Conceptual framework and context of strategic SHRM

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SHRM is an approach of decision making relating to the organizational objectives connecting

people rather than employees who are essential to implementing the business strategy of the
organization.

At the same time, SHRM sets up a rapport connecting HRM with Strategic management while
SHRM aimed to clarify the whole course of action that the organization would like to
accomplish its objectives by the concerned people.

Wright (1998) added that as a component of the strategic management, SHRM would consider to
handling with all people linked with the business for long-term and integrate inclusive issues of
the organizational structure, its culture, managerial effectiveness, performance, resources, as well
as changes of management that deals with HR actions applied to support the competitive strategy
of the organization.

SHRM as a means and approach of supporting the management of HR connecting with the
strategic context of the business while it aimed to endow with an intellect to directing any
disorderly environment of the organization towards an ordered and coherent way adopting
effectual actions and policies.

Becker and Huselid (2006) explained that the SHRM takes into account those verdicts and
course actions to managing the employees of all stages in the way that rooted to the direction of
generating sustaining competitive advantage for the organization.

Sheehan (2005) explored that SHRM should make available of guidelines to selecting triumphant
action to gaining eventual trial of the authenticity of strategic HRM where HR is considered a
strategic issue for overall corporate function and evidence.

To implementing SHRM, it is essential to enlarge the existing strategy of the organization with
clear reflection on the HR dimensions and comprehensible guidance for the HR management
regarding their responsibility and accountability.

Datta (2007) also mentioned that a great deal of the literature endows with the facts of strategic
amalgamation, but it is necessary to address the reasons why strategic incorporation would be
advantageous to organizations.

The wider viewpoint of modern business advocates to amplify the input of HR reflections within
the strategic planning with an outlook to caring employees as an asset of the organization
ensuring their further participation and apprehension through effectual communications, result
oriented procedural practices, well aliened training, reward and career expansion opportunities
concerned with performance.
 Schuler and Jakson (1987) explained the necessity of SHRM arguing that it will provide well-
built visionary and captivate leadership at the top of the organisation that dedicated to the
exposed missions and values with clear understanding to the business strategies, eager to
implementing them effectually, positive focus to the critical success factors, and friendly to
working consistent management team.

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SHRM: Introduction, Characteristics and Scope of

SHRM
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Before we try to explain the meaning of strategic HRM, let us first define the terms ‘strategy’
and ‘strategic management’. The term ‘strategy’ is widely used in and presupposes importance.
In the words of the Oxford Concise Dictionary, strategy means ‘generalship’. Thus, strategy is
associated with the long-term decisions taken at the top of the enterprise. The original literary
meaning of strategy is ‘the art and science of directing military forces’.

The term strategy is frequently being used in the present-day corporate world. It envisages
thinking ahead to survive and grow in a highly competitive environment’. Strategy is concerned
with determining which option will provide maximum benefits. According to Jauch and Glueck.

“Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of
the firm to the challenges of the environment. It is designed to ensure that the basic objectives of
the enterprise are achieved through proper execution by the organization”.

Characteristics of Strategic Human Resource Management(SHRM)

1. Recognition of the outside Environment:Outside environment presents some opportunities and

threats to the organization in the form of-

 Laws
 Economic conditions
 Social and demographic change
 Domestic and international political forces
 Technology and so on.

Strategic human resource strategy explicitly recognizes the threats and opportunities in each area
and attempts to capitalize on the opportunities while minimizing or deflecting the effect of
threats.

2. The impact of Competition: The forces of competition in attracting, rewarding, and using

employees have a major effect on corporate human resource strategy. Forces play out in local, regional
and national labor markets. Labor market dynamics of wage rates, unemployment rates, working
 conditions, benefits levels minimum wages legislation and competition reputation all have an impact on
and are affected by strategic human resource decisions.
3. Long-Range Focus: A strategic human resource management should be long-range focus cause
this is not easy to change the strategic human resource policy.
4. Choice and Decision-making focus: In other words, the strategy has a problem solving or
problem preventing focus. Strategy concentrates on the question, “what should the organization do and
why?” this action orientation requires that decisions be made and carried out.
5. Consideration of all Personnel: A strategic approach to human resources is concerned with all
of the firm’s employees, not just its hourly or operational personnel. Traditionally, human resource
management focuses on hourly employees, with most clerical exempt employees also included.
6. Integration with the Corporate Strategy:Human resource strategy adopted by a firm should be
integrated with the firm’s corporate strategy.

The key idea behind overall strategic mgt is to coordinate all of the company’s resources,
including human resources; in such a way that everything a company does contribute to carrying
out its strategy.

Synergy means the extra benefit or value realized when resources have been combined and
coordinated effectively. This concept often referred to as economies of scope, makes the
combined whole of the company make valuable than the sum of its parts. It is a true benefit of
good strategic management of resources.

Key Features of Strategic Human Resource Management

The key features of SHRM are

 There is an explicit linkage between HR policy and practices and overall organizational strategic
aims and the organizational environment
 There is some organizing schema linking individual HR interventions so that they are mutually
supportive
 Much of the responsibility for the management of human resources is devolved down the line

Approaches of the SHRM

 Attempts to link Human Resource activities with competency based performance measures
 Attempts to link Human Resource activities with business surpluses or profit

Impact of Globalization on HRM

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When a business expands its operation into other countries, the impact of globalization on human
resource development and management is significant. Companies need to consider a diverse
range of practical adjustments to be able to hire, train, retain and support a workforce that’s often
spread throughout several countries, which often have varying cultural identities. Human
 Resources departments must adapt their thinking and practices to include cultural differences,
foreign regulations and technological developments.

Impact of Globalization on HRM

2. Globalization of Human Capital

Perhaps the greatest resource available to any company is the workforce it acquires and retains.
As a company extends its base to a foreign shore, the impact of that globalization on HR
procedures will extend to current workers and also to new employees. The HR department will
need to increase support of its current staff, as they transfer overseas to new positions. Assistance
with visas, work permits, and housing will be required, as well as training in cultural issues and
perhaps language acquisition. New local talent must be acquired and developed, as well. A
company’s ability to move into new markets, will depend on its ability to fill needs with skilled
workers. In some situations, local workers may meet the criteria, but in other situations, they
may be more looking for skilled and already-trained employees to be transferred to positions in
the new overseas location. In this case, the willingness of workers to become mobile could be a
key factor to productivity.

 Corporate and Cultural Differences

Another significant impact of globalization on human resource development is the necessity to

consider cultural differences, both in and out of the workplace. Businesses tend to have their own
corporate cultures or ways of operating, but there are societal and cultural differences between
people as well. Cultural norms within a society affect the workforce and how workers view their
jobs, especially in relation to time spent with their family and ideas about employment
expectations. Some cultures may also have varying mores about gender roles, particularly
concerning the role of women in leadership. While a female in a managerial position is not
uncommon in American culture, the same many not hold true elsewhere.

Similarly, a manager brought in from the home office may not be the best person to manage an
overseas staff, because they do not understand all the nuances of the local culture and what’s
considered acceptable business practice. For example, in some countries, the typical work day
may be quite different from the traditional 9 to 5 hours. Workers might be accustomed to starting
their day earlier in the morning, taking a longer mid-day break for lunch and rest and then
returning finishing their work by early evening. A manager who adapts to local culture may find
better success among his employees.

7. Employment and Tax Laws

Global expansion is also affected by varying tax and labor laws. HR departments need to be
prepared to deal with different tax rates, benefit requirements or labor and environmental
regulations. These requirements may be in addition to or even in conflict with current corporate
policies, so adjustments to maintain compliance with local governments are necessary. HR
 managers must become experts in issues that not only pertain to their industry, but keep current
with issues and government policies within the countries in which their company now operates.

 Long-Distance Communication Challenges

In a small, local business, the HR manager can ask an employee to stop by the HR office to sign
a form, discuss an issue with their paycheck or to handle a policy-related issue. When managing
employees over great distances and perhaps in several sites spread around the globe, HR
departments face a bigger challenge in communicating with their employees. Often, they must
rely on technology such as email or conference calling to relay information, thereby eliminating
some of the more direct human elements of interaction. Offices are also open during different
points in the 24-hour work day, so that even simple issues may take more time to resolve.
Although forms and HR management software should be standardized throughout the company,
accommodations may have to be made for language differences, as well.

Changing Nature of Workforce

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Advances in technology, a more demanding workforce and shifts in priorities are combining to
change the shape of traditional business and create a revolution in the workplace.

The way we work, the shape of our company structures and the expectations of our employees
have all undergone a fundamental shift in the 21st century. With technology as the catalyst, the
momentum of this shift is only going to increase.

Give them flexibility

Employees won’t just be happy doing one job anymore and looking for vertical progression
within that job. Climbing the corporate ladder is a thing of the past. Flexible and flat structures
allow employees to work across multiple areas of the business. This not only improves their own
skills and keeps them engaged but it adds significant value to the company by building a base of
employees who are familiar with different aspects of how the business operates. With this
increased understanding the employee is then able to perform at a much higher level.

Use technology to create a better experience

Tech isn’t something new to Millennials. They have been raised with technology readily
available, especially smart phones which form the hub of the way they communicate, interact
and socialise. That’s why integrating key business tools onto a mobile platform is absolutely
essential for forward thinking businesses. At Quinyx, our mobile app is used by more than
300,000 users each day, who not only use it to see when they are working next but to also see
who they are working with and communicate with them through the app. Their familiarity with
mobile technology and expectations of being able to complete any task with their smart phone
are all met. In making their lives more simple, it then allows them to focus on doing their job.
Put health and wellbeing first

Employers who manage their employees health and wellbeing successfully will reap the benefits
of doing so. This covers everything from nutrition, exercise, mindfulness and even sleep. It also
means creating an environment where employees enjoy spending time. Not only does this
demonstrate a strong duty of care from the employer but it will also improve employee
performance on a purely physical level. For example, an employee who has trouble sleeping
won’t be able to perform at their optimum.

BP are using fitness trackers as part of an incentive programme to help employees reduce
healthcare costs while UK supermarket Tesco’s use smart armbands as a working aid in their
distribution centres.

Just like advances in sport science are helping coaches and athletes improve their performance
through data, companies are now looking at ways they can do the same to optimise their
employees performance to gain advantage over their competition.

Understanding the needs of your staff, and how these needs change over time, helps you create a
business where employees enjoy work. It’s through enjoying work that employees are able to
perform to the best of their abilities and deliver results.

Evolution of SHRM
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HRM can be seen as part of the wider and longer debate about the nature of management in
general and the management of employees in particular. This means that tracing the antecedents
of HRM is as elusive an exercise as arriving at its defining characteristics. Certainly there are
antecedents in organizational theory, and particularly that of the human relations school, but the
nature of HRM has involved important elements of strategic management and business policy,
coupled with operations management, which make a simple ‘family tree’ explanation of HRM’s
derivation highly improbable.

What can be said is that the origins of HRM lie within employment practices associated with
welfare capitalist employers in the United States during the 1930s. Both Jacoby (1997) and
Foulkes (1980) argue that this type of employer exhibited an ideological opposition to
unionisation and collective relations. As an alternative, welfare capitalists believed the firm,
rather than third-party institutions such as the state or trade unions, should provide for the
security and welfare of workers. To deter any propensity to unionise, especially once President
Roosevelt’s New Deal programme commenced after 1933, welfare capitalists often paid
efficiency wages, introduced health care coverage, pension plans and provided lay-off pay.
Equally, they conducted regular surveys of employee opinion and sought to secure employee
commitment via the promotion of strong centralised corporate cultures and long-term cum
permanent employment. Welfare capitalists pioneered individual performance-related pay,
profit-sharing schemes and what is now termed teamworking. This model of employment
regulation had a pioneering role in the development in what is now termed HRM but rested on
structural features such as stable product markets and the absence of marked business cycles.
While the presence of HRM was well established in the American business system before the
1980s, it was only after that period that HRM gained external recognition by academics and
practitioners.

There are a number of reasons for its emergence since then, among the most important of which
are the major pressures experienced in product markets during the recession of 1980–82,
combined with a growing recognition in the USA that trade union influence in collective
employment was reaching fewer employees. By the 1980s the US economy was being
challenged by overseas competitors, most particularly Japan. Discussion tended to focus on two
issues: ‘the productivity of the American worker’, particularly compared with the Japanese
worker, ‘and the declining rate of innovation in American industries’ (Devanna et al., 1984: 33).

From this sprang a desire to create a work situation free from conflict, in which both employers
and employees worked in unity towards the same goal – the success of the organisation
(Fombrun, 1984: 17). Beyond these prescriptive arguments and as a wide-ranging critique of
institutional approaches to industrial relations analysis, Kaufman (1993) suggests that a
preoccupation with pluralist industrial relations within and beyond the period of the New Deal
excluded the non-union sector of the US economy for many years.

In summary, welfare capitalist employers (soft HRM) and antiunion employers (hard HRM) are
embedded features within the US business system, whereas the New Deal Model was a
contingent response to economic crisis in the 1930s. n the UK in the 1980s the business climate
also became conducive to changes in the employment relationship. As in the USA, this was
partly driven by economic pressure in the form of increased product market competition, the
recession in the early part of the decade and the introduction of new technology.

However, a very significant factor in the UK, generally absent from the USA, was the desire of
the government to reform and reshape the conventional model of industrial relations, which
provided a rationale for the development of more employer-oriented employment policies on the
part of management (Beardwell, 1992, 1996). The restructuring of the economy saw a rapid
decline in the old industries and a relative rise in the service sector and in new industries based
on ‘high-tech’ products and services, many of which were comparatively free from the
established patterns of what was sometimes termed the ‘old’ industrial relations.

These changes were overseen by a muscular entrepreneurialism promoted by the Thatcher

Conservative government in the form of privatisation and anti-union legislation ‘which
encouraged firms to introduce new labour practices and to re-order their collective bargaining
arrangements’ (Hendry and Pettigrew, 1990: 19).
 The influence of the US ‘excellence’ literature (e.g. Peters and Waterman, 1982; Kanter, 1984)
also associated the success of ‘leading edge’ companies with the motivation of employees by
involved management styles that also responded to market changes. As a consequence, the
concepts of employee commitment and ‘empowerment’ became another strand in the ongoing
debate about management practice and HRM. A review of these issues suggests that any
discussion of HRM has to come to terms with at least three fundamental problems:

3. That HRM is derived from a range of antecedents, the ultimate mix of which is wholly
dependent upon the stance of the analyst, and which may be drawn from an eclectic range of sources;
4. That HRM is itself a contributory factor in the analysis of the employment relationship, and sets
part of the context in which that debate takes place;
5. That it is difficult to distinguish where the significance of HRM lies – whether it is in its supposed
transformation of styles of employee management in a specific sense, or whether in a broader sense it is
in its capacity to sponsor a wholly redefined relationship between management and employees that
overcomes the traditional issues of control and consent at work.

This ambivalence over the definition, components and scope of HRM can be seen when
examining some of the main UK and US analyses. An early model of HRM, developed by
Fombrun et al. (1984), introduced the concept of strategic human resource management by
which HRM policies are inextricably linked to the ‘formulation and implementation of strategic
corporate and/or business objectives’. The model is illustrated in Figure(The matching model of
HRM).The matching model emphasises the necessity of ‘tight fit’ between HR strategy and
business strategy.

This in turn has led to a plethora of interpretations by practitioners of how these two strategies
are linked. Some offer synergies between human resource planning (manpower planning) and
business strategies, with the driving force rooted in the ‘product market logic’ (Evans and
Lorange, 1989). Whatever the process, the result is very much an emphasis on the unitarist view
of HRM: unitarism assumes that conflict or at least differing views cannot exist within the
organisation because the actors – management and employees – are working to the same goal of
the organisation’s success.

What makes the model particularly attractive for many personnel practitioners is the fact that
HRM assumes a more important position in the formulation of organisational policies. The
personnel department has often been perceived as an administrative support function with a
lowly status. Personnel was now to become very much part of the human resource management
of the organisation, and HRM was conceived to be more than personnel and to have peripheries
wider than the normal personnel function. In order for HRM to be strategic it had to encompass
all the human resource areas of the organisation and be practised by all employees.

In addition, decentralisation and devolvement of responsibility are also seen as very much part of
the HRM strategy as it facilitates communication, involvement and commitment of middle
management and other employees deeper within the organisation. The effectiveness of
organisations thus rested on how the strategy and the structure of the organisation interrelated, a
concept rooted in the view of the organisation developed by Chandler (1962) and evolved in the
matching model.

The Matching Model of HRM

A more flexible model, illustrated in Figure, was developed by Beer et al. (1984) at Harvard
University. ‘The map of HRM territory’, as the authors titled their model, recognised that there
were a variety of ‘stakeholders’ in the corporation, which included shareholders, various groups
of employees, the government and the community. At once the model recognises the legitimate
interests of various groups, and that the creation of HRM strategies would have to recognise
these interests and fuse them as much as possible into the human resource strategy and ultimately
the business strategy.

This recognition of stakeholders’ interests raises a number of important questions for policy-
makers in the organisation: The acknowledgement of these various interest groups has made the
model much more amenable to ‘export’, as the recognition of different legal employment
structures, managerial styles and cultural differences can be more easily accommodated within it.

This neopluralist model has also been recognised as being useful in the study of comparative
HRM (Poole, 1990: 3–5). It is not surprising, therefore, that the Harvard model has found greater
favour among academics and commentators in the UK, which has relatively strong union
structures and different labour traditions from those in the United States. Nevertheless, some
academics have still criticised the model as being too unitarist, while accepting its basic premise
(Hendry and Pettigrew, 1990).

The Map of the HRM Territory

 The first two main approaches to HRM that emerged in the UK are based on the Harvard model,
which is made up of both prescriptive and analytical elements. Among the most perceptive
analysts of HRM, Guest has tended to concentrate on the prescriptive components, while
Pettigrew and Hendry rest on the analytical aspect (Boxall, 1992). Although using the Harvard
model as a basis, both Guest and Pettigrew and Hendry have some criticisms of the model, and
derive from it only that which they consider useful (Guest, 1987, 1989a, 1989b, 1990; Hendry
and Pettigrew, 1986, 1990).

As we have seen, there are difficulties of definition and model-building in HRM, and this has led
British interpreters to take alternative elements in building their own models. Guest is conscious
that if a model is to be useful to researchers it must be useful ‘in the field’ of research, and this
means that elements of HRM have to be pinned down for comparative measurement. He has
therefore developed a set of propositions that he believes are amenable to testing. He also asserts
that the combination of these propositions, which include strategic integration, high commitment,
high quality and flexibility, creates more effective organisations (Guest, 1987).

 Strategic integration is defined as ‘the ability of organisations to integrate HRM issues into their
strategic plans, to ensure that the various aspects of HRM cohere and for line managers to incorporate
an HRM perspective into their decision making’.
 High commitment is defined as being ‘concerned with both behavioural commitment to pursue
agreed goals and attitudinal commitment reflected in a strong identification with the enterprise’.
 High quality ‘refers to all aspects of managerial behaviour, including management of employees
and investment in high-quality employees, which in turn will bear directly on the quality of the goods
and services provided’.
 Finally, flexibility is seen as being ‘primarily concerned with what is sometimes called functional
flexibility but also with an adaptable organisational structure with the capacity to manage innovation’
(Guest, 1989b: 42).

The combination of these propositions leads to a linkage between HRM aims, policies and
outcomes as shown in Table. Whether there is enough evidence to assess the relevance and
efficacy of these HRM relationships will be examined later.

A Human Resource Management Framework

Hendry and Pettigrew (1990) have adapted the Harvard model by drawing on its analytical
aspects. They see HRM ‘as a perspective on employment systems, characterised by their closer
alignment with business strategy’. This model, illustrated in Figure, attempts a theoretically
integrative framework encompassing all styles and modes of HRM and making allowances for
the economic, technical and socio-political influences in society on the organisational strategy.
‘It also enables one to describe the “preconditions” governing a firm’s employment system,
along with the consequences of the latter’ (Hendry and Pettigrew, 1990: 25). It thus explores
‘more fully the implications for employee relations of a variety of approaches to strategic
management’ (Boxall, 1992).

Model of strategic change and human resource management

 Storey studied a number of UK organisations in a series of case studies, and as a result modified
still further the approaches of previous writers on HRM (Storey, 1992). Storey had previously
identified two types of HRM – ‘hard’ and ‘soft’ (Storey, 1989) – the one rooted in the manpower
planning approach and the other in the human relations school. He begins his approach by
defining four elements that distinguish HRM:

8. It is ‘human capability and commitment which, in the final analysis, distinguishes successful
organisations from the rest’.
9. Because HRM is of strategic importance, it needs to be considered by top management in the
formulation of the corporate plan.
10. ‘HRM is, therefore, seen to have long-term implications and to be integral to the core
performance of the business or public sector organisation. In other words it must be the intimate
concern of line managers.’
11. The key levers (the deployment of human resources, evaluation of performance and the
rewarding of it, etc.) ‘are to be used to seek not merely compliance but commitment’.

