STRATEGIC HUMAN RESOURCE MANAGEMENT

STRATEGIC HUMAN RESOURCE MANAGEMENT

CHAPTER 1

Ethics & HRM Theunethical managerial practices that led to the collapses of Enron, Lehman Brothers,Freddie Mac, Fanny Mae and Chrysler in the United States; HIH insurance and One-Tel in Australia; and Satyam Computer Services in India (see the Ethical challenge at theend of this chapter) have amongst many others signalled an urgent need for moreintegrity in corporate governance, not only for moral reasons but also for their adverseeffects on organisations financial sustainability. 1

Syllabus coverageHR Scenario a at the International LevelThe Scene in USA (SHRM USA) The New HR Agenda-- HRM in India-- Emerging HRM Paradigms in the knowledge economy globally ---case studies in HR transformation

STRATEGYThe 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.- Alfred Chandler

Strategic HRM means formulating and executing human resources policies and practices that produce the employee competencies and behaviors the company needs to achieve its strategic aims

What is strategy ?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. Alfred Chandler, Strategy and Structure, (MIT Press, 1962),

The Strategic-Management Model

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Intended versus Emergent StrategyList the factors that may prevent an organisation realising its intended strategyChanges in the external environmentE.g. Increased competition / loss of market shareCrisis e.g. September 11th TsunamiBP oil spillOther?Changes in the internal environment E.g. Product failure / Quality problemsIndustrial unrestOther?

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Stages of Strategic Management

The strategic-management process consists of three stages: strategy formulation, strategy implementation,and strategy evaluation.Strategy formulation includes developing a vision and mission, identifying an organizations external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursueDeciding what new businesses to enter, What businesses to abandon, How to allocate resources, Whether to expand operations or diversify, Whether to enter international markets, Whether to merge or form a joint venture,How to avoid a hostile takeover.Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executedoften called the action stageStrategy evaluationreviewing external and internal factors that are the bases for current strategies, measuring performance, and taking corrective actions

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Levels of strategyCorporate levelDetermine overall scope of the organisationAdd value to the different business unitsMeet expectations of stakeholders Business level (SBU)How to compete successfully in particular marketsOperational / FunctionalHow different parts of organisation deliver strategy

Levels of strategy contd..Corporate Level: ExpansionDiversification TurnaroundRetrenchmentBusiness LevelDifferentiationCost leadershipNicheFunctional levelMarketingFinanceHRLogistics

Strategic HRMSystematically linking people with the firm.

Strategic HRMStrategic HRM is about how the employment relationships for all employees can be managed in such a way as to contribute optimally to the organizations goal achievement. Legge (2005)

PERSPECTIVES ON SHRMThe universalistic perspective / Best practicesThe contingency perspective / Best FitThe configurational perspective

(Delery and Doty, 1996)

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BEST PRACTICE Assumed is that there is a set of best HRM practices that are universal in the sense that they are best in any situation.

Examples:

360 degree appraisalSelective hiringTeam based payLeadership modelsWorkforce analyticsSelf managed teamsFlat structure

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BEST FIT / Vertical fitThe best fit approach emphasizes that HR strategies should be congruent with the context and circumstances of the organization.Best fit involves vertical integration or alignment between the organizations business and HR strategiesThere are three models: lifecycle ( start up, growth, maturity, decline)competitive strategy, ( Cost leader, Differentiator, Niche)strategic configuration ( prospectors , defenders , analysers, reactors) Often said that best fit is better than best practice but best fit models can be unrealistic

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BUNDLING / Horizontal fit Bundling is the development and implementation of several HR practices together so that they are interrelated and therefore complement and reinforce each other.Example of a bundle:Competency frameworks, which are used in assessment and development centres and to specify recruitment standards, identify learning and development needs, indicate the standards of behaviour or performance required and serve as the basis for human resource planning.

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OBJECTIVES OF STRATEGIC HRMTo ensure the availability of a skilled committed and highly motivated workforce in the organization to achieve sustained competitive advantage

To provide direction to the organization so that both the business needs of the organization and the individual and collective needs of its workforce are met

This is achieved by developing and implementing HR practices that are strategically aligned

Extent of application of SHRM would vary between organisationsSHRM is practiced in only those organizations that have a clearly articulated corporate or business strategy

Organizations who do not have a corporate plan cannot have SHRM

In such organization HR personnel carry out the traditional administrative and service roles-not concerned with strategic business issues

Facts about SHRM

The extent of application of SHRM within organizations as well as the form and content of SHRM vary from one organization to another

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Linking HR to strategy

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TRANSLATING STRATEGY INTO HR POLICY AND PRACTICE

Strategic HRM process model

Copyright 2002 South-Western. All rights reserved.422

Copyright 2002 South-Western. All rights reserved.423

HRS STRATEGIC ROLESIdentify the human issues that are vital to business strategy.Help establish and execute strategy.Provide alternative insights.Are centrally involved in creating responsive and market-driven organizations. Conceptualize and execute organizational change.

