Professional Documents
Culture Documents
HUMAN RESOURCE
MANAGEMENT
Tanuja Agarwala
Associate Professor, Faculty of Management Studies
University of Delhi
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Contents ix
Contents
Preface v
Acknowledgements viii
CHAPTER 1
Strategic Human Resource Management: An Introduction 1
Human Resource Strategy 2
Human Resources as Assets 5
Evolution of SHRM 13
Strategic Fit: A Conceptual Framework 18
Distinctive Human Resource Practices 27
Theoretical Perspectives on SHRM 29
SHRM Approaches: The Indian Context 33
Alternative HR Strategies 36
CHAPTER 2
Human Resource Environment 50
Human Resource Environment: A Brief Overview 51
HRM in Knowledge Economy 80
HR Outsourcing 88
Technology and HRM 94
HRM and Change 99
Case Study
Organizational Redesign at Bharat Petroleum Corporation Limited:
The Challenge of Privatization 111
CHAPTER 3
Human Resource Evaluation 121
HRM Evaluation: A Background 122
Human Resource Evaluation: Definition and Overview 123
HRM and Firm Performance 126
Rationale for HR Evaluation 132
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x Contents
CHAPTER 4
Human Resource Planning 180
HRP: An Overview 181
Business Strategy and HRP 182
Significance of HRP in a Changing Environment 186
Perspectives of HRP 191
Objectives of HRP 193
Job Analysis 195
Job Analysis and SHRM 206
Competency-based Job Analysis 210
HRP Horizons 212
HRP Process 214
Special Challenge: HRP and Outsourcing 242
Case Study
Human Resource Issues in Private Participation in Infrastructure
A Case Study of Orissa Power Reforms 250
CHAPTER 5
Acquiring Human Resources 260
Human Resource Acquisition: An Overview 261
External Influences on Staffing 265
Internal Influences on Staffing 267
Recruitment Sources: Internal versus External 268
Methods of Recruitment 269
New Approaches to Recruitment 280
Methods of Employee Selection 287
New Approaches to Executive Selection 295
Staffing Process: Recruiting and Selecting Employees 302
Evaluation of Staffing Process 314
Selection Outcomes 316
Strategic Recruitment and Selection 317
Hiring for a Diverse Workforce 323
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Contents xi
CHAPTER 6
Training and Development of Human Resources 355
The Need for Training and Development 356
Training and Development: Basic Concepts 357
Purposes of Training and Development 361
Significance of Training and Development 364
HRM Approaches to Training and Development 368
Linkage between Business Strategy and Training 369
The Process of Training and Development 373
Special Forms of Training and Development 397
New Developments in Training and Development 408
Case Study
McDonalds 426
CHAPTER 7
Performance Management and Development Systems 433
Performance Management 434
Objectives of Performance Management Systems 437
Developing Performance Management Systems 443
Problems in Performance Management 464
Effective Performance Management Systems 467
Developments in Performance Management 469
Technology and Performance Management 492
Strategic Linkage of Performance Management 496
Case Study
Performance Appraisal at Amber Limited 504
CHAPTER 8
Compensation and Rewards Management 510
Compensation and Rewards 511
Compensation and RewardsDeterminants 525
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xii Contents
CHAPTER 9
Managing Careers 574
CareersContemporary Notions 575
Career Planning, Development, and Management 577
Career Stages 581
Career Planning 584
Career Development 590
Career Management Systems 598
Design and Implementation of Career Management Systems 607
Organizational Career Management: A Typology 612
Career Management for Specific HR Issues: HRD Approach 617
Career Management: An SHRM Approach 613
Case Study
Career Development at Dataware Services and Systems 632
CHAPTER 10
Mentor Relationships 636
The Concept of Mentoring 637
Perspectives of Mentoring 644
Alternative Mentoring Models 647
The Mentoring Relationship 650
Outcomes of Mentoring Programmes 656
Design and Implementation of Formal Mentoring Programmes 666
Barriers to Mentoring 679
Mentoring Relationship: A Strategic HRM Approach 681
Special Issues in Mentoring 686
Case Study
Mentoring at Coca-Cola Foods 701
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Contents xiii
CHAPTER 11
WorkLife Integration 708
Changing Notions of the WorkFamily Relationship 709
WorkLife Issues 710
WorkFamily Relationships: Some Related Terms 719
WorkFamily Conflict 720
WorkLife Balance 723
WorkLife Integration 724
Family-friendly Workplace 733
WorkFamily Culture 735
HRD Perspectives on WorkLife Integration 738
Development of WorkLife Initiatives 742
Towards a Strategic Approach to WorkLife Integration 745
Case Study
Narmada Bank International 756
CHAPTER 12
International Human Resource Management 761
Types of International Organizations 762
International Human Resource Management 764
External Environment and IHRM 767