Storey (1992) approaches an analysis of HRM by creating an ‘ideal type’, the purpose of which
‘is to simplify by highlighting the essential features in an exaggerated way’ (p. 34). This he does
by making a classificatory matrix of 27 points of difference between personnel and IR practices
and HRM practices. The elements are categorised in a four-part basic outline:
 beliefs and assumptions;
 strategic concepts;
 line management;
 key levers.

This ‘ideal type’ of HRM model is not essentially an aim in itself but more a tool in enabling sets
of approaches to be pinpointed in organisations for research and analytical purposes.

Twenty-seven points of difference

Storey’s theoretical model is thus based on conceptions of how organisations have been
transformed from predominantly personnel/IR practices to HRM practices. As it is based on the
ideal type, there are no organisations that conform to this picture in reality. It is in essence a tool
for enabling comparative analysis.
 Models of Strategic HRM
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The  defining   features of HRM   is popularly   known   as models.   These   models    provide   
analytical    framework for  studying   HRM.     They   provide    characterization   of HRM  
that  establishes   variables   and  relationship    to  be researched. Four  most  common   models  
are :

6. The Fombrun   Model

7. The Harvard Model
8. The Guest  Model  and
9. The Warwick  Model

All these models serve the following purposes:

 They provide an analytical framework for studying HRM for example, situational factors,
stakeholders, strategic choice levels, competence etc.
 They validate certain HRM practices and provide distinctiveness to HRM practices.
 They provide a characterization of HRM that establishes variables and relationship to be
researched.
 They help to discover and understand the world for explaining the nature and significance of key
HR practices.

12. THE FOMBRUN MODEL

This   is  the  model of  HRM. It  emphasizes    four functions   of  management   and   their  
interrelatedness Selection,  Appraisal,   Development      and Rewards. This  model  is
incomplete as it  focuses  on  only  four  functions of HRM and  ignore all other  
environmental    and contingency    factors.  But, this model  is simple    and  can  serve  as a
heuristic  framework  for explaining   the  nature   and  significance   of HR activities.

 THE HARVARD MODEL

 This    model    consists    six  critical  components of HRM   namely    stake holders interests,    
situational     factors,    HRM  policy choices,  HR  out  comes, long  term  consequences and a
feedback loop through.

 THE GUEST MODEL

This  model  was developed   by David Guest in 1997. This model emphasizes on the
assumption   that  HR manager has specific strategies to begin with, which demand certain
practices and when executed will result in outcomes. These  out  comes  include  behavioral  
performance    related   and  financial rewards. The model emphasizes the logical sequence of six
components : HR strategy, HR practices, HR outcomes, Behavioral outcomes, Performance
results and financial consequences.
 THE WARWICK MODEL

This model was developed by two researchers, Hendry and Pettigrew of University of Warwick
(hence the name Warwick model). Like other human resource management models, the Warwick
proposition centers around five elements-

1. Outer context (macro environmental forces)

2. Inner context (firm specific or micro environmental forces)
3. Business strategy content
4. HRM context
5. HRM content

The   strength    of  this   model   is  that   it  identifies   and classifies important environment
influences on HRM. This model takes cognizance of business strategy and HR practices, the
external and internal content, in which these activities take place and process by which such
changes take place including transactions between changes in both external content and internal
content.
THE 5-P’S MODEL OF HRM

1. Philosophy: Expressed in statements defining business values and culture. It expresses how to

treat and value people.
2. Policies: Expressed as shared values and guidelines. Policies establish guidelines for action on
people related business issues and HR programs.
3. Programs: Articulated as human resource strategy. These coordinate efforts to facilitate change
to address major people related business issues.
4. Practices: For leadership managerial and operational role practices motivate needed role
behaviors.
 Development and Delivery of HR Strategies
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Eight key steps in the Development and delivering a successful HR strategy

10. Aligning business and HR needs

The business’ goals that is its strategic imperatives – sit at the heart of any HR strategy and in
order to align business and HR needs one key question must to be answered, “Can your
organization’s internal capability deliver its business goals?”

This is where HR receives most criticism. The function is frequently accused of failing to fully
understand its business, goals and strategy for achieving these goals, and its business model and
how it delivers to its customers. For those who already understand the demands of their business,
it is easy to identify where the business has strong core competencies and where the business is
weakest.

Sometimes these weaknesses are related to essential systems or processes, but more often – and
significantly for HR – these weaknesses relate to the quality of the workforce, its motivation and
ability to deliver organization performance. Taking steps to understand your business and where
it has competitive advantage is an essential first step towards determining the key HR
interventions that form the basis of an HR strategy.

 Developing your HR strategy

Deeper knowledge and understanding of your business goals and business model can identify
potential threats and opportunities in the quantity and quality of human resource required by your
organization. This in turn identifies the key components of your HR strategy and the virtuous
circle of providing whatever your organization needs for success.

It is also critical that the HR team has a high level of expertise in aligning major HR
interventions and their relevance to business performance. This calls for expert HR thinking and
identifies the requisite interventions and, equally important, how they fit together to leverage
organization performance.

If there is a strong need for the organization to develop its management capability, for instance,
should you align your compensation strategy to reinforce this objective? If the organizational
structure defines the accountabilities clearly at every level of the organization, is your HR team
selecting and developing against them? This is joined-up HR at work.

Another concern for HR is when it should make strategic interventions. Easy, it either follows
your business cycle, or is triggered by other key events such as a merger, an acquisition or a
change in business direction.
13. Organizational performance

Organizational performance is the process by which business goals and objectives are cascaded
and managed across and down an organization. It provides a link and rationale for all other HR
activity and, in addition, the greatest opportunity to directly impact business success, enhancing
HR’s reputation and contribution.

HR needs to create and install a robust performance management process that sets out
performance objectives for all levels of staff within a business. This is an opportunity to develop
line managers’ skills in being able to disseminate and set stretch targets for their business.

A critical part of this process is a robust performance review process, which gives people
feedback about what has been achieved – what people have done well and not so well.

The third element is a personal development review process where individual strengths and
weaknesses are identified for the purposes of assessing and meeting organizational development
needs.

 Organizational design and structure

Organizational design is the shape, size and structure of the organization required to meet
customers’ needs. It reflects the management processes that drive the business model and
determines organizational agility and flexibility. These processes can be a source of competitive
advantage or sources of frustration, unnecessarily absorbing time, cost and resources.

Decisions affecting the shape, size and cost of the organization will be aligned with the business
strategy. It should be relatively easy to see whether an organization invests in marketing, sales or
manufacturing, for instance, and whether the organization is maximising its work flow
capability.

As people experts, the role of HR is to add value to the structure and operation of the business.
Structural weaknesses offer an opportunity to revamp any part of the organization by identifying
and making appropriate changes, reductions in size or cost; or improvements to the quality of the
operation.

Conversely, structural strengths are a signal to the HR team to reinforce organizational

competence.

 Strategic resourcing

Achieving clarity throughout the organization’s structure is critical in order for resourcing
strategies to work well. If the organization is transparent about its key roles and accountabilities,
this will define the skills and knowledge required to undertake the work and determine strategic
resourcing requirements.
 Deciding on your resourcing strategy means identifying a number of critical components. These
range from the processes needed to determine resourcing needs, the processes to attract the right
people and the processes for assessing and selecting the right people. HR has a strong traditional
involvement in all of the above. In addition, it is essential to ensure each stage of the resourcing
activity is aligned and in direct response to the strategic imperatives.

Another important component determining the effectiveness of any resourcing strategy is the
need to create a ‘recruitment brand’ – how the image (or brand) of the organization appears to
the recruitment market can either support or undermine the success of a resourcing strategy.

 Organization development

If strategic resourcing is about providing a pipeline for importing external talent, then an
organization’s development strategy is the way in which the HR team decides what changes and
improvements need to be made to the current workforce.

Usually these responses work at three levels – the individual, team and organization – and all are
geared to achieve high levels of organizational performance. It requires a close examination of
the strategic imperatives and clarity about the capabilities to execute it.

Development responses will aim to increase business skills, the application of business skills
(sometimes called competencies) and the behavioural elements – all of which contribute to an
organization’s effective performance. It is important at an individual level, particularly for senior
people, that they feel their development needs are agreed and that they are provided with the
skills to do their jobs.

At a team level, it defines individuals’ ability to work with others flexibly and align individual
and team skills and activity to business goals all of which ensure that the organization is
equipped to deliver its goals.

6. Compensation and benefits

Often called reward strategy, the purpose of compensation and benefits systems is to align the
performance of the organization with the way it rewards its people, providing the necessary
incentives and motivation required for an organization to deliver its goals.

Its components are a combination of base pay, bonuses, profit sharing, share options, and a range
of appropriate benefits, usually based on market or competitor norms and the organization’s
ability to pay. Typically, the components of an organization’s reward strategy will reflect the
particular performance culture of a business.

There is evidence that organizations see compensation as a strategic management lever and are
increasingly experimenting with new practices – team bonuses, for example, aimed at improving
team performance or skills/behaviour payments to upskill the workforce or reinforce culture or
 behaviour change. A company’s reward policy in particular benefits from clarity about which
other elements of the HR strategy it aims to support.

5. Organization culture

Culture is usually described as the “way we do things round here” – the way the organization
acts, reacts and interacts. The trend in the last 10 to 15 years has been to align organizational
behaviour more strongly with customers’ needs, creating customer-facing units and customer-
sensitive behaviours. This has been as a direct result of the increased competition around
product, quality, prices and packaging. In re-aligning an organization’s culture there can be real
benefit and competitive advantage through improved service.

HR teams which are closely involved with the organization’s cultural ambitions can lead these
initiatives through their knowledge of organization psychology such as describing new
behaviours and work styles; and through their skills in organizational development and being
able to provide development solutions to deliver the improvements.

Challenges in Strategic Human Resource Management

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It is important to identify what consequences SHRM has on the performance of business. In

other words, as HRM is concerned with the people implications of the company, how can it
change the vision of the organizations future and how can it help to fulfill the mission.

The key role of strategic HR management is already known and there are some issues that HR
strategy may address:

11. Structure

The success of the company depends a lot on whether there is a proper management structure in
place.

 Team-working

By withdrawing old traditional hierarchies a background of creating a team building is created.

In a lot of cases, the less layers there are between the workers and director there are, the more
harmonized is the working environment. Also the communication between staff is easier and
more effective. In addition to that, it could have far-reaching effects on flexibility and
performance and to achieving a better coordination of business.

14. Performance
 This strategy is based on an analysis of the critical success factors and the performance levels
reached in relation to them. The performance can be improved by taking the steps to improve
training, development, reorganization, the development of performance management processes,
business process re-engineering, etc. A lot of companies have already adopted performance
management processes in which the emphasis is on performance improvement and development
and not reward. This scheme brings new priorities of involvement, teamwork and self-
development.

 Quality and customer care

The aim of most companies is to achieve the competitive advantage. The competitive advantage
is often measured by customer satisfaction and hence loyalty and retention. Innovation and cost
reduction is still important but the main focus of attention should be the customers because if
they reject the product due to it not meeting their expectations then everything else looses the
sense. Therefore the strategy for quality should be built into the business strategy.

Achieving a complete integration of HR and business strategies is quite complicated. Partly the
reason for that is that in the past HR manager in the company was not considered to be a part of a
general management team. Furthermore, the personnel advice was not a part of strategic
direction. However, in today’s modern business HR is indispensable.

Impact of Strategic HRM

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Strategic management of human resourcesrepresents a transformation that is relatively new in the

field of human resource management. An important role of strategic human resource
management is about focusing the management in employees as a tool to gain competitive
advantage. Now, organizations are made aware that successful human resources policies and
practices of appropriate can increase performance in various areas such as productivity, quality
and financial performance.

Performance management is a planned process in which key elements are different measurement,
feedback, positive reinforcement and ongoing dialogue between managers and employees. It has
to do with measurement results in the form of performance achieved in comparison with the
expectations expressed as objectives. Also, it has to do with the inputs and values. Inputs are the
knowledge, skills and behaviors necessary to produce the expected results. Needs are identified
by defining these requirements and evaluate the degree to which the expected levels of
performance are achieved through effective use of knowledge and skills, appropriate behavior.

Performance management strategy has to do with all the business and not just the managers. So
managers are not only responsible for delivering the required performance. Managers should
have the confidence to distribute authority and responsibility throughout the organization. In a
 sense, managers need to collaborate and consider as part of their own people in order to report on
achieving the required performance. Managers and their teams are jointly responsible for the
results and are both involved in agreeing what they should do and how they should do it.
Performance management processes are part of sweeping across the organization. Managers and
other employees of the organization should work together to jointly commit to achieving the
performance.

Performance management strategy should focus on the development to a continuous and flexible
process involving managers and all the organization that operate as a single team. This should
determine how they can best work together to achieve the required results. This makes it possible
to focus on the planning of future performance and performance improvements existing. HRM
Strategy provides the basis for regular dialogue and frequent between managers and other
employees about performance needs and further development of the organization. Strategic
human resource management may bring a number of benefits to the organization :

12. Contributing to the goal accomplishment and the survival of the company,
13. Supporting and successfully implementing business strategies of the company,
14. Creating and maintaining a competitive advantage for the company,
15. Improving the responsiveness and innovation potential of the company,
16. Increasing the number of feasible strategic options available to the company,
17. Participating in strategic planning and influencing the strategic direction of the company as an
equally entitled member of top management
18. Improving cooperation between the HRM department and line managers.

SHRM for Competitive Advantage

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The resource-based view of the firm (RBV) represents a paradigm shift in SHRM thinking by
focusing on the internal resources of the organisation, rather than analyzing performance in terms
of the external context. Advocates of the resource-based view of SHRM help us to understand
the conditions under which human resources become a scarce, valuable, organisation-specific,
difficult-to-imitate resource, in other words key ‘strategic assets’ (Barney and Wright, 1998;
Mueller, 1998; Amit and Shoemaker, 1993; Winter, 1987).

Proponents of the resource-based view of the firm (Penrose, 1959; Wernerfelt, 1984; Amit and
Shoemaker, 1993) argue that it is the range and manipulation of an organisation’s resources,
including human resources, that give an organization its ‘uniqueness’ and source of sustainable
competitive advantage. Their work has resulted in an ‘explosion of interest in the Resource-
Based perspective’ (Boxall and Purcell, 2003: 72), particularly in seeking ways to build and
develop ‘unique bundles’ of human and technical resources that will lead to enhanced
organisational performance and sustainable competitive advantage.

Barney (1991, 1995) and Barney and Wright (1998) contribute to the debate on strategic HRM in
two important ways. Firstly, by adopting a resource-based view (Barney, 1991; Wernerfelt,
 1984), they provide an economic foundation for examining the role of human resource
management in gaining sustainable competitive advantage. Secondly, in providing a tool of
analysis in the VRIO framework, and by considering the implications for operationalising human
resource strategy, they emphasise the role of the HR executive as a strategic partner in
developing and sustaining an organisation’s competitive advantage.

The resource-based view therefore recognises the HR function (department) as a key ‘strategic’
player in developing sustainable competitive advantage and an organisation’s human resources
(employees) as key assets in developing and maintaining sustainable competitive advantage.

The VRIO framework

The resource-based view of SHRM explores the ways in which an organisation’s human
resources can provide sustainable competitive advantage. This is best explained by the VRIO
framework:

19. Value
20. Rarity
21. Inimitability
22. Organisation
23. Value

Organisations need to consider how the human resources function can create value; it is quite
common in organisations to reduce costs through HR such as the reduction in headcount and the
introduction of flexible working practices etc., but it is also important to consider how they
might increase revenue. Reicheld (1996) has identified human resources’ contribution to the
business as efficiency, but also as customer selection, customer retention and customer referral,
thus highlighting the impact of HR’s contribution through enhanced customer service
and customer added value.

This view is reflected by Thompson (2001), in recognising the paradigm shift from traditional
added value through economy and efficiency to ensuring that the potential value of outputs is
maximized by ensuring that they fully meet the needs of the customers for whom the product or
service is intended. The suggestion of the resource-based view is that if Human Resources
wishes to be a ‘strategic partner’, they need to know which human resources contribute the most
to sustainable competitive advantage in the business, as some human resources may provide
greater leverage for competitive advantage than others.

Hamel and Prahalad (1993) therefore identify that productivity and performance can be
improved by gaining the same output from fewer resources (rightsizing) and by achieving more
output from given resources (leveraging). In order to achieve this, Human Resources may ask
themselves the following questions:

 On what basis is the firm seeking to distinguish itself from its competitors? Production
efficiency? Innovation? Customer service?
 Where in the value chain is the greatest leverage for achieving differentiation?
 Which employees provide the greatest potential to differentiate a firm from its competitors?

This approach has further implications for the role of human resource managers in a firm, as they
need to understand the economic consequences of human resource practices and understand
where they fit in the value chain. Barney and Wright (1998: 42) suggest that the Human
Resources function needs to be able to explore the following questions:

15. Who are your internal customers and how well do you know their part of the business?
16. Are there organisational policies and practices that make it difficult for your internal clients to
be successful?
17. What services do you provide? What services should you provide? What services should you not
provide?
18. How do these services reduce internal customers’ costs/increase their revenues?
19. Can these services be provided more efficiently by outside vendors?
20. Can you provide these services more efficiently?
21. Do managers in the HR function understand the economic consequence of their jobs?

The value of an organisation’s resources is not sufficient alone, however,

for sustainable competitive advantage, because if other organisations possess the same value,
then it will only provide competitive parity. Therefore an organisation needs to consider the next
stage of the framework: rarity.

 Rarity

The HR Executive needs to consider how to develop and exploit rare characteristics of a firm’s
human resources to gain competitive advantage. Nordstrom is an interesting case, because it
operates in a highly competitive retail industry where you would usually expect a lower level of
skill and subsequently high labour turnover. Nordstrom, however, focused on individual
salespeople as a key source of its competitive advantage. It therefore invested in attracting and
retaining young collegeeducated people who desired a career in retailing.

To ensure horizontal integration, it also provided a highly incentive-based compensation system

(up to twice the industry average), and it encouraged employees to make a ‘heroic effort’ to
attend to customers’ needs. Thus, by investing in its human resources, and ensuring an integrated
approach to development and reward, Nordstrom has taken a ‘relatively homogeneous labour
pool, and exploited the rare characteristics to gain a competitive advantage’ (Barney and Wright,
1998: 34).

 Inimitability

If an organisation’s human resources add value and are rare, they can provide competitive
advantage in the short term, but if other firms can imitate these characteristics, then over time
competitive advantage may be lost and replaced with competitive parity. The third element of the
VRIO framework requires Human Resources to develop and nurture characteristics that cannot
 be easily imitated by the organisation’s competitors. Barney and Wright (1998) recognise the
significance of ‘socially complex phenomena’ here, such as an organisation’s unique history and
culture, which can be used to identify nique practices and behaviours which enable organisations
to ‘leapfrog’ their competitors.

Alchian and Demsetz (1972) also identified the contribution of social complexity in providing
competitive advantage, in their work on the potential synergy that results from effective
teamwork. They found that this ensured a rare and difficult-to-copy commodity for two reasons:
firstly, it provided competitive advantage through its causal ambiguity, as the specific source of
the competitive advantage was difficult to identify; secondly, through its social complexity, as
synergy resulted as team members were involved in socially complex relationships that are not
transferable across organisations. So characteristics such as trust and good relationships become
firm-specific assets that provide value, are rare and are difficult for competitors to copy.

The extract above (Box 2.3) demonstrates the strength of inimitability: SW Airlines exemplifies
the role that socially complex phenomena, such as culture, can play in gaining competitive
advantage. Top management attribute the company’s success to its ‘personality’, a culture of
‘fun’ and ‘trust’, that empowers employees to do what it takes to meet the customers’ needs. This
is reinforced through an extensive selection process, and a culture of trust and empowerment
reinforced by the CEO. SW Airlines attributes its strong financial success to its ‘personality’,
which CEO Kelleher believes cannot be imitated by its competitors. So the human resources of
SW Airlines serve as a source of sustainable competitive advantage, because they create value,
are rare and are virtually impossible to imitate.

