Human Resource Management Practices in Indian Companies
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Concepts associated with the resource-based view of the organization are increasingly finding their way into the strategic HRM debate. Human Resource consists of all the individual employees who contribute to the operations of an organization, whether they are employed fulltime, part-time, on a temporary or permanent basis. Human resource Management is more concerned with the people aspect in management.
Since management involves getting activities completed well with the help of other people and every organization is made up of people, acquiring their services, developing their skills, motivating them to high levels of performance, and ensuring that they continue to maintain their commitments to the organization are essential to achieving organization are essential to achieving organizational objectives.
This study examines how a developing country, and in particular, some selected Indian companies, construe Human Resource Management and whether it is used as a strategy in managing their organizations. It reflects on how organizations in India are influenced by variables that are different from those of their Western counterpart. In the process, this study analyses the meaning of Human Resource Management, the important of corporate culture and corporate strategy in shaping the organization.
A questionnaire analysis of selected Indian companies was carried out, enlightening patterns of similarity and differences arising in its organizations. Following analysis, it was found that India. Is still on the verge of change and is still not capable of fully motivating its people. The process of liberalization and globalization necessitates for focus on the big population and means to utilize it to its fullest potential.
Therefore, unless development agencies, government and non-government organizations are involved to penetrate the human resource development strategies, its real benefits will not build up. Consequently, the execution of human resource management requires an insight in to the understanding of its importance to Indian organizations. Hence, the evolution of Indian approach to human resource management will depend on an increase in the applicability of the American, European and Japanese approach to human resource management implemented in these organizations.
Chapter 1: Introduction
1.1 Main Theme of The Topic
The birth of the “Strategic Human Resource Management” (Strategic HRM) possibly took place less than 20 years ago with an article titled “Human Resources Management: A Strategic Perspective” (Devanna, Fombrum, & Tichy 1981). In such a short time, however, an explosion has occurred in writing and research on Strategic HRM. In 1996 both Academy of Management Journal and Industrial Relations devote special issues to the topic of HRM practices and firm performance and in 1997 International Journal of Human Resource Management presented a special issue on Strategic HRM and firm performance.
‘The almost exponential growth of interest in understanding the strategic role that HRM can play in firm performance implies a mindset of “more, more, more” with regard to research on Strategic HRM. However, before we observe the basic call for more, more, more, perhaps we need to step back and reflect on where we’ve been, where we are, and where we need to be. Human Resource Management (HRM) is a term that, throughout the 1980’s and into the 1990’s has become more and more known to managers and management students. But a decade of getting used to has done too little to clarify exactly what HRM is, where it differs from traditional Personnel Management, and how important it will be for the future.
The growth of HRM as a body of management thought in the 1980’s can be connected to a combination of socio-economic factors, in particular, changes in international contest, the reform of industrial sectors and organizations, and the rise of a improved confidence in the power of managers to manage. Under these conditions the contribution of human resources to the success of organizations has been emphasize through the champion of doctrines of ‘brilliance’, ‘quality’, ‘innovation’ and ‘entrepreneurship’. These developments placed the management of people firmly on the agenda and created the conditions for the emergence of a new-style theory of Personnel Management, bearing the brand HRM.
Perhaps, there is an clear uncertainty that HRM can, or ever could, live up to the wider claims of its power to so totally transform the employment relationship that some of the intrinsic problems of managing a unstable set of employee issues can be resolved more satisfactorily than by approaches that have grown out of the historical development of Personnel Management. In large part such a reaction can be explained in terms of the gulf that appears to be between Personnel Management ‘on the ground’ and the rather more theoretical ‘strategic’ nature of a great deal of the discussion surrounding Human Resource Management.
For Managers, already worn out by the ‘waves of change’, coping with technical innovation and economic shifts, there is a need to develop the contest necessary to manage their working futures (Morgan, 1988). Not only do they need to understand the nature of these changes, but they need also to make on an international perspective in order to manage in different cultures and with different customs. For many years there has been a general interest in the different production systems and management strategies adopted in Japan, the USA and Europe. Increasingly now attention is also focused on the people management systems, attempting to explain the differences in management technique and policies (Mansfield and Poole, 1981; Jacobs et al., 1987).
There is therefore a need to understand how different cultures undertake Human Resource Management for what Doeringer (1981) calls ‘pragmatic’ reasons. That is, because there are lessons to be learned from other cultures and we need to control for cultural influences when examining solutions. To this can be added the further realistic and critical reasons that managers must now carry out their skills and technique in multicultural context, and achieve objectives internationally.
In advanced economies like the United Kingdom and the USA companies, confronted by the Japanese competition and employment strategies coupled with recession and search for excellence have tended to change from Personnel to Human Resource Management or better still strategic Human resource Management. However, there are questions regarding the extent to which this has happened in the developing countries. In answering this question, one must consider the fact that Human Resource Management methods in developing countries will be highly influenced by psycho-economic variables which are considerably different from western countries.
Workers are not forced enough and there is not enough stress put on their training, development, participation and the like. Resources are usually directed to serve the ruling best, then to be unfocused towards finding means and methods for better education, health, and safety for the work force. Women in most developing countries are still treated improperly and there is a lot of power distance between the employer and employee. But the future of Human Resource in developing countries is not miserable, as countries like India have started reallocating their resources towards this department and structures and systems are being set up to facilitate this. The biggest challenge for the developing world is therefore, to convert its vast human resource into chance and take them along in their march into the future.