IHRM Practices 769
Case Study
Natural Pharmaceuticals Ltd 793
Index 797
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Strategic Human Resource Management: An Introduction 1
Strategic Human
1 Resource Management:
An Introduction
OBJECTIVES
After studying this chapter, you will INTRODUCTION
be able to:
l explain the meaning of strategic Since the 1990s, there has been an increased focus on the
human resource management strategic role of human resource management (HRM). The
(SHRM) and differentiate it from strategic approach to HRM refers to the relationship between
traditional human resource
human resource (HR) practices and the strategic objectives,
management (HRM)
that is, the long-term goals of the organization. With the
l discuss the significance of
viewing human resources as
increasing recognition of the potential of human resources
investment and a source of in providing competitive advantage, organizations have
sustainable competitive begun to consider employees as valuable assets or invest-
advantage for organizations ments. This view has become more significant in todays
l acquire an overview of the knowledge economy that depends on the skill and knowledge
conceptual framework of SHRM
of the workforce. From being a routine, administrative, and
l explain the linkage between HR reactive function, the HR function today has evolved to being
strategy and business strategy
proactive and strategic.
l understand different theoretical
approaches to SHRM
The past decade has seen HR researchers and practitio-
ners directing their attention to important questions. For
l appreciate the Indian approach
to the concept of HRM and its instance, what is HR strategy? What factors determine
linkage with organizational goals whether an organization adopts a strategic approach to
HRM? Is there a relationship between the characteristics of
the organization and the adoption of a particular strategic
human resource management (SHRM) approach? Does an
organization achieve competitive advantage by linking HR
strategy with business strategy?
The present chapter explores SHRM, as an approach to
the management of human resources that views people as
assets. The criteria for understanding the contribution of
human resources to the competitive advantage of the orga-
nization are reviewed. The factors that affect the degree
to which an organization is investment oriented in its
management of human resources are also discussed. The
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2 Strategic Human Resource Management
chapter also presents the conceptual framework explaining the strategic fit
between business strategy and HR strategy and highlights the theoretical
perspectives on SHRM. Finally, the chapter addresses the Indian applications
to understanding the management of human resources.
Financial capital
People
Utilization
Processes Organizational goals
People
Technology
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Strategic Human Resource Management: An Introduction 3
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4 Strategic Human Resource Management
s Hu
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Strategic Human Resource Management: An Introduction 5
Human Capital
The term capital refers to wealth, money, or property. Capital is used to generate
more wealth for an organization. When employees are referred to as human
capital, it is implied that they are the resources that generate more wealth.
Human capital refers to the collective skills and knowledge of the total workforce
of an organization that hold economic value for the organization. It enhances
the productivity and profitability of the organization. In order to ensure that
human capital generates more wealth as well as leads to value creation, it is
important that human capital is utilized and managed efficiently and effec-
tively. When the value of people is enhanced, it enhances the value of the
organization. For example, when an organization provides opportunities for
development and an environment conducive to performance, it will result in
higher levels of retention. This aspect is explored in more detail in a later
chapter of the book.
Today, it is possible for any organization to buy machinery and equipment
comparable to that available in leading global organizations. Therefore, ma-
chinery or finance, and access to these resources, are no longer the factors
that differentiate between organizational success or failure. Rather, it is the
ability to use these tangible resources (money, machinery, etc.) that serves as
the distinguishing factor. An organization that holds on to and builds on the
skills, competencies, and knowledge of its workforce can bounce back into
business rather quickly, even if it loses all of its equipment. However, an
organization that loses its workforce but holds on to its tangible assets has
little hope of recovering.