 Organisation

Finally, to ensure that the HR function can provide sustainable competitive advantage, the VRIO
framework suggests that organisations need to ensure that they are organized so that they can
capitalise on the above, adding value, rarity and inimitability. This implies a focus on horizontal
integration, or integrated, coherent systems of HR practices rather than individual practices, that
enable employees to reach their potential (Guest, 1987; Gratton et al., 1999; Wright and Snell,
1991; Wright et al., 1996).

This requires organisations to ensure that their policies and practices in the HR functional areas
are coordinated and coherent, and not contradictory. Adopting such a macro-view, however, is
relatively new to the field of SHRM, as ‘each of the various HRM functions have evolved in
isolation, with little coordination across the disciplines’ (Wright and McMahan, 1992). Thus
there is much best-practice literature focusing on the microperspective, for example on
identifying appropriate training systems, or conducting performance appraisals, or designing
selection systems.

Although this literature has now evolved and recognised the ‘strategic’ nature of the functional
areas, it has tended to focus on vertical integration at the expense of horizontal integration, thus
there is still limited development in the interplay between employee resourcing, employee
development, performance, reward and employee relations strategies. This discussion is explored
in more detail in the next section: best-practice SHRM.

So, to conclude on the VRIO framework, if there are aspects of human resources that do not
provide value, they can only be a source of competitive disadvantage and should be discarded;
aspects of the organisation’s human resources that provide value and are rare provide
competitive parity only; aspects that provide value, are rare but are easily copied provide
temporary competitive advantage, but in time are likely to be imitated and then only provide
parity.

So to achieve competitive advantage that is sustainable over time, the HR function needs to
ensure the organisation’s human resources provide value, are rare, are difficult to copy and that
there are appropriate HR systems and practices in place to capitalise on this. Mueller (1998), in
advocating the resource-based view of SHRM, argues that ‘the existing theorising in strategic
HRM needs to be complemented by an evolutionary perspective on the creation of human
resource competencies’.

He echoes Mintzberg’s concerns (1987) that an overly-rationalistic approach to strategy-making

tends to focus too much attention on past successes and failures, when what is really needed is a
level of strategic thinking that is radically different from the past. He identifies a lack of
theoretical and empirical evidence to justify the emphasis on rational, codified policies of HRM,
and reflects Bamberger and Phillips (1991) in describing human resource strategy as an
‘emergent pattern in a stream of human-resource related decisions occurring over time’.

Thus the strategic planning approach may be viewed by some as a ‘metaphor employed by senior
management to “legitimise emergent decisions and actions”’ (Gioia and Chittipeddi, 1991).
Unlike contingency and universalist theorists (Schuler and Jackson, 1987; Miles and Snow,
1978; Kochan and Barocci, 1985; Pfeffer, 1994, 1998; Huselid, 1995), Mueller is more wary of
the claimed relationship between strategic HRM and the overall financial performance of an
organisation. He recognises that enlightened best-practice HR activities do not automatically
translate into competitive superiority but rather require more complex and subtle conditions for
human resources to become ‘strategic assets’.

He defines these as ‘the social architecture’ or ‘social patterns’ within an organisation which
build up incrementally over time and are therefore difficult to copy. The focus on ‘social
architecture’ rather than culture is deliberate as it provides an emphasis on developing and
changing behaviours rather than values, which are notoriously difficult to change (Ogbonna,
1992). Mueller identifies an organisation’s ‘social architecture’ as a key element in the resource-
based view of SHRM, together with an embedded ‘persistent strategic intent’ on the part of
senior management and embedded learning in daily work routines, which enable the
development of ‘hidden reservoirs’ of skills and knowledge, which in turn can be exploited by
the organisation as ‘strategic assets’. The role of Human Resources is then to channel these
behaviours and skills so that the organisation can tap into these hidden reservoirs. This thinking
is reflected in the work of Hamel and Prahalad (1993, 1994), discussed below.
Applying the Resource-Based view of SHRM

In adopting a focus on the internal context of the business, HR issues and practices are core to
providing sustainable competitive advantage, as they focus on how organizations can define and
build core competencies or capabilities which are superior to those of their competitors. One key
framework here is the work of Hamel and Prahalad (1993, 1994) and their notion of ‘core
competencies’ in their ‘new strategy paradigm’. They argue that ‘for most companies, the
emphasis on competing in the present, means that too much management energy is devoted to
preserving the past and not enough to creating the future’.

Thus it is organisations that focus on identifying and developing their core competencies that are
more likely to be able to stay ahead of their competitors. The key point here is not to anticipate
the future, but create it, by not only focusing on organisational transformation and competing for
market share, but also regenerating strategies and competing for opportunity share. Thus in
creating the future, strategy is not only seen as learning, positioning and planning but also
forgetting, foresight and strategic architecture, where strategy goes beyond achieving ‘fit’ and
resource allocation to achieving ‘stretch’ and resource ‘leverage’.

The level of both tacit and explicit knowledge within the firm, coupled with the ability of
employees to learn, becomes crucial. Indeed, Boxall and Purcell (2003) argue that there is little
point in making a distinction between the resource-based view and the knowledge-based view of
the firm, as both approaches advocate that it is a firm’s ability to learn faster than its competitors
that leads to sustainable competitive advantage.Alternatively, Boxall and Purcell present
Leonard’s (1998) similar analysis based on ‘capabilities’.

These are ‘knowledge sets’ consisting of four dimensions: employee skills and knowledge,
technical systems, managerial systems, and values and norms. In this model, employee
development and incentive systems become a key driving force in achieving sustainable
competitive advantage through core capability. Interestingly, Leonard emphasises the
interlocking, systemic nature of these dimensions and warns organisations of the need to build in
opportunities for renewal, to avoid stagnation.

Hamel and Prahalad’s notion of ‘core competency’

When organisations grow through mergers or acquisitions, as they appear increasingly to do

(Hubbard, 1999), it has been argued that the resource-based view takes on further significance.
When mergers and acquisitions fail, it is often not at the planning stage but at the implementation
stage (Hunt et al., 1987) and people and employee issues have been noted as the cause of one-
third of such failures in one survey (Marks and Mirvis, 1982). Thus ‘human factors’ have been
identified as crucial to successful mergers and acquisitions.

The work of Hamel and Prahalad (1994) indicated that CEOs and directors of multidivisional
firms should be encouraged to identify clusters of ‘know-how’ in their organisations which
‘transcend the artificial divisions of Strategic Business Units’ or at least have the potential to do
so. Thus the role of Human Resources shifts to a ‘strategic’ focus on ‘managing capability’ and
‘know-how’, and ensuring that organisations retain both tacit and explicit knowledge (Nonaka
and Takeuchi, 1995) in order to become more innovative, as organisations move to knowledge-
based strategies as opposed to product-based ones.

The resource-based view of SHRM has recognised that both human capital and organizational
processes can add value to an organisation; however, they are likely to be more powerful when
they mutually reinforce and support one another. The role of Human Resources in ensuring that
exceptional value is achieved and in assisting organisations to build competitive advantage lies
in their ability to implement an integrated and mutually reinforcing HR system which ensures
that talent, once recruited, is developed, rewarded and managed in order to reach their full
potential.

This theme of horizontal integration or achieving congruence between HR policies and practices
is developed further in the next section, best-practice approach to SHRM.

Limitations of the Resource-Based view

The resource-based view is not without its critics, however, particularly in relation to its strong
focus on the internal context of the business. Some writers have suggested that the effectiveness
of the resource-based view approach is inextricably linked to the external context of the firm
(Miller and Shamsie, 1996; Porter, 1991). They have recognized that the resource-based view
approach provides more added value when the external environment is less predictable.

Other writers have noted the tendency for advocates of the resource-based view to focus on
differences between firms in the same sector, as sources of sustainable competitive advantage.
This sometimes ignores the value and significance of common ‘base-line’ or ‘table stake’
(Hamel and Prahalad, 1994) characteristics across industries, which account for their legitimacy
in that particular industry. Thus in the retail sector, there are strong similarities in how the
industry employs a mix of core and peripheral labour, with the periphery tending to be made up
of relatively low-skilled employees, who traditionally demonstrate higher rates of employee
turnover.

Thus in reality, economic performance and efficiency tend to be delivered through rightsizing,
by gaining the same output from fewer and cheaper resources, rather than through leverage, by
achieving more output from given resources. The example of B&Q in the UK, employing more
mature people as both their core and particularly their peripheral workforce, is a good example of
how an organisation can partially differentiate themselves from their competitors, by focusing on
adding value through the knowledge and skills of their human resources.

Staffing: Concept, Nature and Importance of Staffing

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 Staffing

The managerial function of staffing involves manning the organization structure

through proper and effective selection, appraisal and development of the personnel’s to
fill the roles assigned to the employers/workforce.

According to Theo Haimann, “Staffing pertains to recruitment, selection, development

and compensation of subordinates.”

CONCEPTS:

1. Staffing is an important managerial function-Staffing function is the most important

managerial act along with planning, organizing, directing and controlling. The operations of
these four functions depend upon the manpower which is available through staffing
function.
2. Staffing is a pervasive activity- As staffing function is carried out by all mangers and
in all types of concerns where business activities are carried out.
3. Staffing is a continuous activity- This is because staffing function continues
throughout the life of an organization due to the transfers and promotions that take place.
4. The basis of staffing function is efficient management of personnel’s- Human
resources can be efficiently managed by a system or proper procedure, that is, recruitment,
selection, placement, training and development, providing remuneration, etc.
5. Staffing helps in placing right men at the right job- It can be done effectively
through proper recruitment procedures and then finally selecting the most suitable
candidate as per the job requirements.
6. Staffing is performed by all managersdepending upon the nature of business, size
of the company, qualifications and skills of managers, etc. In small companies, the top
management generally performs this function. In medium and small scale enterprise, it is
performed especially by the personnel department of that concern.

Nature of Staffing

Staffing is an integral part of human resource management. It facilitates procurement

and placement of right people on the right jobs.

The nature of staffing function is discussed below:

(i)  People Centred

Staffing is people centred and is relevant in all types of organizations. It is concerned

with all categories of personnel from top to bottom of the organization.
(ii) Responsibility of Every Manager

Staffing is a basic function of management. Every manager is continuously engaged in

performing the staffing function. He is actively associated with recruitment, selection,
training and appraisal of his subordinates. These activities are performed by the chief
executive, departmental managers and foremen in relation to their subordinates. Thus,
staffing is a pervasive function of management and is performed by the managers at all
levels.

It is the duty of every manager to perform the staffing activities such as selection,
training, performance appraisal and counseling of employees. In many enterprises.
Personnel Department is created to perform these activities.

But it does not mean that the managers at different levels are relieved of the
responsibility concerned with staffing. The Personnel Department is established to
provide assistance to the managers in performing their staffing function. Thus, every
manager has to share the responsibility of staffing.

(iii) Human Skills

Staffing function is concerned with training and development of human resources.

Every manager should use human relations skill in providing guidance and training to
the subordinates. Human relations skills are also required in performance appraisal,
transfer and promotion of subordinates. If the staffing function is performed properly,
the human relations in the organization will be cordial.

(iv) Continuous Function

Staffing function is to be performed continuously. It is equally important in the

established organizations and the new organizations. In a new organization, there has
to be recruitment, selection and training of personnel. In a running organization, every
manager is engaged in various staffing activities. He is to guide and train the workers
and also evaluate their performance on a continuous basis.

Importance of Staffing

It is most importance for the organization that right kinds of people are employed. They
should be given adequate training so that wastage is minimum. They must also be
induced to show higher productivity and quality by offering them incentives.
 In fact, effective performance of the staff function is necessary to realize the following
benefits:

1. Efficient Performance of Other Functions

Staffing is the key to the efficient performance of other functions of management. If an

organization does not have competent personnel, it can’t perform planning, organization
and control functions properly.

2. Effective Use of Technology and Other Resources

It is the human factor that is instrumental in the effective utilization of latest technology,
capital, material, etc. the management can ensure right kinds of personnel by
performing the staffing function.

3. Optimum Utilization of Human Resources

The wage bill of big concerns is quite high. They also spend money on recruitment,
selection, training and development of employees. In order to get the optimum output
from the personnel, the staffing function should be performed in an efficient manner.

4. Development of Human Capital

The management is required to determine the manpower requirements well in advance.

It has also to train and develop the existing personnel for career advancement. This will
meet the requirements of the company in future.

5. Motivation of Human Resources

The behaviour of individuals is shaped by many factors such as education level, needs,
socio-cultural factors, etc. that is why, the human aspect of organization has become
very important. The workers can be motivated through financial and non-financial
incentives.

6. Building Higher Morale

Right type of climate should be created for the workers to contribute to the achievement
of the organizational objectives. By performing the staffing function effectively,
management can show the significance it attaches to the personnel working in the
enterprise. This will increase the morale of the employees.
Training and Development
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At the enterprise level, employee training and development are main areas of human resource
development. The efficiency of an organisation depends directly on the capability and talent of
its personnel, and how motivated they are. Capability of a person depends on his ability to work
and the  type of training  he receives. While his personal capability is evaluated through proper
selection procedure, his training is taken care of by the organisation after he has been employed
by the organisation. After employee have been selected for various positions in an   organisation,
training them   for those specific tasks to which they have been assigned assumes great
importance.  It is true in many organisations that before an employee is fitted into a harmonious 
working relationship  with other  employees, he is given adequate training. Training is the act of
increasing the     knowledge and skills of an  employee for performing a particular job. The
major outcome of training  is learning.  A trainee  learn  new habits, refined skills and useful
knowledge during  the  training  that  helps him improve performance.  Training  enables an 
employee to do his present job more efficiently and prepare himself for a higher level job.

Training, Education, Learning and Development

Training

Training is  an  act  of  increasing knowledge, skill and  attitude of  an employee for improving
his performance on the job.

Training   is concerned with imparting specific skill for doing particular job. For example, a clerk
on typing. It is task-oriented activity. It is for job related purpose and short-term.

Education

Education is   concerned  with   increasing  general   knowledge  and understanding  of  an 
employee’s total  environment. Education is directed more towards the future of an individual .It
prepares him for future challenges of life,shapes his career and grooms him for social
responsibilities.

Learning

Learning is the process of accumulation of knowledge,skills and attitudes by whatever means.

Learning   is a broad one which includes both training and education. Learning is observable
modification of behaviour as a result of some experience. Learning may be through experience,
reading, observation, discussions, electronic media including internet,  experimentation,  facing
the new challenges, travel and exploration, etc.

Development
 Development  has a broader  meaning.  Its aim is to grow  or improve  the overall  personality  of
an  individual.   It is continuous   process  and  is on  the initiative  from  individual.  
Development  is  to  meet  an   individual’s   future needs.  Efforts  tow ards  development  
often  depend   on  personal   drive  and ambition.   It   helps   individual’s    in   the   progress   
towards    maturity    and actualisation  of  their  potential  capacities.  Development    is   whole  
process   by   which   employee   learns, grows, improves  his  abilities   to  perform   variety   of 
roles  within   and  outside   the organisation.  He  acquires  socially  desirable  attitudes and
values.

Difference between Training and Development

Training Development

Short term process. Long term process.

Knowledge and skills for a specific

For overall development.
purpose.

Primary related to technical skills Related to managerial, behavioral and attitude

learning. development.

Training is a reactive process to meet

Development is a reactive to meet future needs.
current need.

From management management-

From individual himself-internal motivation.
external motivation.

Develops specific job related skills. Develops total personality.

Training is for non-managerial personnel. Development is for managerial personnel.

Need for Training

24. Employees selected for a job  might  lack  the qualifications  required to  perform    the  job  In 
some cases,   the past experience , attitudes   and   behaviour   patterns     of  experienced   personnel  
might        not be appropriate to  the  new  organisation.   Remedial  training    should   be  given  to  such
 people  to match,  the  needs   of the  organisation.   New  employees  need   to  provided orientation
training to make   them  familiar   with the job  and  the  organisation.
25. Rapid technological innovations impacting the workplace have made it necessary for people to
constantly update their knowledge and skills.
26. Training is necessary to preparing employees for higher-level jobs (promotion).
27. Existing employees require refresh training so as to keep abreast of the latest development in
job operations.  In the phase of rapid technological changes , this is an absolute necessity.
28. Training is necessary when a person moves from one job to another (transfer).
29. Training is necessary to make employees mobile and versatile. They can be placed on various
jobs depending on organizational needs.
30. Training is needed for employees to gain acceptance from peers.
31. Training is needed to make employees more productive and useful in the long run.

Types of Training

Training is required for several purposes. Accordingly, training programmes may be of the
following types:
1. Orientation Training
In orientation training, new hires get a first hand view of what the company stands for, how the
work is carried out and how to get along with colleagues. In short, they learn the specific ways of
doing things in proper manner. When a new employee is from different country and culture, this
initial training is important in helping new employees adjust in the company.

2. Job Training
It refers to the training provided with a view to increase the knowledge and skills of an employee
for improving performance on-the-Job. Employees may be taught the correct methods of
handling equipment and machines used in a job. Such training helps to reduce accidents, waste
and inefficiency in the performance of the job.

3. Safety Training

Training provided to minimize accidents and damage to machinery is known as safety training, It
involves giving instructions in the use of safety devices and in safety consciousness.

4. Promotional Training
It Involves training of existing employees to enable them to perform higher level jobs
.Employees with potential are selected and they are given training before their promotion, so that
they do not find it difficult to shoulder the higher responsibilities of the new positions to which
they are promoted.

5. Refresher Training

Rapid changes in technology may force companies to go in for this kind of training. When
existing techniques become obsolete due to the development of better techniques, employees
have to be trained in the use of new methods and techniques. By organizing short-term courses
which incorporate the latest developments in a particular field, the company may keep its
employees up-to-date and ready to take on emerging challenges. It is conducted at regular
intervals by taking the help of outside consultants who specialize in a particular descriptive.

6. Remedial Training
Such training is arranged to overcome the shortcomings in the behavior and performance of old
employees. Some of the experienced employees might have picked up appropriate methods and
styles of working. Such employees are identified and correct work methods and procedures are
taught to them. Remedial training should be conducted by psychological experts.

Steps to Identify Training Needs

All training activities must be related to the specific needs of the organization and the individual
employees. A training programme should be launched only after the training needs are assessed
clearly and specifically. The effectiveness of a training programme can be judged only with the
help of training needs identified in advance. In order to identify training needs, the gap between
the existing and required levels of knowledge, skills performance and aptitudes should be
specified. The problem areas that can be resolved through training should also be identified.
Training need can be identified through the following types of analysis :

i.Analysis of objectives
This is the study of short term and long term objectives and the strategies followed at various
levels to meet these objectives.

ii.Resource utilization
How the various organizational resources (human,physical and financial) are put to use is the
main focus of this study. The contributions of various departments are also examined by
establishing efficiency indices for each unit. This is done to find out comparative labour costs,
whether a unit is undermanned or over-manned.

iii.Environmental scanning
Here the economic, political, socio cultural and technological environment of the organization is
examined.

iv.Organisational climate analysis

The climate of an organization speaks about the attitudes of members towards work, company
policies, supervisors, etc. Absenteeism, turnover ratios generally reflect the prevailing employee
attitudes. These can be used to find out whether training efforts have improved the overall climte
within the company or not.

2. Task or role analysis

It is a systemic and detailed analysts of jobs to identify job contents, the knowledge skills and
aptitudes required and the work behaviour. On the part of the job holder, particular attention
should be paid to the tasks to be performed, the methods to be used, the way employees have
learnt these methods and the performance standards required of employees. Also called
operations analysis, the purpose is to decide what should be taught. Questionnaire, interviews
human resource records, reports, tests, observation and other methods can be used to collect
information about jobs in the organisation.

3. Manpower Analysis
Here the focus is on the individual in a given job. There are three issues to be resolved :
i.It is necessary to decide whether performance of individual is sub-standard and training is
required.
ii.Whether the employees is capable of being trained .
iii.Whether poor performers on the job need to be replaced by those who can do the job.

Other options to training such as modifications in the job or processes should be looked into.
Personal observation, performance reviews, supervisory reports, diagnostic tests help in
collecting the required information and select particular training options that try to improve the
performance of individual workers.

Strategic Options of Human Resource Development

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Developing your small business’s human resources strategies and tactics can seem an especially
daunting task. In many smaller organizations, the HR function is handled by the business owner
or by a senior manager without the support of a large team of professionals. There are a number
of tried and trued human resource development strategies that can enable your business to
manage its most valuable resource its people without overwhelming your time or energy.

