1458-Strat Humen ResMgmt 06 [MC-S3-CC-4] Cover Oct24.

pdf - October 19, 2024

 Contents

PAGE
UNIT-I
Lesson 1: Concept and Context of SHRM 3–19
Lesson 2: Corporate Strategy of SHRM 20–34
Lesson 3: E
 volution of Strategic HRM and its Relationship with the
Resource-based View of Firm  35–50
Lesson 4: SHRM and HR: Relationship and Challenges 51–65
Lesson 5: Competencies of HR Professionals 66–82

UNIT-II
Lesson 6: Strategic Human Resource Planning and Recruitment 85–106
Lesson 7: Strategic Selection, Training and Development 107–130
Lesson 8: Reward and Compensation Strategy 131–149
Lesson 9: Corporate Strategy; Career Development; Organization
Development Industrial Relations; Workforce Diversity 150–168
Lesson 10: Employee Separation, Retrenchment and Retention 169–183

UNIT-III
Lesson 11: Identifying Strategic Positions 187–206
Lesson 12: HR Analytics 207–226
Lesson 13: What is Employee Engagement? 227–244
Lesson 14: Matching Culture With Strategy 245–263
Lesson 15: Behavioural Issues in Strategy Implementation 264–282

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

PAGE
UNIT-IV
SHRM and Business Performance
Lesson 16: Strategic Human Resource Management for Competitive
Advantage285–304
Lesson 17: High Performance Work Systems and Strategic Human
Resource Management 305–321
Lesson 18: Human Resource Management and Firm Performance:
Evaluating Strategic Human Resource Management
Effectiveness322–341
Lesson 19: SHRM and Customer Outcomes; HR Analytics 342–364
Lesson 20: HC Bridge Model and Decision Science Model 365–383

UNIT-V
Issues in Mergers and Acquisition
Lesson 21: Issues in Mergers and Acquisitions 387–406
Lesson 22: Outsourcing and Its HR Implications 407–425
Lesson 23: HR Strategy in International Context: HRM in Developing
Countries426–444
Lesson 24: Technology Ethics and Values and HRM 445–462
Lesson 25: Future of SHRM 463–481

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 UNIT - I

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Strategic Human Resource Management_L1-15.indd 2 16-Oct-24 2:49:02 PM
 L E S S O N

1
Concept and Context
of SHRM
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
1.1 Concept and Context of SHRM
1.2 Importance and Relevance of SHRM
1.3 Dimensions of the Role of SHRM
1.4 Context of Strategic Human Resource Management
1.5 Conclusion
1.6 References

1.1 Concept and Context of SHRM

About HRM
The concept of Human Resource Management (HRM) has generated a lot of interest among
academics and practitioners alike since its emergence in the mid-1980s. The overall pur-
pose of HRM is to ensure that the organization is able to achieve success through people.
Ulrich and Lake (1990) point out the importance of HR systems in an organisation when
they say: ‘HRM systems can be the source of organizational capabilities that allow firms
to learn and capitalize on new opportunities’.
Storey (1989) believes that HRM can be regarded as a ‘set of interrelated policies with
an ideological and philosophical underpinning’. He suggests four aspects that constitute
the meaningful version of HRM:
1. A particular constellation of beliefs and assumptions;
2. A strategic thrust informing decisions about people management;
3. The central involvement of line managers;
4. Reliance upon a set of ‘levers’ to shape the employment relationship.
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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes There have been many theoretical models of HRM that have been proposed to
aid the understanding of the field and many are constantly being envisioned.
One of the first models proposed to understand HRM was the Matching
model of Fombrun et al. (1984). They held that HR systems and the or-
ganization structure should be managed in a way that is congruent with
organizational strategy (hence the name ‘matching model’).
According to this model, the typical human resource cycle is generally
understood to consist four generic processes or functions that are per-
formed in all organizations. These are:
1. Selection: Matching available human resources to jobs or procuring
such resources.
2. Appraisal: (Performance Management).
3. Rewards: ‘The reward system is one of the most under-utilized and
mishandled managerial tools for driving organizational performance’.
It must reward short- as well as long-term achievements, bearing
in mind that ‘business must perform in the present to succeed in
the future’.
4. Development: Developing high-quality employees.
This is by no means a comprehensive list of HR functions but is merely
a generic common one that lists the functions required in most if not all
organisations. Depending on the industry and organisation, the HR func-
tions also include retention and exit management of employees, facilitation
of understanding about the organisational culture and its assimilation by
employees, management of workforce diversity, ensuring ethical treatment
and well-being of employees among others.
Another of the many models of HRM proposed by the academia is the
Harvard framework of Beer et al. (1984). The Harvard model believes
that HRM has two characteristic features:
1. Line managers accept more responsibility for ensuring the alignment
of competitive strategy and personnel policies;
2. Personnel has the mission of setting policies that govern how personnel
activities are developed and implemented in ways that make them
more mutually reinforcing.
Thus, this model emphasises: ‘A longer-term perspective in managing
people and consideration of people as potential assets rather than merely
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 Concept and Context of SHRM

a variable cost’. It also underscores the view that HRM primarily belongs Notes
to line managers.
All models have their own strengths and weaknesses and are generally
found to be normative in the sense that any and all models need to be
customised in order to be rendered suitable for implementation by prac-
titioners. However, it is important to note that this diversity and variety
do not detract from the need for the underlying concept of HRM. There
is only a difference of opinion regarding the exact definition, scope and
role of HRM in different situations.
Thus, the need for HRM is understood to be indispensable in today’s work
organisations. However, the importance of the role of HRM in strategy for-
mulation and its implementation is a relatively new concept and as such needs
to be clearly understood in order to better understand the nuances of this
relationship. But in order to do so we must first understand the underlying
concept of strategic management and how it manifests in the corporate world.
Understanding Strategic Management
The word ‘strategy’, derives from the Greek noun strategus, meaning ‘com-
mander in chief’. The development and usage of the word suggest that it is
composed of stratos (army) and agein (to lead). In a management context,
the word ‘strategy’ has now come to denote a specific pattern of decisions
and actions undertaken by the top management of the organization in or-
der to accomplish performance goals. Wheelan and Hunger (1995) define
strategic management as ‘that set of managerial decisions and actions that
determines the long-run performance of a corporation’. Hill and Jones (2001)
take a similar view when they define strategy as ‘an action a company takes
to attain superior performance’. This indicates that the aim and objective
of strategic management are more long-term and performance-oriented. In
other words, this indicates that the field of strategic management looks at
the long-term bottom-line impact of managerial decisions and actions.
Strategic management is considered to be a continuous activity that
requires a constant adjustment of three major interdependent poles: the
values of senior management, the environment, and the resources avail-
able. In both the descriptive and prescriptive management texts, strategic
management appears as a cycle in which several activities follow and
feed upon one another. The strategic management process is typically
broken down into five steps:

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Notes 1. Evaluation of organisation’s mission and goals

2. SWOT analysis of the organisation with respect to the environment
3. Strategy formulation
4. Strategy implementation
5. Strategy evaluation.
The first step in the strategic management model begins with senior
managers evaluating their position in relation to the organization’s current
mission and goals. The mission describes the organization’s values and
aspirations; it is the organization’s very reason for existence and indicates
the direction in which senior management is going or wishes to go. Goals
are the desired ends sought through the actual operating procedures of
the organization and typically describe short-term measurable outcomes.
The second step involving SWOT analysis of the environment looks at
the internal organizational strengths and weaknesses and the external
environment for opportunities and threats. The factors that are most
important to the organization’s future are referred to as strategic factors
and can be summarized by the acronym SWOT - Strengths, Weaknesses,
Opportunities and Threats.
The third step of Strategic Formulation involves senior managers evaluat-
ing the interaction between strategic factors and making strategic choic-
es that guide managers to meet the organization’s goals. Strategies are
formulated at the corporate, business and specific functional levels. The
term ‘strategic choice’ raises the question of who makes decisions and
why they are made. The notion of strategic choice also draws attention
to strategic management as a ‘political process’ whereby decisions and
actions on issues are taken by a ‘power-dominant’ group of managers
within the organization. Child (1972) validates this interpretation of the
decision-making process when he says: When incorporating strategic
choice in a theory of organizations, one is recognizing the operation of
an essentially political process, in which constraints and opportunities
are functions of the power exercised by decision-makers in the light of
ideological values. In a political model of strategic management, it is
necessary to consider the distribution of power within the organization.
According to Purcell and Ahlstrand (1994), we must consider ‘where
power lies, how it comes to be there, and how the outcome of compet-
ing power plays and coalitions within senior management are linked to
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 Concept and Context of SHRM

