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Strategy is an art of projecting and directing. It is a means to reach the business objectives and a perspective of addressing minor & critical issues (Armstrong, 2000). Human Resource Strategy is concerned with those decisions which have a major and long-term effect on the employment and development of people in the organisation and on the relationships which exist between its management and staff (Armstrong, 1992). An HR strategy will express the intentions of the enterprise about how it should manage its human resources. These intentions provide basis for plans, developments and programmes for managing change. HR strategy exists to support the achievement of the business strategy. This support should be both proactive and reactive (Cooke, 1992).
An organisation has to develop HR strategies in order to adapt to its environment (Debrah, 1994). The aim of strategic human resource management is to endure that the culture, style and structure of the organisation, and the quality, commitment and motivation of its employees, contribute fully to the achievement of business objectives (Armstrong, 1992). The human resource in an organisation undertakes multiple activities and responsibilities. Recruitment & selection, Managing Pay, Rewards & Recognition are some the main practices handled by the HR personnel on a regular basis.
FACTORS AFFECTING HRM
It is generally observed that human resource management (HRM) strategies and practices are affected by some factors which can be internal and/or external. Thus, HR managers need to understand that many interrelated factors impinge on an organisation. They have to be able to identify and consider the impact of environmental factors on HR activities, and they need to anticipate changes in these factors. Human Resource Managers often have very little control, if any, over external environmental factors such as legislation, society and the economy. However, in some situations, the HR manager may be able to moderate the effects of the environmental conditions if appropriate measures are taken (Debrah, 1994).
National Culture and HRM
Culture is an acquired knowledge that people use to interpret, experience and generate social behaviour. This knowledge forms values, creates attitudes and influences behaviour (Hodgetts and Luthans, 2000). Hofstede describes culture as the collective programming of the mind which distinguishes the members of one group or category of people from another (Hofstede, 1994). The culture followed by the individuals of a country is 'National Culture'.
Hofstede developed mainly four dimensions of national culture as Power Distance, Individualism v/s Collectivism, Uncertainty Avoidance and Masculinity v/s Femininity. A fifth dimension of Long verses Short Orientation was developed later. Hofstede claimed the applicability of these dimensions to be Universal i.e. they are valid for the developed as well as the developing countries.
Hofstede's Power Distance Index (PDI) shows India as a high power distance country (PDI 77) as compared to the US and Britain (Hofstede,1994). The emotional distance between subordinates and their bosses is large in India and the subordinates are unlikely to approach and contradict their bosses directly (Hofstede,1994). India is low in masculinity. This is reflected in a paternalistic management style and preference is given for personalised relationships rather than more divorced performance orientation (Kanungo and Jaeger, 1990). This generates a 'tendermindedness' and 'soft work culture' that is associated with a reluctance to take bold decisions and see them through the end (Sinha, 1990) cited in (Budhwar, 2001). Job-related decisions are influenced more by interpersonal relations than by the personal goals of the organisation or by task demands. The Indian culture dictates the political connections and attributed status, not achievement status that underpins selection, promotion and transfer systems. (Kanungo and Mendonca, 1994). Moreover, low social and intellectual mobility forces owners to recruit managers from their own families, castes and communities, reinforcing old customs, values and beliefs. The top industrial houses (such as Tatas, Birlas) are good examples of this (Budhwar, 2001).
High level of collectivism can be observed in the Indian culture which implies that family and group accomplishments are prioritised over work outcomes. The primary purpose of work is not to express or fulfil one's self, but as a means to fulfil one's family and social obligations. Indeed family and social networking in India is an important method of obtaining work, securing promotion and advancing pay (Sparrow and Budhwar, 1996; 1997) cited in (Budhwar, 2001). In the Indian collectivist culture, which means they manage their work on team or group, rewards & bonus are given to employees as per the team/group performance. Whereas in collectivist countries like America, individuals are rewarded according to their individual contribution and if not, are prepared to move on (Schneider and Barsoux, 2003).
Cultural differences do not just influence where companies need to recruit, but also how they go about it. For example, hiring in China may require going through government agencies, such as the Foreign Enterprise Service Corporation Offices (FESCO) and local labour bureaus, and personal connections (guanxi). This may make some managers, especially Americans, uncomfortable, as it is seen as nepotism. In United States such practices would be avoided (or not openly admitted). However, in collectivist countries like India, nepotism is a natural outcome and the employers sometimes favour friends and relatives in terms of securing a job, promotions, rewards, salary hike, etc. (Schneider and Barsoux, 2003).
Key HRM Practices in Indian Organisations (Chatterjee, 2007)
To an extent, the present HRM system in India is a mixture of social, economic, religious and political factors which have prevailed in India for a long time. The influence of trade Unions and labour laws is significant and they greatly influence HR policies and practices in Indian companies, (in the recruitment of new employees, payment of bonuses and transfers). Indian managers note that common Indian values, norms of behaviour and customs have an important influence on the HRM policies and practices. Managers' actions are dictated by these values and norms of behaviour. They feel that pressure groups (such as unions) act as saviours of employees belonging to the reserved categories, dictate the terms and conditions of certain agreements and most of the time are felt to cause trouble for management (Budhwar, 2001).
