1991; Gopinath, 1994; Miner
and Mezias, 1996; Easterby-Smith, 1997; Edmonson and Moingeon, 1998; Tsang, 1997;
Sharma, 2001; Sharma and Sharma, 2002) has been accepted, no common theory or
model has emerged due to the divergence in the perception and approaches. Although
some authors maintain the theory about organizational learning and organizational
theorists dates back to Taylor’s introduction to repetitive tasks to improve
productivity in the early 1900s and Weber, who have examined the notion (Ulrich
et al., 1993). Looking into the regular focus to organizational learning concept, it
appears that it has existed since March and Simon, 1958; Cyert and March, 1963;
Cangelose and Diil, 1965 discuss the topic about 30 years ago. A wide multitude of
definitions and conceptions of organizational learning exists (see Crossan et al., 1999;
Edmonson and Moingeon, 1998), many of them more implicit than explicit, and many
of them substantially different if not incompatible. As such, the field of organizational
learning remains to a large extent fragmented, disconcerted and difficult to penetrate
(Easterby-Smith, 1997; Easterby-Smith et al., 1998; Garvin, 1993).
Theorists like Sadler-Smith et al. (1999) have openly criticized the field, and state
that the perspective taken in organizational learning is sometimes a normative one,
which presupposes that “something is wrong with organizations which do not conform
to some ideal state” rather than “being based on trying to understand existing learning
capabilities and orientations” (Dibella et al., 1996a). Huber (1991) points out in his
review of organizational learning, learning can be characterize by adaptation to
 ET changing environment events, by flexibility and responsiveness, by change within the
48,8/9 organizations. In many ways, organizational learning has become an umbrella concept
that encompasses many topics in the study of organizations. On the academic side,
though recent popular management journals presented learning as a source of
competitive advantage, definitions and mechanism involved in achieving this
advantage are not specified (Ghosal, 1987; Edmonson and Moingeon, 1998). They also
684 note the lack of empirical evidence to link learning with organizational performance
and learning by organizations is essential for the success of the organizations, while at
the same time recognizing the need to “inspire further work in this promising new area
of inquiry”. In Indian context, no major empirical research has been carried out on the
issue. It is often argued that organizational learning is concerned with collective
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capability and not merely with the capability of individuals in the organization.
In most of the literature on organizational learning and organizational performance,
it is the ability of people to act together that matters for organizational performance.
There is an extensive empirical literature in the HRM, which has investigated the
relationship between HR and organizational performance i.e. stock market
performance (e.g. yield), accounting measures (return on investment) and subjective
measures. The relationship between organizational learning and business results is
built on a rather simple premise that better deployment and use of HR should correlate
with higher business performance (Ulrich et al., 1993). Pfeffer (1994) asserted that HR
capabilities are the pre-eminent organizational resource and the key to achieving
outstanding performance. Huselid and Becker (1997)) found that firm effectiveness was
associated with HR capabilities and its attributes. In a recent research, Karami (2002)
argued, unlike conventional assets, strategic HR, as an intellectual or organizational
capital, is largely invisible and, can not appear on the firm’s balance sheet (Tomer,
1987; Analoui, 1998). Such assets could only be found in a skilled, motivated and
adaptable workforce, and in the HRM system that strategically develops and sustains
it. Indeed, as intellectual capital has come to represent an increasing fraction of many
firms’ total assets, the strategic role of the HRM system has also become more critical
(Kakabadse et al., 1998), a source of organizational capabilities that allow firms to learn
and capitalize on new opportunities. It is these limitations in the current state of
knowledge that are addressed in this paper.
We attempt to analyze the prior empirical literature on this topic by focusing on the
impact of overall organizational learning on organizational performance. It is difficult
to establish a casual link between organizational learning and organizational
performance. More conceptual and empirical work is needed to develop and test more
comprehensive theories in this field. In the Indian perspective, no empirical research
has been conducted to study how the learning and HR processes build the competitive
advantage. Though there have been studies by researchers like Pareek’s (1988)
Organizational Learning Diagnostics’s test, Akhilesh et al. (1995) on evolving
performing organizations through people, Rastogi (1998, 1999); Nilkant and
Ramnarayan (1998); Deshpande and Pendse’s (undated) a 25-item questionnaire on
five aspects of learning organizations suggested by Senge (1990); and another 44-item
questionnaire on four aspects suggested by Garvin (1993); and Rawani and Gupta
(2000), about learning in Indian banks. In a recent study on organizational learning
capabilities in Indian context, Bhatnagar and Sharma (2004), found that firm’s financial
turnover was found to be a significant predictor of OLC, while firm’s profit as predictor
 of OLC in Indian organizations was found to be insignificant. Theorists are primarily Organizational
assuming that improving performance especially human at all levels will lead to learning and
improvement at the organizational level, but this assumption is seldom tested. The
assessment of performance has been almost exclusively at the level of individual or performance
team, little attention has been paid to the processes and structures by which individual
or team level performance could be translated to organizational level performance
(Jackson et al., 2004). Studies by Nevis et al. (1995) attempt to link learning to 685
organizational capability and performance in an empirical fashion found to be in the
minority. Miner and Mezias (1996) even judge that “the ratio of systematic, empirical
research to learning theories is far too low”. These arguments suggest:
H1. Organizational learning, which largely gets reflected through HRM has a
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positive correlation with organizational performance.