employee relations’. The strategic choice perspective on organizational Notes

decision-making makes the discourse on strategy ‘more concrete’ and
provides important insights into how the employment relationship is
managed.
Strategy implementation, fourth step in the process, is an area of activ-
ity that focuses on the techniques used by managers to implement their
strategies. In particular, it refers to activities that deal with leadership
style, the structure of the organization, the information and control sys-
tems, and the management of human resources. Many of the established
management consultants and academics emphasize that leadership is the
most important and difficult part of the strategic implementation process.
The last step Strategy evaluation is an activity that determines to what
extent the actual change and performance match the desired change and
performance.
The strategic management model depicts the five major activities as form-
ing a rational and linear process. It is, however, important to note that it
is a normative model, that is, it shows how strategic management should
be done rather than describing what is actually done by senior managers
(Wheelen & Hunger, 1995). As we have already noted, the notion that
strategic decision making is a political process-implies a potential gap
between the theoretical model and reality.
Concept of Strategic Human Resource Management
SHRM as a concept is very difficult to pin down with a definition and
as such there have been as many attempts at its definition as there are
points of view about it. Some define it as: A distinctive approach to
employment management which seeks to achieve competitive advantage
through the strategic deployment of a highly committed and capable
workforce using an array of cultural, structural and personnel techniques
(Storey, 2001). While others have taken a more system-oriented view
like Boxall and Purcell (2003) do when they describe ‘Human resource
management (alternatively employee relations or labour management)
includes the firm’s work systems and its models of employment. It em-
braces both individual and collective aspects of people management. It
is not restricted to any one style or ideology’. Some have simplified it
with the opinion that Strategic HRM focuses on actions that differentiate
the firm from its competitors (Purcell, 1999).

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Notes Just like strategic management, SHRM can also be understood by the
three underlying concepts of competitive advantage, distinctive capabil-
ities and strategic fit.
Competitive Advantage: As already discussed above, human resources
are a ready source of sustained competitive advantage. This is so because
by their very nature human resources are individuals with various back-
grounds, experiences and motivations and are thus unique and individual
in their own right. No employee can perfectly dissociate from their iden-
tity and personal life and hence bring one or more aspects of it to the
workplace with them. This makes them unique and thus inimitable. This
uniqueness receives a boost when the personalities and idiosyncrasies of
the employees are in line with organisational values and culture. This
boosts the sustainability of the competitive advantage that the human
resource represents.
Distinctive Capabilities: In terms of human resources, the distinctive
capabilities of an organisation can be thought to primarily refer to the
knowledge, skills, expertise and commitment of the employees. This
means that if the organisation is aware of the unique capabilities of its
human resources or has in fact proactively collected such resources for
their capabilities then they can harness these for strategic gains. SHRM
advocates that these distinctive capabilities be strategically acquired or
developed with planned efforts in order to gain sustained advantage over
long term.
Strategic Fit: Even the best plants would fail to produce if they are
put in a hostile environment without support for long. Similarly, even
the most carefully chosen human resources will not provide any per-
manent results if they are misfit in the organisation or simply have no
place in the long-term strategy of the organisation. It is very crucial
for the right capabilities to be nurtured in order to promote maximal
realisations of opportunities in the external environment while min-
imising the threats. The right capabilities are those that play on the
strengths of the individuals as well as the organisation and ignore the
weaknesses of the same. This is the strategic fit between the human
resources and organisational strategy which needs to be managed in
order to efficiently practice SHRM.

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Notes
1.2 Importance and Relevance of SHRM
Strategic Human Resource Management has been, and remains, one of
the most powerful and influential ideas to have emerged in the field of
business and management during the past twenty-five years. It has had
implications and applications in all spheres of management. Policy mak-
ers at government level have drawn upon the idea in order to promote
‘high performance workplaces’ and ‘human capital management’. Within
business corporations, the idea that the way in which people are man-
aged could be one of, if not the most crucial factor in the whole array
of competitiveness inducing variables, has become a widely accepted
proposition during this period.
The idea of SHRM is to promote high performance workplaces and human
capital management. SHRM can be defined as the linking of human resources
(HR) with organisations’ strategic goals and objectives so as to improve busi-
ness performance and develop organisational culture that nurtures innovation,
flexibility and competitive advantage. In an organisation, SHRM means ac-
cepting and involving the HR function as a strategic partner in the formulation
and implementation of the company’s strategies through HR activities such
as recruiting, selecting, training and rewarding personnel. It basically centers
on HR programs with long-term objectives i.e. instead of focusing just on
internal HR issues, the major focus is on addressing and solving problems that
affect people management programs in the long run. Therefore, the primary
goal of strategic HR is to increase employee productivity and to identify key
HR areas where strategies can be implemented in the long run to improve
the overall employee motivation along with productivity.
Strategic orientation of human resource management (HRM) is important
for all organisations irrespective of its size and domain. It simply requires
the alignment of every HR function with business strategy. It establishes
relationship between HRM and strategic management of the organization
and facilitates the HRM to change its image as a “cost center” to that
of a “strategic business partner”. SHRM pertains to not just one or two
but all the dimensions of traditional HRM and each of these dimensions
needs to be looked through the eyes of strategic management in order to
truly understand not just the concept SHRM but also the practitioner’s
view of the same.

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Notes
1.3 Dimensions of the Role of SHRM
Other lesson notes will discuss each of the major dimension and its role
and relationship with SHRM in detail. However, given below is a brief
overview of few of the selected dimensions to aid better understanding
of the concept of SHRM as viewed by managers.
SHRM and Performance
SHRM is all about long-term gains made in the bottom line through
strategic alignment and sustained competitive advantage. This requires
optimal performance in order to succeed. Performance, in an SHRM
context, is not just a dimension as in traditional HRM where the HR
manager monitors the appraisal and uses it to facilitate other functions.
Performance, in a strategic context, is the very bedrock of success for
indeed any efforts to gain strategic advantage will always fall short of
success in the face of suboptimal performance. Also it is very important
to note here that when a firm plans its HRM strategically then not just
performance of individual employees or teams but the whole performance
management system needs to be aligned with the strategic planning and
overall business goals. It is when there is true congruence in the perfor-
mance management systems and the overall strategy of the organisation
that the best benefits of SHRM can be gained.
SHRM and Leadership
SHRM has been understood as a top-driven practice. The very concept
of managerial leadership permeates and structures the theory and prac-
tice of work organizations thereby influencing SHRM a great deal. Most
definitions of managerial leadership reflect the assumption that it involves
a process whereby an individual exerts influence upon others in an or-
ganizational context. Within the literature, there is a continuing debate
over the alleged differences between a manager and a leader: managers
develop plans whereas leaders create a vision (Kotter, 1996). Paradigms
like ‘transformational leadership’ and ‘charismatic leadership’ may be
explained by understanding the prerequisites of the resource-based SHRM
model. Managers are looking for a style of leadership that will develop
the firm’s human endowment and, moreover, cultivate commitment, flex-
ibility, innovation and change.

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There are explicit links between learning, leadership and organizational Notes
change. Thus, it would seem that a key constraint on the development of
a resource-based SHRM model is leadership competencies. Apparently,
‘most re-engineering failures stem from breakdowns in leadership’ (Hammer
& Champy, 1993). In other words, the ‘transformational’ leadership is
all about empowering the workers. These models emphasise that the
psychological contracts of the employees and their relationships with the
organisation can be manipulated by a successful leader. The employees
when thus manipulated to believe that they owe the organisation for
empowering them and they are a part of the ‘family’ are more likely to
adhere to strategic directives than those who feel alienated or underappre-
ciated by the leadership. This does not mean that the power structures at
workplace are much different but effective strategic leadership can shift
the focus of employees towards a long-term mutually beneficial outlook
thereby aiding the bottom line.

SHRM and Workplace Learning

Existence and exploitation of distinctive capabilities is one of the ba-
sic underlying concepts of strategic management. Formal and informal
work-related learning has come to represent a key lever that can help
managers to achieve the substantive HRM goals of commitment, flex-
ibility and quality (Beer et al., 1984; Keep, 1989). From a managerial
perspective, formal and informal learning can, it is argued, strengthen an
organization’s ‘core competencies’ and thus act as a lever to sustainable
competitive advantage - having the ability to learn faster than one’s com-
petitors is of the essence here. There is a growing body of work that has
taken a more critical look at workplace learning. Some of these writers,
for example, emphasize how workplace learning can strengthen ‘cultural
control’ (Legge, 1995), strengthen the power of those at the ‘apex of the
organization’ and be a source of conflict when linked to productivity or
flexibility bargaining and job control (Bratton, 2001). Thus, it is very
important to understand and orient the learning systems towards the
planned strategic outcomes. Failure to ensure availability of competent
workforce at strategically critical points is a recipe for disaster that needs
to be avoided at all costs.