Corporate Culture and HRM
Organizational Culture is a pattern of basic assumptions-invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration- that has worked well enough to be considered valid and, therefore, to be taught to new members as a correct way to perceive, think, and feel in relation to those problems Schein, (1985) cited in Francesco & Gold,( 1998).
Buchanan and Huczynski (2010) define corporate culture as:
The collection of relatively uniform and enduring beliefs, values, customs, traditions and practices which are shared by an organisation's members and which are transmitted from one generation of employees to the next.
The concept of organisational or corporate "culture" has in recent years forced its way to the forefront of the managerial and academic literature Most formalised corporate cultures, as expressed in corporate mission statements (e.g. IBM or Hewlett-Packard) appear to be centrally concerned with the way employees are to be treated and with expectations to their behaviour (Kirkbride, 1987).
Managing human resources requires understanding of the influence of both the internal and external environments of organisations. The internal environment is represented by the internal work culture, whereas the external environment is represented by the enterprise or institutional culture (e.g. market characteristics, nature of industry, ownership status and resource availability) as well as the socio-cultural environment (e.g. paternalism, power distance, etc.) (Aycan et al., 2000).
The uncritical adaptation of HRM practices and techniques evolved in the context of Western cultural values may not be effective in other socio-cultural environments. The model of 'Culture Fit' explains the way in which socio-cultural environment influences internal work culture and human resource management (Aycan et al., 2000). Managers who perceived paternalism (India) and high power distance in their socio-cultural environment assumed employee reactivity, and furthermore, did not provide job enrichment and empowerment.
Hierarchy and inequality are deeply rooted in Indian tradition and these are found to be reflecting in the HR practices in the form of unequal placements and pay structures as per the castes and class groups. The early socialisation process in India highlights the importance of family structure and remnants of British colonial influence. Age also matters greatly in India, and seniority can be expected to play a significant role in decisions about pay and promotion (Budhwar, 2001). The Indian culture showed high rate of Paternalism as compared to USA, Canada and the other countries in the study. However, Indians seemed to be unfortunate in terms of job enrichment and reward allocation. Israel scored the minimum is Paternalism & Power Distance however, in terms of HR practices it is more privileged with regards to job enrichment & reward allocation (Aycan et al., 2000).
Organisation culture is considered as a significant tool of management control (Buchanan and Huczynski, 1997). The organisation may wish to recruit and select only those people who will fit the existing corporate culture. Thus the organisation would seek in this process to probe behind and beyond qualifications, skills and experience to discover the expectations, attitudes and values of candidates, in an attempt to ensure a correct match with the organisation's culture (Kirkbride, 1987).
Business Strategy and HRM
Chandler, (1962) defines a strategy as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. It is a set of fundamental or critical choices about the ends and means of a business (Child, 1972) cited in (Armstrong, 2000).
Strategy is about defining intentions (strategic intent) and allocating or matching resources to opportunities resource based strategy. It is described as a logical, step-by-step (systematic) affair, the outcome of which is a formal written statement that provides a definitive guide to the organisation's long-term intentions.
Mamman, (2009a) describes the five components of a strategy as plan, pattern, position, perspective and ploy. A strategic business plan is a formal document setting out an organisation's goals and initiatives over a defined time period. A strategy is found in every business because it is rooted in the important choices the managers and staff of the firm make about what to do and how to do it (Boxall and Purcell, 2003).
All definitions of human resource management agree on one point: that there must be a link between a firm's business strategy and the deployment and utilization of the human resources. The type of market a firm chooses to enter, will deeply influence the design of jobs, the skills required, the number of people to be engaged, and so on (Purcell, 1995). Analysis of the concept of business strategy as a basis for HR strategy has to take account not only of the different levels and styles of strategy but also of the diversity of ways in which strategy is formed. Business and HR issues influence each other, and in turn influence corporate and business unit strategy (Cooke, 1992).
HR strategies flow from and support the achievement of business strategies. They play a proactive role by helping to form business strategies through culture management and by providing a framework of reference relating to human resources for those who create the business strategy (Armstrong, 1992).
Porter (1985) mentions the generic strategies for achieving above average performance in industry are: cost leadership, differentiation, and focus. In cost leadership strategy, a firm sets out to become the low-cost producer in industry. In a differentiation strategy, the firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It is rewarded for its uniqueness with a premium price. In focus strategy, the focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
A competitive strategy implies a series of systematic and related decisions that gives a business a competitive advantage relative to other businesses (Schuler and Jackson, 1987). Human resource management practices can help to create a source of sustained competitive advantage, especially when they are aligned with organisation's competitive strategy (Begin, 1991; Butler et al., 1991; Cappelli and Singh, 1992; Jackson and Schuler, 1995) cited in (Wang and Shyu, 2008).
Resourcing strategies provide guidance on what the organisation must do to obtain, retain and develop the human resources it needs to achieve its goals. Their aim is to enable the enterprise to build upon its capacities and strengths through the people it employs. Such strategies exist to identify the people and skills required to support the business strategy, and they should also contribute to the formulation of that strategy (Spellman, 1992).