The emphasis on human resources has become all the more important
as there is a marked movement towards a knowledge-based economy and
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6 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 7
Cannot be
duplicated
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8 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 9
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10 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 11
responsibility. Employees who have a particular skill set that is valuable to the
organization, but still easily transferable to its competitors, can be the target of
competing organizations. Therefore, investment in this set of employees has
a high degree of associated risk. For example, employees with an IT skill set
can easily move from one organization to another, where the cost of switch-
ing jobs is quite low. This has compelled IT firms to frequently adjust and
improve their employment packages and design HR strategies to stay ahead
of their rivals.
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12 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 13
EVOLUTION OF SHRM
The HR function has evolved over time. The history of the function pre-dates
Taylors theory of scientific management and Fayols administrative theory.
However, it was only during the 1930s and 1940s that the function grew in
significance, largely due to the war-time imperatives. At this time, the HR
functions matured and focused largely on labour relations and staffing. In
India, the Tata Iron and Steel Company (TISCO) was one of the first organi-
zations to set up a personnel department in the year 1947. Figure 1.5 presents
the evolution of the HR function.
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14 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 15
Objectives of SHRM
The major objectives of SHRM are as follows:
l To ensure the availability of a skilled, committed, and highly motivated
workforce in the organization to achieve sustained competitive advan-
tage.
l 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 prac-
tices that are strategically aligned.
The extent of application of SHRM within organizations, as well as the
form and content of SHRM, vary from one organization to another. Strategic
human resource management is practiced in only those organizations that
have a clearly articulated corporate or business strategy. Organizations that
lack a corporate plan cannot have SHRM. Rather, in such organizations, HR
personnel carry out the traditional administrative and service roles and are
not concerned with strategic business issues.
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16 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 17
SHRM HR Strategies
n A general approach to strategic management n Outcome (manifestation) of the general
of human resources SHRM approach
n Aligned with the organizational intention n Focus on specific organizational intentions
about its future direction about what needs to be done
n Focus on long-term people issue n Focus on specific issues that facilitate the
n Defines the areas in which specific HR achievement of corporate strategy
strategies need to be developed n Human resource strategy decisions are
n Focus on macro concerns such as structure, derived from SHRM
culture
n Strategic HRM decisions are built into the
strategic business plan
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Strategic Human Resource Management: An Introduction 19
Fit
Perspective
Fit as Fit as
gestalt contingency
Fit as an ideal
set of practices
(best practice
approach)
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20 Strategic Human Resource Management
Three of the above five types of fit provide the following possible approaches
to SHRM:
l the best fit approach
l the HR bundles or configuration approach
l the best practice approach
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Strategic Human Resource Management: An Introduction 21
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22 Strategic Human Resource Management
HR Strategy Classification
Of these three bases of classification of HR strategy, the most popular approach
is the type of business strategy and the adoption of complementary HR
strategies. Some approaches linking business strategy with HR strategy are
discussed. Porter emphasized the fit point of view by stating that all the activities
of an organization must be tailored to fit its business strategy. Schuler and
Jackson focused on Porters classification of the three generic business
strategies, i.e., cost leadership, differentiation, and focus. They argued that HR
practices should be designed to reinforce the behavioural implications of these
generic strategies. Based on the role requirements, each competitive strategy
is defined in terms of a matching HRM strategy, as shown in Table 1.5.
Table 1.5: Linking Business Strategy and HR Strategy
n Moderate concern for quality and quantity n Equal and fair pay, many incentives for
creativity
n Long-term performance measures
n External recruitment and hiring of people who
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Strategic Human Resource Management: An Introduction 23
Table 1.6: Miles and Snows Classification of Business Strategy and HR Strategy
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24 Strategic Human Resource Management
Scholars Frameworks
Golden and Proposed the following four types of linkages between HRM and strategic
Ramanujam (1985) planning process:
1. Administrative Linkage: HR department adopts the traditional
personnel role, provides routine operational support, and handles
paperwork. Functional managers see HR function as relatively
unimportant.
2. One Way Linkage: There is a sequential relationship between
strategic planning and the HR function. The HR function reacts to and
designs HR programmes to support the strategic objectives of the firm.