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Notes SHRM and Industrial Relations

Worker commitment is firmly embedded in the SHRM model as a require-
ment for gaining sustained competitive advantage. Many argue that there
is a contradiction between the objectives of the SHRM model and trade
unions. In the prescriptive management literature, the argument is that the
collectivist culture of trade unions, defined by their ‘them and us’ attitude,
is not aligned with the HRM’s goal of high employee commitment and
the individualization of the employment relationship. Critics argue that
‘high-commitment’ HR strategies are designed to provide workers with a
false sense of job security and to obscure underlying sources of conflict
inherent in capitalist employment relations. While on the opposite end
of the spectrum, other scholars have argued that trade unions and the
‘high-performance-high-commitment’ HRM model cannot only coexist but
are indeed necessary if any high performance work system is to succeed.
SHRM and Diversity
There is a lot of diversity in today’s workplaces. Diversity can be cul-
tural, geographical and even ethical. The corporate world is marked by
the prevalence of multinational organisations today. This phenomenon
is increasing as the proverbial distances in the business world shrink
each day. This, however, brings its own set of issues. The employment
relationship is necessarily shaped by national systems of employment
legislation and the cultural contexts in which it operates. Thus, as the
corporate world is becoming more globalized, variations in national
regulatory systems, labour markets and institutional and natural contexts
are likely to constrain or shape any tendency towards ‘convergence’ or
a ‘universal’ model of best HRM practice. This has necessitated a need
for the management to move from international HRM towards a more
comparative HRM.
International HRM has been defined as ‘HRM issues, functions and poli-
cies and practices that result from the strategic activities of multinational
enterprises and that impact the international concerns and goals of those
enterprises’ (Scullion, 2001). Of considerable interest to HR academics
and practitioners is the question of the extent to which an HR strategy
that works effectively in one country and culture can be transplanted to
others. International HRM tends to emphasize the subordination of national

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culture and national employment practices to corporate culture and HRM Notes
practices (Boxall, 1995). This can lead to potential disasters when such
presumptions backfire. It is hardly fair to expect managers and workers
in culturally different places like Mexico, Chile, India, Pakistan, South
Africa and elsewhere to accept the underlying ideology and embrace the
HRM paradigm prevalent in the USA. Indeed, recent comparative research
suggests that there are significant differences between Asian, European
and North American companies with regard to HR strategies (Brewster,
2001; Kidd et al., 2001; Scullion, 2001). A diligent HRM system should
seek to explain the patterns and variations encountered in cross-national
HRM rather than being simply a description of HRM institutions and
HR practices in selected countries. For any strategy to succeed, it is
imperative that the implementation be excellent. Implementation needs
actual people. Thus any SHRM initiative is dependent on people for its
success and thus it should be sensitive to and aligned with the diversity
inherent in work.
Thus, the SHRM can be defined as the organisations action plan to align
HRM with strategic business objectives so that the competitive advan-
tage can be achieved through its skilled, committed and well-motivated
workforce. This can only be possible if every HR function is strategically
aligned.

1.4 Context of Strategic Human Resource Management

No man is an island. The same is true for any entity that interacts with
the world we live in and organisations are no exceptions. Indeed organ-
isations are much more complex systems that not only interact with the
external environment but also the internal environment as well. Thus, the
context in which SHRM needs to be understood has to be considered at
the two levels, external and the internal.
On an external level, there are many factors that may govern or influence
the environment in which an organisation functions. Some of the aspects
of the factors are evident like most of those mentioned below while some
are not immediately apparent in their influence:
1. Technological factors
2. Economic factors

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Notes 3. Sociocultural factors

4. Politico-legal factors
Technological Factors: The existing technological know-how and the rate
of advancement and innovation in the same is an important influencer
of strategy as is the rate at which the old technology is rendered useless
or uncompetitive. One such example is that of the software industry
where the rate of both innovation and obsoletion has accelerated at an
exponential pace and innovative turnarounds are measured in number
of years if not months instead of decades. The impact of technology
on businesses is nothing new. Industrial revolution is a testament to
this statement. Assembly lines and then automation paved the way for
future prosperity at the cost of present of many. Automation, robotics,
advanced technical tools not only changed the key skill requirements for
roles across organisations they also rendered many previously valuable
roles obsolete. Worker resentment is directly proportional to their fear
of change and insecurity. As such the SHRM practice needs to carefully
align expectations with strategic goals and plan to manage the expected
changes in order to prevent backlash and promote acceptance of changes.
Economic Factors: The cost of factors of production and their impact
on market needs to be factored in any robust strategy. Also the macro-
economical indicators are important sources of precious information for
strategists. Global economic trends and national economic conditions
both can substantially influence the business strategy of any organisation.
There are international platforms like the World Trade Organisation and
the World Bank which wield considerable influence over nations too. The
economies of the world are no longer independent but are increasingly
interdependent as was evident in the overall struggle against decline faced
by the leading world economies in the face of economic recession in the
USA. Costs of production too are mostly driven by international markets
and as such susceptible to international events. The resources available
in the global village of business today are also much different than
those of the past with improved transportation and communication. The
increased ease of mobility of all resources including HR has the potential
to be both greatly advantageous if managed well as well as detrimental
if ignored. Thus any robust strategy needs to consider economic factors
in order to be successful.

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 Concept and Context of SHRM

Sociocultural Factors: The world is changing rapidly and so are societal Notes
norms and cultures. This dynamism is further aided by the multicultural
workplaces of today that are a direct consequence of globalisation. This
necessitates the need for factoring in values and attitudes of society in
general and workforce in particular when contemplating any strategy. This
has also been highlighted in the context of diversity many times. As cul-
ture is a dynamic entity in itself, the influx of foreign elements of other
cultures brought in by the global exposure, ease of communication and
multiethnic workforce has only added to this dynamism. Societal norms
are changing especially acceptance of previously marginalised sections of
society like women and minorities in workplaces has changed drastically
with increasing focus of equal participation being important to the image
as well. Organisations are seen going beyond the legal requirements to
court society’s good opinion regarding the same. With increased global
communications and presence of social media, organisations can no longer
afford to antagonise the society in which they exist.
Politico-Legal Factors: Any business is subject to the local laws and
governing bodies. This influence is further compounded when we take
into account the fact that globalisation means nations also interact at a
business level and there may be political and legal pressures or require-
ments that put constraints on the freedom of business across political
borders. Trade agreements and trade sanctions between nations are an
example of such constraints that may impact strategy of organisations
located in member nations. There are global forums that dictate the rules
of business at the international level and all organisations must account
for these potentialities in their strategy. At local level too, the increased
exposure to information and global practices has led to changing politi-
cal and legal dynamics. Governments are also much more conscious of
their duties and failure to deliver. Transparency in governance has led
to openness in policy making and this has been driven towards a more
inclusive attitude that has resulted in several changes in how the busi-
nesses used to interact with the political bodies. Protective laws have
also forced many an organisation to adapt or perish.
Thus, the external environment is fraught with potholes that can pull
down any strategists who are not prepared for such contingencies. These
factors are also not in control of the organisation and as such can only

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Notes be addressed in the contingency plans of strategists. The factors that are
somewhat in their control are the internal factors.
In the context of internal organisational environment, any strategic
intervention, SHRM is no exception to this, needs to be aligned with its
internal drivers. In the context of SHRM, it needs to be aligned with each
and every system of human resources. This is so because implementation
of any strategy is always going to happen at a human level and if there
is no buy-in created for the strategy or if the strategy is in contrast to the
existing systems then there are going to be clashes which hamper growth
and success. Thus, the organisations need to align their entire employee
life cycles around the strategy. The four most common systems are:
1. Selection/Promotion/Placement
2. Compensation and rewards
3. Development
4. Appraisal
Strategies require distinctive capabilities in turn demand that the best fit
of each role be identified and made available whether through transfer,
promotion or selection. They also require that the strategic resource be
then nurtured and suitably rewarded to implement the strategy. Develop-
ment of resources aids in customisation of resource skill-sets to organi-
sational requirements and enhances the inimitability or uniqueness of the
skills leading to increased sustainability of competitive advantage. The
appraisal process is indeed the most critical of all from the implementa-
tion perspective as this is the process that can provide valuable feedback
information about the success of strategy and pave the way for corrective
measures or contingencies to be enacted well in time.
Thus, the context is crucial to any strategic initiative and SHRM practice
too needs to be seen in the context of its external and internal environ-
ments and include the same in its formulation of strategies.

1.5 Conclusion
In this lesson, we reviewed the concepts of HRM and strategy. We briefly
discussed the concept of strategic management in general before moving
on to the topic of strategic human resource management. The concept

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 Concept and Context of SHRM

of SHRM is an amalgamation of the concepts of HRM and strategic Notes

management. SHRM, we found, should be long-term, top driven and
oriented towards bottom line. It aims at harnessing the inherent inimita-
bility of skilled human resources to generate a difficult-to-duplicate and
thus sustained competitive advantage. The three-part concept of strategy
comprising competitive advantage, distinctive capabilities and strategic
fit lends itself well to a human resource-based interpretation for this very
reason. SHRM has not only the potential to revolutionise the business
but it is also essential for any organisation that seeks to strategically
plan and direct its future. Strategic outlook is necessary for each and
every dimension of human interaction and needs to be carefully formu-
lated with respect to each. All the strategy in the world may be rendered
useless if an organisation fails to take into account the performance or
the trade unions or other equally important aspects of HRM. It is also
critical to note the context in which SHRM exists. Externally, the tech-
nological, economical, sociocultural and the politico-legal factors need
to be considered and internally each and every HR system including but
not limited to the Selection/Promotion/Placement, Compensation and
rewards, Development, and Performance appraisal needs to be aligned
with organisational objectives and overall corporate and business strategy
in order to create a robust strategic initiative that will stand the test of
time and change.
After understanding the concept of SHRM and the context in which it
exists, we will now take a look at how the corporate strategy interacts
with the concept and practice of SHRM in detail in the second lesson.

