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One of the most powerful fields of new business arena is the Strategic Human Resource Management. Business developers and policy makers are becoming more concerned about the quality of the work life and workplace as a part of the human capital management and have stretched this concept up to the strategic level. Strategic HRM links the strategic objectives and goals with that to human resource and focuses the organization towards developing culture for innovation and competitive advantage. Its functions are not much different from HR except to take each HR function as a strategic partner. It focuses on HRM programs with long term perspective. Its primary focus is to find and solve such problems that can affect the people in the long run and hence increase employee productivity by emphasizing such issues that occurs outside human resource rather than the traditional HR issues through innovation in technology, new management concepts, managing diversities in cross cultural organizations and looking for continuous improvement to gain a competitive advantage. Along with its own functions, strategic human resource management also do some of the strong challenges that are faced by the traditional human resource management i.e. aligning human resource with organizational strategy, labor market issues, integration of skills in human resource development and knowledge management.
To review a firm's human resource practices strategically, I have selected "Ittehad Chemicals Limited". It is a Pakistani based chemical company and is market follower and with huge profits as Pakistan have only three big guns in chemical industry and Ittehad Chemicals is one of them.
Ittehad Chemicals Limited is one of the few big names in basic organic chemicals producers in Pakistan since a long way. The Factory was found in 1964.Â Ittehad Chemicals Limited has a huge product range and serving almost every industry ranging from textiles, carpets, fertilizers to soaps and detergents, from vegetable oil, paper and board to power generation, gas, petroleum to sugar and beverages. The present product line includes Caustic Soda (Solid, Liquid and Flakes), Liquid Chlorine, Hydrochloric Acid, Sodium Hypochlorite (Liquid Bleach, Zinc Sulphate Mono, Bleaching Earth, Sulphuric Acid and Lime, for industrial use.
The company's vision is:
"To be the first choice of preference by customers looking for premium quality chemical products. We aspire to be a trend setter in our industry and always look to the future with courage and a commitment to excellence in all our practices."
To excel in all practices, Ittehad Chemicals Limited must excel in the human resource's efficiency too. The company's Human Resource vision is:
"We believe in true human resource utilization. Ittehad Chemicals Limited must be the true twenty first century organization by re-inventing the organizational competencies"
For a strategic human resource oriented organization, the vision and strategy of its human resource must be aligned with the organizational strategy and vision. Strategic human resource management is the broader approach to view HR. First, it links the strategic management process with that of human resource practices. Then it reveals the similarities among different human resource management functions through a series of planned actions. There are six theoretical models to term an organization as 'strategic', (behavioral perspective, institutional theory, power/resource dependence models, resource-based view of the firm, agency/transaction cost theory, and cybernetic models). These models would be very useful for understanding Ittehad Chemical's strategic perspectives.
Under strategic models of human resource management, I would like to discuss Ittehad Chemicals limited in the context of the behavioral perspective model and resource dependence model. The behavioral perspective model assumes that the basic reason behind different employment practices is to manage and control your employee's attitudes and behaviors. And this control can lead to better results if it is properly aligned with the strategy of the organization because the most effective behaviors and attitudes differs for every company and they mainly depends upon the strategy that the specific company pursue. Thus in strategic human resource context, in order to reinforce behaviors, different human resource practices and policies are required and supported by the organizational strategy.
Ittehad Chemicals Limited uses this behavioral perspective model for guiding its strategy with the help of its human resource's behaviors. Its behavioral approach is used specifically at managerial level. Behavior approach maintains that behavior is the product of individual's interaction with his or her environment. Now days this approach is not giving maximum results but is aligned exact according to the organizational strategy. The reason why it is still not giving hundred percent is current economic conditions as the raw materials (gas, electricity etc) are too expensive, a particular department might not be able to achieve the best of results or profits as it cannot achieve its target in the most desirable way. So, due to external factors, a department has to suffer as they are not in control of that department. That's why Ittehad Chemicals Limited's HR department is mainly concerned with the behaviors keeping these exceptions into mind and focus mainly on declarative knowledge, procedural knowledge and the motivation behind his behavior and attitude.
One of the prominent aspects of Ittehad Chemical Limited's behavioral approach is the motivation for innovation and self initiatives. Managers are allowed to innovate chemical formulae and to present the possible outcomes to the laboratory management and the higher authorities who readily act on the proposals. In case of success, the efforts of the initiator are appreciated and compensated while in case of failure, management encourages the effort for the positive behavior and attitude towards innovation. This shows organization's focus is towards role behaviors more than knowledge and potential of the employees.