1.2 Aims and objectives;
To critically evaluate strategic Human Resource Management practices In Indian Companies.
Critically assess and evaluate theories, concepts and models of SHRM given in the literature. To examine the nature of the context of HRM, the problematical nature of organizations in a developing country (like India). To examine the background to the growth of interest in India to HRM and the extent of HRM practice among Indian employers. To analyze the nature of the context of HRM, the problematical nature of organizations in a developing country (like India).
Chapter 2: Research Methodology
Research Design and Methodology
As I have used a survey-questionnaire approach to gather data. The study is based on two stage sampling design. In the first step, Indian organizations were chosen randomly from the national capital region of India. In the second step, the organizations, top, middle and senior level managers in HR or who were line managers were randomly selected to fill in the questionnaires. From this sample of 40 managers a total of 12 questionnaires were filled in.
A total of 28 questionnaires returned were either incomplete or the managers refused to oblige. The scope of the study has been limited to managers from the industries in the national capital region of India. The organizations from which the managers responded spanned the multinational companies. Research instruments Human Role Assessment Survey Questionnaire (Conner and Ulrich, 1996) was administered on the sample. Participants were asked to refer to the HR professionals in their business entity and rate the current quality of each activity.
This study discusses the methodology and the approach that the researcher followed for the completion of this study. In order for the aims of the project to be fulfilled it is necessary to acquire knowledge of the practices of Human Resource Management within Indian Companies. The research was done with a phenomenological approach. It is so called because it is based on the way people experience social phenomena in the world that they live. This method has its own merits and demerits.
On one hand it facilitate the understanding of how and why, it make possible for the researcher to be alive to the changes that occur during the research process, and this method is good for understanding social processes. On the other hand there are certain limitations such as, data collection can be time consuming, data analysis is difficult, and the research has to live with the hesitation that clear patterns may not emerge (Saunders, Lewis & Thornhill, 1997). The snapshot view was taken for the companies being analyzed through questionnaires and the literature looked into the development of the HRM techniques through time in the developing countries with special emphasis on India.
In order to talk to the objectives of the research, secondary information was collected from books, journals, magazines and newspapers, etc. the research tries to consider the performing areas upon which any form of strategic HRM depends, it describes the current state of the Human Resource Management and Personnel Management in India and tries to evaluate its level of operation to determine whether it is a strategic tool for shaping corporate strategy. This study is thus, descriptive as well as exploratory and concentrates more on qualitative approach. Basically there are two types of research methods, quantitative and qualitative.
Quantitative research uses technique based on the principles of physical sciences. Statistical methods are used then to test fixed theory. Quantitative research is also prepared to provide a linear progress from problem to solution. According to Smith (1988) the scientist spends time observing the actions and groups of people. Thus the researchers simply observe without making and value judgments after which the researcher explains the observed behavior.
The qualitative data is based on meanings expressed through word. . It results in collection of non-standardized data that requires classification, and is analyzed through the use of conceptualization. Quantitative research then goes from observation to theory, then to testing. However, according to motley (1986) this order is often violated and studies are attacked because they do not follow the conventional chain of events.
He goes on further to criticize studies for lacking a strong theoretical basis from which to operate. Yet, quantitative researchers fail to realize the position they put themselves in when they do this. Quantitative research however comes with advantages and disadvantages. Its main advantage is that it gives out quantifiable data, which needs to be generalized sometimes. Also, its greater weakness is that it does not account for human behavior, which is not quantifiable, but significant to find the objectives of the research.
In compare, qualitative methods are entirely different, reluctant to more on analysis and are less prone to try and measure every aspect of the study. Qualitative research tends to produce rich intense data, relating to small numbers of people, as opposed to vast standardized data relating to large numbers. Qualitative studies are mainly about people’s subjective interpretations of complex situations. Burrell and Morgan (1979) call this the “interpretive paradigm”. There is little need to quantifying every detail in qualitative research because it’s not worried about prediction and control (Lindlof, 1995).
Nonetheless, this does not mean that qualitative research is not practical. It includes the understanding of the researcher and the subjects of the research. Researchers using the qualitative approach make systematic observations and work to say something meaningful about their chosen topic doing it in a particular way (Buttny, 1993). However, it’s arguable that qualitative methods are more effective when trying to research relationships between people in organizations (Walker, 1985 p.3)
There was a limitation as qualitative data analysis is very monotonous and conclusion from such data is subject to debate and might be unfair by individual’s viewpoint (Gill and Johnson, 1997). Questionnaires (appendix 1) were used for collecting the primary data from the companies. The company were selected in India random and questionnaires were sent to them to identify the extent to which Human Resource Management is practiced and its perceived usefulness in improving the efficiency of organizations.
Despite, their difference research approaches qualitative and quantitative research seen to share similar characteristics. Both of them use a structure which allows researchers to make performance. Furthermore, they both use interpretation to observe initial results of a course of research. However, qualitative differs greatly in relation to data gathering. Nevertheless, the analysis of qualitative data is highly personalized. Obviously the analysis of the researcher is extremely likely personalized. Obviously the analysis of the researcher is extremely likely to affect the outcome of the researcher. This raises the question of validity and reliability in qualitative research.
The basis for these differences lies in the purpose of the research. Quantitative research is intended to be in charge of the topic being studied enabling the researcher to know the content of his or her data before it is even collected.
Researchers undergoing qualitative approach of research do not worry with every measurable detail. “Fundamentally, qualitative researchers seek to preserve the form and content of human behavior and analyze its qualities, rather than subject it to mathematical or formal transformation’s (Lindlof, 1995). Basically, qualitative researchers strive for an agreement on phenomenon.