1.6 References
‹ ‹Barney, J. (1991). “Types of Competition and the Theory of Strategy:
Towards an Integrative Approach”, Academy of Management Review,
Vol. 11(4), pp.791–800.
‹ ‹Beer M, Sector B, Lawrence, P, Quinn M.D., Walton R. (1984).
Managing Human Assets, New York: The free press.
‹ ‹Boxall,P. and Purcell, J. (2003). Strategy and Human Resource
Management, Basingstoke: Palgrave Macmillan.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes ‹ ‹Boxall, P. (1995). Building the theory of comparative HRM. Human

Resource Management Journal, 5(5), 5–17.
‹ ‹Bratton J, Gold J. (2001). HRM - Theory and practice, London:
Routledge.
‹ ‹Brewster, C. (2001). HRM: the comparative dimension. Human
resource management: A critical text, 255–71.
‹ ‹Child, J. (1972). “Organisational structure, environment and performance:
the role of strategic choice” Sociology, Vol. 6(3), pp. 1–22.
‹ ‹Fombrun, C. J., Tichy, N. M., Devanna, M.A. (1984). Strategic
Human Resource Management, New York: Wiley.
‹ ‹Hammer, M. and Champy, J. (1993). Reengineering the Corporation,
London: Nicholas Brealey.
‹ ‹Hill, C, Jones, G. (2001). Strategic Management: An integrated
approach (5th ed), Boston, M.A.: Houghton Mifflin.
‹ ‹Keep, E. (1989). “Corporate training strategies”, in Storey, J. (Ed.),
New Perspectives in Human Resource Management, Routledge,
London, pp. 109–36.
‹ ‹Kidd, J.B., Li, X. and Richter, J. (eds.). (2001). Advances in HRM
in Asia. Basingstoke: Palgrave.
‹ ‹Kotter, J. (1996). Leading Change, Boston: Harvard Business School
Press.
‹ ‹Legge, K. (1995). HRM: rhetoric, reality and hidden agendas. Human
resource management: A critical text, 33.
‹ ‹Porter, M.E. (1985). Competitive Advantage, New York: Free Press.
Purcell J. (1999).
‹ ‹Purcell, J, Ahlstrand, B. (1994). Human Resource Management in
the Multidivisional Company, Oxford: Oxford University Press.
‹ ‹Scullion, H. (2001). International Human Resource Management: In
J., Stores (ed). Human Resource Management: A critical text (2nd
ed.), London: International Thompson Business.
‹ ‹Storey,J. (1989). “From personnel management to human resource
management”, in ed Storey J. New perspective on human resource
management, London: Routledge.

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‹ ‹Storey, J. (2001). ‘Human resource management today: an assessment’, Notes

in Storey, J. (ed.), Human Resource Management: A Critical Text,
London: Thomson Learning.
‹ ‹Ulrich D., and Lake, D. (1990). Organisational Capability: Competing
from inside out, New York: John Wiley & Sons.
‹ ‹Wheelan, T. L., and Hunger, J.D. (1995). Strategic Management
and Business Policy, 5th ed, Reading: Addison-Wesley Longman.

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 L E S S O N

2
Corporate Strategy
of SHRM
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
2.1 About Corporate Strategy
2.2 Types of Corporate Strategies
2.3 Link between Corporate Strategy and HRM
2.4 References

2.1 About Corporate Strategy

Corporate strategy describes a corporation’s overall direction in terms of its general phi-
losophy towards the growth and the management of its various business units. It refers to
decisions on what business to enter, what businesses to retain in the portfolio and those
to exit from. It specifically directs attention at how the corporate office can add value
to the diverse businesses in the portfolio so that their value as a part of the corporation
exceeds the value they would have as free-standing businesses (Armstrong, 1994). Such
strategies may determine the types of business a corporation wants to be involved in and
what business units should be acquired, modified or sold. Thus, this strategy addresses
the fundamental question, ‘What business are we in’?’
Devising a strategy for a multidivisional company involves at least four types of initiatives:
1. Establishing investment priorities and steering corporate resources into the most
attractive business units.
2. Initiating actions to improve the combined performance of those business units with
which the corporation first became involved.
3. Finding ways to improve the synergy between related business units in order to
increase performance.
4. Making decisions dealing with diversification.
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 Corporate Strategy of SHRM

Corporate strategies as described above are expected to operate at a broad Notes

level and are more fundamental in their outlook. They are operationalised
through business strategies which are more practically oriented towards
achieving the objectives of the corporate strategies. If a corporation has
just one business, there is no difference between corporate strategy and
business strategy.
Business strategy focuses on achieving competitive advantage on a sustained
basis. Organisations may take different approach to achieve the same. Superior
efficiency, superior quality, superior customer responsiveness and superior
innovation are all considered to drive competitive advantage in different
ways. Companies achieve these drivers of competitive advantage through
the creation of distinctive competencies. Some academics consider four
modes of strategic orientation: defenders, prospectors, analyzers and reac-
tors. Defenders are companies with a limited product line and management
focus on improving the efficiency of their existing operations. Commitment
to this cost orientation, makes senior managers unlikely to explore new
areas. Prospectors are companies with fairly broad product lines that focus
on product innovation and market opportunities. These sales orientations
make senior managers emphasize ‘creativity over efficiency’. Analyzers
are companies that operate in at least two different product market areas,
one stable and one variable. In this situation, senior managers emphasize
efficiency in the stable areas and innovation in the variable areas. Reactors
are companies that lack a consistent strategy-structure-culture relationship.
In this reactive orientation, senior management’s responses to environmen-
tal changes and pressures thus tend to be piecemeal strategic adjustments.
Distinctive competencies are built through resources and capabilities. Ca-
pabilities are a company’s skills at coordinating its resources and using
them productively. These capabilities get embedded in an organisation’s
routines and processes. By their very nature, capabilities are more difficult
to copy or imitate as they are often the result of a complex interaction
between the structure, systems and values of an organisation. Though,
it is sometimes difficult to explain post facto how exactly a capability
was created, it is possible for an organisation to take deliberate actions
to create capabilities. Competing companies within a single industry can
choose any one of the above four types of strategy. But they then need
to adopt an appropriate combination of structure, culture and processes
consistent with that strategy in response to their environment. The different
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Notes competitive strategies influence the ‘downstream’ functional strategies and

the deliberate actions taken to create resources and capabilities spring
from these functional strategies of the organisation.
Functional strategy pertains to the major functional operations within the
business unit, including research and development, marketing, manufac-
turing, finance and HR. This strategy level is typically mostly concerned
with maximizing resource productivity and addresses the question, ‘How
do we support the business strategy?’
Thus, it is at this functional level that the HRM policies and practices are
expected to support the business strategy goals. After all, as someone aptly
stated, ‘A good business strategy is always informed by people factors’.

2.2 Types of Corporate Strategies

Corporate strategies are driven by long-term organizational goals and the
environment in which the organisation operates. There are mainly three
types of corporate strategies commonly found in the strategic management
literature viz. growth strategy, stability strategy and renewal strategy.
Growth Strategy
A growth strategy is when an organization expands the number of mar-
kets served or products offered, either through its current business(es) or
through new business(es). Because of its growth strategy, an organization
may increase revenues, number of employees, or market share.
Growth platforms are specifically named initiatives selected by a business
organization to fuel revenue and earnings growth. Growth platforms may
be strategic or tactical. Strategic growth platforms are longer-term initia-
tives for high-scale revenue increases. Generic examples of commonly
selected strategic growth platforms include pursuit of specific and new
product areas, entry into new distribution channels, vertical or horizontal
integration, and new product development. With growth strategy, types
of commonly associated business level strategies are:
Horizontal Integration Strategy: The merger or acquisition of new
business operations. An example of horizontal integration would be Apple
entering the search-engine market or a new industry related to laptops
and smartphones.