How HR helps form strategyFormation of a companys strategy = identifying, analyzing and balancing external opportunities and threats with internal strengths and weaknesses

HRs Strategy Formulation RoleHR helps top management formulate strategy in a variety of ways by.Supplying competitive intelligence regarding the external environmentSupplying information regarding the companys internal human strengths and weaknesses.Showing how the firms HR activities can and do contribute to creating value for the company.

How HR helps strategy executionFunctional strategies should support competitive strategies- TCS downsizingValue chain analysis IKEA value chain analysisOutsourcing : Microsof outsourcing cloud computing projects to AditiInsourcing : HarmanStrategy Formulation : Succession plan - TATA

good HR strategy:Satisfy Business NeedsIs Founded On Detailed AnalysisCan Be Turned Into Actionable ProgrammesIs Coherent And IntegratedTakes Account Of The Needs Of Line Managers, Employees And Other Stakeholders

The Five Ps Model of SHRMPhilosophyStatements of how organization values & treats employees; essentially culture of the organizationPoliciesExpressions of shared values & guidelines for action on employee-related business issuesProgramsCoordinated & strategized approaches to initiate, disseminate, & sustain strategic organizational change efforts necessitated by strategic business needs

The Five Ps Model of SHRMPracticesHR practices motivate behaviors that allow individuals to assume roles consistent with organizations strategic objectivesThree categories of roles:LeadershipManagerialOperational

The Five Ps Model of SHRMProcessesContinuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities

The Five Ps Model of SHRMSuccessful SHRM efforts begin with identification of strategic needsEmployee participation is critical to linking strategy & HR practicesStrategic HR depends on systematic & analytical mindsetCorporate HR departments can have impact on organizations efforts to launch strategic initiatives

DIFFRENCES BETWEEN TRADITIONAL HRM & SHRMStrategic human resource management and traditional HR functions differ in several ways(adapted from Mellow 2003)

by Prof. Mary BodraTraditional HRMSHRMResponsibility for HR programsStaff personnel in the HR departmentLine managers,all managers responsible for people are HR managersFocus of activitiesEmployees relations,motivation,productivity,compliance with lawsPartnerships with internal and external customersRole of HRReactive and transactionalProactive and transformational,change leaderInitiative for changeSlow,piecemeal,fragmented,not integrated with larger issuesFast,flexible,systematic,change initiatives implemented in concert with other HR systems

by Prof. Mary BodraTraditional HRMSHRMTime horizonShort termConsider various time frames as necessary (short,medium,or long)ControlBureaucratic control through rules ,procedures and policiesOrganic control through flexibility as few restrictions on employee behaviour as possibleJob designFocus on scientific management principles-division of labour,independence and specializationBroad job design,flexibility,teams and groups and cross -trainingImportance investmentsCapital ,products,technology and financePeople and their knowledge,skills and abilitiesAccountabilityCost centreInvestment centre

Implications of SHRMSuccessful SHRM efforts begin with identification of strategic needs.Employee participation is critical to linking strategy and HR practices.Strategic HR depends on a systematic and analytical mindset.Corporate HR departments can have an impact on their organizations efforts to launch strategic initiatives.

Advantages and disadvantages of Strategic HRM

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Benefits of SHRMFacilitates development of high-quality workforce through focus on types of people & skills neededFacilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest costFacilitates planning & assessment of environmental uncertainty & adaptation of organization to external forces

Performance appraisal and compensation based on current performance

HR managers lack of ability to understand challenges and opportunities in other functional areas

Top management fail to realize the overall contribution HR can make in overall organization strategy (HR is routine and inflexible job)

Problems and Challenges of SHRM

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Functional managers do not view themselves as HR manager (concerned with technical aspects of job)Fail to quantify HR cost and benefits (Team building)Strategic HR need drastic changes in way of doing job, practices, and culture etc (people tendency to resist to change)