According to Kaplan and Maxwell (1994) the goal for understanding a phenomenon from the point of view of the participants is largely lost when textual data is quantified. Thus its come be seen that qualitative methods rise above most of the shortcomings of quantitative methods. Qualitative research strives to bring depth to a phenomenon that quantitative methods lack.
Collection of Data
In order to address the objectives of the research, secondary data was collected from books, journals, magazines, newspapers, embassies etc. Secondary data is information which has been collected, collated and analyzed by others for other purposes, while primary data is information collected as part of a particular research because it is considered relevant to the study and research problem (Ghauri et al, 1995:54-57, Riley et al 2000:107).
In addition, the following secondary sources that can also be important for any kind of research including the researcher’s study can also come in the form of: Central and local government studies and reports, census reports, State budgets, rules on international trade regarding imports and exports, and policies on the foreign direct investment.
Studies and reports of institutions and departments such as the central bureau of statistics, universities, telecommunications departments, marketing and other research institutes, chambers of commerce and foreign missions such as embassies, trade centers and consulates.
Academic as well as organizational journals and newsletters pertinent to the problem area. In many countries, different branch organizations publish journals on statistics regarding their own industry, the development of a particular discipline or problem area. Textbooks and other published material directly or indirectly related to the problem area.
And lastly, theses and reports written by other students in our own university and in other schools and universities are the best guide line for the student. Many schools keep an up-to-date record of all these written in different disciplines. This is perhaps the most important secondary source at the earlier stages of our research process. They provide us with insight not only into our problem area, but also into the other sources mentioned above.
The reason for using secondary data is because it’s very advantageous in terms of saving time and money. It also not only helps me to prepare and understand the research problem better, but it also extends the base for which scientific conclusions can be drawn. Another advantage of consulting secondary data is that it suggests suitable methods or data to handle a particular research problem. According to Churchill (1987:181) ‘Do not bypass secondary data. Begin with secondary data, and only when the secondary data exhausted or show retreating returns, proceeds to primary data.”
In addition to secondary data, primary data is equally essential for more insight into the company being researched on. There are several choices regarding the means of collecting primary data. Usually, this includes observations which entails listening and watching other people’s behavior in a way that allows some type of analytical interpretation used to collect first-hand information in a natural setting to interpret and understand the observed behavior or situation more accurately; surveys (questionnaires) and interviews which are the most popular data collection method in business studies.
The researcher also collected primary data in addition to the secondary data in forms of case studies, unstructured interviews, and participant observation with few respondents. Other includes observations, surveys (questionnaires) and interviews by mail, phone, and personal contact. Surveys and questionnaires are the most popular data collection method in business studies.
The most valid research method for the major part of the study was considered to be the interview. Interviews can be differentiated according to the level of structure and standardization adopted: a structured interview being one where a predetermined and standardized or a formal set of questions is adhered to, an unstructured interview does not follow any prearranged process; a semi-structured interview will normally contain an element of both.
The advantage of a semi-structured interview is that it enables a disciplined approach to be taken without constraining or inhibiting the responses by the rigidity imposed by a totally structured interview (Elliott and Christopher 1973). Chisnall (1986) stressed that the interaction between the interviewer and the respondent contributes greatly to the success of the interviewer. ‘The intellectual atmosphere of an interview is at least as important as the mechanics of the interview processes.
However with this study, the researchers also focused on using questionnaires which are said to be descriptive and analytical as my form of primary data to gain information related to India , initially in Indian organization to identify the extent of which Human Resource Management is practiced and its perceived usefulness in improving the efficiency of Keane and other related organizations. An experience survey approach which is a qualitative information collection technique used in marketing was is a qualitative information collection technique used in marketing was in attempts to tap the knowledge and experience survey approach which is a qualitative information collection technique used in marketing was used in attempts to tap the knowledge and experience of those familiar with the general subject being investigated in addition to identifying the current phenomena.
Surveys involve questions of some sort and are important for collecting people’s opinions and needs. It also helped the researcher acquire information quickly with relatively minimal expense and effort from a relatively large number of respondents. The qualitative research is often focused on social process. It is thus common in social and behavioral sciences and those who want to understand human behaviors and functions suitable for studying organizations, groups and individuals (Strauss and Corbin, 1990). Furthermore, descriptive surveys are often used to obtain consumer attitudes towards a certain product and to ascertain views and opinion of employees in an organization (Reeves and Harper, 1981).
These surveys will thus help researchers understand the behavior of employees in regards to motivation, job satisfaction and grievances in relation to how human resource management is acknowledged in their company and their view towards HRM practices in India generally. However, in addition to helping the researcher with their study, surveys also help these various organizations understand the expectations and requirements of their customers as well as employees, develop service or product based on the standards as well as employees, develop service or product based on the standards of their required findings: determine how well the organization are satisfying requirements both within the company and outside and finally establish goals and access how well to meet these goals.
Special care was taken for designing the questionnaire: questionnaire focus, questionnaire phraseology, the form of response, and question sequencing and overall presentation. Questionnaire were designed in order to gain an in depth knowledge of Human Resource activities in organizations and for a remedy of reality.
There are factors which have limited to be unaware about the real meaning of Human resource Management and so most were not very co-operative, as they thought that allowing this type of research would identify some of their weaknesses, which would in turn threaten their competitiveness. The results of the questionnaire survey will be analyzed in depth, but it is important to first point some of the methodological problems that were faced during the course of this study.