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 Corporate Strategy of SHRM

Vertical Integration Strategy: Integrating successive stages in the Notes

production and marketing process under the ownership or control of a
single management organization. An example might include a gas-station
company acquiring an oil refinery.
Diversification Strategy: A corporate strategy in which a company ac-
quires or establishes a business other than that of its current product.
Diversification can occur either at the business-unit level or at the cor-
porate level. At the business-unit level, diversification is most likely to
involve expansion into a new segment of an industry in which the busi-
ness already competes. At the corporate level, it generally means entrance
into a promising business outside the scope of the existing business unit.
Market Penetration Strategy: Market penetration occurs when a com-
pany penetrates a market in which current products already exist. This
strategy generally requires great competitive strength, a strong brand, or
both, as most market penetrations demand actively taking market share
from current incumbents. It is an aggressive and often risky approach
to growth.
Market Development Strategy: Market development strategy entails
expanding the potential market through new users or new uses for a
product. The strategy is best accomplished through identifying unique
niche needs in a specific type of user and filling those needs. Market
research is critical in development strategies. New users can be defined as
new geographic segments, new demographic segments, new institutional
segments, or new psychographic segments.
New Product Development Strategy: In business and engineering, New
Product Development (NPD) is the process of developing, researching,
and bringing a new product to market. A product is a set of benefits of-
fered for exchange and can be tangible (that is, something physical you
can touch) or intangible (for example, a service, experience, or belief).
Identifying new needs or new ways of filling them and developing a
new process or product that accomplishes this aim are the goals of this
growth strategy. NPD requires investment in research and development,
usually over the long term, and extensive trial and error.

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Notes Renewal Strategy

Renewal strategy is a direct response to performance issues in an organ-
isation. Managers need to develop strategies that address declining per-
formance. A corporate renewal strategy is a response to a decline in the
corporation’s performance. If customers start buying less of a company’s
products, or the company has unexpected cost increases for materials and
labor, the corporation can create a strategy to alleviate these problems.
Another corporation can buy out a poorly performing firm, and use a
corporate renewal strategy to make it more productive.
The status quo is no longer acceptable and high level strategic interventions
are required. The two main types of renewal strategies are retrenchment
and turnaround strategies.
A corporation does not have to be bankrupt or incur a loss to use a cor-
porate renewable strategy. A turnaround strategy can involve purchasing
a competitor, especially if the competitor has useful patents or popular
products. The corporation has more options available if it implements
its renewal strategy before other negative events happen, while it can
still take out loans and attract new stockholders. Management can use a
corporate renewal strategy while the business is still profitable to make
sure it stays profitable. When the corporation has multiple divisions, the
turnaround strategy considers the future profitability of each division. If a
division is losing money now, but it has the potential to earn high profits
in the future, the corporation can fix the problems with that division. The
corporation can sell off unprofitable divisions with less future income
potential. This is retrenchment strategy and maybe useful in ‘cutting
one’s losses short’. Retrenchment strategy is often used in order to cut
expenses with the goal of becoming a more financially stable business.
Typically the strategy involves withdrawing from certain markets or the
discontinuation of selling certain products or service in order to make
a beneficial renewal. Retrenchment strategies are harder to implement
in some industries. A manufacturing company has to pay for equipment
repair, maintenance, and energy bills to continue making new products,
so it is difficult for the company to reduce its expenses.
Stability Strategy
A stability strategy is a corporate strategy in which an organization con-
tinues to do what it is currently doing. Examples of this strategy include

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continuing to serve the same clients by offering the same product or Notes
service, maintaining market share, and sustaining the organization’s cur-
rent business operations. The organization does not grow, but does not
fall behind, either.
This strategy is actually an overarching term for many sub-strategies that
an organisation follows in times where focussed growth and renewal are
not its primary concerns. The strategies that an organisation follows when
it seeks to consolidate or exploit its strengths are a part of this group.
We discuss below few of the strategies that can be pursued by a stable
organisation in order to ensure its future growth and stability.
Global Strategy
Global strategy, as defined in business terms, is an organization’s strategic
guide to pursuing various geographic markets. A global strategy can be
used for the following benefits among others:
Cost Leadership: A global strategy may be appropriate in industries
where firms face strong pressures to reduce costs but weak pressures
to respond locally; globalization therefore allows these firms to sell a
standardized product worldwide. By expanding to a broader consumer
base, these firms can take advantage of scale economies and learning
curve effects because they are able to mass-produce a standard product
that can be exported.
Market Expansion: Differentiation strategies also enable economies of
scope, either fulfilling different needs in different markets with a similar
series of products, or developing new products based upon the needs and
consumption habits of a new market. Differentiation as part of a global
strategy will often require localization, as organizations must adapt to
consumer tastes better to compete in the new country. For example,
Coca-Cola tastes different depending on the country where it is bought
because of differences in local preferences.
Sourcing: Other popular and primary strategic reasons for globalization
include building supplier relationships, improving access to raw materi-
als (unique to a given region), and cutting costs by using other regions’
specializations. Starbucks sources coffee beans from all over the world,
as climate dramatically affects the type and quality of the bean. The glo-
balization strategy of Starbucks is hugely dependent on global sourcing,

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Notes and strategic managers must carefully monitor this process for costs and
benefits.
Global strategies require firms to coordinate tightly their product and
pricing strategies across international markets and locations; therefore,
firms that pursue a global strategy are typically highly centralized.
With global markets in mind, strategic managers must expand their per-
spective and use varied models to generate different strategies for different
places. Managers must conduct a cost/benefit analysis to identify which
country actually offers the best profit potential. These analyses are how
strategists incorporate global concerns into strategic management.
Cooperative Strategy
A strategic alliance is a relationship between two or more parties to
pursue a set of agreed-upon goals or to meet a critical business need
while remaining independent organizations. This form of cooperation lies
between mergers and acquisitions and organic growth.
Partners may provide the strategic alliance with resources such as prod-
ucts, distribution channels, manufacturing capability, project funding,
capital equipment, knowledge, expertise, or intellectual property. Strategic
alliances allow each partner to concentrate on its own best capabilities,
learn and develop other competencies, and assure adequate suitability of
resources and competencies.
Upper management is tasked with the partner assessment and developing
complex interactive strategies when entering a strategic alliance. Align-
ing stakeholders from different businesses and ensuring the costs do not
outweigh the benefits requires careful managerial consideration. It is also
essential to align alliance objectives with the overall corporate strategy.
A carefully planned and executed cooperation strategy has a high potential
for delivering synergistic gains for all involved parties.
E-Business Strategy
In the emerging global economy, e-business has become an increasingly
necessary component of business strategy. The integration of information
and communications technology (ICT) has revolutionized relationships
within organizations and among organizations and individuals. E-business
methods enable companies to link their internal and external data-processing

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systems more efficiently and flexibly, to work more closely with sup- Notes
pliers and partners, and to better satisfy the needs and expectations of
customers. E-business refers to a strategic focus with an emphasis on
the functions that occur using electronic capabilities. E-business involves
business processes that span the entire value chain: electronic purchas-
ing and supply chain management, electronic order processing, customer
service, and business partner collaboration.
E-business enhances three Primary Processes:
1. Production processes including procurement, ordering and replenishment
of stocks; processing of payments; electronic access to suppliers;
and production control processes.
2. Customer-focused processes including promotional and marketing
efforts, Internet sales, customer purchase orders and payments, and
customer support.
3. Internal management processes including employee services, training,
internal information-sharing, video-conferencing, and recruiting.
Electronic applications enhance information flow between production
and sales forces to improve sales-force productivity. It improves the
efficiency of work-group communications and electronic publishing
of internal business information.
This is a strategy that is a must for any organisation in today’s techno-
logical environment.
Consolidation Strategy
Consolidation occurs when two companies combine to form a new enter-
prise altogether, eliminating competition and creating broader economies
of scale or scope.
Mergers and acquisitions (M&A) is an aspect of corporate strategy dealing
with the buying, selling, dividing, and combining of different companies
and similar entities that can help an enterprise grow rapidly in its sector
or location, or acquire new sectors or locations. Because of the costs
involved, consolidation is a very high-level strategic decision. The logic
driving consolidation is the creation of economies of scale, economies of
scope, new locations, new technology, or some other form of increased

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Notes competitive capacity. Other motives for merger and acquisition that may
not add shareholder value include diversification, manager overconfidence,
empire-building, and management compensation. Though it may seem
that acquisition is more of a turnaround strategy, it is not so from the
perspective of the acquirer. For any merger or acquisition to be consid-
ered, the organisation must first be stable on its own.

