How HRM Drives Sustainable Organizational Performance? The Mediating Role of Organizational Innovation.

Abstract

In today’s volatile and competitive business environment, sustainable organizational performance (SOP) demands more than traditional efficiency; it requires adaptive strategies and innovative thinking. This study investigates how Human Resource Management (HRM) practices serve as strategic levers to foster Organizational Innovation (OI), thereby enhancing SOP in the banking sector of Sri Lanka’s Batticaloa District. A quantitative study used primary data from 238 bank employees in Batticaloa District, measured with a five-point Likert scale. Data were analyzed using univariate, bivariate, and multivariate methods via SPSS (Version 22). The current study examines the mediating role of OI in the HRM–SOP relationship. Findings confirm that while HRM practices significantly influence SOP, their impact is amplified when mediated through OI. The results underscore the value of HRM practices in cultivating a culture of innovation that drives sustainability. This study contributes to the underexplored intersection of HRM, innovation, and sustainability in emerging economies. It provides strategic insights for practitioners seeking to steer their organizations through dynamic markets with agile, people-centric strategies. By aligning HRM systems with innovation objectives, firms can unlock the human capital potential necessary for sustainable success despite resource constraints and unpredictability.