However, it is safe to note that the greatest drawback under the exploratory study lies where the findings may seem credible enough to be released incorrectly as conclusions. Further downside includes the tendency to extend the exploratory phase, and inadequate representation of diversity.
A few problems arose during this research due to time and distance limit. As all the questionnaires were sent to various parts of India, the time was too short and limited for data gathering, the result of which led to the waiting for more replies from such companies. The distance makes it difficult to keep in touch with the companies in order to get a response, in terms of phone calls, which would be very expensive, and the postal questionnaires are very time consuming.
Similarly, there were many companies which did not respond to the questionnaires, probably since they did not see Human Resource Management as an integral issue in organizational building and strategy. Thus was quite discouraging for study being carried out. Another probable reason could have been that the companies did not bother posting the questionnaire back at their own expense, or they might not have been able to understand the purpose of the study clearly just by looking at the questionnaire and thus they did not feel like responding.
In order to minimize problems of this sort, it is important for the leaders of developing countries, like India, to become more involved and encourages managers of companies to contribute to the betterment of the Human Resource Management by actively participating in the studies like this. This is important as the research is not only academically viable but also potentially useful to them. It may also be necessary to extend the time allotted for this type of study.
At the time of writing up this study, there was in fact a response from only companies, and thus the results from these companies can only be analyzed. The companies that responded were from small size, thus the result of this study may possibly be gender, at the companies were selected at random.
Chapter 3: Literature Review - Background Theory
Nowadays, it is a common belief in both the business and the academic world that “the human resources of an organization can be a source of competitive advantage”, provided that the policies for managing people are integrated with strategic business planning and organizational culture (Beer, Spector, Lawrence, Quinn, Mills, & Walton, 1985).There is a incredible pressure to an organization to perform their duties properly with the rate of the rapid changes taking place. Accordingly organization change such as association, new ways of handing over works, high changing rate in workforce and employee’s capabilities and priorities is observe in the past.
Human resource management has become a invasive and influential approach to the management of employment in a wide range of market economies. As a result, the analysis and evaluation of HRM have become major themes in academic, policy and practitioner literatures. Good human resource management entails recruiting and hiring the best employees and getting the most out of them through effective training and supervision. Human resource management helps in identifying key skills sets, knowledge and valued required in the employee. Through manpower planning the management determines its human resource needs and implements plans to address them.
Any assessment of the emergence of Human Resource Management has, at least, to take account of this changing context of employment and provide some explanations as to the relationships that exits between the contribution HRM has made to some of these changes on the one hand and, on the other hand, the impact that such changes have had on the theory and practice of HRM itself. (Beardwell and Holden, 1994: 5). An analysis of data relating to the question of a link between Strategic Human Resource Management (SHRM) and performance reveals there is uncertainty as to the direction of the link.
Can better performing organizations attribute their good performance to the quality of their HRM or is the standard of their performance due to other factors? The quality of HRM might be an outcome of performance rather than a contributing factor to that performance. There are questions about the meaning of a strategic approach to HRM. What makes an organization’s approach to HRM ‘strategic’ and is there a satisfactory method of differentiating between an approach to HRM that might be considered strategic or one that is not seen to be strategic?
As organization restructure, human resources tend to decrease in quantities but increase in quality and in their value to organizational effectiveness. Investing in the development of these valued resources make sense. Most of the companies in developing countries invest in new technology, new machinery, new plant to increase productivity because better models have been developed but we need to develop our own ‘better models’ in human resource area
A strategy is a course of action. It shows how the enterprise will move from the business it is now to the business it wants to be in, given its opportunities and threats and its internal strength and weaknesses. Strategic human resource management means formulating and executing HR systems that produce the employee competencies and behaviors the company requires to achieve its strategic aims. The high-performance work system is designed to maximize the overall quality of human capital throughout the organization, and provides a set of benchmarks against which today’s HR manager can compare the structure, content, and efficiency and effectiveness of his or her HR system.
Increased in international competition due to newly emerging multinationals and divisional organization has given new scope of management particularly Human Resource Management .India has also woken up to the reality that human resources management is key factor for the better performance of an organization . Its is an ultimate goal an ambition to organization to perform their duty perfectly can only seen in developed countries like UK and USA . The organizational change and development have become a part of working life.
3.2 Meaning of Human Resource Management
HR include all the individual employees who contribute to the operations of an organization in any means of form either temporary or permanent basis. (Thompson and Mabey ,1994) It process of getting work done with help of people in efficient manner . It includes planning ,organizing, leading and controlling to make work done till the end task. To manage an organization the common factor taken in consider are goal, limited resource and people.
The basic infrastructure of any business is the human capital. Human resource management, therefore, is one of the most important and recognized functions in the industry today. There is more pressure on HR to deliver, develop, and retain employees recognizing the importance of human capital. In today’s world of technological advancement, human resource is the only factors, which differentiate the true potential of an organization.