2.3 Link between Corporate Strategy and HRM

Recognition of the link between corporate and business strategies and
strategies related to the people function is not new. McKinsey’s 7-S frame-
work that emphasised the need for the alignment of seven organisational
variables (superordinate goals, strategy, structure, systems, staff, skills, and
style) for organisational effectiveness is about twenty years old (Krishnan,
2005). Thus, business strategy, more or less, guides HR strategy in a stra-
tegic environment. This is not to suggest that strategic human resource
management stems solely from the organisation’s business strategy. The
two must inform one another. The way in which people are managed,
motivated and deployed, and the availability of skills and knowledge,
should all shape the business strategy. It is now increasingly common to
find business strategies that are inextricably linked with, and incorporated
into, strategic HRM, defining the management of all resources within the
organisation. Individual HR strategies, however, may be shaped by the
business strategy. Most organisations today recognise that people are what
drive value, which is why human capital is often referred to as a business’
most important asset. Individuals’ knowledge, skills and abilities are assets
which the organisation should invest in and leverage to create sustainable
value for the organisation and its various stakeholders. The intangible value
of an organisation relating to the people it employs is gaining recognition
among accountants and investors, and its implications for long-term sus-
tained performance are now generally accepted.
In the 21st century HR is no more a departmental function. It is a core
process determining the viability of your strategies. Strategies fail if
they are not supported by the appropriate human resource. For corpo-
rate, business and HR strategies to be integrated well, it is apparent that
the top management, business heads and HR professionals need to work

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closely with each other. This requires a different set of tasks for the HR Notes
managers than the traditional HRM requires. Some of them are:
1. HR professionals must spend more time and effort understanding
the business environment and the key strategic issues faced by the
company
2. HR professionals must get more involved in the nitty-gritty of the
business, i.e., in operational details and issues
3. HR professionals must move towards taking an integrated look at the
people in the organisation, bridging the gap between HR and IR
4. HR professionals must see themselves as knowledge workers and
facilitators of knowledge flows within the organisation
5. HR professionals need to change from a support paradigm to a value
creation paradigm
We have discussed many possible corporate strategies in this lesson earlier.
We now need to understand how the overall strategy interacts with the
HR strategy. We will try to understand the same for each major strategic
outlook. But before we proceed to discuss each case, it is very important
to keep in mind that any practical application of strategic management
and SHRM deviates significantly from theory and as such these discus-
sions are only to give conceptual clarity to the reader and not to act as
guidelines or aids for practical implementation.
Growth Strategy and SHRM
A growth strategy is that when an organization engages in pursuit of specific
and new product areas, entry into new distribution channels, vertical or
horizontal integration, or new product development. This requires intense
input from the HR perspective as it is concerned exploring new areas or
systems. A strategic HRM perspective in this case can help an organisa-
tion better prepare its implementers viz. the managers and employees, to
better set their future expectations and also better equip themselves for
thriving in the coming changes. The exact SHRM initiatives will vary with
the exact combination of strategies employed and also the environment.
We will discuss each growth strategy listed earlier on a theoretical level

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Notes but the actual practical application varies significantly due to dynamic
factors not the least of which is the environment.
Horizontal Integration Strategy and SHRM: Horizontal integration is
the process of a company increasing production of goods or services at
the same part of the supply chain. A company may do this via internal
expansion, acquisition or merger. Any of these options has major HR
implications and as such a suitable SHRM initiative should preempt the
needs of whichever option the organisation undertakes. Competencies of
HR in this case would be to manage the employee expectations of change
and equip themselves and others to be best prepared for adjusting to it.
Change must be presented as an opportunity instead of threat.
Vertical integration strategy and SHRM - Vertical integration is a strategy
where a company expands its business operations into different steps on
the same production path, such as when a manufacturer owns its supplier
and/or distributor. In following this strategy, the organisation again enters
into related but different work. The domain is same but the perspective of
a supplier and receiver is different anywhere. This difference in perspec-
tives can lead to change resistance if not managed well. SHRM in such
a scenario must plan and account for appropriate resource availability as
well as change management.
Diversification Strategy and SHRM: Diversification can occur either at
the business-unit level by exploring a new segment or at the corporate
level by exploring outside the current scope of business. Thus, there is
significant change of domain possible in diversification. SHRM needs
to plan and account for this change and its impact. The HR themselves
should also don the ‘change agent’ cap and help equip line managers and
employees for the tasks ahead. This may include preparing for upgradation
or acquisition of suitable resources.
Market Penetration Strategy and SHRM: This strategy generally re-
quires great competitive strength, a strong brand, or both, as most market
penetrations demand actively taking market share from current incum-
bents. Thus, the focus of the SHRM should be to enhance these facets
of the organisation while ensuring that the core resources necessary for
successful strategy are amply provided for or planned.
Market Development Strategy and SHRM: This strategy is best accom-
plished through identifying unique niche needs in a specific type of user

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and filling those needs. This requires presence of skilled and experienced Notes
resources. The SHRM tasks here is more of human capital management.
New Product Development Strategy and SHRM: New product devel-
opment is the process of developing, researching, and bringing a new
product to market. This strategy requires investment in research and
development, usually over the long term, and extensive trial and error.
This makes it primarily dependent on the human resources for its success.
The SHRM initiative should focus on creating a culture of innovation
and availability and retention of skilled resources over a long term for
this strategy to yield maximum gains.
Renewal Strategy and SHRM
Renewal strategy is a direct response to performance issues in an organ-
isation. The status quo is no longer acceptable and high level strategic
interventions are required. There is inevitable change eminent in this
situation and the role of SHRM is to facilitate this change management.
At times of crisis or major environmental shift, it is the goodwill and
commitment of employees that can be a major source of resilience. Such
goodwill and commitment cannot be engendered through a confrontational
human resource policy. Transparency and fairness on a continuing basis
are essential to create the reservoir of goodwill that makes employees
willing partners in organisational transformation.
Stability Strategy and SHRM
In these strategies, the SHRM initiative and the HR role is not heavily
involved with change management but more focussed on being the enabler
and the employee champion.
Global Strategy and SHRM: Primary strategic reasons for globalization
are to build supplier relationships, to improve access to raw materials,
and to cut costs by relying on other regions’ specializations. Thus, this
strategy involves a lot of inter-cultural interaction and can backfire if
handled poorly. Creation of cultural sensitivity and adjustability is a key
factor that may influence its success. The role of SHRM is to anticipate
the required behavioural changes and to ensure that the HR managers are
well enabled to facilitate the creation of appropriate human resource pool.
E-business Strategy and SHRM: In the emerging global economy, e-com-
merce and e-business have become increasingly necessary components

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes of business strategy and strong catalysts for economic development. As

such a major role of SHRM is to enable the organisation equip itself
with resources equipped with the correct skills and to create a culture
that promotes these new technologies.
Co-operation Strategy and SHRM: This strategy aims for a synergy
where each partner hopes that the benefits from the alliance will be
greater than those from individual efforts. Partners may provide the
strategic alliance with resources such as products, distribution channels,
manufacturing capability, project funding, capital equipment, knowledge,
expertise, or intellectual property. The alliance often involves technology
transfer (access to knowledge and expertise), shared expenses, and shared
risk. This indicates that the knowledge residing in the human resources is
a key variable for cooperation and thus needs to be strategically managed
through a well planned SHRM initiative.
Consolidation (or M&A) Strategy and SHRM: Because of the costs
involved, consolidation is a very high-level strategic decision. All stake-
holders in both organizations should be consulted, and agreements will
often take many months or years to conclude. Cultural conflicts between
two different organizations are not uncommon, as the mission, vision,
and values of the individuals and groups within them are likely to differ.
Managing this type of change strategically is complex and rife with con-
flict. Mismanagement during these processes can minimize the potential
synergistic gains and reduce the efficacy of the new strategic plan. Thus,
SHRM is of utmost importance in this strategy’s success.
For corporate, business and HR strategies to be integrated well, it is
apparent that the top management, business heads and HR professionals
need to work closely with each other.
Strategic HRM can be seen as the means through which human capital
is converted into organisational value. Human capital evaluation is useful
in that it provides information about the current and potential capabil-
ities of human capital to inform the development of strategy. Business
success will be achieved if the organisation is successful in managing
this human capital to achieve this potential and embed it in products and
services that have a market value. Strategic HRM could then be viewed
as the defining framework within which these evaluation, reporting and

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management processes take place and which ensures that they are iterative Notes
and mutually reinforcing.
Examples from the Business World
The American steel manufacturer, Nucor, is an excellent example of a
company that has integrated its human resource strategy tightly with
other functional strategies to create inimitable capabilities and drive
competitive advantage. Nucor’s competitive advantage is based on cost
leadership. It achieves this through all the four building blocks – effi-
ciency, quality, innovation and responsiveness. At the base is a well-
matched human resource strategy. Nucor hires goal-oriented, self-reliant
people who are motivated by striving for continuous improvement that
yields them increasing monetary compensation. Since the production of
quality steel depends on teamwork, workers within the plant are eligible
for substantial incentives based on the output of their group. But, plant
manager’s compensation depends not only on the performance of the plant
they are managing, but of the company as a whole – this is to provide
an incentive to transfer best practices and innovations to other parts of
the organisation. To keep costs down, it has very few layers, all manag-
ers travel by economy class, and even frequent flier miles are used by
the company. Nucor builds small plants, close to locations where there
is demand for its products – this is to reduce transportation costs, but
also to be more responsive to its customers. Every time it has to build a
new plant it assembles an in-house group to build it so that it can take
advantage of its learning from earlier projects as well as prevent diffusion
of its innovations to others.
Nucor undertakes little research and development on its own, but maintains
close links with technology suppliers the world over and keeps a close
watch on developments that could affect its competitiveness. It is willing
to experiment with new technologies that have been proven at the pilot
plant level by using its plant design skills to scale these technologies up
to a commercial scale. (Krishnan, 2005)
McKinsey and Company is a good example of a differentiator. It offers
premium management consulting services to clients internationally. This
is a case in which people are really at the core of the value proposition.
McKinsey hires the best people out of the top business schools (and in
recent years, engineering and other disciplines as well). To ensure that