3. Two Way Linkage: There is a reciprocal, interdependent relationship
between strategic planning and HR function. Business plans affect and
are affected by HR activities. HR function is seen as important.
4. Integrative Linkage: There is a dynamic interaction, formal as well
as informal, between HR function and strategic linkage. The senior
HR executive is a strategic business partner with other senior
executives of the firm.
Schuler (1992) Proposed the 5-P model that links the strategic business needs with strategic
HRM activities. The 5Ps are: HR philosophy, HR policies, HR programmes,
HR practices, and HR processes. Strategic human resource management begins
with the identification of strategic business needs. It is seen as consisting of
all those activities that formulate and implement the strategic business
needs. These activities have an influence on the behaviour of people. If
SHRM helps meet business needs, then it is important to assess the impact
of business on HRM activities including the 5Ps.
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Strategic Human Resource Management: An Introduction 25
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26 Strategic Human Resource Management
policies and practices are understood in order to work out how the innovation
can support these practices.
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Strategic Human Resource Management: An Introduction 27
appraisals that are behaviour or outcome based. Beyond this, however, agree-
ments are relatively few. For instance, the list of desirable best practices varies
significantly in literature. Moreover, advocates of the approach do not answer
what goals are being served by best practices, nor do they specify whose goals
are being served.
An important point of disagreement with the best practice approach relates to
the fact that many successful organizations refuse to adopt these practices. Hence,
the assumption that perhaps, competition will drive out firms that do not adopt
the best practices, leading to the failure of these firms, does not hold ground.
There is, thus, a counterpoint to the best practice approach that argues that
the notion of a single set of best practices may be overstated. This view adopts
the premise that distinctive HR practices lead to the competitiveness of a
particular firm.
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28 Strategic Human Resource Management
HR Competencies
Prospectors, e.g.,
Outside development
BCG, Pepsi
Flexibility
Inside selection
Business
Strategies
Outside development
Established
markets/niches Defenders, e.g.
Inside selection IBM, McKinsey,
Coca-Cola
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Strategic Human Resource Management: An Introduction 29
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30 Strategic Human Resource Management
SHRM
Human resources An organization performs Human resources are a There are three distinct
should be integrated best when each unique and distinguishable types of HR strategies:
with the strategic departmental unit source of competitive l inducement
planning process maximizes its contributions advantage l investment
of the firm limited to its unique area l involvement
of expertise
Functional Perspective
Strategic human resource management literature classified as functional has
two characteristics.
1. Human resource is seen as a staff function and, therefore, as advisory
and subordinate to the core line functions. This is in accordance with
the classical organization design theory.
2. The sub-functional strategies, such as the compensation and recruitment
strategies, are equated with the overall HR strategy.
This perspective relies on the principle that an organization performs best
when each departmental unit maximizes its contributions, limited to its unique
area of expertise. It further accepts that organizations should be structured
around differences in rank or grade, resulting in the creation of staff func-
tional specialists. General managers at the top have the responsibility of giving
direction to the firm, functional managers with independent expertise (HR
functional staff specialists) are in the middle, and subordinates who carry out
supervisors directives are at the bottom. Schuler and Jacksons (1987) frame-
work is representative of this perspective. Strategic HRM, according to this
perspective, is defined as a carefully planned effort by functional HR managers
to shape subordinate behaviour so as to make it consistent with the desires
of top management as expressed in the strategic plan. This approach repre-
sents the traditional definitions of HR wherein HR was proposed to be a staff
activity.
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Strategic Human Resource Management: An Introduction 31
Economic Perspective
This perspective views human resources as a unique and distinguishable
source of competitive advantage. Barneys resource-based VRIO framework,
discussed earlier, takes an economic perspective on SHRM. Wright and
McMahan (1992) extended Barneys view and argued that human resources
can be a source of sustained competitive advantage when four basic require-
ments are methuman resources must add value to the firms production
processes, skills sought by the firm must be rare, human capital must not be
easily imitable, and human resources must not be subject to replacement by
technological advances or other substitutes.