Human resource management is the process of coordinating an organization’s human resources, or employees to meet organizational goals. Some of the challenges today in human resource management are maintaining a diverse workforce, dealing with major technological changes, keeping up the government regulations, and handling corporate restructuring, and downsizing, Human resource professional deals with areas such as:
- Employee recruitment and selection
- Performance evaluation
- Compensation and benefits
- Professional development
- Safety and health
- labor relations
The smooth version of HRM emphasizes the importance of high commitment, workplace learning and enlightened leadership. Most normative HRM models, whether US or British, assert that the organization’s Human Resource are valued assets, not a variable cost, and emphasize the commitment of employees as a source of competitive advantage (Legge, 1989) By contrast, the difficult version of HRM emphasizes the calculative, quantitative and strategic management aspects of managing the workforce in a balanced way (Storey, 1989).
the term HR strategies refer to the specific human resource management courses of action the company pursues to achieve its aims. Wheelen and Hunger (1995, p.3) define strategic management as “that set of managerial decisions and actions that determines the long-run performance of a corporation”. Strategic management is considered to be a continuous activity that requires a constant adjustment of three major interdependent poles: the values of senior management, the environment, and the resources available. HR strategy is thus to build a committed workforce, preferably in a nonunion environment.
FedEx’s specific HR strategies stem from this aim. They include: using various methods to build two-way communications; screening out potential managers whose values are not people-oriented; guaranteeing to the greatest extent possible fair treatment and employee security for all employees; and utilizing various promotion-from-within activities to give employees every opportunity to fully realize their potential. Strategic human resource management means create and perform HR system- HR Policies and activities-that produce the employee competencies and behaviors the company needs to achieve its strategic aims.
The basic process of aligning HR strategies and actions with business strategy entails four steps: Formulate the business strategy; identify the workforce ( employee) behaviors needed to produce the outcomes that will help the company achieve its strategic goals; formulate HR strategic policies and actions to produce these employee behaviors; and develop measures (metrics) to evaluate the HR department’s performance.
HR system include seven steps: Define the business strategy outline the company’s value chain; identify the strategically required organizational outcomes; identify the required workforce competencies and behaviors; identify the strategically relevant HR system policies and activities; design the HR scorecard measurement system; and periodically evaluate the measurement system.
Although the roots of the strategic literature on HRM are in manpower planning, it is the normative HRM models developed in the 1980’s that made the strategic concept central to research productivity in this area (Cappelli and Singh, 1982). In the 1980’s scholars attached the prefix strategy to the term human resource management and the idea of strategic integration became prominent in the HRM literature. Interest among practitioners in linking the strategy concept to HRM can be explained by the pressure to enhance the status of HRM professionals within companies (Purcell and Ahistrand, 1994)
the fact that employees today can be a competitive advantage has led to the growth of a new field known as strategic human resource management. Strategic human resource management has been defined as the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. Put another way, it is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals. Strategic HR means accepting the HR function as a strategic partner in both the formulation of the company’s strategies, as well as in the implementation of those strategies through HR activities such as recruiting, selecting, training, and rewarding personnel.
At the other end of the continuum is the reactive orientation, which sees the HR function as being fully subservient to corporate and business-level strategy, and organizational-level strategies as ultimately determining HR policies and practices. One the business strategy has been determined; an HR strategy is implemented to support the chosen competitive strategy. In this sense, a HR strategy is concerned with the challenge of matching the philosophy, policies, programmed, practices, and processes – the five Process – in a way that will stimulate and reinforce the different employee role behaviors appropriate for each competitive strategy (Schuler, 1989, 1992).
Strategic planning is part of the firm’s management process. In its simplest sense, however, strategic planning is simple: Decide what business you’re in now and which ones you want to be in, formulate a strategy for getting there, and execute you’re strategy. Strategic management consists of the completion stage. It is the method to identify and execute the organization operation, by toning the company’s Capabilities with the demands of its environment.
Managing strategy is an ongoing process. Competitors introduce new products, technological innovations make production processes obsolete, and social trends reduce demand for some products or services while boosting demand for others. Strategic control keeps the company’s strategy up to date. It is the process of assessing progress towards strategic goals and taking corrective action as needed. Management monitors the extent to which the firm’s is meeting its strategic goals, and asks why deviations exist. Management simultaneously scans the firm’s strategic situation (competitors, technical advances, customer demographics, and so on) to see if it should make any adjustments. Strategic control addresses several important questions: for example, are all the resources of our firm contributing as planned to achieving our strategic goals?” What is the reason for any discrepancies?” and, do changes in our situation suggest that we should revise our strategic plan?”
As HR managers do assume more strategic planning responsibilities, they will have to acquire new skills. This does not just mean technical skills relating to activities like selection and training. HR managers will need and in-depth understanding of the value creating proposition of the firm. How does the company make money? What activities and processes are most critical for wealth creation as defined by customers and capital markets? Who in the firm executes these activities successful.
Strategy formulation is only one part of the equation however; it is often in the details of implementation that business strategies get into difficulties. Implementation like formulation requires an appropriate environment. There no doubt therefore that human resource is essential to the business and a favorable human resource (HR) environment has to be established before the various strategic choices can be analyzed. It is human resource strategy, and the role of human resources in building competitive advantage and successful strategies.
Formulation of strategies focuses on managing with chance and pressure in the atmosphere. Human resource management (HRM) can play main function in the organization’s whole strategy, particularly when human resources are analysis as provided that a main competitive advantage. Strategic human resource management (SHRM) is the useful request of the organization human resources to achieve the organizations taken as whole strategies.
Human resource strategies to accomplish the organization in general strategies. Human resource strategies define the method in which the organization perform, predetermine, policy and behavior will be aligned to acquire regularity with the organization’s complete strategies. Such strategies perform a completion function and are important means of achieving direction, regularity, and consistency in human resource efforts.