Method and research sample

The sample of the study comprised of three Indian global organizations chosen
through purposive sampling technique. The sample represented India’s leading
organizations in the field of IT, Petrochemical, Infocom and Pharmaceutical. Initially
the organizations as a whole was considered, then we looked more closely at the use of
organizational learning methods in these organizations. We decided to do in depth
study on the issue so we interviewed 100 senior managers from Indian global firms out
of which 72 were HR and 28 line managers. In all the cases, the questionnaires were
distributed and collected personally. On an average the questionnaires required about
45 minutes for completion. Then these survey responses were matched with the annual
reports of the organizations and CMIE financial data reports, which was used for the
organizational performance. The data was analyzed using SPSS 12 version.

Measures
Based on the extensive review of literature, the survey instrument included items that
assessed organizational learning and organization. Miller (1996) work on
organizational learning was modified and adopted for measuring organizational
learning. Organizational learning is acquisition of knowledge by individuals and
groups who are willing to apply it in their jobs in making decisions and influencing
others to accomplish tasks important for the organizations, cumulative effects of
continuous organizational learning that are much difficult to imitate and continuous
learning as an important capability that can serve as a source of sustainable
competitive advantage. The nine item scale on organizational learning consisted of
items like HR strategies, training and learning, performance appraisal, rewards and
incentives, supportive atmosphere, teamwork, knowledge creation, quality
management and flexibility on five point Likert type scale varying from 1 (strongly
disagree) to 5 (strong agree). Responses were calculated so that higher values indicate
higher organizational learning in the organizations. Cronbach alpha (a) coefficient of
these items was found to be ranging 0.78 for nine items. Organizational performance
outcomes are the indicators that reflect the organizational efficiencies or inefficiencies
in terms of corporate image, competences and financial performance etc. (Mabey et al.,
1998). For measuring organizational performance, Beal’s scale (2000) was modified and
adopted. This was measured by the ratings of the managers concerning the indicators
 ET of organizational performance. The reported Cronbach alpha for this scale was 0.69 for
48,8/9 four items. In this research, the value of the alphas for all the scales gave an indication
of the internal consistency and stability of measurement generated by research scales
(Malhotra, 1999). Therefore, we can say the data collected were quite reliable.

686 Results and analyses

Table I shows the organizational learning for the each organization. The total is the
average of rating given by the managers from each company. Each manager was given
a set of questionnaire to rate his or her company for objective assessment. Out of 45
points, these three global companies seems to be doing reasonably well, with each
company achieving high standards in most of the areas related to organizational
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learning. In Figure 1, we have tried to depict the responses of managers through bar
chart in these three Indian global organizations.

Discussion
The findings of the study greatly supported the hypothesis that organizational
learning, which largely gets reflected through HRM has a positive correlation with
organizational performance. In all the three global organizations, managers’ responses
showed that the organizations are doing well in the area of organizational learning
through HRM practices and their effectiveness gets reflected in their organizational
performance and rating of the financial reports. Similarly, correlation among the
measures of organizational performance and organizational learning was found to be
positive and significant, although the correlation among them was a moderate one.
Knowing that somebody works in an organization, that is doing well, could have
biased our results. But the results were consistent with our four measures of
organizational performance in the measure of the study. These findings, which are
consistent across capital markets, financial reports, and accounting based measures of
the organizational performance, are sufficiently robust to deal with the selectivity
biases. Combined with the evidence from recent studies, organizational learning covers
all the things that must be in place, e.g. learning processes, HR systems and roles, and
organization cultures – to build and enhance this capability (see Table II).

Companies 1 2 3

Learning based HR strategies 4 4 5

Training and learning 4.5 4.5 4
Performance Appraisal 4.5 4 4.5
Rewards and Incentives 4.5 4 4.5
Supportive atmosphere 4 4 5
Teamwork 4 4 5
Knowledge creation 4 4 5
Table I. Quality management 4 4.5 5
Organizational learning Flexibility 4.5 4 4.5
rating in three Indian Total 38 37 42.5
global organizations Managers interviewed 30 40 30
 Organizational
learning and
performance

687
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Figure 1.
Organizational learning in
three Indian global
companies