Broadly there are three main areas in which Ittehad Chemical Limited is linked up with the behavioral perspective model. First, it is having focus on those human resource practices which helps in elicit the positive attitude and behavior. Second, these practices are directly linked with the company's vision and strategy. Third, these practices guide the human resource towards achieving their targets and hence contributing to the organization success.
Ittehad Chemicals uses behavioral approach for the managerial level. But for the non-managerial posts, results based approach is used which focuses on the outcomes and the results produced rather than what sort of behavior employee's show in the workplace as it requires less time and also it is cost effective. Although Ittehad Chemicals limited is using different approaches for different level of workers, the ultimate theme behind it is to keep all the efforts aligned with the organizational strategy.
The resource dependence model focuses mainly on relationships in an organization. These relationships can be within or among the organization. According to this model, there is a flow of important resources e.g. money, skills, innovation etc on which the whole organization depends.
Control over any of these resources provides an individual or group with an important source of power.Â Ittehad Chemicals Limited's human resource is somewhat following this model. They focus on getting power relationships through technology and skills. Highly automated production plants are imported from China and Germany and highly skilled workers are there to maintain these plants. These expertise has lead Ittehad Chemicals to compete with the industrial leader i.e. Sitara Chemicals Limited. Pfeffer and Cohen (1984) studied the determinants of the development of internal labor markets (i.e., internal promotion systems rather than hiring from outside). Ittehad Chemicals Limited is having same philosophy of managerial succession. They always prefer to grow the management internally rather than hiring from outside. That's why the average experience of an Ittehad Chemical Limited's manager is around 20-22 years. These all characteristics sum up to the achievement of the overall mission keeping the organizational strategy aligned with it and result in the 'strategic' nature of the organization.
One of the key factors to respond in the today's dynamic environment is to manage the change. An organization must be flexible enough to cater the change so that they can handle the pressures of the dynamic environment e.g. worldwide competition, changing demand of the customer, advancement in the technology and changes in the legislation. Such factors force organization to change their ways of operations which can result in re-allocation of team and individual goals, elimination of mall functioned policies and processes and searching/adding new ways of doing things. It is not an easy task to do because breaking the status quo is something always hard to do. This requires changes in the organizational strategy by transforming the organizational culture, changing processes and implement radical changes. There was a survey in 2007 with several HR managers that revealed the reasons for causing changes in the organizations were mainly due to new performance management process, changes in culture, changes in information technology, changes in strategy, changing in accounting systems, downsizing or layoffs, changes in legislations, rebranding, mergers or acquisitions, change in the ownership and outsourcing.
Ittehad Chemicals Limited believes change management as a core skill and is required by the most managers and that must be implemented in such a way that meets the organizational goals. They have kept pace with the changing environment of a country like Pakistan where the level of uncertainty is so high. During recession when most of the organizations were laying the people off, Ittehad Chemicals was not among them. Its flexible marketing and human resource structure enabled it to handle the changing environment by holding the same number of employees. The government reduced the tax rates on imports of Ittehad Chemical Limited's frontline product i.e caustic soda which resulted in the strength of global competition. Under such pressure, Ittehad Chemicals Limited had to make sudden decisions which came through an innovation of its research and development department who invented the use of bi-products (which were previously being wasted) in making new products. For instance, huge amount of chlorine was wasted but with the new techniques, Ittehad Chemicals Limited was able to use it in manufacturing paraffin wax which was a breakthrough at that time.
Not only were the wastes used in new product development, the experts also worked on the raw materials to develop new products. For instance HCL was used to make different chemicals, the experts found another use i.e. they succeeded to develop calcium chloride by using HCL by using the same raw materials. Such competent work force made Ittehad Chemical Limited's position stronger at the time of recession. The company did not downsize and preferred to run with the same amount of employees.
Another response of changing market situations and dynamics, Ittehad Chemicals Limited invested in new technology. Some five to six years back, all the production plants were manual but Ittehad Chemicals Limited shifted to the automation and huge investments were made in this regard. The company also changed its existing production technology by investing in replacing few plants so that the productivity gets enhanced in addition to the low cost of production.
Another vital factor in handling the change is Ittehad Chemical Limited's strong performance management systems. The system of appraising the employees is strong enough to identify the development and training needs. For instance when SAP was installed in the company, the employees had to learn the changed system. Ittehad Chemicals Limited was one of the pioneer companies in Pakistan to install SAP so every employee was anxious to learn the new system and skills. The human resource department identified the training needs of every employee and provided them the required skills. Such system develops an urge in the employees to learn more which shows human resource and human resource department has a great impact on supporting and facilitating the change in the company.