Strategy execution has traditionally been the “bread and butter” of HR’S strategy role. HR management supports strategic implementation in other ways. For example, HR is involved in the execution of most firm’s downsizing and restructuring strategies, through out placing employees, instating pay-for-performance plans, reducing health care costs, and retraining employees. HR played a strategic role in merging two “wildly divergent” cultures and dealing with the uncertainty and initial shock that rippled through both organizations when the merger was announced.
In order to have an effective competitive strategy, the company must have one or more competitive advantages, factors that allow an organization to differentiate its product or service.” Wal-Mart builds its low-cost leader strategy on the duel competitive advantages of a satellite-based inventory and distribution system, and on employment policies that help it to achieve extraordinarily low employment costs.
When HRM first emerged the debate largely focused on whether HRM represented a fundamental step-change in people management or was merely a phase in the historical development of personal management. As an example of the step-change argument, Beer and Spector (1985: 231-232) stated that ‘the transformation we are observing amounts to more than a subtle shift in the traditional practices of personnel or the substitution of new terms for unchanging practices.
In this respect, HRM can be seen to be as much a product of its time as the other historical phases of personnel management such as welfare, labor management, or industrial relations. Many employers are replacing out-dated personnel practices with new policies for human resource management, which put the emphasis on developing the talents and capabilities of each individual employee. Using this approach Legge (1995) identified a number of similarities between HRM and personal management.
Both models emphasized the important of integration; both linked employee development with the achievement of organizational goals; both sought to ensure that the right people were in the right jobs. In addition, both gave people management to line managers; for example, the IPM (1963) definition stated that ‘personal management’ is the responsibility of all who manage people, as well as being a description of the work of those who are employed as specialists.’
Legge’s (1995) analysis also identified three significant differences between personal management and HRM. The first difference concerns the focus of activity as personal management ‘appears to be something performed on subordinates by managers rather than something performed on subordinates by managers rather than something that the latter experience themselves’ (p. 74) whereas under HRM ‘much greater attention is paid to the management of manager’s (Storey, 2001:7).
This relates to the second difference which concerns the role of line manager’s under personnel management their primary role is the implementation of personnel procedures whereas under HRM they are responsible for devising and driving a business-oriented HR strategy. The third difference, identified by Legge, relates to perceptions about organizational culture. The management of organizational culture is a central element of HRM models but not personnel management models, which often pre-dated the interest in organizational culture. Legge (1995: 75) argues that ‘these three differences in emphasis all point to HRM, in theory, being essentially a more central strategic management task than personnel.
Among the famous models of Personnel Management came American definitions too from Glueck (1974) who stated that ‘Personnel are concerned with matching people to the jobs that must be done to achieve the organization’s goals’. Also according to Megginson (1972) ‘It is believed that the most significant aspect of Personnel Management is to be found through the direction and control of the human resources of an organization in its daily operations the successful performance of the personnel function necessitates that each manager orient himself within this total business environment in order to help achieve the various organizational programs and objectives’.
However in contrast some British Definitions is concerned with obtaining the best possible staff for an organization and, having got them, looking after them so that they will want to stay and give of their best to their jobs’. Torrington and Hall (1987) has also point out that ‘Personnel Management is concerned with obtaining the best possible staff for an organization and, having got them, looking after them so that they will want to say and give of their best to their jobs’. Torrington and Hall (1987) also point out that ‘Personnel Management is a series of activities which: first enable working people and their employing organizations to agree about the objectives and nature of their relationship and, secondly, ensures that the agreement is fulfilled’.
Analyzing these statements, it would appear that Personnel Management is about selecting, developing, rewarding, and directing employees in such a way that not only will they achieve satisfaction and ‘give of their best’ at work, but by doing so doing enable the employing organization to achieve goals. Furthermore, human resources are valuable and a source of competitive advantage, that they can be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employee to act flexibly in the interests of the ‘adaptive organization’s pursuit of excellence’.
There are also differences between the American and British models. The American models of HRM assume that ‘there is a long-run coincidence of interests between the various stakeholders of the organization’, as Beer and Spector (1985) would put it. Nonetheless the British models take on a rather different approach in recognizing that the HRM model is basically unitaristic, marginalizes the role that trade unions might play in organizations, find this source either of logical inconsistency within the model or of practical unfeasibility in its execution. However, most HRM models, whether British or American, asserts that employees are valued assets and, with the emphasis on commitment, adaptability and employees as a source of competitive advantage, the image might equally be presented as ‘resourceful’ humans.
After reflecting on these models, we can see that although Personnel Management and Human Resource Management are interlinked, they do have certain differences and similarities. Under both of them, individuals are see as an asset to the organization and also the development of their abilities that will result in organizational success. Both models emphasize the importance of integration Personnel/HRM practices with organizational goals.
3.3 HRM and Strategic Integration Within Business Policy
In a world of fierce competition within organizations arising from the external environment, it is the human capability integrated with other external environment, it is the human capability integrated with other organizational variables that distinguishes successful organizations from the rest. From this follows that HR should be fostered and organizations should keep them in mind when moving towards their objectives.
Another important issue to bear in mind when making human resource decisions is that, they should be treated as an integral part of the organization while making important strategic decisions. Furthermore, if there is a systematic and integrated approach to Human Resource Management, constant vigil of top management and labor resources flowing in the organization will result in clear cut communication of objectives and goals bringing the best out of these individuals and give that particular organization a leading edge.
This analysis of different elements of HRM would not be complete without emphasis being placed on the organizational level conditions which sometimes becomes favorable or unfavorable to it. Although this discussion of HRM shows that it is highly influenced by corporate strategy, it should be noted that this integrated approach fails in companies which have grown by taking over business of a different nature than the present one.