Recruitment and Hiring

The recruitment and hiring of employees is often seen as one of the necessary evils of running a
business. The hiring process can take valuable time away from other important tasks, and
training new employees is an intense process. Nonetheless, the recruitment tactic an organization
adopts can be of utmost importance in setting its long-term growth and productivity strategy.
This is because hiring the right employees for the right jobs makes the business’s operations run
more smoothly and effectively over time. The key to recruitment is in determining exactly where
your business has needs. Do you need a specialist IT person? If so, don’t hire someone with
expertise in marketing to fill this position. Do you need a generalist who can take on a number of
different tasks? Then look for someone who’s managed projects or has experience working in a
fast-paced environment.

Training

Once you’ve hired employees, training them to do the work as your business requires it to be
done is an important tactic in human resource development. While all organizations ideally want
to hire skilled people to fill open positions, almost all employees need some level of on-the-job
training. Your business might have particular ways of processing invoices, or it might have its
own systems for information technology. These particular policies and procedures have to be
communicated to new employees, and current employees have to be periodically retrained on
key areas. This is important for any company’s long-term strategy of efficiency and growth.
Employees who work smartly and on the same page eliminate waste and save the organization
money.

Benefits and Compensation

Providing benefits and compensation goes without saying for the HR function. However, there
are novel tactics and strategies that your organization can think about initiating to help it attract
the very best employees. Offering work-life balance programs such as flexible working hours,
paternity leave, work-at-home options and extended holiday time for good performance are all
ways to reward your employees above and beyond the traditional model of pay-for-service HR.
These innovative strategies help keep your employees engaged and it helps them feel like they
are valued by the business.

Evaluation and Professional Development

Evaluating employee performance is a final key strategy for human resource development. Some
organizations institute annual evaluation procedures while other businesses only evaluate
employees when something seems to be going wrong. However, regular evaluation of your
workforce can help to spot areas where additional training is needed or where rewards and
benefits can be levied. It also gives the business owner or manager an opportunity to offer
professional development programs to its employees. Professional development includes any
training or further education plan that isn’t normally available to employees as part of their on-
site training. Sending employees to conferences or networking events, staff retreats and tuition
reimbursement are forms of professional development. They train your employees to sharpen
their skills, which they will ultimately use to contribute back into your organization.

SHRM: Definition, Need and Importance

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Strategic human resource management or SHRM is a branch of HRM. It emerged from

the discipline of human resource management and is a fairly new field. Strategic HRM is
defined as “the linking of human resources with strategic goals and objectives in order
to improve business performance and develop organizational culture that foster
innovation and competitive advantage.” SHRM in an organization means “to accept and
involve the functions of HR as a strategic partner in formulating and implementing the
company’s strategies through human resource activities which may involve recruiting,
selecting, rewarding and training company personnel. In spite of the similarity in names,
HRM and SHRM are two different practices; SHRM is basically a part of the complete
HRM process. Besides that SHRM focuses more on long-term objectives rather than the
 in-house objectives with employees dealt by HRM. In the late 1980’s writers started
stating strong opinions for a much more strategic approach to managing people than
was the standard practice of that time. They clamored for the change of traditional
management practices of industrial relations and people to the modern more improved
ones.

The center point of SHRM is to address and solve problems that effect management
programs centering on people in the long run and more than often globally. We can say
that the main goal or objective of SHRM is to increase productivity not only in the
employees but in the business overall, it achieves this by focusing on business
problems and obstacles outside of the human resources range. SHRM identifies
important human resource areas where strategies can be implied for the improvement
of productivity and employee motivation. To achieve good results communication
between human resource and top management of the organization is of utmost
importance as cooperation is not possible without active participation.

KEY FEATURES OF SHRM

The key features of strategic human resource management are given below:

32. Some organizing strategies or schemes link individual human resource interventions so that
they are ‘mutually supportive’
33. A great amount of responsibility is transferred down the line for the management of HR
34. There is a precise link between overall organization strategy, organization environment, HR
policies and practices.

DEVELOPMENT IN SHRM

In recent times HRM professionals have been facing challenges with employee
participation, performance management, employee reward systems, high commitment
work systems and human resource flow because of globalization. Traditional models
and techniques have no place in today’s business world; also local companies which go
global cannot use the same tactics in the global business world. Top managements and
HR professionals that are involved in strategic human resource management face a
wide range of issues which include some of the following:

 Rapid change in technology

 Introduction of new concepts of general management
 Globalization of market integration
 Increased competition, which may not necessarily be local
 Resultant corporate climates
 Constantly changing ownership

Process of Strategic Management

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The strategic management process means defining the organization’s strategy. It is also defined
as the process by which managers make a choice of a set of strategies for the organization that
will enable it to achieve better performance.

Strategic management is a continuous process that appraises the business and industries in which
the organization is involved; appraises it’s competitors; and fixes goals to meet all the present
and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

35. Environmental Scanning: Environmental scanning refers to a process of collecting, scrutinizing

and providing information for strategic purposes. It helps in analyzing the internal and external factors
influencing an organization. After executing the environmental analysis process, management should
evaluate it on a continuous basis and strive to improve it.
36. Strategy Formulation: Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After conducting
environment scanning, managers formulate corporate, business and functional strategies.
37. Strategy Implementation: Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation includes
designing the organization’s structure, distributing resources, developing decision making process, and
managing human resources.
38. Strategy Evaluation: Strategy evaluation is the final step of strategy management process. The
key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes
sure that the organizational strategy as well as it’s implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new
strategic management plan. Present businesses that have already created a strategic management
plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

 Strategic management is an ongoing process. Therefore, it must be realized that each component
interacts with the other components and that this interaction often happens in chorus.

Compensation
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Compensation is a systematic approach to providing monetary value to employees in exchange

for work performed. Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction.

Compensation is a tool used by management for a variety of purposes to further the existance of
the company. Compensation may be adjusted according the the business needs, goals, and
available resources.

Compensation may be used to:

39. Recruit and retain qualified employees.

40. Increase or maintain morale/satisfaction.
41. Reward and encourage peak performance.
42. Achieve internal and external equity.
43. Reduce turnover and encourage company loyalty.
44. Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many employers.
To some extent, the availability and cost of qualified applicants for open positions is determined
by market factors beyond the control of the employer. While an employer may set compensation
levels for new hires and advertize those salary ranges, it does so in the context of other
employers seeking to hire from the same applicant pool.

Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that
must be reached between the monetary value the employer is willing to pay and the sentiments of
worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or
salary levels at the expence of satisfaction and morale. Conversely, an employer wishing to
reduce employee turnover may seek to increase salaries and salary levels.

Compensation may also be used as a reward for exceptional job performance. Examples of such
plans include: bonuses, commissions, stock, profit sharing, gain sharing.

Components of a compensation system

Compensation will be perceived by employees as fair if based on systematic components.

Various compensation systems have developed to determine the value of positions. These
 systems utilize many similar components including job descriptions, salary ranges/structures, and
written procedures.

The components of a compensation system include

 Job Descriptions A critical component of both compensation and selection systems, job
descriptions define in writing the responsibilities, requirements, functions, duties, location,
environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually
or for entire job families.
 Job Analysis The process of analyzing jobs from which job descriptions are developed. Job
analysis techniques include the use of interviews, questionnaires, and observation.
 Job Evaluation A system for comparing jobs for the purpose of determining appropriate
compensation levels for individual jobs or job elements. There are four main techniques: Ranking,
Classification, Factor Comparison, and Point Method.
 Pay Structures Useful for standardizing compensation practices. Most pay structures include
several grades with each grade containing a minimum salary/wage and either step increments or grade
range. Step increments are common with union positions where the pay for each job is pre-determined
through collective bargaining.
 Salary Surveys Collections of salary and market data. May include average salaries, inflation
indicators, cost of living indicators, salary budget averages. Companies may purchase results of surveys
conducted by survey vendors or may conduct their own salary surveys. When purchasing the results of
salary surveys conducted by other vendors, note that surveys may be conducted within a specific
industry or across industries as well as within one geographical region or across different geographical
regions. Know which industry or geographic location the salary results pertain to before comparing the
results to your company.
 Policies and Regulations

Types of compensation

Different types of compensation include:

22. Base Pay

23. Commissions
24. Overtime Pay
25. Bonuses, Profit Sharing, Merit Pay
26. Stock Options
27. Travel/Meal/Housing Allowance
28. Benefits including: dental, insurance, medical, vacation, leaves, retirement, taxes.

Employee Separation
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 The termination of employees from membership of the organization is referred as employee
separation. The rate at which employees leave the organization is measured by the rate of
employee separation.

The Costs of Employee Separation

The employee separation is always resulted in some costs. The intensity of the incurring costs
varies on the basis of the decision of the management that either the empty position of separated
employee is replaced by a new employee or the position may be eliminated permanently.
Following are the costs that are linked with the employee separation.

45. Recruitment Costs

46. Selection Costs
47. Training Costs
48. Separation Costs

Benefits of Employee Separation

On one hand there are costs attached with the employee separation, but on the other hand there
are some resulting benefits too. Following are some of the Employee Benefits that are associated
with the employee separation.

 The labor cost is reduced

 The employees who perform poorly, are replaced
 The innovation is increased in the organization
 The diversity is enhanced in the organization

Types of Employee Separation

There are two main types of employee separations on the basis of the initiation of the
employment relationship termination. These two types of employee separations are as follow.

29. Voluntary Separation

When an employee terminates the employment relationship, then this form of employee
separation is known as voluntary separation. Voluntary separation is further divided into two
categories.

 Quits
 Retirements

 Involuntary Separation
 When employer of an organization ends the employment relationship with any employee, then
this employee separation is called involuntary separation. There may be a number of reasons for
involuntary separations like the employee does not fit with the requirements of a particular job or
due to economic necessity. Involuntary separation is further divided into the following
categories.

 Discharges
 Layoffs
 Rightsizing or downsizing

HR Strategy
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A Human Resource strategy is a business’s overall plan for managing its human capital to align
it with its business activities. The Human Resource strategy sets the direction for all the key
areas of HR, including hiring, performance appraisal, development, and compensation.

The HR strategy is thus a long-term plan that dictates HR practices throughout the organization.

An HR strategy has a set of characteristics:

49. It requires an analysis of the organization and the external environment

50. It takes longer than one year to implement
51. It shapes the character and direction of Human Resources Management activities
52. Helps in the deployment and allocation of organizational resources (i.e. money, time, personnel)
53. Is revised on a yearly basis
54. It incorporates the expert judgment of senior (HR) management
55. It is number-driven
56. It results in a specific behavior

A very useful model here is the standard causal model of HRM, one of the key HR models. This
model shows where HR strategy originates from and how it influences HR execution and
business performance.

The model shows that the HR strategy is a result of the broader (business) strategy. It shows that
HR activities create value when they are aligned with what the organization tries to achieve.
When there is alignment (fit) between the two, HR will contribute to the performance of the
organization.

The overall business strategy is formulated based on the past and the present. It is a result of
what the company has been doing in the past and its current internal capabilities. An often used
tool to arrive at this strategy is the SWOT analysis.
In the SWOT analysis, the organization’s internal Strength and Weaknesses, and its external
Threats and Opportunities are mapped. Strengths include the company’s core know-how and
know-what. These are its production capacity, existing brand, marketing channels, sales
capabilities, R&D expertise, and other human capital factors.

SWOT Analysis

The company’s strategy leverages its Strengths to capitalize on the Opportunities in the market.
At the same time, it tries to circumvent Threats and minimize the impact of Weaknesses.
 The result of this strategy-setting is the company’s value proposition. For example, the value
proposition of Walmart, a discount retailer, is “every day low prices”. This explains a number of
internal HR practices, especially the ones related to worker compensation.

The HR strategy is based on the organizational strategy. The HR strategy touches on all the key
areas in HR. These include recruitment, learning & development, performance appraisal,
compensation, and succession planning.

An example of an HR strategy is an HR mission statement and HR vision, with concrete, high-

level actions about how to execute on this mission and vision

Components of Strategic HRM

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No matter the size of a business, the human resource department, even if just one person, is
tasked with caring for and managing a company’s most important resource – its people. The
department’s daily workload might include recruiting talent, hiring workers, onboarding new
hires, managing payroll and benefits, along with many other personnel tasks. As a means of
improving efficiency and streamlining duties, many HR departments utilize human resource
management systems (HRMS). These clusters of software solutions allow HR departments to
automate routine tasks and free up time for staff members to focus on areas that require more
personalized attention.

Serve Core HR Functions

The most basic component of a HRMS serves the core HR needs – such as payroll, benefits and
workforce management – made up of activities and processes for managing large numbers of
hourly employees. It can involve programs that handle tasks such as:

57. Scheduling shifts

58. Recording attendance
59. Tracking absences and sick days
60. Clocking time worked

Some programs can also differentiate between union and non-union workers or employees and
freelance workers, and make appropriate payroll calculations based on these distinctions.
Benefits and employee contributions can also be easily tracked. All of an employee’s vital
information is organized in one easy-to-access file that is managed much more efficiently by the
HRMS than by manual processes.

Facilitate Talent Management

Other types of programs are designed to help HR departments manage their talent, or the actual
employees within the company. This can cover a broad range of tasks including:
 Processes for recruiting new staff
 Onboarding
 Orientation
 Performance management and evaluation
 Training and professional development

In some cases, a system may allow an HR representative to create a job posting online, view
incoming applications and track candidates through the hiring process.

Increasingly, orientation materials such as filling out payroll information and other paperwork
are being relegated to online applications so HR staff are not required to be physically present to
handle some of the basics, freeing them to do other work. Once great employees are on board,
other components work to track performance metrics and provide professional development to
retain top performers.

Encourage Employee Engagement

Some HR departments may extend their HRMS tools by also utilizing social media and online
applications to engage their employees and stimulate interaction within the corporate
environment. Through these channels, employees can:

30. Collaborate on projects

31. Learn more about the corporate brand
32. Refer qualified friends for job openings
33. Respond to company surveys designed to measure job satisfaction
34. Make corporate announcements and policy updates

Meet Compliance Standards

Industries that operate in financial, health, insurance or public sector capacities are required to
follow specific regulations and are subject to reporting and compliance standards. An HRMS
component specifically designed to keep track of frequently changing regulations allows HR
departments to stay on top of the necessary record-keeping and reporting requirements.
Automated maintenance informs the HR department when background checks, licenses or
continuing educational requirements need to be updated and assures that the company is
operating in compliance.

Analyze Corporate HR Trends

Particularly in larger companies, analytics are increasingly important to upper level managers
and HR departments. Programs that track the effectiveness of HR initiatives and recruitment
methods help key executives pinpoint what works in attracting new talent to the company. They
can also compare salary levels within the industry and make adjustments if needed. Data that is
compiled from the fluctuating workforce also helps leaders gain a better understanding of
turnover trends, such as why employees move on to another company or how to improve worker
retention.

Organizational HR Strategies
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Organizational strategy is a plan for evolving a business over time. You might want your
company to be a leader in “green” technology in five years, or maybe you envision raising sales
by 20 percent during the next 24 months. Whatever your plans, you need employees to carry
them out and human resources leadership to prepare them for the task.

Profitability

Linking HR strategy to organizational strategy can be profitable. Towers Watson, a company

specializing in human capital, reports in the study “Watson Wyatt’s 2002 Human Capital Index”
that shareholders’ total returns were 64 percent over five years under progressive HR practices,
compared with total returns of 21 percent under weak HR practices. Using a progressive strategy,
HR can identify the skills your business wants employees to have and close existing skill gaps
through aggressive recruiting and training.

Obstructions

High turnover, excessive absenteeism, low productivity and overall employee dissatisfaction
disrupt your business operations. These obstructions not only raise your operating costs — hiring
and retraining replacement staff is especially expensive for small businesses — they also derail
organizational strategies. As your chief “employee problem-solver,” HR often conducts exit
interviews with departing employees to find out why they’re leaving and take corrective action,
or the company might make managers more responsible for keeping staff on board by tying their
pay to retention rates. To raise productivity and retention, HR can recommend such low-cost
incentives as flexible work schedules, performance awards or money-saving discounts from
retailers.

Staff Buy-in

Organizational strategy has a better chance of succeeding when employees understand and buy
in to your plan. HR is the liaison between management and staff. It can influence employees’
attitudes and behaviors towards your company and gain their support for your strategic plan. The
HR strategy that’s focused on developing staff loyalty, for example, can give your organizational
strategy the employee support needed to make your company a leader in green technology or
increase your product sales.

Workplace Mandates
When HR strategy is linked to organizational strategy, companies have the benefit of HR’s
expertise on workplace regulations and employment laws. HR is responsible for keeping
organizations in compliance with safety regulations, anti-discrimination laws and other state and
federal workplace requirements. When your organizational strategy conflicts with workplace
mandates, your business could be sued or fined. For instance, plans for a new manufacturing
process that significantly raises temperatures on the plant floor could violate Occupational
Health and Safety Administration standards.

Functional HR Strategies
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Business Management and Strategy

This is sometimes referred to as “the business of business.” It involves understanding

information from inside the organization, and from external sources such as market trends to
align the corporation’s human capital with its own needs. People involved in this area develop
strategies and actions to best utilize staff and management to meet the corporate response to the
information. They analyze data and develop programs that will initiate needed changes, and then
evaluate the results.

Workforce Planning and Employment

This area of Functional Human Resource Management deals with staffing. Your Business at
Arizona Central includes determining personnel needs as one of the duties of people in this area.
Once a need is identified, the manager must not only define the position, but decide where and
when to advertise openings. Recruitment involves screening applicants and conducting
interviews as well. Sometimes human resource workers will hire directly and other times they
simply narrow the applicant field for supervisors. Once staff people are hired, it becomes the
responsibility of the human resource department to develop strategies to retain the hiree.

Human Resource Development

This area is important because it benefits both worker and management. Development specialists
identify places where skill development is needed. This may be in “soft” areas such as customer
service and communications, or in technical skills such as computer or equipment operation.
Data indicates that when corporations invest in training staff, the employees are more satisfied,
and productivity increases. Development personnel may conduct the trainings themselves or
bring in trainers.

Total Rewards or Compensation

 This division of Functional Human Resource Management deals with one of the largest expenses
of a corporation. It includes direct compensation like wages and bonuses as well as indirect
compensation given as benefit packages. Human resource workers in this department work with
payroll processing, benefit enrollment and proper handling of insurance claims. Their goal is to
meet employee needs at a cost-effective level.

Employee/Labor Relations

Workers in this arena must understand collective bargaining and compliance guidelines. Their
goal is to balance corporate and employee needs. This includes morale management such as
developing incentive and recognition programs. It also involves the implementation of
performance appraisal procedures and routine evaluations.

Risk Management

This area involves working within OSHA guidelines to provide a safe and ergonomic work
environment. Professionals in this arena develop safety policies and conduct safety audits of the
corporation to assure they are in compliance with state and federal mandates. They also provide
safety trainings and assist in accident reporting procedures.

As businesses expand, even go global, there will be increasing demand for professionals working
with divergent standards and laws to manage the “human capital” of the corporations. An
understanding of Functional Human Resource Management will allow students to select and
hone career paths.

Models of Strategic HRM

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The  defining   features of HRM   is popularly   known   as models.   These   models    provide   
analytical    framework for  studying   HRM.     They   provide    characterization   of HRM  
that  establishes   variables   and  relationship    to  be researched. Four  most  common   models  
are :

61. The Fombrun   Model

62. The Harvard Model
63. The Guest  Model  and
64. The Warwick  Model

All these models serve the following purposes:

 They provide an analytical framework for studying HRM for example, situational factors,
stakeholders, strategic choice levels, competence etc.
 They validate certain HRM practices and provide distinctiveness to HRM practices.
 They provide a characterization of HRM that establishes variables and relationship to be
researched.
 They help to discover and understand the world for explaining the nature and significance of key
HR practices.

35. THE FOMBRUN MODEL

This   is  the  model of  HRM. It  emphasizes    four functions   of  management   and   their  
interrelatedness Selection,  Appraisal,   Development      and Rewards. This  model  is
incomplete as it  focuses  on  only  four  functions of HRM and  ignore all other  
environmental    and contingency    factors.  But, this model  is simple    and  can  serve  as a
heuristic  framework  for explaining   the  nature   and  significance   of HR activities.