Organisation Structure and HRM
Organisational structure is the formal system of task and reporting relationships that control, co-ordinate and motivate employees to work together to achieve organisational goals (Buchanan and Huczynski, 2010). Minzberg (1983) defines the structure on an organisation as the sum total of the ways in which labour is divided into distant tasks and then coordination is achieved among these tasks. The purpose of an organisational structure is first, to divide up organisational activities and them allocate them to sub-units; second, to co-ordinate and control these activities so that they achieve the aims of the organisation (Buchanan and Huczynski, 2010).
Minzberg (1983) the five coordinating mechanisms to explain the fundamental ways in which organisations coordinate their work through mutual adjustment, direct supervision, standardization of work processes, standardization of work outputs, and standardization of worker skills. These should be considered as the most basic elements of structure, that hold organisations together. Daft(1998), identifies the determinants of structure as: size, organisational technology, the environment, the organisation's goals and strategy and culture. He further explains the structural dimensions as: formalization, specialization, standardization, hierarchy of authority, complexity, centralization, professionalism and personnel ratios.
The basic five: (Minzberg, 1983).
Simple structure- based on direct supervision, in which the strategic apex is the key part
Machine bureaucracy- based on standardization of work processes, in which technostructure is the key part
Professional Bureaucracy- based on standardization of skills, in which the operating core is the key part
Divisional Form- based on standardization of outputs, in which the middle line is the key part
Adhocracy- based on mutual adjustment, in which the support staff (sometimes with operating core) is the key part
Depending on the organisational structure and its elements, the HR strategies and practices are undertaken. The structure of an organisation influences an organisation's ability to attract certain kinds of employees and it indirectly determines the reward system. Simple structure needs low specialisation and low standardisation with limited planning and training with most specialists being hired on contract. Professional bureaucracy recruits only trained and experienced individuals with specialisation because of the highly complex tasks. Timely on-the-job programmed trainings are undertaken (Mamman, 2009b).
Flat hierarchies imply a wider span-of-control and fewer promotion opportunities; they also force managers to delegate their work effectively if they are not to be faced with an intolerable workload. In case of flat hierarchies, the employees are well educated about the various HR policies in an organisation. Whereas in tall hierarchies, the employees do not have much knowledge about the HR policies and decisions but such hierarchical structures give more scope for promotion and growth to the employees because of its narrow span-of-control.
World-class organizations (WCOs) tend to have flat hierarchical structures so that everyone can be closer to the customer. These organisations are customer-driven. Their human resource management (HRM) programs are designed to help their people share ownership of problems and solutions, achieve strong commitment and involvement by top management, communicate consistent goals and objectives at all levels and functions in the organization, and help develop an effective use of recognition and reward programs (Hodgetts and Luthans, 2000).
The 2008 Global financial crisis, affected the economies of the developed as well the developing countries in the world. This crisis further increased resulting in global recession. With such high rate of recession affecting the economies, cost cutting measures were adopted everywhere. HR professionals helped the organisations in their efforts to deal with the economy by working with management and executives to reorganise the workforce and the compensation and benefits expenditure. Steps were taken to reduce the budgets, delaying planned HRIT upgrades or projects, reassigned staff responsibilities while trying to keep current HR department staff levels, and cutting back on HR department training (Sandler, 2009).
The HR departments in almost all the industries had to adopt various new strategies of salary cuts, lowering the incentives and the spending on corporate travel and conferences, perks such as lunch vouchers, mobile phone allowances, festival and New Year greeting budgets had to be slashed. Most employees experienced salary-cuts and the bonuses were freezed. Apart from that, with pressure from senior management regarding job cuts, HR had to freeze its recruitment and selection practices.
In India, Wipro lowered its number of campus hires from 8,000 to 14,000 (Jena and Sahoo, 2009). Companies like Patni computers, Fidelity and 24/7 shed low performers and continued with cut staff and freeze hiring. Kingfisher Airline also stopped the intake of pilots till further notice owing to downfall of aviation industry (Garg, 2009). Because of the job cuts and layoffs across the organisations, many employees preferred to stick to the existing employers rather than switching to different jobs which were already scarce. In such cases, concentration was shifted to retention policies and investments were made in training and development plans. However, these organisations had to remain alert in order to retain top performers to ensure productivity in the times to come (Garg, 2009).
Apart from this, many organisations took an advantage of this opportunity and started hiring skilled labour at lower rates. Recession did not cloud the hiring plan of TCS despite the rigorous job cuts. It has made 24,789 technical campus offers for 2009-2010, a 13% increase over its intake of 22,000 for the current fiscal. Its closest rival, Infosys Technologies, has made around 20,000 offers, an 18% increase (Jena and Sahoo, 2009).
Strategic plans made by HRM in order to cope with the economic slowdown:
Cost control measures undertaken e.g. By reducing the expenditures & negotiating with the dealers
Training plans controlled / postponed
Pay cuts and Employee layoffs
Reassign staff duties & responsibilities
Outsourcing activities to low-cost cities / countries
Efficient use of human resource
Recruitment plans not undertaken
( As adapted from Sandler, 2009)