Typological Perspective
Typologies help in developing systematic comprehensive theories for the study
of new innovations in managerial thought. Dyer and Holder (1988) identified
three ideal HR strategic types based on their observations of HR practices
in several firms in the US. They intended their typology to specify the content
of HR strategic decisions and also to highlight the underlying philosophical
considerations that are the major determinants of strategy. The three distinct
types of HR strategies identified by them were as follows:
Inducement strategy It is used by firms to support a business environment
that is highly competitive with respect to price and/or quantity. In this strategy,
the decision making power is highly centralized, with supervisors accepting
only a moderate amount of employee initiative, while discouraging innova-
tion and spontaneity. Human resource strategies focus on cost, expecting high
performance in a minimally staffed organization. Loyalty and commitment
are rewarded by the organization to discourage high employee turnover.
Investment strategy It is most likely to be found in firms where the business
strategy is based on differentiation, such as quality, features, or service, rather
than price. The organization is characterized by a tall structure, power is
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Strategic Human Resource Management: An Introduction 33
SHRM:
Indian HRD Framework (Athreya)
context
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34 Strategic Human Resource Management
(a climate that sets norms, values, and culture, and ensures a high level of
motivation for employees). It is not necessary for a firm to use all the systems
at the same time.
An organization can facilitate the process of development by allocating
resources for the purpose and by exemplifying an HRD philosophy that values
human beings and promotes their development. The model also emphasizes a
linkage between the HRD subsystems and corporate plans of the organization.
Thus, the framework also incorporates the external fit perspective. The basic
themes underlying these subsystems are as follows:
l human resources are the most important assets of the organization
l a healthy climate is essential for the development of human resources
l employee commitment is enhanced with the opportunity to discover and
actualize ones potential in ones work
l human resource development practices can be monitored so as to make
them beneficial to both the individual and the organization
A periodic evaluation of the functioning of these systems or practices helps
in re-engineering and realigning HRD to the organizations business needs.
Rao proposed a model to explain the linkages between HRD instruments (put
in operation they become practices), processes, outcomes, and organizational
effectiveness. In this model, the HRD instruments include various tools, that
is, subsystems such as performance appraisal, training, compensation, etc.
The HR practices, if effectively used, can create a conducive HRD culture
and learning processes. Human resource development processes are inter-
mediate variables and affect the HRD outcomes. They are less easily observ-
able and are softer dimensions that indicate the effectiveness of HR practices.
Human resource development process variables include role clarity, com-
munication, and the practice of HRD values such as openness, collaboration,
trust, autonomy, confrontation, etc. Such HRD culture and processes can
result in more observable and quantifiable outcomes.
The HR outcomes may include a higher level of employee competence
and better utilization of human resources through higher motivation and
commitment. These outcomes can influence the business goals of the organi-
zation, which may be in terms of higher productivity, more profits, better
image, and more satisfied customers and stakeholders.
According to the model, HR, by itself, cannot contribute to profits. The
strategies, technology, finances, markets, etc., also need to be in place. However,
good HR practices may build the competencies and commitment of employees
to such an extent that they make sure that the other variables are taken care of
to a great extent. Thus, it is the people who can provide competitive advantage
to an organization. This model suggests that, other things being the same, an
organization that has a better HRD climate and processes, and competent
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Strategic Human Resource Management: An Introduction 35
HRD as an Approach
This perspective has been put forward by Dayal (1993), who advocates that
HRD is an approach, and not a function. This perspective highlights that the
underlying belief of all HR programmes of an organization is individual growth
and development, which lead to improved organizational performance. Dayal
propounds that HR programmes are need-based, and may vary significantly
in their approach and emphasis in the following ways:
l Emphasis on philosophy: When an organization articulates its beliefs
about people and operationalizes them in personnel systems and
managerial practices in the organization, it views HRD as a way of life,
and not as a programme.
l Emphasis on programmes: Human resource initiatives by an organization
are integrated with the problem areas identified by the organization.
l Emphasis on leader behaviour: In some situations, leader behaviour is re-
garded as the central feature of HR initiatives. Transformational
leaders create an environment in which employees can improve their
capabilities and achieve an impressive growth.
Growth of individuals without that of the organization is not sustainable.
Hence, HR initiatives should aim at the development of the system as a whole.