 THE HARVARD MODEL

This    model    consists    six  critical  components of HRM   namely    stake holders interests,    
situational     factors,    HRM  policy choices,  HR  out  comes, long  term  consequences and a
feedback loop through.
 THE GUEST MODEL

This  model  was developed   by David Guest in 1997. This model emphasizes on the
assumption   that  HR manager has specific strategies to begin with, which demand certain
practices and when executed will result in outcomes. These  out  comes  include  behavioral  
performance    related   and  financial rewards. The model emphasizes the logical sequence of six
components : HR strategy, HR practices, HR outcomes, Behavioral outcomes, Performance
results and financial consequences.
 THE WARWICK MODEL

This model was developed by two researchers, Hendry and Pettigrew of University of Warwick
(hence the name Warwick model). Like other human resource management models, the Warwick
proposition centers around five elements-

7. Outer context (macro environmental forces)

8. Inner context (firm specific or micro environmental forces)
9. Business strategy content
10. HRM context
11. HRM content

The   strength    of  this   model   is  that   it  identifies   and classifies important environment
influences on HRM. This model takes cognizance of business strategy and HR practices, the
external and internal content, in which these activities take place and process by which such
changes take place including transactions between changes in both external content and internal
content.
 THE 5-P’S MODEL OF HRM

6. Philosophy: Expressed in statements defining business values and culture. It expresses how to

treat and value people.
7. Policies: Expressed as shared values and guidelines. Policies establish guidelines for action on
people related business issues and HR programs.
8. Programs: Articulated as human resource strategy. These coordinate efforts to facilitate change
to address major people related business issues.
9. Practices: For leadership managerial and operational role practices motivate needed role
behaviors.
Employee Engagement
THEINTACTFRONT8 FEB 20192 COMMENTS

Employee Engagement

Employee engagement is not the same as employee satisfaction

Employee Satisfaction only indicates how happy or content your employees are. It does not
address their level of motivation, involvement, or emotional commitment. For some employees,
being satisfied means collecting a paycheck while doing as little work as possible.

When organizations focus on how to improve employee satisfaction, changes won’t necessarily
lead to increased performance. Oftentimes, the conditions that make employees “satisfied” with
their jobs are the same conditions that frustrate high performing employees. Top performers
embrace change, search out ways to improve, and challenge the status quo. They expect all
employees be held accountable for delivering results, whereas low performers avoid
accountability, cling to the status quo, and resist change.

Employee engagement goes beyond activities, games, and events. Employee engagement drives

performance. Engaged employees look at the whole of the company and understand their
purpose, where, and how they fit in. This leads to better decision-making. Organizations with an
engaged workforce outperform their competition. They have a higher earning per share
(EPS) and recover more quickly after recessions and financial setbacks. Engagement is a key
differentiator when it comes to growth and innovation. To better understand the needs of your
organization, administering an employee engagement survey is key. This is not the same as a
satisfaction survey.

Moreover, expectations of employees have changed. Mobile professional careers are much more
common than “job for lifers”. Retention of top talent is more difficult than before. A company
that has an effective employee engagement strategy and a highly engaged workforce is more
likely to retain top performers as well as attract new talent. Successful organizations are value-
driven with employee-centric cultures.

How is employee engagement measured?

Measure what matters.

Employee engagement surveys have been developed specifically to measure the performance,
strategic alignment, competency and satisfaction of contributors. Engagement surveys must be
statistically validated and benchmarked against other organizations if they are going to provide
useful results. Without these things, it is difficult to know what you are measuring and whether
the results are good or bad.

Engagement can be accurately measured with short surveys that contain just a few questions, but
such short surveys can only provide an indication of whether employees are engaged. They have
a hard time explaining why employees are engaged or disengaged because they lack detail.
Without sufficient information, an organization cannot develop meaningful activities, training
programs, strategies, and initiatives to raise levels of engagement. 

In order to get a complete picture of employee engagement, a survey needs to include about 50 to
80 questions that cover a complete range of relevant topics. There should also be open ended
questions to further diagnose potential engagement problems in a company.

When should an organization measure employee engagement?

The best time to conduct an employee engagement survey is anytime. The timing of an
engagement survey will have an effect on survey results, but it is always a good time to have a
better understanding of how engaged your employees are.

Create a readiness assessment, communicate the reasons for doing the engagement survey,
communicate results, and take action on survey results. These actions give meaning to the
survey. Otherwise, a survey ends up being more of a waste of time and de-motivator.

Components of employee engagement

There are two primary factors that drive employee engagement. These factors are based on
statistical analysis and widely supported by industry research.

Engagement with The Organization measures

how engaged employees are with the Engagement with “My Manager” is a more
organization as a whole, and by extension, specific measure of how employees relate to
how they feel about senior management. This their direct supervisors. Topics include feeling
factor has to do with confidence in   valued, being treated fairly, receiving feedback
organizational leadership as well as trust, and direction, and generally, having a strong
fairness, values, and respect – i.e. how people working relationship between employee and
like to be treated by others, both at work and manager based on mutual respect.
outside of work.

The two Organization factors deal with how The two Manager factors look at whether

employees relate to and connect with the managers display the essential skills and
organization. behaviors needed to be effective.
Beyond the Two Core Engagement Factors

High performance organizations, and highly engaged employees, also excel in these areas:

Strategic Alignment: Do employees have clarity of purpose and direction? Do employees

understand how the work they do contributes to the organization’s success? Strategic Alignment
ensures that employees have clarity of purpose and direction, and that their efforts are focused in
the right direction. If those efforts are not focused in the right direction, they could be wasted. 

Managing Execution: The most effective managers excel at the people skills, but they also
provide clear expectations, hold people accountable, and stay focused on delivering results. 

Leader and Manager Competency is measured as part of the employee survey via upward
feedback.
For a more complete assessment of manager competency, we recommend using a 360 Degree
Feedback Survey.
 Who should be involved in employee engagement initiatives?

Research shows that many organizations struggle to bridge engagement survey results to its
financial impact on the organization. It is important to understand how engagement affects a
company’s bottom line.

A high-performing workforce is necessary to remain competitive, even survive. Developing

programs to raise levels of employee engagement must be intentional, have meaning, purpose
based on survey results.

HR can lead the charge to create an effective employee engagement strategy, but it needs to be
embraced by the entire organization. There is a clear gap between the optimism of upper
management and what middle managers experience with their teams. To understand the whole-
organization picture, it’s essential to have an effective, multi-directional communication strategy
in the organization. Effective communication is one of the most important factors that is most
likely to bring company success. Organizations that thrive are able to articulate and communicate
what success looks like – as individual employees, teams and departments, and the company as a
whole. This increases engagement organization-wide.

Ways of Achieving Employee engagement

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Four things are important when we talk about employee engagement; commitment, motivation,
loyalty and trust. Their level determines the quality of engagement of an employee. Each one is
briefly discussed in the coming paragraphs.

65. Commitment: Commitment means the degree to which individuals associate themselves with
the job, the responsibilities and the organisational objectives. Engaged employees are those who are
fascinated by their work and committed to face every challenge to attain their goals. They are
dependable and highly productive and therefore, are accountable for what they do.
66. Motivation: Up till recently it was believed that the biggest motivation is achievement. The
reverse is also true, which means achievement results in more motivation. If employees put in their 100
percent efforts to take their organisation to the next level, this attained status motivates them more
than anything. Proper rewards and recognitions can further motivate them to achieve more and more
for their organisation. Motivation and achievement go hand in hand and act as the burning fuels for the
success of any organisation.
67. Loyalty: Employees who are actively engaged in their work show more loyalty towards the
organisation. The best part is that they need less focus and attention of managers to perform their task
as they themselves feel accountable for their job responsibilities and results attained. However, it
doesn’t take much time for actively engaged employees to turn into disengaged employees if the
organisation doesn’t have a well established reward system. Recognition is a basic necessity of
individuals to remain steered up towards their job.
68. Trust: High levels of employee engagement can be fostered only when trust prevails in the
organisation from both the sides. As they share strong emotional bond with the organisation, the latter
should also show trust in their abilities. Employees must be given autonomy to perform their tasks their
way. They should not be restricted to a specific rules and regulations and therefore, should be
motivated to experiment to perform their task in a different and innovative manner.

Phases of Employee Engagement

 Attract
The first phase of the employee engagement cycle is attracting the best talent from the industry.
This phase involves creating a positive impression about the work culture and employee career
as a potential employer. It is all about carefully creating an authentic, genuine and crafted image
as an employer. This is although an indirect yet the first impression that attracts a big pool of
candidates to apply for the job vacancies in an organisation. The first phase is the most important
phase of the employee engagement cycle.

Another aspect spreading the reputation of an organisation is its employees. They are not only
the employees but also are regarded as internal customers. Their job and career satisfaction
speaks about their workplace. Therefore, they should not be taken for granted. Besides attracting
the talent from the outside, it is important to keep the existing employees attracted towards the
organisation.

36. Acquire
The acquire image involves more than one thing. It includes (1) the way the potential candidates
are interacted while advertising a position; (2) keeping the promises that were made while hiring
them and (3) providing the new joiners a right kind of work culture.

When an organisation advertises a position, interested candidates apply. The way their
applications are created, the reaction of the organisation and the manner in which they are
approached speak a lot about the image and work culture of an organisation.

Hiring the best talent not only serves the purpose. During their honeymoon or initial period with
the organisation, the company must try to keep all the promises that were made during the
selection process.

Besides this, they should feel happy and satisfied when their expectations are tested against the
reality. Providing the right kind of culture also plays an important role in keeping them engaged.

The whole idea is to prepare them to perform their best by giving them challenging tasks right
from the beginning. It’s like developing a habit or culture right from the time they decide to work
with the organisation.

 Advance
Continuous moving the talent is the last but an unending phase. It not only involves promoting
the employees to a higher designation along with salary increments but also growing them in
other tangible and intangible ways. Job rotation can help them grow in experience, responsibility
and belongingness but only when it is done right. Advancing the employees in every aspect, be it
monetary or non-monetary, is the key to retain people and develop their overall personality.

The 3 C’s of Employee Engagement

Career: When individuals join an organisation, they expect to build a career with it. If the top
management and immediate managers spend dedicated time in carving out the careers of its
employees, they will feel that they belong to the organisation. They feel engaged when they
receive support from the management in growing their careers.

An organisation can provide its employees with opportunities to grow professionally through job
rotations, indulging them in significant tasks, challenging assignments and promotions. They
should also be given a specific level of authority and autonomy to take their decisions on their
own. The organisations prepare an entirely new breed of employees if they genuinely invest in
developing the careers of their people.

Competence: Competence is all about the ability to grow. Regular workshops and training
sessions must be held in order to help employees acquire a higher level of skills and
competencies. The focus should be on developing for marketable skills. Most employees after
spending a few months look for competence-boosting opportunities with the organisation so that
they can grow and move to the next level of their careers. While the career focuses on the actual
growth in terms of designation, wages and perks and authority, competence is the ability to grow
utilizing the opportunities.

Care: Sitting at the topmost, care is regarded the finest art of the managers by which they can
make employees feel an indispensable part of their organisation. The managers need to be
empathetic and sensitive towards people and understand their personal problems. Showing small
day-to-day caring gestures towards employees make them feel that they belong to the
organisation and organisation belongs to them.

Process and outcomes of employee engagement

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This is the hardcore fact that the future business performance and revenues and profitability of an
organisation no longer depends upon traditional capital management and investment and
portfolio management. But the success of any organisation in this constantly changing world of
work depends upon human capital management. The companies who understood this fact long
before are the most successful and highly productive organisations of the currents times. Those
who have just realised it are still struggling to establish a reputation in the industry.

Since the mantra of success of any organisation is the higher involvement, engagement and
dedication of employees towards their jobs and their continuous performance to attain more, it is
 necessary to keep their spirits high, motivate them to perform their best always and generate a
breed of satisfied and dedicated employees. Employee Engagement is not a onetime process that
can quickly bring results; rather it is an ending process that will go on till the existence of an
organisation.

As it is an established fact that there is a clear link between organisational performance and
employee engagement, every organisation seeking sustenance and growth in the ever changing
world of work quickly respond to the needs of employees along with designing and
implementing a customised process to increase the levels of employee engagement. The
following are a few basic steps in this process based on the best industry practices.

69. Prepare and Design: The first step in the process is about discovering the specific requirements
of your organisation and deciding the priorities. After that a customised design of carrying the whole
process can be designed. It is recommended to seek advice of expert management consultant in order
to increase the chances of getting it done right at the first attempt.
70. Employee Engagement Survey: Design the questions of the employee engagement survey and
deploy it with the help of an appropriate media. It can be either in printed form or set online depending
upon the comfort level of the employees and your questionnaire evaluation process.
71. Result Analysis: It is the most important step in the entire process. It is time when reports are to
be analysed to find out what exactly motivates employees to perform their best and what actually
disengages them and finally compels them to leave the organisation. The results and information can
then be delivered through presentations.
72. Action Planning: ‘How to turn the results of the survey in to an action’ is a challenging question
that organisations need to deal with the utmost care. Coaching of line managers as well as HR
professionals is very important in order to tell them how to take appropriate actions to engage
employees. They should also be told about do’s and don’ts so that they can successfully implement the
changes.
73. Action Follow-up: Action follow up is necessary in order to find out if the action has been taken
in the right direction or not and if it is producing the desired results.

Cost of Disengaged Workforce

The findings of the Gallup Study of 2008 show that while the engaged employees believe they
can contribute to company’s growth, the disengaged employee believes otherwise, i.e. his job
does not contribute to the organization. This belief of the disengaged employee creates a
negative spiral that affects his work, co-workers, customers, productivity, and eventually both
happiness of employee and company performance. Some effects are illustrated below:

 Effect on Work: The disengaged employee tries to evade work, struggles to meet deadlines and
is reluctant to accept additional responsibility.
 Effect on Co-Workers: The negativity of a disengaged employee, demonstrated either through
raves and rants or complete withdrawal from participation, affects the team morale. After all who has
not heard of the proverb – one bad apple can spoil the whole bunch.
 Effect on Customers: Every employee, whether an organization likes it or not, becomes its
ambassador. And a disengaged employee either by actively de-selling the organization, or by complete
apathy towards their work, product, process, organization help create disengaged customers.
 Effects on Productivity: Disengaged employees seldom push themselves to meet organizational
goals let alone contribute to innovative practices at workplace. Since, they do not believe that their work
contributes to the organization; they evade completing tasks thereby affecting team productivity.
 Effect on Company Performance: In the corporate world, time is money and organizations must
innovate to stay relevant. A disengaged workforce by virtue of delayed completion of tasks and inability
to improvise and innovate cost the company dollars which ultimately affects bottom line. This has been
validated by a Gallup Study whose research showed that costs of disengaged workforce in the United
States was upwards of $300bn annually.
 Effect on Personal Life of Employee: A disengaged employee is seldom able to shake off the
lethargy and perform in the current organization or land a job of preference. This leads to pent up
frustration which may ultimately affect his personal and family life.

Benefits of an Engaged Workforce

An engaged workforce form an emotional connect with the organization that helps them

37. Go the Extra Mile to Achieve Individual and Company Success

38. Innovate at Workplace
39. Attract customers and employees
40. Become Evangelists of the company, its product and processes
41. Infuse energy and positivity at workplace.
 Knowledge Management
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Knowledge management is the systematic management of an organization’s knowledge assets

for the purpose of creating value and meeting tactical & strategic requirements; it consists of the
initiatives, processes, strategies, and systems that sustain and enhance the storage, assessment,
sharing, refinement, and creation of knowledge.

The full scope of knowledge management (KM) is not something that is universally accepted.
However, before one looks at the differences in the definitions, let’s the similarities.

KM is about making the right knowledge available to the right people. It is about making sure
that an organization can learn, and that it will be able to retrieve and use its knowledge assets in
current applications as they are needed. In the words of Peter Drucker it is “the coordination and
exploitation of organizational knowledge resources, in order to create benefit and competitive
advantage” (Drucker 1999).

Where the disagreement sometimes occurs is in conjunction with the creation of new knowledge.
Wellman (2009) limits the scope of KM to lessons learned and the techniques employed for the
management of what is already known. He argues that knowledge creation is often perceived as a
separate discipline and generally falls under innovation management.

Bukowitz and Williams (1999) link KM directly to tactical and strategic requirements. Its focus
is on the use and enhancement of knowledge based assets to enable the firm to respond to these
issues. According to this view, the answer to the question “what is knowledge management”
would be significantly broader.

A similarly broad definition is presented by Davenport & Prusak (2000), which states that KM
“is managing the corporation’s knowledge through a systematically and organizationally
specified process for acquiring, organizing, sustaining, applying, sharing and renewing both
the tacit and explicit knowledge of employees to enhance organizational performance and create
value.”

Under the initiative referred to as “act“, the integrated model outlines a series of knowledge
management processes. They will be used as headings for the subsections presented here, and
can be accessed through the menu on the left. These are:

74. Knowledge Discovery & Detection

75. Knowledge Organization & Assessment
76. Knowledge Sharing
77. Knowledge Reuse
78. Knowledge Creation
79. Knowledge Acquisition
 These form the backbone of knowledge management processes as they outline all aspects
involved in the actual management of knowledge.

While the knowledge management processes section dealt with the general ways knowledge can
be managed, this section tackles long-term knowledge management strategy. Strategic
investments represent the company’s choices/options so as to enable and enhance the processes
outlined earlier (e.g. knowledge sharing) and to offer help define which knowledge is relevant
(i.e. in line with strategic objectives) and which is not.

This section is based on the strategic part of the integrated knowledge management model, which
includes:

 Knowledge management strategic initiatives:

 Invest: Support of existing structures, competencies, knowledge retention mechanisms, culture,
external network, and knowledge management systems
 Invest: Implement changes to structures, competencies, knowledge retention mechanisms,
culture, external network, and knowledge management systems
 Divest: Remove obsolete knowledge

The articles that follow are based solely on the points under “invest“. Based on that we arrive at
the following headings:

42. KM and Organizational Structures

43. KM and Organizational Culture
44. KM and Knowledge Retention
45. KM and Core Competencies
46. KM and External Knowledge Network
47. KM and Knowledge Management Systems
48. Summary: Knowledge Management Best Practices

Building Knowledge Management into Strategic

framework
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KM strategy is a plan that describes how an organization will manage its information and
knowledge better for the benefit of that organization and its stakeholders. A good IKM strategy
is closely aligned with the organization’s overall strategy and objectives.

A good, clear KM strategy can help to:

80. Increase awareness and understanding of KM in your organisation

81. Articulate the business case and identify potential benefits
82. Gain senior management commitment
83. attract resources for implementation
84. Communicate good KM practice
85. Give a clear, communicable plan about where you are now, where you want to go, and how to
plan to get there
86. Give you a basis against which to measure your progress,

There are many ways to approach the development of a KM strategy, as well as many ways of
presenting the strategy document itself. There is no ‘one size fits all’. Larger organizations will
probably need a detailed, formal strategy document whereas for a smaller organization
something briefer and less formal might be more appropriate.
Knowledge Sharing as a Core Competency
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The knowledge management definition presented earlier, involved the reuse and creation of
relevant knowledge. The word relevant links knowledge management (KM) to the concept of
organizational core competencies. Once again, the challenge here is to discuss this subject
without diverging too much into related topics that are not directly relevant to KM.

Core competencies: Definitions vary greatly. The term was originally coined by Pralahad and
Hamel (1990) who defined it as “the collective learning of the organization, especially how to
coordinate different production skills and integrate multiple streams of technologies”. Since then
it has been defined in multiple ways, but very generally, core competencies refer to the firm’s
primary expertise, which is a source of sustained competitive advantage. Arriving at a more
precise definition is not necessary for our purpose here. Suffice it to say, that these are key
capabilities, which, from the resource-based perspective of the firm, are the primary drivers of
innovation and competitive advantage.
 Core competencies thus have a large knowledge component, and managing them is, in the very
least, a product of corporate strategy working with KM and innovation management. This
simplified model has strategy dictating the overall direction, KM managing the knowledge
dynamics, and innovation management turning core competencies into profitable core products.
To understand the role of KM let us look at a brief overview of how core competencies are
managed:

87. Identifying and assessing core competencies

The firm should map out its key competencies, possibly linking them directly to specific core
products. Then, an evaluation must take place, assessing what one has vs. what one needs to have
(as determined by strategy and the competitive environment). KM is responsible for identifying
where the key knowledge is located, including the tacit expertise and knowledge embedded in
products, routines, etc, as well as identifying knowledge gaps.

 Sustaining core competencies

Organizational core competencies, like all knowledge assets, have the virtue of improving rather
than depreciating through use. Conversely, lack of use will lead to erosion of any skill set. The
role of KM here is twofold, on the one hand, it must keep stock of the state of key knowledge
assets and, on the other, it must leverage key knowledge assets across the organization.