BARRIERS TO STRATEGIC HR

HR ROLES IN KNOWLEDGE-BASED ECONOMY

Lengnick Hall Model 1. HUMAN CAPITAL STEWARD Creates an environment & culture in which employees voluntarily contribute skills, ideas, & energy Human capital is not owned by organization

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2. KNOWLEDGE FACILITATORProcures necessary employee knowledge & skill sets that allow information to be acquired, developed, & disseminatedProvides a competitive advantage Must be part of strategically designed employee development plan

HR ROLES IN KNOWLEDGE-BASED ECONOMY

3. RELATIONSHIP BUILDERBuilding Team work, Cross functional teamsDevelops structure, work practices, & culture that allow individuals to work togetherDevelops networks that focus on strategic objectives

HR ROLES IN KNOWLEDGE-BASED ECONOMY

4. RAPID DEVELOPMENT SPECIALIST Organizational culture and HR system that are flexible enough to adapt to changeCreates fluid & adaptable structure & systemsGlobal, knowledge-based economy mandates flexibility & culture that embraces change

HR ROLES IN KNOWLEDGE-BASED ECONOMY

Creating the Strategic Human ResourceManagement SystemHuman Resource ProfessionalsEmployee Behaviors and CompetenciesComponents of a Strategic HRM SystemHuman Resource Policies and Practices

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346Three Main Strategic Human Resource System Components

Characteristics of HPWSmulti-skilled work teamsempowered front-line workersextensive traininglabor-management cooperationcommitment to qualitycustomer satisfaction

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Indian HR practices

Staffing PracticesResumes seek strong educational background.

Employee referrals (predominantly used for middle and senior management).

Succession planning (predominantly used for middle and senior management).

Elaborate employment tests related to the job, especially at entry level.

E-recruitment: Naukri.com was the first e-portal established in 1998 (naukri means job in Hindi ).

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Staffing Practices

Newspaper advertisements are used to brand the company to potential applicants.

Newspaper advertisements will specify age and gender requirements.

Personal questions will be asked in interviews/resumes about:

AgeMarital statusFamily plans (women planning to start a family) Family background Caste backgroundPhotos to be includedVerification of educational certificates

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Training PracticesTraining (future orientation):Education is extremely valued, and training is an extension of it.Entry point training programs (3 to12 months of orientation).Ongoing training programs. Development programs (promotions involve training).In-house training centers are a common feature in Indian organizations.Deductive learning style in training: Known as top-down approach where learning principles start with general concepts and move toward specific application.

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Performance AppraisalCultural dimensions of collectivism and power distance make objective appraisals a challenge.

Supervisors and subordinates develop close relationships.Organizational loyalty is as important as work performance.Employee promotions are frequently based on seniority.

Annual performance appraisals.Supervisors provide performance ratings that are frequently inflated due to personal relationships. Employment at will does not exist in India. Employment termination carries a social stigma.

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Compensation and Benefits

In addition to a base salary, compensation includes:House rent allowance (HRA*).Medical allowance.Dearness allowance (DA*).Leave travel allowance (LTA*).Commuter allowance.* These allowances are frequently referred by their acronyms

Several categories of leave (vacation) exist:Sick leave: 7 days (medical certificate required).Casual leave: 7 days (for personal and family emergencies, requires prior permission of boss). Employees can take maximum 2 days at a timeAnnual leave: 3 weeks (after one year of employment).Federal holidays: About 20 days.

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Compensation and Benefits

Retirement age: 55-60 years (private sector);.60 years (public sector).Retirement Benefits: Employees receive two lump-sum payments when they retire:Provident Fund (similar to 401(k))Typical contributions: 10-12 percent of base salary (employer and employee).Payable on retirement, voluntary separation, death.

GratuityOnly employer contributes (15 days salary per year of service).Tax-exempt for employees.Payable on retirement, voluntary separation, death.

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Compensation and BenefitsOrganizations are seen as an extension of the family.

Provide both short-term and long-term personal loans.

Personal loans for housing, car, home maintenance and family emergencies.

Loan amounts vary by position and level in organization.

All employees after their probation (confirmation) period are eligible.

Many medium and large organizations have cafeterias with subsidized lunch facilities.

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Compensation and BenefitsExecutives receive special benefits to reflect status such as:

Club memberships.Overseas training.Company housing.Company cars.Provided with drivers.International cars.Operational and maintenance costs.Phone bill reimbursements.Organizations provide business and cell phones.

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