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Notes it can have a steady inflow of such new talent, it follows an “Up or
out” policy; associates who don’t make the grade have to leave the firm
after a few years. Yet, this policy has not created an army of embittered
ex-McKinseyians. This is because of the extensive feedback McKinsey
employees get almost from the day they enter the firm, as also the close
mentoring by senior McKinsey partners. McKinsey puts tremendous em-
phasis on the credibility and integrity of its performance measurement
and feedback system because they have recognised that this is critically
important to running a meritocracy. And it doesn’t hurt business either –
many McKinsey assignments come through the McKinsey alumni network
who are often senior managers in large corporations. (Krishnan, 2005)
In the context of Indian corporate world, HR has gained centre stage in
traditional business houses which were exposed to global competition for
the first time in the last few decades. The focus has increased on the
value addition aspect that a corporate house brings to each of its constit-
uent business. This focus on corporate strategy has led to an increased
scrutiny of various business functions as well.
Most groups have focused on HR as an area for change – the Aditya
Birla group and the RPG group are two examples of prominent business
houses that have made visible and substantive interventions in the HR
arena towards increasing professionalisation, independence in operational
decision-making, greater transparency in performance measurement, and
market-linked compensation. Some groups like the Tatas recognised early
that HR initiatives were a powerful way for the group to create value –
the creation and running of the TMTC; the Tata Administrative Service;
support for XLRI; and an industry renowned graduate engineer training
scheme at Tata Steel and Telco. (Krishnan, 2005)

2.4 References
‹ ‹Armstrong, M., Long, P. (1994). The Reality of Strategic HRM,
London: Institute of Personnel and Development.
‹ ‹Krishnan, Rishikesha T. “Linking Corporate Strategy and HR Strategy:
Implications for HR Professionals.” In R. Padaki, N.M. Agrawal,
C. Balaji and G. Mahapatra (eds.) Emerging Asia: An HR Agenda,
New Delhi: Tata McGraw Hill, 2005, pp. 215–23.

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 L E S S O N

3
Evolution of Strategic
HRM and Its Relationship
with the Resource-based
View of Firm
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
3.1 The Concepts of Personnel Management and Human Resource Management
3.2 Concepts of Human Resource Management and Strategic HRM
3.3 Evolution of Strategic HRM
3.4 Approaches to Implementing Strategic HRM
3.5 Resource-based View of the Firm
3.6 Strategic HRM and Resource-based View
3.7 Conclusion
3.8 References

3.1 The Concepts of Personnel Management and Human Resource

Management
The need to manage the workers has been around as long as there have been workers.
The need for a separate entity dealing with the issue, however, arose with the advent of
industrial progress that made delegation necessary in the face of ever increasing workloads
on line managers and ever increasing worker expectations. Initially, personnel management
came into being with the primary focus on the administrative aspects of worker interac-
tions and to ensure that the work policies dictated by the management were smoothly
implemented. The role was more concerned with the practical and utilitarian aspects of
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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes a worker’s interface with management and was not considered to be a

main player. It was a functional role that had to be fulfilled and had no
strategic importance at all.
Some believe that modern human resource management evolved from
this view of personnel management (Storey, 1989; Legge, 1995) whereas
others (Guest, 1989) are of the opinion that human resource management
and personnel management are just two names for one and the same
thing. According to Storey (1989), the comparison of human resource
management and personnel management literature yields slight differences
between their definitions. They believe that while personnel management
is more individualistic in the sense that it focusses on the day-to-day
practical aspects of an employee’s work life, human resource management
is more functionally oriented in the sense that its purpose is to facilitate
the business goals through its management of human resources.
The nomenclature of the two also suggests personnel management looked
at employees as personnel who worked with resources to produce results
whereas human resource management in its very name acknowledges
that employees too are resources that are available to an organisation. It
increases the worth attached to the notion of employees and duly recog-
nises that their input is at least as much, if not more, critical than that
of other resources deployed by the organisations.

3.2 Concepts of Human Resource Management and

Strategic HRM
The growing competition due to immense globalisation, most organizations
have begun to recognise that their human resources are an incredible source
of competitive advantage in the current scenario. Human resource depart-
ments have evolved from being a simple functional role to become ‘strategic
partners’ responsible for the direct contribution to organisation’s objectives.
Strategic human resource management (strategic HRM) is a relatively new
field, which has evolved out of the parent discipline of human resource
management. Walker (1992) defined Strategic HRM as “the means of
aligning the management of human resources with the strategic content of
business” and Boxall (1996) expressed the view that “the critical concerns
of human resource management are integral to strategic management in
any business” (Armstrong, 2006)

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 Evolution of Strategic HRM and Its Relationship

Organisations which invest in their human resources as their strategic Notes

and sustainable competitive advantage are the most successful ones. They
recognize their personnel as the soul of their business. In addition, they
adopt a set of practices and innovative technologies which are designed
to develop, deploy and connect employees with professional skills and
knowledge in order to achieve business priorities which represent the
performance at an individual level (performance management) and as a
consequence of that, the business performance.
Strategic HRM in any organization means the ultimate acceptance of its
functions in the formulation and implementation of its strategies. In particular,
objectives of strategic HRM are recruiting, selecting, training and rewarding
personnel to increase the capacity of a business to execute its strategies.
Strategic HRM helps the organization in achieving its objectives by:
1. Training the managers to effectively handle subordinates
2. Creating awareness regarding the importance of various means of
effective communication
3. Planning an efficient and most importantly fair rewarding system
4. Preventing the phenomenon of square pegs in round holes
5. Maintaining motivational levels of employees at an optimum
6. Taking appropriate steps to counter tardiness, absenteeism and high
turnover
7. Aligning employee goals with the organization
8. Quantifying the contribution of employee costs to the total costs of
the organization and taking steps to optimize them
9. Proactively identify the strategic needs of the organization

3.3 Evolution of Strategic HRM

The full concept of human resource management emerged in the mid-
1980s against the background of the populist writers on management
who flourished in that decade. Many produced lists of the attributes that
they claimed characterized successful companies. These popular ‘school
of excellence’ writers may have exerted some influence on management
thinking about the need for strong cultures and commitment but there
was no real clarity in the concept provided.
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Notes According to Legge (1995), the concept of human resource management

has gone through three stages:
1. The initial concepts developed by American writers in the 1980s.
2. The take-up of these comments by British writers in the late 1980s
and earlier 1990s who were often sceptical about the reality beyond
the rhetoric and dubious about its morality.
3. The assimilation of human resource management into traditional
personnel management.
Some experts believe that there are two variations of human resource
management namely the ‘soft’ and the ‘hard’ model. Truss (1999) states
that ‘soft’ and ‘hard’ models of human resource management are “diamet-
rically opposed along a number of dimensions”. On the other hand, some
like Armstrong (2006) opine that the two models cannot be distinguished
precisely. This seems to be true for at least some theoretical dimensions
such as strategic integration. From a practical perspective, the lines are
much more blurred with most practical implementations of the concept
having a liberal mixture of elements of both.
Some aspects of the basic philosophy of ‘soft human resource manage-
ment’ can be traced back to the writings of McGregor (1960) who, as
mentioned by Truss (1999), even used the terminology ‘hard’ and ‘soft’
to characterize forms of management control McGregor’s theory X es-
sentially describes the ‘control’ model of management as described by
Walton (1985), while McGregor’s theory Y emphasizes the importance
of integrating the needs of the organization and those of the individual
the principle of mutual commitment. Let us first consider the theoretical
outline of these two concepts.
In ‘hard’ human resource management models people in organisations are
a business resource and economic factor among others (Guest 1989; Legge
1995). People are regarded as human capital in which the organisation
invests, and from which the organisation expects return on its investment
to achieve competitive advantage. Employees are seen as a resource to be
utilized and, at the same time, as a cost to be minimised. The emphasis
on ‘hard’ models is on “quantitative, calculative and business-strategic
aspects of managing the headcounts resource” (Storey 1989).