49. Building core competencies

Building new core competencies involves interplay between knowledge, practice, coordination,
and refinement. Knowledge assets must be built, enhanced, combined, and coordinated in an
environment that supports experimentation and improvement. Building core competencies can be
a complicated endeavor since sustained competitive advantage is derived from assets that are
hard to imitate. From a KM perspective, this implies the build up of specific tacit knowledge and
expertise (i.e. uncodified knowledge that is generally more valuable, and inherently more
difficult to copy and transfer), often across multiple departments or functions.

 Unlearning core competencies

Organizations have a habit of trying to keep doing what they have always been doing.
Unlearning a competency when it is no longer useful is one of the key aspects of a successful
firm, and history is riddled with examples of companies that have failed to do so. In the process
of unlearning, KM again plays an important role by identifying and managing the firm’s
knowledge assets in the right direction. This may be done through re-training, restructuring,
creating new knowledge flows, external knowledge acquisition, outright removal, etc.

The specific dynamics of the processes of knowledge creation, knowledge acquisition,

knowledge sharing, and knowledge reuse, which are central to the management of core
competencies, have been discussed earlier. The purpose of this section is to emphasize that KM
is not just a collection of individual initiatives. The build up of skills and competencies,
involving the coordination of multiple KM disciplines with other organizational functions, must
often be managed according to long-term strategic goals and coordinated across the organization.
 Strategic Approach to Industrial Relations
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The Industrial Relations or IR shows the relationship between the management and the workmen
within the industry and the role of a regulatory body to resolve the industrial disputes.

IR is perceived differently by a different group of behavioral practitioners and theorists. Some

believed that IR is related to the Class Conflict while some perceived it in terms of Mutual Co-
operation and still others perceived it in terms of Competing Interests of various groups. On the
basis of these perceptions, there are four popular approaches to Industrial Relations. These are:

88. Unitary Approach

The unitary approach is based on the notion that all the members of the organization Viz.
Managers, workers, and other staff have a common set of objectives, purposes and interests and,
therefore, work in unison towards the accomplishment of shared goals. Here, the conflict is seen
as a temporary divergence which is caused due to the poor management or the negligence on the
part of the employees to understand and mix with the organizational culture.

The unitary approach is based on the assumption that the overall profitability of the firm could be
increased if everyone in the organization has the common interest/purpose and works
unanimously towards its completion thereby establishing the harmonious relations. Here the
strikes are considered as destructive.

 Pluralistic Approach

The pluralistic approach is just the opposite of unitary approach which is based on the
assumption that an organization is an alliance of powerful and divergent sub-groups
(management and trade unions), having different competing interests are mediated by the
management. The management and the trade unions (association of workers) are the powerful
sub-groups that may not agree with certain terms and conditions prevailing in the organization
and to resolve those management tries to mediate the interest of both the groups.

During mediation, if the management pays less attention to the needs of the workers then they
form unions in order to protect their interest and influence the management decision. The unions
so formed helps in balancing the power between the management and employees. Thus, it is
based on the notion that the conflict between the management and the employees is inevitable
and is viewed as instrumental in the innovation and growth.

50. Marxist Approach

The Marxist approach is based on the basic assumption that the conflict is regarded as the
product of a capitalist society. This means that conflict arises not just because of the rift between
the employee and the employer, but also because of the division in the society between those
 who owns the means of production (capitalists) and the ones who have only labor to offer. The
ultimate objective of the capitalists is to increase the productivity by paying possible minimum
wages to the workers due to which the latter feels exploited.

To overcome such situation workers form unions so as to safeguard their interests. These trade
unions are considered as a weapon to bring about a revolutionary social change that focuses on
improving the overall position of the workers in the capitalist system and not to overthrow.
Unlike the pluralist approach, the Marxist believes that the state intervention via legislation and
industrial tribunals work in the interest of the management and do not ensure a balance between
the competing groups. Thus, according to this approach, the pluralist supports the capitalism, and
the unitary approach is anathema.

 Human Relations Approach

The Human relations approach is propounded by Elton Mayo, who is a humanist and believes in
the positive nature of the employees. According to him, given human initiatives from
management, the employees positively listens and responds properly to them and hence there is
no room left for the conflict to arise. But however Marxists and Pluralists did not appreciate too
much stress on the positive nature of the workers.

Thus, these approaches to industrial relations must be properly understood by the HR managers
as these offer a solid foundation for much of the role of human resource management.

Recruitment Process Outsourcing Head Hunting

THEINTACTFRONT8 FEB 20192 COMMENTS

Recruitment process outsourcing (RPO) is a form of business process outsourcing (BPO) where
an employer transfers all or part of its recruitment processes to an external service provider,
according to the Recruitment Process Outsourcing Association (RPOA). An RPO provider can
provide its own or may assume the company’s staff, technology, methodologies, and reporting.
In all cases, RPO differs greatly from providers such as staffing companies and contingent/
retained search providers in that it assumes ownership of the design and management of the
recruitment process and the responsibility of results.

Today, the recruiting environment is rather complex. In order to effectively recruit top talent,
you need to navigate a tight labor market; become proficient in a set of relevant technologies;
and manage and nurture candidates and hiring managers. RPO providers are subject-matter-
experts; talent acquisition is their core competency. They know how to navigate the recruiting
environment, stay current with the latest recruiting technology and have the resources to scale
recruiting capacity to meet hiring demands. RPOs bring people, technology, process, and metrics
into a talent acquisition function.

According to RPOA co-founder and Talent Acquisition expert John Younger, “the number one
reason companies succeed, struggle, or fail directly correlates with who they hire.”
Depending on what an organization is looking for, an RPO solution can bring an array of many
benefits including managing hiring fluctuations throughout the year; reducing total recruiting
cost and dependency on staffing agencies; improving hiring manager satisfaction; reducing time-
to-fill; elevating employment brand; improving candidate experience; simplifying or
streamlining the hiring process; and saving time for other duties among other benefits.

Historically, RPO provided high-volume hiring for large organizations at a lower cost compared
to other recruiting options. However, RPO has evolved over the last few years to become a
flexible strategic talent acquisition solution with additional benefits that can be adopted by small
and medium-size organizations as well.

Over the past few years, RPO has been trickling down into the smaller and middle market
domain as outsourced recruiting becomes applicable to these markets. As a result, smaller, agile
RPOs are rising into the higher ranks of strategic recruiting partners and carving their unique
niche in the talent acquisition marketplace.

Unlike other outsourced recruiting models, recruitment process outsourcing is a strategic

partnership that brings additional value-added benefits, including:

Analysis and planning. When run effectively, RPO providers work with their clients to
understand the business side of recruitment or business goals. They help clients forecast staffing
needs and plan the necessary resources to respond to these needs, which help achieve those
business goals.

Extensive job marketing. RPO providers market client jobs through job boards, social media,
referrals, and networking to drive candidate exposure to jobs and employer brand (a major
differentiator from staffing solutions).

Sourcing and engaging talent. In addition to finding talent, RPO providers build up employment
brand and recognition; engage future potential talent through talent communities and talent
pipelines; and source candidates in advance and with multiple sourcing assessments.

Candidate assessments. RPO providers assess candidates, guide them through the beginning of
the recruitment process, and make sure they have the core skills, competencies, and motivators to
do the job.

Candidate care. Managing the candidate experience is very important as it reflects on your

employer brand. RPO providers help clients take care of the candidates and manage their
experience, whether they are being interviewed, hired, or considered for the job.

Three basic types of RPO engagements

RPO is not a one-size-fits-all. RPO offers different engagement models.  John Younger, RPO
expert, and RPOA co-founder describes the following three main RPO engagement types:
 On-Demand RPO: A contract-based engagement with a qualified provider that knows the
company, their messaging, their processes and the results they need. The contract specifies a
defined number of roles within a defined period of time.

Function-Based RPO: The RPO provider takes a piece of the company’s recruiting needs entirely
off the company’s plate (e.g., the IT department or an entire division of the organization).

Full RPO: When the RPO vendor provides a company’s entire internal recruiting function
including access to the provider’s full breadth of resources.

HR Outsourcing: BPO
MDUTHEINTACTONE27 APR 20192 COMMENTS

HR Outsourcing is a process in which the human resource activities of an organization are

outsourced so as to focus on the organization`s core competencies. Often HR functions are
complex and time consuming that it will create difficulty in managing other important thrust
areas. By HR outsourcing, this problem can be avoided which will enhance effectiveness by
focussing on what the organization is best at. It will also improve the flexibility of the
organization to the rapidly changing business needs. Usually businesses that outsource HR are
typically small to midsize firms with number of employees ranging from 25 to 1500.

There are HR outsourcing firms present so as to meet an organization`s HR requirements. Some

HR outsourcing firms are generalists, offering a wide variety of services, while others are
specialists, focusing on specific areas such as recruitment, payroll etc. Depending on the degree
of outsourcing required, we can either outsource the entire HR functions or contract for specific
HR functions. Some of the services provided by HR outsourcing firms are:

89. Recruiting, training, and development

90. Overseeing organizational structure and staffing requirements
91. Tracking department objectives, goals, and strategies
92. Employee orientation programs

Some of the well-known HR outsourcing companies are Viteb, PeopleStrong, Trinet etc.

HR outsourcing has become a popular solution for organizations to remain competitive and cut
costs. It also provides skilled professionals who are focused specifically on HR.

Hence, this concludes the definition of HR Outsourcing along with its overview.

HR outsourcing (also known as HRO) is the process of sub-contracting human resources

functions to an external supplier.
 Reviews of business processes have led many organisations to decide that it makes business
sense to sub-contract some or all non-core activities to specialist providers.

HR, as a non-profit centre, is an obvious candidate for outsourcing.

There are many ways in which outsourcing human resources can be done:

 Business process HR outsourcing (also known as BPO), where an external supplier manages
discrete HR activities, such as payroll administration or recruitment, or perhaps the whole human
resources function.
 Shared service HR outsourcing, where only the transaction or administrative elements of HR’s
activities are subcontracted to an external supplier. This may include the personal interface with
employees.
 Application (and facilities) service HR outsourcing, where external providers look after the
technological (and physical) infrastructure to support human resources activities.

Outsourcing human resources or some of its processes to an external provider is a major business
decision as, while it may be cost-effective, it introduces new elements of risk, including:

51. Loss of control

52. Impact on the employer/employee relationship
53. Loss of flexibility
54. Failure to deliver cost benefits
55. Legal or regulatory requirements
56. Industrial relations issues

The operation of any HR outsourcing arrangement should be governed by a service level

agreement. This will define the required standards of performance by both parties and any
penalties for non-compliance. A service level agreement is a crucial document and must be
negotiated with great care to mitigate the above risks.

People management plays a crucial role in delivering organisational performance. In today’s

modern, knowledge economy this is more true than ever before. The decision to outsource
human resources is therefore not to be taken lightly.

There are many circumstances in which outsourcing HR services can deliver tangible benefits to
the organisation, for example by freeing HR professionals to devote more time to a strategic role
supporting organisational performance.

The CIPD identifies a number of strategic drivers for outsourcing HR services:

Advantages and disadvantages of HR outsourcing

Potential benefits of HR outsourcing

 Reduced cost 
 Increased efficiency 
 Access to improved HR IT systems 
 Improved management information (including human capital metrics) 
 Access to HR expertise not available internally 
 Increased flexibility and speed of response 
 Philosophical reasons (for example the organisation is outsourcing a number of its support
functions, of which HR is just one part) 
 Reduced risk 
 To free HR resources to operate more strategically.

Potential pitfalls of HR outsourcing

 Don’t outsource what you don’t understand. The HR outsource provider will only have to
subsequently solve the problem (at a cost) and the provider’s solution might not be most suitable from
your organisation’s perspective
 HR outsourcing does not absolve the organisation of good people management practices nor of
overall responsibility for the provision of HR services
 Increasingly, HR outsourcing arrangements are often long term (five to 10 year contracts are not
unusual). An understanding of the organisation’s current and future business strategy and potential
changing business (and hence risk) profile is important before entering into any contractual
arrangement. This helps to avoid being tied into unfavourable contractual arrangements
 Loss of local knowledge and processes which instead reside with the outsource provider
 Standardisation of processes in line with outsource provider not organisational preferences.

Strategic Decision to Outsourcing

AKTUTHEINTACTONE6 AUG 20192 COMMENTS

Does strategic outsourcing actually benefit an organization? Or will it backfire in the long run?
Here’s how outsourcing has impacted organizations in India, and how it can benefit you.
by Soutiman Das Gupta

What do companies like Hero Honda Motors, Bharti Tele-Ventures Limited, the National Stock
Exchange (NSE), HDFC Bank, Sony Entertainment Television, Hyatt Services India Pvt. Ltd,
and HPCL have in common?

The common thread running through these large organizations is that all of them have chosen
outsourcing as a strategic business decision to garner tangible and intangible benefits in the near
and long run.
Indeed, it’s difficult to find a successful and growing organization in India, irrespective of size,
that does not outsource a certain amount of its IT infrastructure services or management.

Does it work?

Does it make sense for an organization to outsource its IT needs? Most of the CIOs and analysts
we spoke to felt that strategic outsourcing helps an organization to save on cost and speed up
delivery while focusing on core business needs.

To elaborate on the benefits, let’s look at Infrastructure Strategies (IS 2004), the CIO annual
survey conducted by Network Magazine to analyze technology investment patterns in the Indian
enterprise. The survey, conducted amongst India’s top corporates, shows that nearly 54 per cent
of the CIOs outsource “to reduce costs”.

A similar view is echoed by Michele Caminos, Vice President, Team Manager, IT Services,
Asia/Pacific, Gartner. “The most compelling reason why companies get into outsourcing
engagements is to save costs,” she agrees.

According to Infrastructure Strategies, other impor-tant drivers for strategic IT outsourcing are
focus on core competencies, access to special expertise, higher speed of delivery, and access to
new technologies.

Focus on the core

Given the pressures of a competitive market, organizations tend to focus on their core activities
— activities that link-up directly with the revenues and hence the profitability. In such a
scenario, companies tend to outsource their non-core tasks to focus on business decision-making.
And IT infrastructure easily lends itself to outsourcing.

Hero Honda Motors is a good example of an organization that uses strategic outsourcing to focus
on core competency. “We wanted to outsource all routine (IT maintenance) tasks so that we
could concentrate on the main business issues. With the headache of dealing with routine
complaints taken away, our staff focuses on user requirements and is able to deliver services to
users on time,” explains SR Balasubramanian, Vice President – Information Systems, Hero
Honda Motors Limited.

The IS 2004 survey reports that 46 per cent of the CIOs who outsource or have plans to do so,
consider “focus on core competencies” as the second most important reason to outsource.

“There are definite cost savings in terms of resource management and less manpower costs. As
an IT team we can focus more on providing new infrastructure solutions to enable various
requirements of our core media business rather than get caught up with the daily maintenance
requirements of the existing set-up,” explains Aneeta Pankaj, Senior Manager, Information
Technology, Sony Entertainment Television (SET) India Private Limited.
Competitive Business Strategy

Outsourcing is best adopted after a careful look at business needs and available options. It is
essential that the outsourcing relationship provides strategic business benefits in the future.

“Outsourcing provides a competitive strategy benefit in a number of ways to an organization. It

allows ease of management, reduction in cost, lesser manpower, and frees up internal resources,”
says Pankaj.

“Outsourcing can, and frequently does, provide both long- and short-term benefits to companies
that outsource, provided they have a strategic objective for outsourcing. Medium and long-term
gains are best realised by selecting a vendor who brings value to your core business, rather than
one who can provide you with the lowest prices,” explains Sharad Sanghi, Managing Director &
CEO, Netmagic Solution Pvt. Ltd.

Business-Related

It’s important to understand that outsourcing is a business-related decision and not simply an IT
need. The ultimate goal of outsourcing is to bring benefits to the business and subsequently the
customer.

Hero Honda’s Balasubramanian says, “We believe an outsourcing service provider could better
handle our day-to-day management needs than our own team. We’ve not added numbers to our
staffing in spite of increased business activity. Since the outsourcing agency manages the data
centre round the clock, our staff has been relieved from working in shifts.”

Bharti Tele-Ventures Limited has cut one of the largest outsourcing deals in Asia on the IT
infrastructure and network management areas. Dr Jai Menon, Joint President, Enterprise
Business, Bharti Tele-Ventures, says that the outsourcing relationship has brought, “unparalleled
value to the company for our customers, employees and shareholders.”

“For customers, it brings innovative and streamlined products and services like billing, CRM and
data warehousing. For employees, it brings enhanced performance-critical applications like
intranet, e-mail and online collaboration. And at an overall level, the strategic alliance provides
predictable IT spends, and additional revenue streams to further enhance shareholder value,” he
adds.

The changing landscape

In the past, Indian companies were not very keen to outsource their IT needs, primarily because
their enterprise IT environments were relatively less complex, easier to manage, and inexpensive
to maintain. Besides, few outsourcing service providers offered a number of outsourcing options
under one roof.
But now, IT environments in companies have become more complex. There has been growth in
terms of volume of business, range of services, number of employees, number of competitors,
nationwide locations, and enterprise applications. This calls for more attention to IT as a service
to provide strategic business benefits.

To help organizations get optimum value out IT and use it as a strategic tool to further the cause
of business, many CIOs think it worth their while to outsource IT infrastructure management.

Innovative options

Indian enterprises today have a variety of outsourcing options from which they can choose the
right fit. Outsourcing solution providers offer services that include desktop client management,
server management, cable management, firewall management, patch management, software
license management, IT audits, backbone and connectivity, website hosting, and IT infrastructure
management.

Thus the available services are innovative, significantly more customised, and better aligned with
individual customer requirements. An enterprise can pick-and-chose specific services and build a
reliable mode of service delivery. A company can outsource basic desktop management needs, or
the management of the entire nationwide IT infrastructure if needed.

To introduce more flexibility, many service providers offer clients hire-purchase schemes,
infrastructure on-demand, and pay-as-you-use options.

Hyatt Services India Pvt. Ltd has given a three-year contract to a service provider to outsource
network monitoring services. Says Harcharan Singh, the company’s Director of Information
Systems, “The service provider has to upgrade and buy back the existing hardware as per the
depreciation cost agreed in the SLA. This clause protects us from technology obsolescence, since
technology changes rapidly.”

IndusInd bank has entered into an infrastructure-on-demand agreement with IBM India, which
includes building an IT infrastructure, implementing server consolidation, and setting up disaster
recovery systems. The partnership supports the bank’s goal to become totally customer-centric
by providing more secure, responsive and efficient service, in line with its renewed focus on
retail banking. It allows the bank to scale up operations and pursue aggressive growth plans.

Before you outsource

All things said, outsourcing is a strategic business decision that should be made only if a
company sees true business benefits accruing from it. Badly-planned outsourcing could result in
erosion of service value and cost escalation, but a well-planned outsourcing decision can help
you sleep better at night, knowing that the responsibility of deliverables is in safe hands.

Michele Caminos of Gartner highlights a few steps that can lead you to take a proper decision in
this context.
93. What type of a service is it? Identify characteristics of service and the respective type.
94. What perspective is driving the effort? Identify decision rights (service owner) and input rights
(other stakeholders).
95. How are other perspectives affected? Identify conflicts and work them out. Check ‘killer’ factor.
Improve solution.
96. Check compliance with principles and fit with architecture.
97. Who should carry it out? Evaluate different staffing possibilities. Select best from combination.
98. Who should participate in the decision? Submit service proposal to specific decision process.
Follow it up.

She recommends the following:

 Understand different business perspectives and how they affect sourcing decisions.
 Understand how perspectives must be harnessed to drive sourcing decisions.
 Develop a structured sequence of steps to sourcing decisions.
 Develop evolving governance architecture to support sourcing decisions.
 Develop internal sourcing decision roles.

Human Side of Mergers and Acquisitions

THEINTACTFRONT5 FEB 20192 COMMENTS

Mergers and acquisitions are a huge business.  In 2015 alone, almost $5 trillion dollars were
spent on mergers and acquisitions globally.  That’s trillion with a T, and this figure eclipsed the
previous record established in 2007.  A number of major deals continue to be in the works, and
while it is unclear how the incoming administration will impact these activities; there is every
reason to believe that industry consolidation will likely continue.

There are, of course, a number of reasons why M&As are pursued.  There are promises of
synergies, more efficient operations, new markets, better consumer practices, improved product
innovation, stronger strategic fit, and greater shareholder returns.  But what looks good on a
financial statement may not translate to actual benefits.  In fact, according to McKinsey, 70% of
mergers fail to achieve their financial objectives; and so for the activity in 2015, $3.5 trillion did
not achieve its expected return.  And interestingly, the greatest benefit in M&As often goes to
the seller, not the buyer.  This phenomenon is known as “the winner’s curse.”