3.4 The Influence of Corporate Strategy
HR and Corporate Strategy
perhaps the most striking change in HR’S role today is its growing involvement in developing and implementing the company’s strategy. Strategy-the company’s plan how it will balance its internal strength and weaknesses with external opportunities and threats in order to maintain a competitive advantage-was traditionally a job mostly for the firm’s operating (line) managers. The particular concern of this study is the impact of corporate strategy on the management of human resources.
The companies analyzed were selected at random (with different back ground and sizes). It seems sensible to ask hoe the behavior these firms influence the management of people at work by the corporate strategies they adopt, and by the controls they exercise on the behavior of business unit and subsidiary companies.
The corporate office in many enterprise have four roles, the development and execution of corporate strategies, the monitoring of divisional and operating subsidiary performance, the allocation of internal capital and the treasury function managing relations with the external capital and money markets. All four, to a greater or lesser extent, impact on the management of human resources as this study seeks to illustrate. In the first section consideration is given to the position of large enterprise in the British economy, indication a concentration of economic power in excess of that found in many other industrialized nations (Purcell, 1992)
A model of corporate strategy is developed in the second section derived from the well known distinction between strategy and structure developed by chandler (1962).
Here three levels of strategy are identified. Decision on long run goals and the scope of activities constitute first order strategy. These, in the normative model directly affect and lead to decisions on the way the enterprise is structured to achieve its goals, what is termed second-order strategy. Both first order and second order strategy provide the critical context in which fictional strategies are developed. Our concern is with those to do with human resource management, what are termed third order strategies. The term strategy is used through out to indicate that the focus is on those decisions which have a major and long term effect on the behavior of the firm ( hickson et al,1986) as opposed to day to day operating decisions.
The distinctive feature of multi divisional is that their internal operating procedures are more refined and differentiated than those found in functional or holding companies. The decision to move to a multi-divisional structure from, say a centralized functional firm or to adapt the configuration to emphasize local profit centers, is a strategic decision of substantial importance in its consequence fro employee relations. The decision to reorganize might have been triggered by strategic decision taken over for example to diversify.
One useful way of distinguishing between types of strategy decision in terms of upstream and down stream (Purcell, 1992). ‘Upstream’, first order decisions are concerned with the long term directions will have implications for the type of people employed, the size of the firm and the technology required. If an upstream decision is made to acquire a going concern a second set of considerations apply concerning the extent to which the new firm is to be kept apart from or integrated with existing operations and about the nature of the acquired firm’s relationship with new owner.
These can be classified as more downstream or second order, strategic decisions. This is similar to chandler’s (1962) distinction between strategy and structure and his oft-quoted dictum that structure follows (i.e. is downstream form) strategy. The difference here is that decision strategy (the type of business undertaken now and in the future) and on structures (how the firm is organized to meet its goals) are both of strategic importance in that they have a long –run implications for organizational behavior, are taken in conditions of uncertainty and commit resources of people, time and money to their attainment.
It is in the context of down stream strategic decisions on organizational structure that choices on human resource structures and approaches come to be made. These are themselves strategic since they establish the basic parameters of employee relations management in the firm, but are likely to be deeply influenced by first and second decisions as well as by environment factors of law, trade unions and external labor markets. These are termed here as third order strategic decisions. It will be appreciated, as the model implies that the actual conduct of human resource management, let alone employee-relations behavior, is influenced by an enormous variety of forces interacting in a complex and dynamic way.
In theory in this idealized, normative model, strategy in HRM is determined in the context of first order, long run decisions on the direction and scope of the firms activities and purposes (location, technology, skill, requirements, etc) and second –order decisions on the structure of the firms seen in its internal operating procedures(levels of authority, control systems, profit centers etc) what actually happens in employee relations will be determined by decision at all three levels and by the willingness and ability of local management to do what is intended in the context of specific environment conditions and forces.
One principle objection needs to be raised on the nature of the model. Like many such models it implies rationality in the process of decision making: a carefully planned series of decisions where human resource management is designed to mesh with organizational structures which in turn derive from first order strategies. But strategic decisions are characterized by the need to cope with uncertainty, to integrate management activity in various fields, and are concern with change. A political process model to strategic decisions is more appropriate.
‘strategic decision;, write Johnson (1987) ‘are characterized by the political hurly burly of the organizational life with a high incidence of bargaining, a trading off costs and benefits of one interest group against another, all within a notable lack of clarity in terms of environment influences and objectives’. The process is especially complicated in the area of human resource management. Since it is difficult to determine the ends, it is also difficult to measure whether the firm is successful in its personnel or human resource policies.
One of the problems with the rational, normative model of strategy formulation as described and prescribed by many books on corporate strategy is that it tends to depersonalize and reduce analysis to a common currency of figured and hard data of markets, shares, discounted cash flows and rate of return, questions of values or purpose beyond the ‘bottom line’ are acutely uncomfortable to strategic decision makers.
In the rational model, phenomena which cannot be reduced to figures such as motivation, good industrial relations or good employment standards are easily discounted or ignored. If it were possible to prove that ‘enlightened or progressive’ approached to the management of people at work were invariably associated with higher productivity, lower unit cost and improved profit, and that exploitative coercive systems failed. Life for the social science researcher and human executive would be easier. As it is, little can be conclusively proved because of the complexity of variables and the impossibility of monitoring and measuring all the relevant dynamics and relations.