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36 Strategic Human Resource Management
ALTERNATIVE HR STRATEGIES
Following are some examples of the businessHR linkage and the alternative
HR strategies adopted by firms in different industries.
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Strategic Human Resource Management: An Introduction 37
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38 Strategic Human Resource Management
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Strategic Human Resource Management: An Introduction 39
no system for rewarding the skill development of the contract workers. They
are not active in providing training for their workers.
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40 Strategic Human Resource Management
The above model reinforces the view that business strategy changes need
to be accompanied by concomitant SHRM initiatives to ensure the success of
the business strategy.
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Strategic Human Resource Management: An Introduction 41
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42 Strategic Human Resource Management
Summary
All physical and capital resources depend on people firm is in its management of human resources were
for their efficient utilization, maintenance, and highlighted. Three conceptual approaches to
management. Hence, there is an increasing recog- SHRM, that is, the best practice, best fit, and
nition among management thinkers of the impor- HR bundles approach, were examined to under-
tance of human resources in providing competitive stand the concept of fit between business strategy
advantage to organizations. As a result, employees and HR strategy. The premise that distinctive HR
are now referred to as human capital or human as- practices are the drivers that lead to core compe-
sets. Instead of viewing human resources as a cost tencies, firm competitiveness and, in turn, business
to the organization, firms have begun to consider strategies, was also discussed. Four theoretical per-
employees as investments. Since business objec- spectives of SHRM, viz. fit, functional, economic,
tives are achieved through people, it is important and typological perspective, were presented and the
to integrate HRM with the business strategy of the relationship between business strategy and HR strat-
organization. egy was examined. The chapter discussed three
In this chapter, we discussed the meaning of bases of classification of HR strategies, that is, stages
SHRM and the evolution of HR function over time of business life-cycle, type of business strategy, and
into a strategically focused one. According to the types and numbers of products. The Indian per-
resource-based view (RBV) of the firm, human re- spective on SHRM was also presented. The chap-
sources become a source of sustained competitive ter ends with a few examples of the business-HR
advantage for a firm when the four criteria of value, strategy linkage from the manufacturing, hospital,
rareness, non-imitability, and organization are met. and retail banking industries.
Factors that determine how investment oriented a
Keywords
Administrative Theory is a classical organization structuring organizations. This approach attributed
theory proposed by Henri Fayol. The focus of managerial success to certain principles of man-
this approach was on the most efficient way of agement.
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Strategic Human Resource Management: An Introduction 43
Asset is something that is owned by the firm and Human Resource Management (HRM) is an
that has an exchange value. overall approach towards the management of people
Best Practices are superior management practices working in the organization for accomplishing the
that are readily identifiable and transferable across goals of the organization.
organizations irrespective of the context. All firms Human Resources is a term used to refer to the
will attain performance improvements only if they people who work in an organization. These are the
identify and implement best practice or bench- resources on which other resources depend for their
mark. effective and efficient utilization.
Change Management refers to specific efforts Internal Fit refers to the development and imple-
undertaken by a firm to steer a planned change in a mentation of several HR practices together so that
specified direction with the help of a change agent. they are interrelated and internally consistent with
Competitive Advantage is a situation where an each HR practice, complementing and reinforcing
organization is able to differentiate its products or the other. This is also known as horizontal integra-
services from those of its competitors to increase tion or bundling.
its market share and gains, and maintains an edge Knowledge Economy refers to all jobs, compa-
over its competitors. nies, and industries in which the knowledge and
Distinctive HR Practices refer to unique HR prac- skills of people, rather than the capabilities of ma-
tices that help to create unique competencies that chines and technologies, determine competitive
differentiate the products and services. This differ- advantage.
entiation leads to competitiveness of the firm. Resource-Based View (RBV) is a view that holds
Employee Stock Option Plans (ESOP) give em- that human resources contribute to sustained
ployees the right to purchase a fixed number of competitive advantage for a firm when they are
shares of the company stock at a specified, usually valuable, non-tradable, non-imitable, and non-sub-
lower, price for a limited period of time. ESOPs stitutable. This view is popularly called the VRIO
are used by firms as an incentive for executives framework
and as a retention tool. Scientific Management is an early approach to
External Fit is a theory that proposes that differ- management and organizational behaviour proposed
ences in business orientations or strategies of orga- by F.W. Taylor. The approach focused on the role of
nizations call for different types of people as well employees as individuals and emphasized the im-
as different HR strategies. This is also called verti- portance of designing jobs as efficiently as possible.
cal integration. Skill Mobility refers to the ease with which em-
Greenfield Firms are high performing firms that ployees with a particular skill set can move from
are started from scratch at a new site. one employer to another with little loss in pay or
responsibility.