The reasons for this less than stellar record are complex.  It can certainly vary by which strategy
of brand integration is embraced:  assimilation, federation, confederation or metamorphosis
(Bouchikhi and Kimberly, 2012).  The most commonly attributed reasons for underperformance
are that most companies routinely overestimate the value of synergies and underestimate the
impact of one-time costs.  These technical factors can restrict the new deal right from the
beginning, but there are other considerations.  The costs of disruption can also be significant for
both customers and employees as illustrated by the following data points:
99. The average newly created company will see 2 to 5% of their combined customers disappear
(McKinsey, 2004).
100. There is a 20% rise in actively disengaged employees after a merger/acquisition (Forbes, 2017)
101. It can take three years to return to pre-merger engagement levels (Forbes, 2017).
102. It is reasonable to expect that at least 20% of executives will leave during the post-merger
period.
103. Pritchett indicates that a 15% decline in productivity should be expected from middle
management during the implementation period.

These talent and cultural impacts have significant ripple effects, but many companies do not get
serious about the human side of bringing organizations together.  The landscape is littered with
examples of failed efforts to create synergies and integrate cultures:  AOL-Time Warner and
Compaq-HP to name just two.  It is assumed to be more about the balance sheet than the hard
work of cultural due diligence, communication and integrating two distinct organizations.  But
according to Deloitte, at least 30% of the reason for the underperformance of mergers and
acquisitions is precisely for these “soft” reasons.

Calculating the impact of poorly leveraged HR practices on mergers and acquisitions

1) 70% of M&As fail to achieve their financial objectives (a KPMG study puts the estimate at
83%) and

2) 30% of the reasons that M&As fail is because of “human factors.” 

Given the $5 trillion M&A activity from 2015, human factors account for about $1 trillion in lost
opportunity.

HR levers in 2015 M&As, therefore, represent a 13-figure upside (i.e., $1 trillion has a lot of
zeros).  This amount is worthy of our consideration; just to put it in context, a trillion dollars
could buy:

 Apple and have $250 billion left over.

 College education for 8.3 million people.
 769 Yankee stadiums.
 Cover the entire state of Delaware with $100 bills.

Fanciful:  certainly, but let’s not forget that an unrealized investment (from poor M&A human
factor integration) is quite real to the people affected.  “The soft stuff, again, turns out to be
the hard stuff.”

Achieving the right balance

There are no simple answers, or one easy formula, to achieving greater success in mergers and
acquisitions.  So many economic, political, legal, personal and contextual factors pertain, but it is
 true that if the human-side is ignored or underserved, then success is virtually impossible to
achieve.  It is important to see M&As as a process, not an event.

People factors need to be addressed throughout all stages, including;

1) Pre-deal analysis

2) Due diligence

3) Integration planning

4) Eventual implementation after the deal is consummated.

HR must be a fearless and continuous advocate to protect and optimize the investment potential
of the newly formed organization.

Three stage model of M&A

AKTUTHEINTACTONE21 JAN 20201 COMMENT

104. Strategy

Under this phase, M&A Advisors assess the changes pertaining to the acquirer’s industry and
identify growth opportunities and targets in line with the firm’s corporate strategy.

This encompasses creating a portfolio strategy and an operating model assessment, corporate
financing or investment banking and strategic alternatives.

Besides, this stage also covers target screening, deal structuring, readiness review, synergy
analysis and modeling.

 Execution

During the execution phase, M&A expert advisors in commercial, financial, HR, IT, operational
and tax aspects provide insight into the transition and financing options. The execution phase
combines experience and knowledge to bring closure to the complex process.

This stage covers, plan structuring, financial advisory, negotiation support, due diligence,
preliminary price allocation, tax structuring and more.
57. Integration

In the final phase, integration or separation will present the acquirer with a set of challenges
including costs, timelines and business disruptions, among others. This phase spans integration
or separation planning support, developing the sales purchase agreement, financial agreement
advisory, finalizing valuation and purchase price, completion statement advisory.

Post-deal closure, M&A advisors organize Day 1 Readiness Transition Service Agreement,
synergy support, human capital integration, tax integration and restructuring.  Technology M&A
Advisors assure of a hassle-free process all throughout the integration phase including end-state
planning.
Global Human Resource Management: Selection,
Development
THESTREAK25 FEB 20193 COMMENTS

Due to increased globalization and easy mobility and communications between countries,

companies operate at international level. Major task for organizations which operate across
international boundaries is to manage the dissimilar stresses of the drive for integration and
differentiation. In broader sense, International human resource management process has same
activities as in Domestic HRM such as planning and staffing however domestic HRM is operated
in one nation And IHRM activities are involved in different countries. International Human
Resource Management is a branch of management studies that examines the design and effects
of organizational human resource practices in cross-cultural contexts. It occupies an exciting
position in the interstices of international business, human resource management and
organizational behaviour, scholarships. Theoretical studied explained that International HRM is
the interplay between three dimensions: HR activities, the types of people being employed in the
organisation and the different countries that an organisation is operating in (Dowling, 1999).
Complexities caused by these last two variables, are what differentiates international HRM from
domestic HRM, as the HR activities themselves are relatively similar.

Concept of International Human Resource Management

Broadly defined, International human resource management is the study and application of all
human resource management activities as they impact the process of managing human resources
in enterprises in the global environment. IHRM can be explained as “The set of distinct
activities, functions and processes that are directed at attracting, developing and maintaining an
MNC’s human resources. It is the aggregate of the various HRM systems used to manage people
in the MNC, both at home and overseas” (Taylor, Beechler et al. 1996). An international
organization or firm is one in which operations take place in subsidiaries overseas, which rely on
the business expertise or manufacturing capacity of the parent company. Such companies or
organizations bring with them their own management attitudes and business styles.

Human resource managers of such organizations cannot afford to ignore the international
influences on their work. International human resource management play significant role in
providing solution to global business issues. Theorists explained that International HR
management denotes to an extension of HR that relates to having people working abroad. These
can be either expatriate staff, those who are recruited from or work within their own home
countries (locally recruited staff), or even third country nationals (individuals from neither the
‘parent’ nor ‘home’ country, but rather a third country. The kinds of organizations in which this
is the case can range from those with a small office or subsidiary based abroad, to major
multinational corporations, international public-sector organizations, or international NGOs
(charities) with sites all over the world. It can also encompass an organization working in a joint
partnership with another organization overseas. Alternatively it could be a home based
organization with overseas offices or a company with selected departments which are offshore.
The differences between IHRM and HRM is that IHRM is being unpredictable and influenced
more by external factors, requiring more functions, having continuously changing perspectives,
requiring more intervention in employees’ personal lives, and being more risky.

Major functions of International Human Resource Management

In International human resource management, there are five functional areas that include
recruitment and selection, development and training, performance evaluation, remuneration and
labor relations. In the first function of IHRM, Recruitment and selection, company employs new
qualified candidates for international operations. Selection requires choosing from this pool the
candidate whose qualifications most closely match the job requirements. Staffing is a complex
function of international human resource management. In an global firms, the managing and
staffing approach strongly affects the type of employee the company prefers. In a company with
an ethnocentric approach, parent country nationals usually staff important positions at
headquarters and subsidiaries. In recruitment and selection methods, firms consider both
headquarters’ practices and those widespread in the countries of its subsidiaries. Local culture
also have great impact on recruitment and selection practices, and in some countries, local laws
require a specific approach. In choosing the suitable candidate, it is needed to make balance
between internal corporate consistency and sensitivity to local labor practices.

Another significant function of IHRM is Development and training which is aimed to offer
sufficient training to personnel in a company and enable them to fulfil their goals, as well as
show better performance and growth with their work. At global level, human resource
development experts must have responsibility for training and development of employees located
in subsidiaries around the world, specialized training to prepare expatriates for assignments
abroad, and lastly development of a special group of worldwide minded managers. International
human resource development programs may be done in two ways such as centralized and
decentralized. In a centralized approach, training originates at the headquarters and corporate
trainers travel to subsidiaries, often adapting to local situations. This fits the ethnocentric model.
A geocentric approach is also centralized, and trainers could be sent from various positions in
either the headquarters or subsidiaries to any other location in the company. In a decentralized
approach, training is given locally, following a polycentric model. When training is
decentralized, the cultural backgrounds of the trainers and trainees are usually similar. Local
people develop training materials and techniques for use in their own area. It is important that
trainer must be qualified.

Performance evaluation is the effective function of international human resource management. In

companies, the performance evaluation is regularly performed for administration or development
intentions. Usually, administration conduct evaluation when there is doubt of performance of
candidate and there is a need of performance evaluation on work conditions of employees,
promotions, rewards and/or layoffs. In multinational companies, performance appraisals are
usually done annually and use a standardized evaluation form. Performance evaluation is
complex task for International HR managers because the organization must evaluate employees
from different countries working in different subsidiaries. Performance evaluation depends on
the organization’s overall human resource management strategy.
Remuneration and benefits is other functional approach of IHRM. Remuneration of employees
plays an important role in hiring new employees because pay is the major source of people to
live in the world. To develop an international system of compensation and benefits, firms have
two primary concerns. The first is comparability. A good compensation system disperses salaries
to employees that are internally equivalent and competitive within the marketplace. The
international organization must also consider the salaries of people who may transfer from other
locations. The second major concern is cost. Organizations struggle to reduce all expenses, and
payroll is one of the largest.

Lastly, the labor relations function of IHRM which describes the role of management and
workers in the workplace. In many countries, the government regulates labor relations practices.

Laurent (1986) recommends that international approach to human resource management would
require numerous steps, Firstly, an explicit recognition by the parent organization that its own
peculiar ways of managing human resources reflect some of the assumptions and values of its
home culture. Secondly, an clear recognition by the parent organization that its peculiar ways are
neither universally better nor worse than others, but are different and likely to exhibit strengths
and weaknesses, particularly abroad. Next step is unambiguous recognition by the parent
organization that its foreign subsidiaries may have other preferred ways of managing people that
are neither intrinsically better nor worse, but could possibly be more effective locally. Next step
is preparedness from headquarters not only to acknowledge cultural differences, but also to take
action in order to make them discussable and therefore useable. Last step is developing genuine
belief by all parties that more creative and effective ways of managing people could be
developed as a result of cross-cultural learning.

Some people consider international HRM is similar to expatriate management. But IHRM has
more importance and it includes more activities as compared to just the management of
expatriates. It involves the international management of people. Although International HR
managers assume the same activities as their domestically-based colleagues, the scope and
intricacy of these tasks will depend on the extent of internationalisation of the organisation.
Moving in global economy, organisations have to amend their traditional ways of managing
people. The human factor is progressively more acknowledged as critical to organizational
success. Theorists, Bohlander and Snell commented that “In the past, observers feared that
machines might one day eliminate the need for people at work”. Actually, just the opposite has
been occurring. People are more important than earlier time.

In fast-growing economies, it is easy to access money and technology than good people.
Competitive advantage belongs to companies that know how to attract, select, deploy, and
develop talent. In multinational companies, major objective of HRM function is to make certain
that the most effective use is made of its human resources. To accomplish this, HR professionals
undertake a range of activities around sourcing, development, reward and performance
management, HR planning, employee involvement and communications. If the organisation has
a strategic HR function, these activities will support and inform organisational strategy. HR
professionals are also used extensively in organisational change and development initiatives. For
international organisations, these HR activities need to be co-ordinated across both the home
country and different national subsidiaries and to take into account the needs of both parent
country nationals (PCNs), host country nationals (HCNs) and third country nationals (TCNs).

Model of IHRM

The role of the IHR manager will differ and it depends on the international orientation of the
organisation. It is critical that managers must be able to interpret international organisational
strategy and develop IHR policies and practices which support that focus. As a strategic partner,
the IHR manager should equally advise senior management of any mismatch between stated
organisation internationalisation goals and actual IHR practice. In order to enhance the
competitive advantage of firm, the IHR professionals must focus on their international
competencies and learn about the basics of global business.

International Human Resource Management

Strategies of International Human Resource Management

To respond major challenges in business, International HR executives are forced to formulate

strategies and practices that will make their organizations successful. At the macro level,
strategic global HRM is used to ensure that the organization overarching values, objectives and
goals are supportedby the HR policies, procedures and practices (Brewster & Suutari, 2015). At
the meso level, HR executives are mainly concerned to deal with issues relating to unions in the
host country. At the micro level, HR executives are attempting to foster a global mindset among
the workforce through developing HR competencies and business-related.

While implementing an IHR strategy, management team must ascertain the current and intended
nature of international operations in the organisation (multi-domestic, international, global or
transnational. Mangers should determine the extent to which HR policies and practices should be
standardised or localised in accordance with overall organisational strategy. They must assess the
extent to which local cultural, social, political, economic and legal factors will impinge on any
attempts to apply standard HR policies if integration is a key factor in organisational strategy and
ensure a computerised database of global human resources is used if integration is desired. In
formulation of IHRM strategy, it is recommended to work with the senior management team to
identify the competencies required to achieve global organisational objectives and also work
with national HR and line managers to formulate IHR policies and practices in the key areas of
sourcing, development and reward which will embed a transnational mindset in the organisation.

Major issues/ challenges of international Human Resource Management

A crucial challenge for all international organisations is the need to achieve target in relation to
the competing demands of global integration and co-ordination versus local responsiveness, the
“global versus local” debate. Main challenges in IHRM include high failure rates of expatriation
and repatriation, Deployment, getting the right mix of skills in the organization regardless of
geographical location, Knowledge and innovation dissemination and managing critical
knowledge and speed of information flow, Talent identification and development and identify
capable people who are able to f unction effectively, Barriers to women in IHRM, International
ethics, language (e.g spoken, written, body). Other challenges are Different labor laws, Different
political climate, and different stage of technological advancement, different values and attitudes
e.g. time, achievement risk taking, Roles of religion e.g. sacred objects, prayer, taboos, holidays,
etc, Educational level attained, Social organizations e.g. social institutions, authority structures,
interest groups, status systems.

Major issues for IHRM include the variety of international organizational models that exist, the
extent to which HRM policy and practice should vary in different countries, the problem of
managing people in different cultures and environments, the approaches used to select, deploy,
develop and reward expatriates who could be nationals of the parent company or ‘third-country
nationals’ (TCNs), nationals of countries other than the parent company who work abroad in
subsidiaries of that organization. Cultural and environmental diversity is main problems in
international HRM. Haley stated that in culture where people are emphasized, it is the quality of
international relationships which is important. In cultures where ideologies are emphasized,
sharing common beliefs is more important than group membership. Hofstede (1980) emphasizes
that there are a number of cultural dimensions that affect international operations. Sparrow and
Hiltrop (1997) recognize various HR areas that may be affected by national culture such as
decisions on what makes an effective manager, giving face-to-face feedback, readiness to accept
international assignments, pay systems and different concepts of social justice, approaches to
organizational structuring and strategic dynamics.

These cultural differences mentioned gave the saying ‘think globally and act locally’. This means
that an international balancing act is essential, which leads to the important assumption given by
Bartlett and Ghoshal (1991) that denotes ‘Balancing the needs of co-ordination, control and
autonomy and maintaining the appropriate balance are critical to the success of the multinational
company.’

Ulrich (1998) proposed that to accomplish this balancing act, there are six capabilities that
enable firms to integrate and concentrate international activities and also separate and adopt local
activities that include being able to determine core activities and non-core activities, achieving
consistency while allowing flexibility, building global brand equity while honouring local
customs, obtaining leverage (bigger is better) while achieving focus (smaller is better, sharing
learning and creating new knowledge andengendering a global perspective while ensuring local
accountability.

Other problems are managing international assignments, employee and family adjustment,
selecting the right person for international task, culture and communication barrier. Challenges
of IHRM are clarifying taxation issues, coordinating foreign currencies, exchange rates,
compensation plans, working directly with the families of employees, more involvement in
employees personal life, facility etc, Different HR systems for different geographic locations,
More complex external constituencies, foreign Governments, political and religious groups,
heightened exposure to risks such as health, terrorism, legal issues, human and financial
consequences of mistakes.
 Laurent (1986) stated that “in order to build, maintain and develop the corporate identity,
multinational organizations need to strive for consistency in their ways of managing people on a
worldwide basis. Yet, and in order to be effective locally, they also need to adapt those ways to
the specific cultural requirements of different societies. While the global nature of business may
call for increased consistency, the variety of cultural environments may be calling for
differentiation.”

From a business perspective, forces for global integration include operational requirements,
strategic co-ordination and multinational customers. In contrast, forces for local responsiveness
include highly diverse consumer requirements, tailored distribution channels and broader social
and political constraints to market entry. From an HR perspective, there are many factors
constraining the use of standardised HR practices including differing national business systems,
labour laws, national HR practice, education systems and national cultural norms. Organisations
still want to implement standardised HR systems internationally. Their option depends on their
stage of internationalisation and international mindset. Major barriers to effective global HRM
are variations, perception, of HR, Attitude and actions of headquarters towards, HR, resistance to
change, cultural differences in learning and teaching styles.

To summarize, International human resource management has important role in a company to

survive in global business. International HRM scrutinizes the way in which international
organisations manage their human resources across these different national contexts It is a
Procuring, Allocating, and Effectively utilizing human resources in a multinational corporation,
while balancing the integration and differentiation of HR activities in foreign locations. HR
managers have to sort out problems with globalisation and internationalisation due to dissimilar
cultures, different policies or procedures, language and legislation. The International HRM
assists in organizational remodel as it plays a role of innovator. International human resource
management professionals have not only begun to frame their research in terms of organization
theories, they are also increasingly using the international context to extend existing theories.

Difference between global HRM Vs Domestic HRM

AKTUTHEINTACTONE21 JAN 20201 COMMENT

105. Increased functional activities

In order to manage human resources across countries, the functional activities of human resource
departments increase multi-fold. These activities include managing expatriation, cross-country
relocation, international taxation, trans-national labour legislation, etc.

 Functional heterogeneity

Since an MNE operates in diverse business environments with wide variations in government
policies, culture, and regulatory environments, it has to carry out a variety of HRM functions,
such as recruitment and selection, performance evaluation, managing compensation, and training
and development, with considerable heterogeneity.
 Satisfying various stakeholders, such as the employers, business partners, and the host country
governments with effective human resource management in cross-country settings is indeed a
challenging task.

58. Increased involvement in employees’ personal lives

Managing expatriates involves relocating their entire families across countries: this is an
important factor in ensuring employees’ satisfaction as satisfied employees are crucial to
effective output.

Relocating includes preparing not only the employees but their entire families, including spouse
and children, to develop an understanding and appreciation for cross-cultural environment and
equip them for potential cultural shock.

Further, issues such as education of children, meaningful engagement/employment for the

spouse, accommodation, and transport become highly significant for employees, not only in the
capacity to influence the decision to take up an overseas assignment but also in determining the
employees’ level of satisfaction and job performance.

 Enhanced risks

Since human resource activities involve relocation of employees and their families across a
country, which requires substantially higher costs in terms of their travel, training, and relocation
expenses, the consequences of under- performance of expatriates or their premature return from
international assignments is much higher compared to domestic assignment.

Therefore, an MNE has to develop and implement its international HRM strategies effectively so
as to minimize such risks. Besides, the risks of employees’ and their families’ safety in terms of
health and life increases multi-fold in trans-national assignments due to changes in climatic
conditions, epidemic, war, terrorism, and incidence of riots and robbery.

 Increased influence of external environment

Like all other activities in international business, managing human resources is also influenced
by external environment. The diversity of cultural, regulatory, financial, and political
environments requires considerable adaptations in a firm’s HRM strategy.

International managers have to take into account the cultural differences in values, expectations,
behaviours, negotiation, and communication styles of international workforce while designing
organizations and recruiting, selecting, training, motivating, compensating, evaluating, and
controlling of employees.
Expatriation and Repatriation
THEINTACTFRONT9 FEB 20192 COMMENTS

Expatriation

An expatriate is an employee who has left his native land and is working and temporarily
residing in a foreign country. An expatriate can also be a citizen who has relinquished citizenship
in their home country to become the citizen of another country. The term originates from the
Latin words, ex (out of) and patria (fatherland).

A firm’s employees who are transferred out of their home base into some other area of the firm’s
international operations are referred to as expatriates. The practice of global mobility of a
company’s workforce helps in building competitive advantages. All expatriate employees are
entitled to receive an expatriate premium while working in a foreign country. This includes
monetary benefits and non-monetary incentives like housing and education.

When the initiative for expatriation comes from individuals rather than employers, it is called
self-initiated expatriation (SIE). An illustration of this is the fact that some Asian Companies
have recently hired a number of Western managers.