Based on your analysis in Part A identify one of the key aspects of SHRM and draw up a short literature review of the key ideas and practices as a basis for determining improvement in the organization. You may select from ONE of the following:
Performance Management Systems
Human Resource Development / Knowledge
Personnel Department Service delivery
Employee Relations / Partnership working
Corporate Social Responsibility and organisational ethics
The key aspect that I have identified from part A is the Performance Management System of Ittehad Chemicals limited. Let's have a look on its whole performance management system:
Unit Level Strategy
The personnel department of Ittehad Chemicals Ltd takes care of the most important asset of Ittehad Chemicals Ltd; Human resource. This department manages and mobilizes the human resource. With its expanding business operations, the requirement of new employees keeps on arising. Human Resource Management strives to achieve organizational goals and goals of the employees through effective personnel programs, policies and procedures.
Unit level Mission
"To engage in best practice human resource management that enables organizational excellence"
Unit level Vision
"We believe in true human resource utilization. ICL must be the true twenty first century organization by re-inventing the organizational competencies"
Unit level Objectives
"Quality of work Life (QWL), innovative and strategic HR practices, healthy workplace, implementation of new employee's relations concepts are the major objectives."
Unit level Slogan
"To achieve maximum profit by attracting, retaining, training and compensating capable and qualified Human Resource for a mutually beneficial relationship between the company and its employees"
Individual Level Strategy
Every department has its own individual level mission and strategies. The strategy of HR department's head is as follows:
Measure and identify the training and development needs of every employee.
Establish and maintain appropriate systems for measuring necessary aspects of HR development.
Monitor measure and report on HR issues, opportunities and development plans and achievements.
Manage and control departmental expenditure within budget.
As far as the measurement approach for the executives is used, ICL uses behavioral approach. Behavior approach focuses specifically on the attitudes and behaviors of individuals towards their job and is suitable under the following circumstances.
The link between behaviors and results is not obvious
Considering the current economy downturn/recession, when the raw materials (gas, electricity etc) become too expensive, a particular department might not be able to achieve the best of results or profits as it cannot achieve its target in the most desirable way. So, due to external factors, a department has to suffer as they are not that in control of that department.
Poor results are due to causes beyond the performer's control
This is usually when individuals has to face a decrease in the sales/production/profit due to the unexpected problems arising within the context and environment of the organization. For instance, an individual or a department is unable to complete his task due the apparatus (or any other technical) failure, he has no control whatsoever over the results to occur.
Moreover, another concept that is used in order to evaluate the performance at the executive level is what is usually called "Determinants of Performance" which simply comprises of the following
As far as the measuring performance for the posts such as supervisors and below, the results approach is used which focuses on the outcomes and the results produced rather than what sort of behavior employees show in the workplace. Generally, the following are the advantages of using such an approach.
Requires less time
Data is totally objective
The results approach is appropriate in the following circumstances
Workers are skilled in the needed behaviors
It states that the workers possess the skills and knowledge which is required in the workplace in order to achieve the desired results.
Behaviors and results are obviously related
Such an approach is useful when the tasks are repetitive.
Results show consistent improvement over time
It is necessary to make the employees realize the sort of skills they should acquire and sustain over time for the purpose of successful completion of the job. For such purpose, results approach is a good option as it reveals pure objective data which can be easily assessed in order to review the consistent improvement over time.
Gathering Performance Information
The Immediate officers of the employees appraise their performances. For this task, there is a Performa PPE (Performance Planning & Evaluation), which is included in the appendix. In the Performa, the target achieving tendency of the employee and his behavioral such as follows, are measure:
Human Resource Development
Appropriate scores are given according to the conduct of the employee and suggestions & recommendations are also given.
Structure of Appraisal
180 degree performance appraisal is used for all the departments whereas 360 degree appraisal is used specifically for the marketing department. Appraisal forms are attached with this report.
Implementation involves conducting performance appraisal. The Immediate officers of the employees appraise their performances. Appraisal specifically work as a communication channel between the appraisee and the appraiser by answering the following questions.
What is performance management
How does it fits in department's strategy
What's in it for the employee
How does it work
What are the accountabilities of employees
How does this system related to other initiatives.
Personal Development Plans
Personal development plans are identified from current performance of the employees. Development needs are planned and attached with the appraisal. Development Needs form is attached with the report. e.g ICL has recently identified some workers who need training regarding handling furnace. For this purpose, ICL has arranged a 3 days training program for such workers.