HR Strategy refers to the planned and effective
use of human resources by an organization to Strategic Fit is a theory that proposes that if
facilitate the successful achievement of the corpo- an organization seeks to maximize competitive
rate strategy. It is concerned with ensuring that the advantage, it must match its internal resources and
organization has the required people, training, skills (organizational competencies) with the op-
rewards, and good employee relations. portunities available in the external environment.
Human Capital is a term used to refer to the col- Strategic Human Resource Management
lective skills and knowledge of the total workforce (SHRM) is the relationship between HRM and
of an organization that have an economic value to strategic management in a firm. It is the pattern of
the organization and enhance its productivity and planned human resource deployment and activities
profitability. intended to enable the firm to achieve its goals.
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44 Strategic Human Resource Management
Strategy refers to the determination of the long- The Mission Statement of a company is a brief
term goals and objectives of an organization, and statement that represents why the organization
the allocation of resources necessary for carrying exists. It is a statement of the purpose of the firm.
out these goals.
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Strategic Human Resource Management: An Introduction 45
1. Mr Apte has recently been deputed from a large should focus on its distinctive competencies.
public sector manufacturing firm to head the The other team members should raise ques-
HR department of a national airline. He does tions about the suggestion and discuss its pros
not have prior experience in the airline indus- and cons. All the members should keep the
try. However, he has extensive experience as contemporary scenario of the airline industry
an HR person and has high levels of functional in mind. The role-play should end with a draft
expertise. He has proved himself by success- preparation that identifies the distinctive com-
fully aligning HRM with the strategic objec- petencies of the airline and suggests the business
tives of the organization in his parent firm. The strategy that would be most appropriate. Al-
national airline has lost its monopoly with the ternatively, the members may suggest what
entry of private players in the airline industry. business strategy (according to Porters classi-
As the head of HR, Mr Apte feels that the na- fication) the airline should adopt and why. They
tional airline has failed to align its strategy should also suggest the HR strategy that will
around its distinctive competencies. Mr Apte match the suggested business strategy.
has resolved to bring up this issue in a meeting 2. Assume that you are an external consultant
with the top management and highlight the hired by a firm that is planning a restructuring
need to build business strategy around the dis- exercise. After an extensive study of the firm,
tinctive competencies of the firm. you discover that it continues to be traditional
Six students should volunteer for the role- in its approach to managing human resources.
play, each playing the role of a member of the You have taken an appointment with the Vice
top management team. One student plays the President (HR) of the firm to discuss your find-
role of Mr Apte. The other five play the fol- ings and to suggest changes. Structure your
lowing roles respectively: Head of Marketing, discussion around the following aspects:
Head of Business Strategy, Head of Finance, l the need to view human resources as an
Head of Operations, and the CEO. As Mr Apte, asset and a source of competitive advantage
the student should convince the members of
l the need to move towards a strategic per-
the team about the importance of designing
spective of HR function
the business strategy around the distinctive
l major HR issues during and after the re-
competencies of the firm. Further, he should
emphasize that instead of attempting to imi- structuring
tate the strategy of its competitors, the airline l changes in the HR strategy of the firm
Classroom Projects
1. The purpose of this activity is to discuss the Position 2: Distinctive HR practices of the firm
direction of businessHR strategy linkage. Half determine the core competencies that determine
the students in the class should take Position 1 the competitive strategy of the firm
and the other half should take Position 2 with Each student should individually develop
respect to the notion of fit between business and write his/her ideas in support of the position
strategy and HR practices: taken. The students of the class can be divided
Position 1: The competitive strategy of the firm into two groups according to the position they
should determine the HR strategy take. The members of each group should share
2[IRUG8QLYHUVLW\3UHVV
46 Strategic Human Resource Management
their individual ideas and develop arguments in consist of the students who choose the same
support of their chosen position. After allowing industry. Each group member should identify
15 minutes time for group discussion, each and discuss the nature of the HR function and
group should present its arguments. Each group practices followed by the organization he/she
can have a presentation time of 10 minutes. An selects within the particular industry. They
open discussion with the class should highlight should also compare the organizations within
the pros and cons of each position. The students the industry and discuss the similarities and
should also be encouraged to cite examples of differences, and the causes for the same. Class
successful firms that have relied on either of presentations should follow discussions on the
the above positions to support their arguments. importance of SHRM, transformation of HR
2. This exercise needs some out-of-class prepara- function from a traditional to a strategic func-
tion. As the first part of the project, students tion, significance of linking business strategy
are asked to read the description of traditional and HR strategy, and intra-industry and inter-
HR versus strategic HR presented in the chap- industry differences with respect to HR strategy.