Dubai is a country where the population is composed predominantly of expatriates from

countries like India, Pakistan, Bangladesh and Philippines, with only 20% of the population
made up of citizens. Most popular expatriate destinations are Spain, followed by Germany and
Britain.

Repatriation

Before elaboration on the stages in the repatriation process, it is useful to understand that on
completion of the overseas assignment, the MNC brings the expatriate back to the human
country, although not all foreign assignments end with a transfer to home- rather the expatriate is
re-assigned to another international assignment. Some employees are made to travel around the
globe frequency in which case they form part of the MNC’s international cadre of managers.
Even with such managers, repatriation is essential, particularly at retirement.

 
Preparation involves developing plans for the future and gathering information about the new
position. The firm may provide a checklist of items to be considered before the return to the
home(e.g. closer of bank accounts and settling bills) or a through preparation of the employee
and his or her family for the transfer to home.

Physical relocation refers to saying good bye to colleagues and friends, and traveling to the next
posting, usually the home country. Personalized relocation reduces the amount of uncertainly
stress, and disruptions experienced by the repatriate and family.

Transition means setting into temporary accommodation, where necessary , making arrangement
for housing and schooling, and carrying out other administrative tasks such as renewing driving
license, and opening bank account.

Readjusting involves coping with reverse culture shock and career demands. Of all the steps in
the repatriation process, re-adjusting is the most difficult one. The re-entry adjusting is a tough
task because of multiple factors. First there is anxiety experienced when he or she returns home,
the  apprehensive being accentuated by the uncertainly about the placement  in the firm, career
prospects and a  sense of isolation, feeling of devaluing the international experience, coping with
new role demands and probable loss of status  and pay.

MNC respond to the repatriation problem in several ways. Many firms have formal repatriation
programs. Some companies assign the expatriate to a mentor, popularly called as the godfather.
The mentor is usually in a more senior position than the expatriate and knows him or her
personally. The purpose behind the use of a mentor is to remove the sense of alienation through
the provision of information (e.g. workplace changes) on a regularly basis, so that expatriate is
better prepared for the conditions he or she is likely to face upon re-entry. The mentor should
also ensure that expatriate is not sidelined when important decisions are made regarding
positions and promotions.

Challenging of re-entry: Repatriation poses certain problems more intense than those

encountered at expatriation. Infact, assignee views expatriation as sort of reward for impressed
performance but repatriation is perceived as the end of a honeymoon on his or her career.
Challenging of re-entry relate to the individual assignee as well as the MNC

Individual perspective: Challenges from the assignee perspective include personal and

professional. From a personal perspective, the assignee experience reverse culture shock. The
returnee expects that the country would remain the same when he or she had left. But after
repatriation the assignee finds that things are not the same. Political, economic, social and
cultural climate has changed. Moreover, the returnees themselves are not same old individuals.
The stay abroad has brought changes in their perception, attitudes, habits and practices. These
changes have created high expectations about the home country, but the hopes do not match with
reality. They exhibit fussiness about everything and this separates expatriates from home country
citizens. It Is not be assignee alone facing the adjusting problem. Even the spouse has the same
problem. Children too find re-entry difficult. Coming back to school, attempting to regain
acceptance into peer groups and being out-of-touch with current slang, sports, and fashion do
cause problems.

Lowered social status, deleted spendable income, housing problem, problem of children’s school
difficulty of club membership and the like add to re-entrant’s problems.

Professional disappointments add to the returnee’s woes. The repartee feels that his or her skills
acquired  while on foreign service are no more in use. The repatriate is of the opinion that job at
the home is lacking in organization is unfairly ignoring the global competence acquired by the
returnee. Worst, organizations may not guarantee jobs to the returnee. Often, due to poor career
planning, repatriates are placed in a holding pattern- being assigned jobs that are available,
without regard to the individual’s abilities, capabilities and needs. Many returnees companies
that, upon returns they are offered a limited member of career choices and are rarely considered
for promotions-which make them feel that they have removed from the main stream of corporate
advancement.

Challenges from organization Perspective:  As is too well known majority of the returnees
consider quitting the organization. Considering the investment made on training, position,
maintaining the assignee while on assignment, his or her quitting will adversely effect the MNC
‘s bottom line. Often loss of the multinational becomes gain for a rival. When an experienced
assignee quits and joins a rival organization the latter tends to gain competitive advantage. In
addition, high withdrawals by returnees may after the company’s ability to hire bright individuals
in future.
 Building a Multicultural Organization
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A multicultural organization is one that has a workforce which includes people from
diverse backgrounds across all departments, and which offers them equal opportunity
for input and advancement within the company.

A multicultural organization also possesses an absence of discrimination or prejudice

towards people of based on their race, religion, ethnicity, gender, age, sexual orientation,
or physical limitation. In a multicultural organization, skill, talent, and performance are
the criteria for meritocratic advancement.

A multicultural organization recognizes that the contributions of its employees include

perspectives based on culture, gender, and other unique characteristics.

Few companies in our times want to make their products or services available only to
one narrow slice of the population. A multicultural workforce helps them create
products that meet the needs and expectations of a broader population.

An emphasis on diversity also may attract a better talent pool. In a survey by

Glassdoor.com, fully 67% of job-seekers said that a diverse workforce was an important
factor in their decision to accept or reject a job offer.

Moreover, a multicultural workforce is seen as essential for any business considering

going global. “As national politics and discourse seem to grow more inward-looking and
divisive across America and Europe, successful businesses must continue to think
inclusively and globally,” notes a blog for Hult International Business School.
“Embracing cultural diversity in the workplace is an important first step for businesses
that want to be competitive on an international scale.”

Building a Multicultural Organization

106. Make multicultural management a strategic focus. Value the contributions of employees
from all parts of your company and from different cultural backgrounds. To establish a welcoming
and supportive work environment, senior management should set the tone by making it clear to
managers and employees that the company will not tolerate insensitive comments or discrimination
of any kind.
107. Use focus groups, surveys and one-on-one discussions to determine how effectively
employees and managers can function in a multicultural setting.
108. Develop strategic and operational plans to correct the identified gaps. For example, if the
middle and top management ranks do not have sufficient experience in managing multicultural
teams, consider making changes to your in-house leadership development programs. Global
companies should not be importing managers from their headquarters to fill overseas management
positions, except on a transitional basis.
109. Foster an environment of multicultural understanding. This includes respecting and
accommodating the cultural differences in your company. For example, a development team in India
may need certain days off during the year for religious celebrations. Publish tips on your internal
website that employees can use as references for planning purposes.
110. Create opportunities for culturally diverse groups to work together. For example, if you have
one partnership with a manufacturing company in Mexico and another with a product design facility
in Europe, bring key employees from these companies together in process improvement teams or
new product development groups.
111. Implement cultural diversity training programs. In addition to discussing myths and
stereotypes that can prevent multicultural groups from working together effectively, the training
programs should increase your employees’ ability to understand cultural differences and
communicate effectively across these differences.
112. Train your employees to look for nonverbal communication signals when working in a
multicultural environment. For example, silence could indicate agreement in some cultures and
disagreement or disapproval in others. Self-promotion may be acceptable and even expected in
North America, but not necessarily in certain parts of Asia. You may have to set aside funds for
translation facilities, especially when negotiating agreements or collaborating on development
projects.
113. Recognize differences in decision-making processes. For example, the chief executive
officer of a family-held company in India may sign a partnership agreement, but the actual approval
might involve several family members. When it comes to negotiations, executives from some
cultures may prefer working on the specifics, while others may prefer to work on a broad framework
and fill in the details later.

Multinational Corporations
MDUTHEINTACTONE25 OCT 20192 COMMENTS

Multinational Corporations or Multinational Companies are corporate organizations that operate

in more than one country other than home country. Multinational Companies (MNCs) have their
central head office in the home country and secondary offices, facilities, factories, industries, and
other such assets in other countries.

These companies operate worldwide and hence also known as global enterprises. The activities
are controlled and operated by the parent company worldwide. Products and services of MNCs
are sold around various countries which require global management.

Features of a Multinational Company

114. High Turnover and Many Assets

MNCs operate on a global scale. Which means they have huge assets in almost all countries in
which they operate. Their turnovers can also be incomprehensibly large.

 Control

MNCs have unity of control. So while they have many branches in many countries, the main
control will remain with the head office in its country of origin. The business operations in the
host country have their own management and offices, but the ultimate control will still remain at
the head office.

59. Technological Advantages

As we saw earlier, an MNC has at its disposal huge amounts of wealth and investments. This
allows them to use the best technology available to boost their products and their company. Most
companies also invest huge money in their Research & Development Department to invent and
discover new technological marvels.

 Management by Professionals

An MNC is run by very competent and capable individuals. They have suitable managers to take
care of their business operations, technology, finances, expansion etc. And they are also able to
attract the top talent to their corporations due to their resources and their reputations.

 Aggressive Marketing

MNCs can spend a lot of their money on marketing, advertising, and promotional activities.
They target an international audience, so effective marketing becomes necessary. Aggressive
marketing allows them to capture the market and sell their products globally.

Merits of a Multinational Companies in a Host Country

 One of the main advantages to the host country is that MNCs boost theireconomic growth. They
bring with them huge investments and capital. And then through subsidiaries, joint ventures, branches,
factories they promote rapid industrial growth. In fact, MNCs are known as the messengers of progress.
 A multinational corporation helps the technological growth of the country as well. They bring
new innovationsand technological advancements to the host country. They help modernize the industry
in developing countries.
 MNCs also reduce the host countries dependence on imports. Imports reduce while exports
from the country see a rise.
 All MNCs have enormous capitaland resources at their disposal. A good portion of such
resources is invested in R&D. This can be very beneficial to the host countries where they set up their
R&D facilities.
 Multinational corporations also promote maximum utilization of the country’s resources. This, in
turn, leads to economic development.

Merits of Multinational Companies in the Home Country

12. MNCs make their home countries (country of origin) very rich by their revenues. The
corporation will collect fees, royalties, profits, charges from all their host countries and bring them back
to the home country. This huge inflow of foreign exchange is very beneficial to the home country.
13. MNCs provide a means of co-operation between developed countries and developing or
underdeveloped countries. This allows both to benefit from the partnership.
14. And these multinational corporations also help promote bilateral trade relations between
countries. This is beneficial to both the countries and the global market and economy.

Strategic Choice
THESTREAK26 DEC 20183 COMMENTS

Strategic choice is a systemic theory of strategy. This theory is built on a notion of interaction in
which organizations adapt to their environment in a self-regulating, negative-feedback
(cybernetic) manner so as to achieve their goals. The dynamics, or pattern of movement over
time, are those of movement to states of stable equilibrium. Prediction is not seen as problematic.
The analysis is primarily at the macro level of the organization in which cause and effect are
related to each other in a linear manner. Micro-diversity receives little attention and interaction is
assumed to be uniform and harmonious.

Importance of Strategic Choices

Whether a business succeeds or fails depends in large measure on the strategic choices made by
the owner. Spending large amounts of time and money introducing a product that turns out to
have a very limited market is an example of a bad strategic choice. Anticipating a change in
consumer tastes and introducing a service to take advantage of that change before competitors do
is an example of a good strategic choice. The development of business strategy takes into
account that all companies must cope with limited resources to some extent. The most successful
companies can allocate scarce resources to the projects that have the greatest positive impact on
revenue growth or improvements in productivity and efficiency that can increase profit margins.
 Strategic Choice Process

(I) Focusing on strategic alternatives: It involves identification of all alternatives. The strategist
examines what the organization wants to achieve (desired performance) and what it has really
achieved (actual performance). The gap between the two positions constitutes the background for
various alternatives and diagnosis. This is gap analysis. The gap between what is desired and
what is achieved widens as the time passes if no strategy is adopted

(II) Evaluating strategic alternatives: The next step is to assess the pros and cons of various
alternatives and their suitability. The tools which may be used are portfolio analysis, GE business
screen and corporate Parenting.

(iii) Considering decision factors:

(a) Objective factors:-

115. Environmental factor

116. Volatility of environment
117. Input supply from environment
118. Powerful stakeholders
119. Organizational factors
120. Organization’s mission
121. Strategic intent
122. Business definition
123. Strengths and weaknesses
 (b) Subjective factors:-

 Strategies adopted in the previous period

 Personal preferences of decision- makers
 Management’s attitude toward risk
 Pressure from stakeholder
 Pressure from corporate culture
 Needs and desires of key managers.

Leadership Meaning and Types of Leaders

AKTUTHEINTACTONE28 AUG 20192 COMMENTS

Leadership

“Leadership is the quality of behavior of individuals whereby they guide people or their
activities in organizing efforts” — Chester I. Barnard

“Leadership is the ability of a superior to induce subordinates to work with confidence

and I zeal” — Koontz and ‘Donnell

“Leadership is the process by which an executive imaginatively directs, guides and

influences the work of others in attaining specified goals.” — Theo Haimann

Leadership may be defined as a position of power held by an individual in a group, which

provides him with an opportunity to exercise interpersonal influence on the group
members for mobilizing and directing their efforts towards certain goals. The leader is
at the Centre of group’s power structure, keeps the group together, infuses life into it,
moves it towards its goals and maintains its momentum.

For example, a leader of national or international standing commands widespread

influence over a large number of people while the influence of the leader of a small work
group in an organization is very limited. Both are leaders in their own right and fulfill our
definition of leadership.

Leadership is an influential process. The leader is in a position to shape, regulate,

control and change the attitudes, behaviour and performance of his group members.
The latter are supposed to comply with the former’s desires and directives and partially
suspend their own judgment and discretion. There exists a particular relationship
between the leader and his group members which is characterized by interpersonal and
social interaction.
Nature of Leadership

(i) Leadership derives from power and is similar to, yet distinct from, management. In
fact, “leadership” and “management” are different. There can be leaders of completely
unorganized groups, but there can be managers only of organized groups. Thus it can
be said that a manager is necessarily a leader but a leader may not be a manager.

(ii) Leadership is essential for managing. The ability to lead effectively is one of the keys
to being an effective manager because she/he has to combine resources and lead a
group to achieve objectives.

(iii) Leadership and motivation are closely interconnected. By understanding motivation,

one can appreciate better what people want and why they act as they do. A leader can
encourage or dampen workers motivation by creating a favorable or unfavorable
working environment in the organization.

(iv) The essence of leadership is followership. In other words, it is the willingness of

people to follow a person that makes that person a leader. Moreover, people tend to
follow those whom they see as providing a means of achieving their desires, needs and
wants.

(v) Leadership involves an unequal distribution of power between leaders and group
members. Group members are not powerless; they can shape group activities in some
ways. Still, the leader will usually have more power than the group members.

(vi) Leaders can influence the followers’ behavior in some ways. In fact, leaders can
influence workers either to do ill or well for the company. The leader must be able to
empower and motivate the followers to the cause.

(vii) The leader must co-exist with the subordinates or followers and must have the
clear idea about their demands and ambitions. This creates loyalty and trust in
subordinates for their leader.

(viii) Leadership is to be concerned about values. Followers learn ethics and values
from their leaders. Leaders are the real teachers of ethics, and they can reinforce ideas.
It is very important for leaders to make positive statements of ethics if they are not
hypocritical.
 (ix) Leading is a very demanding job for both physically and psychologically. The leader
must have the strength, power, and ability to meet the bodily requirements; zeal, energy,
and patience to meet the mental requirements for leading.

TYPES OF LEADER

1. Managerial Leader

A managerial leader is the least effective of the five types of leaders. They have the
least influence. People only follow them because they have to. They are not in the
position to serve others. Their desire is to be served by others because they are in the
position. They see others as tools to use to complete the objective for the day. They
prefer to make decisions. Their weakness is character development.

Here’s a brief review of characteristics:

124. Character is weak.

125. Desire is “to be served” rather than “to serve.”
126. They have a scarcity mindset.
127. Competency can range from undeveloped to highly developed.
128. Focus is on managing (directing/controlling) people and processes.
129. Values the position more than the people.
130. Strength comes from power, control, formal authority, and personal results.

2. Relational Leader

A relational leader builds relationships in order to influence others. People want to

follow them because of who they are, not what they know. They develop mutual respect
with others and work well with them. Although people want to follow them, they have
not developed specialized knowledge. Their weakness is not making the necessary
sacrifices to develop their competency.

Here’s a brief review of characteristics:

 Character is strong.
 Desire is to serve.
 They have an abundance mindset.
 Competency is undeveloped and generalized.
 Focus is on leading (influencing/releasing) people.
 Values people more than the position.
 Strength comes from relationships and moral authority.
 3. Motivational Leader

A motivational leader seeks mutual benefit for themselves, others, and the organization.
People want to follow them because of who they are and what they know. They
influence others from the outside. They are process focused. They are trusted and
deliver results for themselves, their families, their team, their organization, their
customers, their suppliers, and their community. Their weakness is not making the
necessary sacrifices to reproduce other motivational leaders.

Here’s a brief review of characteristics:

60. Character is strong.

61. Desire is to serve.
62. They have an abundance mindset.
63. Competency is developed and specialized.
64. Focus is on leading (influencing/releasing) people, managing the processes, and getting
results.
65. Values people more than the position.
66. Strength comes from relationships, moral authority, and team results.

4. Inspirational Leader

An inspirational leader inspires managerial and relational leaders to become

motivational leaders. Their focus is on growing themselves in order to inspire others to
grow. They influence others on the inside. They are people-focused not process-
focused. They focus heavily on character development. True inspirational leaders are
followed because of how much they care and who they are on the inside. They are
inspired by the growth of those following them.

Here’s a brief review of characteristics:

 Character is stronger.
 Desire is to serve and develop others.
 They have an abundance mindset.
 Competency is highly developed and specialized.
 Focus is on leading (influencing/releasing) people and developing motivational leaders.
 Values people more than the position.
 Strength comes from relationships, moral authority, and the growth of others.

5. Transformational Leader
 A transformational leader’s passion and purpose is to transform others. They are the
most influential of the five types of leaders and are highly respected. Their reputation
precedes them. They are well known for developing leaders. Their influence touches
people in all industries and across multiple generations. They have influenced many
leaders for many years. Their influence is continuously being transferred through many
other leaders at many different times in multiple locations.

Here’s a brief review of characteristics:

 Character is strongest.
 Desire is to serve and to develop others.
 They have an abundance mindset.
 Competency is highly developed and specialized.
 Focus is on leading (influencing/releasing) people and developing motivational and
inspirational leaders.
 Values people more than the position.
 Strength comes from relationships, moral authority, growth of others, and the respect they
have earned.

Strategic Issues in International Assignment

AKTUTHEINTACTONE21 JAN 20201 COMMENT

Also referred to as a secondment or transfer, an assignment might be internal (to a different role
abroad with the same employer) or to an external employer. A key characteristic of an
international assignment is that an employee from one legal entity and country (‘home’ country)
temporarily performs services in another country (‘host’ country).

Potential Assignment Structures

There are a number of different ways in which assignments can be structured and documented.
Which approach is appropriate will depend on a range of issues including employment law, tax,
pension, social security and regulatory implications as well as the expectations of employees.
Five frequently used assignment structures are:

131. The employee continues to be employed solely by the home employer;

132. The contract with the home employer is suspended and the employee enters into a local
employment contract with the host employer for the assignment;
133. The contract with the home employer is terminated with a promise of re-employment at the
end of the assignment. In the meantime, the employee enters into a local employment contract with the
host employer;
134. The contract with the home employer is suspended and the employee enters into a contract
with an international assignment company (IAC) within the employer group; or
135. The contract with the home employer is suspended and the employee enters into a contract
with both an IAC and the host country employer

When deciding on the best structure for the circumstances, some questions to consider are:

 Do the host country’s laws require employment by a local entity, ruling out sole employment by
the home employer?
 Where there is no contract of employment in place with the host employer, could local laws
presume that the host is the de facto employer?
 If the home contract is “suspended”, is the home employer prepared to accept the legal
uncertainty, in employment law terms, that this status brings?
 In a dual contract structure, who will bear the greatest risk of being liable for employment
claims – host, home (or the IAC)?
 Will the employee accept the termination of his/her home contract?
 What is the impact on pension and benefit schemes, social security and tax?

Are there key terms in the home contract that require special consideration and protection, for
example, restrictive covenants and confidentiality?

Which national law applies, when and to what? Which courts would have jurisdiction in the
event of a dispute?

Who pays for, and manages, the employee during the assignment and will the employee return to
the home country?

Looking forward

It is inevitable that documenting assignments will become a smoother process as employers

become more familiar with the issues involved. However, the range of significant personal, legal
and financial implications will mean that a degree of tailoring will always be necessary, in order
to avoid negative repercussions.