If some; proof’ is obtained over a short period of time in specific circumstances, it is often found to be impossible to replicate. This ambiguity in human resource management and the relative weakness of the function in the corporate corridors of power(Hegarty and Hoffman,1987) often leads to a situation where discussion on first and second order strategy are taken without consideration of their effects on the conduct of human resource management. Third order party concerned with the management of people is increasingly required to fit the strategy and structure of the firm especially as countervailing requirements in the environment (trade union power, industrial proposals, income policy and labor law) appear to have receded in 1980s. it is more difficult to argue ‘we cant do that because..’ than it was a decade ago. We need to consider how trends in first-order and second order strategy, especially towards diversification and decentralization, affect the management of human resources.
First order strategy
There is growing tendency for large companies to be diversified. One if the critical issues facing the corporate office especially the CEO is the allocation of capital to the various parts of the business and the identification of growth areas with in the portfolio and outside for possible acquisition. This involves the use of portfolio planning developed as a means of identifying the attractiveness of various parts of the portfolio business as an aid to capital allocation and determining mix of business held by the enterprise.
The most well known system is that developed by the BCG as shown in figure. The purpose of this model is to help the strategic planners classify the various business units in the portfolio in terms of their potential for cash generation or the cash usage. High market share business, assuming the experience curve, will have lower costs than their competitors with smaller share and should be able to generate more profit. Market growth indicates the likely demands for investment.
When there is high growth there will be substantial demands for investment in terms of new plant, equipment and technical innovation. Low growth markets require less investment. The model combines the two axes and leads to generalization about corporate business strategy.
Star (high-share, high growth) are in an advantageous position. While they require high levels of investment their dominant position in the market often allows them to produce sufficient profits to finance further growth.
Cash cows (high-share, low-growth) produce large profits and positive cash flows. They require modest amounts of capital to maintain their market share, renew equipment and to keep in step with technology change. The cash surplus is used to finance the stars where necessary and particularly to help develop new business ventured in growth markets, the wild cat or question-market business.
Wild cat , business compete in rapidly growing markets with the aim of moving up the experience curve ahead of the competition market growth in new market is difficult to predict and the gaining of experience and efficiency in situation of uncertainty can be difficult. These business are therefore uncertain and require substantial investment in excess of their own profitability.
Dogs (low-share, low-growth) Do not produce much profit and are not worth investing in. two options exist: either divest the business or act to pare costs down to minimum to squeeze out the surplus value.
It is not our concern to debate the strengths and weakness of portfolio planning for strategic management. The question of concern here is the implication that flow from it in terms of second order strategies and third order human resource matters. At a general level the most important implication is that the enterprise in not as a unified business but a collection of business. Portfolio planning says nothing about the long-term aims or the purposes of firm and by its analytical methods find no place for history, tradition or culture. Firms excessively committed to portfolio planning tend to ignore or find difficulty with that aspect of corporate strategy determines ‘the kind of economic and human organization it is or intends to be, and the nature of the economic or non economic contribution It intends to make its shareholders, employees, customers, and communities’(Andrews,1980)
There is nothing inherently wrong in separation and decentralization and there are many advantages to be gained from avoiding over centralized, bureaucratic systems allowing unit mangers to design their own employee-relation strategies for their circumstances. These are two difficulties, however.
First, the implication that inter unit comparisons drawn by trade unions and employees themselves are to be avoided or minimized and employee involvement in strategic affairs through corporate consultative committees and collective bargaining, employee trustees in pension funds, and work director schemes are out of place. If the logic of portfolio planning is a separation of business units (Second-order Strategy) then employee relations similarly needs to be separated and decentralized. Employees and the unions that represent them must, from a management point of view, adapt a unit perspective and be concerned with the parochial needs of the unit, not the strategic thrust of the enterprise.
The question ark business will always avoid most rigidity associated with larger firms, like overhead costs, formal job grading and the likes because they are expensive for them in an ever growing and changing market. Start business will always face the problems of managing large and growing firms. The free form structure of the question mark will mostly likely to be replaced with a more formal structure with the growth of a more sophisticated Human Resource Management. If Human Resource Management is followed here strategically, it will produce policies based on high individualism paying more to recruit and retain the best labor.
Cash flows reflect market maturity and emphasize a need for order. In short a system of collective bargaining, job evaluation and a modern method of managing a unionized work force. The requirement for the management of cash flows is to ensure high profits through marketing and sales expenditure and improved resource usage.
Dogs are most vulnerable to market changes because of better performance by competitors from with in and without. Since there is little prospect of increasing the market share, cost should be made by reducing any surplus labor and overhead costs such as welfare benefits, etc.
In sum different business in the portfolio require different types of employee relations and must be treated separate units. The management of HR thus becomes an operational responsibility and inhibits trade union interest in strategic management.
Second order strategy
The implication portfolio planning was seen first in the need to develop a variety of business in different segments of the product –market lifecycles and secondly to manage these differently according to market need and positioning.
This has considerable influence on second order strategies concerning the structuring of the enterprise, in the performance-control systems and difficulty in imposing administrative controls and institutional strategy. One of the difficulties associated with product portfolio systems is the definition of the business unit. What exactly is the market the unit is designed to serve? The term multidivisional company portraits an image of relative Ely large organizational structures designed to trade in general markets.
Hill and Pickering(1986), noted in their study of 144 British companies that while most had opted for the divisional form the tendency was for the number of divisions to be relatively small. Each division was likely to have a number of operating subsidiaries (on average 10.4 per division). It was therefore by no means valid to assume that there is a direct one to one relationship between a division, one distinct business and one end
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