Organizational Organizational
learning Performance

Organizational learning Pearson correlation 1 0.41 * *

Sig. (2-tailed) 0.001
N 100 100
Organizational performance Pearson correlation 0.41 * * 1 Table II.
Sig. (2-tailed) 0.001 Correlation between
N 100 100 organizational learning
and organizational
Note: p ¼ 0:05 level performance

Our findings are in consonance with the earlier researches on the area. Akhilesh et al.
(1995), while discussing about performing organizations, focused on the need to create
learning organizations for building learn capabilities and competencies. Quinn (1992)
suggests that looking beyond mere product lines to a strategy built around core
intellectual or service competencies provides both a rigorously maintainable strategic
focus and long term flexibility. He further suggests that looking beyond core
intellectual or service competencies provides with a rigorously maintainable strategic
focus and long term flexibility. Dibella et al. (1996a) emphasize individual skills vs
skills in learning and working collectively. Simon (1991) feels that insight and
innovative ideas occur to individuals not organizations, so ideas are shared actions
taken and common meaning developed to be developed as organization artefacts
(Argyris and Schon, 1978, 1996; Draft and Weick, 1984; Huber, 1991; Stata, 1989).
 ET Continuous innovation leads to competitive advantage. According to Rastogi (1998)
48,8/9 knowledge including core-competencies and capabilities are the most valuable crucial
resources in the crucial resource in the context.
Organizations must, therefore design themselves as laboratories for learning in
terms of acquiring, generating, sharing and using knowledge resources continuously
towards innovation and performance enhancement and acquisition, sharing and use
688 of knowledge resources must involve all members of the organization. Walton (1999)
feels that the HRM plays a major role in the development and sustaining of the
learning organization philosophy, as they are designs of systems and process, for
leaving across the whole organization, as opposed to being purveyors of training.
According to Garratt (1997) systems are required to move the learning to where it is
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needed. Ideas only occur to individuals, so organization learning needs to be

considered at individual, group and organizational level (Crossan et al., 1999;
Nonaka and Takeuchi 1995) with strategy encompassing the entire enterprise and
HRM. So the critical managerial activities should focus and revolve around building
the knowledge resource of the organization (Rastogi, 1998). Rastogi (1998) feels that
the knowledge workers form an important proportion of the workforce in
knowledge – intensive enterprises.
Attracting, retaining, and motivating are must for ensuring the sustained success of
an organization. Crossan et al. (1999) feel the necessity to link human resource
management, strategic management and the management of information technology
and systems as a mean to facilitate the flow of learning. Jones and Hendry (1994) draw
links between training, development, wider human resource management and
company performance and competitiveness. Beckhard and Pritchard (1992) refer to the
encouragement of taking risks, giving feedback and learning lessons – the “softer”
consensual side of HRM supports the change strategies as strategic objectives that are
defined to include the learning as strategic objectives that one defined to include the
learning that must take place in order to achieve them. Pedler et al. (1989)) points out
company’s policies and strategy formulation together with implementation evaluation
and improvement are consciously structured as a learning process enabling continuous
improvements through flexibility. Combined with evidence from recent studies linking
organizational learning to superior organizational performance and sustainable
competitive advantage, our results support the decade old arguments that investment
in organizational learning and HR capabilities are a potential source of competitive
advantage.

Conclusion
To conclude, from a modest sample of three global firms and 100 managers, our
study suggests that the level of organizational learning in the organizations is going
to be the one of the important criteria for determining their growth and success. We
do offer our empirical evidence for organizational learning to determine the
performance of the organizations. But this conclusion may not be generalized for
number of reasons. First, smaller firms have both advantages and disadvantages
compared to large organizations when considering organizational learning. They are
more flexible and less centralized but at the same time they do not have good
infrastructure and HRM. Second, most of the studies are done on the large
companies so the applicability on the smaller firms becomes a problem. Third,
 global firms’ policies are based on the institutional environment of the foreign Organizational
countries so to develop a common model is a difficult task and lastly, organizational learning and
performance is a result of number of factors, even the strongest proponents of
organizational learning would not claim it is the key to success in all the areas of performance
organizational performance (Denton, 1998). These issues are very important for
future work to address.
689
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Further reading
Bate, P. (1990), “The cultural paralysis of innovation”, paper presented at the 7th International
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Itami, H. (1987), Mobilizing Invisible Resources, Harvard University Press, Cambridge, MA.
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Conference Proceedings, Atlanta, GA.
Juechter, M. (1993), “Learning by doing”, Training and Development, October 29.
 ET Mahoney, J. (1995), “The management of resource and the resource of management”, Journal of
Business Research, Vol. 33, pp. 91-101.
48,8/9
Mills, D. and Friesen, B. (1992), “The learning organization”, European Management Journal,
Vol. 10 No. 2, pp. 146-62.
Stacey, R. (1993), Strategic Management and Organizational Dynamics, Pitman, London.

692 Corresponding author

Aradhana Khandekar can be contacted at: [email protected]
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