Development Need Required
Handling of furnace
On the job training
Qualify with minimum B-grade
Increase in efficiency
Quality Control Workshops
Qualify the training certificate
The above performance management process will result in the performance evaluation of the employees which ultimately helps ICL to develop:
Strong Developmental plans for the employees.
Strong Administrative activities.
Strong Management Succession.
Alignment of organization and unit level strategies.
Strong Communication between top level mgt.
Key ideas and practices as a basis for Performance Management System and its improvement in the organization
Performance Management Success Factors
The key factor behind a successful performance management system is the selection of a good performance management team (Victor Holman).
There are many factors that are not in the hands of the performance management team and are base for the performance initiatives. These are such factors that require whole organizational support. These factors include:
CEO's commitment and support
Data and information access
Support and commitment from the whole staff
Support from each department and unit to bridge the communication.
All of the above factors must be done in allocated time.
Other success factors include:
There should be someone exceptionally competent who will guide the performance management team. A strong minded leader can guides the whole process smoothly and efficiently.
Sharing of vision and mission:
It is important that management shares its vision, goals and policies with all the employees so that every employee has a clear vision and goals in his mind.
The Performance Management Contribution
There are many advantages of a performance management system; it can contribute in the following ways:
Motivation to Perform: When someone gets feedback of his performance either good or bad, he is motivated to bring change in the behavior and attitude.
Self-Esteem: Appreciating a good work fulfills a basic need of an employee and hence contributes in lifting the self esteem.
Insights about Subordinates: Management gains different sort of data regarding their employees. For instance, they can easily differentiate between the good, average and poor performing employees that can lead towards planning for managerial succession.
Job Criteria are defined: It defines a virtual boundary of every job and that leads towards better understanding of required behaviors and results. It also defines a boundary for a successful performer.
Enhanced Self Insight: An employee is likely to develop better understanding of himself and the development activities as he progress through the organization. He can better analyze his own weaknesses and strengths which can further refine his efforts.
Administrative Actions: The administrative actions of the human resource department are enhanced through the performance management system as this system can result in making decisions in administrative actions like increments, promotions, transfers, terminations etc. In a sense, this system ensures that the administrative actions are taken fairly and hence it improves the subordinate and supervisor's trust.
Clear Goals: The corporate level and the unit level goals are made clear and employee gets a clear view of his role for the organizational success. This also gives a picture that how goals are tickled down to unit and individual level.
More Competencies: Employees get more competencies as the performance appraisal leads towards required development goals and training needs. So it is a prominent contributor of job enrichment.
Better Protection from Lawsuits: Data gathered through performance management system is documented properly and becomes a proof for every activity which leads towards better protection from lawsuits.
Better Communication from Supervisors: Once a supervisor has clearly identified roles, goals and strategies, he can better communicate them to the employees. It will enhance the process of Management by Objective (MBO)
A Facilitator for Change: This system can proved to b a vital factor for causing change in an organization. Suppose a firm is changing its culture and giving highest priority to customer service. Performance management system will use to align this new and changed culture with that of unit and organization level strategy and objectives, identify the development needs for carrying new culture and hence product and service quality is improved.
Disadvantages of a Poorly Structured Performance Management Process
If the performance management system is poorly structured, it can ruin every process of the organization as:
Increased Turnover: Employees may become upset if the system is not implemented properly. They can leave the job psychologically or physically.
Misleading Information: An employee's performance can be fabricated in different ways if there would be no standardized rules and procedures.
Lowering Self Esteem: Inappropriate feedback can lowers the self-esteem of an employee that can result in de motivation.
Wastage of Resources: Time and resources get wasted if goals are not aligned at the individual level
Damaged Relationships: As a result of poorly implemented performance system, the relationship between the employee and supervisor can suffer.
Job Dissatisfaction: The system is perceived unfair when it is not implemented fairly, the job burnout level gets increased and employees find ways to get rid of the work.
Lawsuits Vulnerability: The employees, who think that they are treated unfairly, can easily file a case against organization.
Biasness Problem: When there are no standards to appraise, biasness factor can easily come into play.
Morale Problem: If there is no incentive for the top performers, their productivity and morale will become down.
Stakeholders are Affected: Stakeholders are affected if there is a lack of visibility. It reflects as if organization is lacking commitment.
Problem Chain: If the information gathered after appraisal is invalid, all the training and development decisions and hence the top management will suffer.
Lack of interest leads towards improper feedback: If the management do not show concern in performance measurement, it can result in late appraisals, negligence of performance issues and lack of honest decisions based on performance and there will be improper feedback.