ter. Each student should choose an organiza- 3. Form groups of four to five members and dis-
tion and collect information about the HR cuss the significance of human resources for
function and strategy of this organization. The achieving competitive advantage with respect
organizations should belong to one of the fol- to the manufacturing as well as the service sec-
lowing industries: FMCG, pharmaceutical, air- tor. Also, discuss whether human resources are
lines, hospitality, or software. The information a cost or an investment for an organization.
should relate to the various aspects on which Report your discussion to the class.
traditional HR differs from strategic HR. To 4. Apply the resource-based view (RBV) model
obtain this information, the student can use to your institute/University. In groups of four,
Internet resources as well as available company determine the value of the institutes human
documents. The students should prepare and resources in terms of Barneys four criteria for
submit this report to the class instructor prior achieving competitive advantage. Compare
to the class. your institute/University with a competitor on
For the second part of the project, the stu- these criteria. Develop an HR strategy to best
dents should be divided into small groups based deploy and utilize the human resources of the
on their chosen industry. Each group should institute. Prepare a report for class discussion.
Field Projects
1. For this project, the instructor should divide report for class presentation as well as a written
the class into groups of five each. Each group report for submission to the instructor. The
should visit two organizations, both of which groups should make presentations in the class
should be at the same stage of development in highlighting the development stage of the or-
the business life cycle, that is, start-up, growth, ganizations they visit, their business strategy,
maturity, or decline. The group members and the nature of the HR strategy of these or-
should conduct interviews with HR managers ganizations. When all groups have made their
as well as a few senior line managers of the presentations, the instructor should engage the
organizations to obtain information about the class in a discussion about the need to match
business strategies and HR strategies of these the HR strategies with the stage of develop-
organizations. Each group should prepare a ment of the organization. The discussion should
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Strategic Human Resource Management: An Introduction 47
also focus on how and why HR strategies of l Did the HR strategies change post merger/
organizations at different stages of business life acquisition?
cycle differ from each other. l What were the main HR aspects related to
2. Visit a retail bank that has been through a the mergers and acquisitions that were faced
merger or acquisition. Interview one or two by these banks? How were these issues
senior managers of the bank in order to obtain handled?
information about the business strategies of the l Were the HR practices and strategy congru-
two banks, prior to as well as after the merger/ ent with the business strategy in the newly
acquisition. Use Porters classification of busi- formed entity as a result of the merger/ac-
ness strategy to determine the strategy of the quisition?
banks. Also interview the HR managers of the
You may also interview four to five line man-
banks to understand the HR strategy of each
agers to obtain their perception of and satisfac-
of these organizations before the merger or
tion with the merger/acquisition. Find out what
acquisition. Obtain information on the changes
human resource practices were used and ob-
in HR practices after the merger/acquisition.
tain their evaluations on what was helpful or
Based on the information, answer the follow-
harmful. Also obtain their appraisal about the
ing questions:
success or failure of the merger/acquisition. On
l What type of business strategy was followed the basis of the above information present a
by each bank prior to merger/acquisition? critical appraisal of the role of HR strategy in
l Was there a change in the business strategy the success or failure of business decisions such
of these banks after the merger/acquisition? as mergers and acquisitions. Prepare a written
l What HR strategies were followed by each report for classroom submission.
bank prior to the merger/acquisition?
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