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‘Hard’ models are strongly focused on the strategic integration of human Notes
resource management with business goals (Legge 1995). They highlight
management interests and regard employees as a means to achieve or-
ganisational objectives. Therefore, people are resources to be strictly
directed and controlled through quantitative performance management
and HR databases.
‘Soft’ models stress the human aspect of the human resource (Guest,
1989; Truss, 1999). In ‘soft’ human resource management employees are
“valued assets” and a “source of competitive advantage.” (Legge 1995).
They are regarded as capable and worthy. Direct forms of supervision,
pressure and control as are typical for ‘hard’ human resource management
models and conventional personnel management are not considered as
correct practices.
The Harvard model hinges on a multiple stakeholders theory whereas the
Warwick model is a contextual model hinging on a political and change
process theory and that the New York model is a contingency model
hinging on a variation of the strategic matching theories.
The Harvard model of human resource management sees employees as
resources. However, they are viewed as being fundamentally different
from other resources as they cannot be managed in the same way. The
stress here is on people as human resources i.e. are not like any other
resources as the former can be motivated or demotivated, they can co-
operate with management or resist it. They can think, create, imagine,
plan, learn, feel emotion and perform a huge number of tasks.
The model postulates that human resource management emphasises that
employees are critical to achieving sustainable competitive advantage,
that HR practices need to be integrated with corporate strategy and that
the specialists help organisational controllers to meet both efficiency and
equity objectives (Bratton & Gold, 2001).
The Warwick model on the other hand consists of inner and outer context
and places more emphasis on strategy. However, Hendry and Pettigrew
(1992) argue that the Warwick model is based on the Harvard model only
that the former concentrates more on strategy. Both are the same in that
regard they argued. The Warwick model has business strategy content,
while the Harvard model has business strategy in situational factors. The

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Notes Harvard model has task-technology in the situational factors part whilst
the Warwick model has task-technology in the inner context.
The New York model on the other hand (which happens to be a varia-
tion of the strategic matching theory) sees human resource management
as a menu of strategic choices to be made by HR executives intended
to promote the most effective role behaviours that are consistent with
the organisational strategy. Proponents of this model were Schuler and
Jackson (1987) who stated that the strategic choices to be made by ex-
ecutives include Planning Choices, Staffing Choices, Appraisal Choices,
Compensation Choices and Training and Development Choices.
Strategic HRM is essential an integrated process that aims to achieve
‘strategy fit’. A strategic HRM approach produces HR strategies that are
integrated vertically with the business strategy and are ideally an inte-
gral part of that strategy, contributing to the business planning process
as it happens. Walker (1992) defines strategic HRM as ‘the means of
aligning the management of human resources with the strategic content
of the businesses.
Vertical integration helps in ensuring that the organisation has the best
skilled, committed and well-motivated workforce which it needs to achieve
its business objectives. This can be attained by linking HR strategies
to basic competitive strategies. As defined by Porter (1985), these are
innovation, quality-enhancement and cost leadership. Some of the steps
involved are:
1. To develop the required skills of its employees
2. Allowing occasional failure
3. Giving them more discretion - using minimum controls (empowerment)
4. Providing more resources for experimentation
5. Assessing performance on the basis of its potential long-term
contribution.
Horizontal integration is accomplished by developing a well-knit range
of interconnected and mutually reinforcing HR policies and practices.
This may be achieved by the use of share process, such as competence
analysis, which provides a common frame of references and performances
management, which is concerned with role definition, employee devel-
opment and reward.

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Notes
3.4 Approaches to Implementing Strategic HRM
Strategic HRM models demonstrate how an organization links its business
strategies and HR function to achieve its goals. Although, strategic HRM
adopts resource-based philosophy, there are three different models described
in literature viz. Control-based, Resource-based and Integrative model.
Control-based approach generally deals with control of workplace and
direct monitoring of employee performance. According to this approach,
HR strategies and management structure are used as instruments and tech-
niques to enhance labour productivity and thereby increasing profitability.
Resource-based approach satisfies the human capital requirements of the
organization (Armstrong, 2006). It was observed by Bratton and Gold (2001)
that sustained competitive advantage is not achieved by external market
position but careful assessment of their own skills and capabilities that com-
petitors cannot copy. Main objective of this approach is improving resource
capability and effective utilization of resources to achieve the goals set by
the organization. Within this model there are three different approaches by
which organization can implement strategic HRM practices (Armstrong, 2006).
They are called High performance management approach, High commitment
management approach and High involvement management approach and are
focussed on performance, commitment and involvement as the names suggest.
The integrative approach is an amalgamation of the above two and seeks
to obtain the benefits of both the approaches. Ulrich (1997) stated strategic
HRM as an outcome of mission, vision and priorities of HR department.
Strategic HRM is identified in three levels namely Strategic, Manage-
rial and operational level. Strategic level looks to the long-term future,
Managerial level looks at the mid-term and the operation level looks at
the short-term focus. Different models and approaches help understand
the functionality of strategic HRM and how organizations are able and
keen to implement it to achieve competitive advantage.

3.5 Resource-based View of the Firm

We will discuss the resource-based view (resource-based view) of firm
and its relationship with strategic HRM in detail. First, let us understand
the concept of resource-based view in relation to the product-based view.

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Notes For the firm, resources and products are two sides of the same coin. Most
products require the services of several resources and most resources can
be used in several products. By specifying the size of the firm’s activity
in different product markets, it is possible to infer the minimum necessary
resource commitments. Conversely, by specifying a resource profile for
a firm, it is possible to find the optimal product-market activities. ‘The
traditional concept of strategy (Andrews, 1971) is phrased in terms of
the resource position (strengths and weaknesses) of the firm, whereas
most of our formal strategic tools operate on the product-market side
(opportunities and threats). While these two perspectives should ultimately
yield the same insights, one might expect these insights to come with
differing ease, depending on the perspective taken.
According to resource-based view proponents, it is much more feasible
to exploit external opportunities using existing resources in a new way
rather than trying to acquire new skills for each different opportunity. In
resource-based view model, resources are given the major role in helping
companies to achieve higher organizational performance. There are two
types of resources: tangible and intangible.
Tangible assets are physical things. Land, buildings, machinery, equipment
and capital – all these assets are tangible. Physical resources can easily
be bought in the market so they confer little advantage to the companies
in the long run because rivals can soon acquire the identical assets.
Intangible assets are everything else that has no physical presence but
can still be owned by the company. Brand reputation, trademarks, skills,
intellectual property are all intangible assets. Unlike physical resources,
brand reputation is built over a long time and is something that other
companies cannot buy from the market. Intangible resources usually
stay within a company and are the main source of sustainable competi-
tive advantage. Human resources are, however, unique in this regard as
when employees leave they take their skills and capabilities away from
the organisation.
The two critical assumptions of resource-based view are that resources
must also be heterogeneous and immobile.
Heterogeneous resources: The first assumption is that skills, capabilities
and other resources that organizations possess differ from one company

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to another. If organizations had the same amount and mix of resources, Notes
they could not employ different strategies to outcompete each other. What
one company would do, the other could simply follow and no competitive
advantage could be achieved. This is the scenario of perfect competition,
yet real-world markets are far from perfectly competitive and some com-
panies, which are exposed to the same external and competitive forces
(same external conditions), are able to implement different strategies
and outperform each other. Therefore, resource-based view assumes that
companies achieve competitive advantage by using their different bundles
of resources. This is certainly true in the context of human resources as
each individual is unique.
Immobile resources: The second assumption of resource-based view is that
resources are not mobile and do not move from company to company,
at least in short-run. Due to this immobility, companies cannot replicate
rivals’ resources and implement the same strategies. Intangible resources,
such as brand equity, processes, knowledge or intellectual property are
usually immobile. This assumption is not set in stone in case of human
resources and hence sustained effort is needed to retain strategically
important resources.
In the resource-based view, the organisation is viewed as a collection of
both tangible and intangible resources and capabilities required for suc-
ceeding against market competition. In line with human capital theory,
resource-based theory emphasizes that investment in people adds to their
value in the firm.

3.6 Strategic HRM and Resource-based View

In the search for competitive advantage, strategy researchers acknowledged
human capital, intellectual capital and knowledge as critical components.
Strategic HRM recognises core competencies, dynamic capabilities and
knowledge-based view of firm as central to its concept in the sense that
these are the aspects of a firm’s HR that can lend it a significant strate-
gic advantage resource-based view also focuses on these aspects of HR
in order to exploit market conditions or opportunities even if they arise
unexpectedly.
Though the field of strategic HRM was not directly derived from the
resource-based view, it has clearly been instrumental in its development.
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Notes This was largely due to the resource-based view shifting emphasis in the
strategy literature away from external or environmental factors toward
internal firm resources as the source of competitive advantage. Growing
acceptance of internal resources as sources of competitive advantage
brought legitimacy to HR’s assertion that people are strategically import-
ant to firm success. Thus, given both the need to conceptually justify the
value of HR and the propensity for the strategic HRM field to borrow
concepts and theories from the broader strategy literature, the integration
of the resource-based view of the firm into the strategic HRM literature
was a natural consequence. Over a period of time, the positioning of re-
source-based view within the strategic HRM literature as a foundation for
both theoretical and empirical examinations has become firmly entrenched.
Within the strategic literature, the resource-based view has helped to put
“people” (or a firm’s human resources) on the radar. Concepts such as
knowledge, dynamic capability, learning organizations, and leadership as
sources of competitive advantage turn attention toward the intersection
of strategy and HR issues.
Developing strategic capability, in other words, achieving strategic fit
between resources and opportunities and obtaining added value from the
effective deployment of resources is a fundamental aim of resource-based
HR strategy. A resource-based approach will address methods of increasing
the firm’s strategic capability by the development of managers and other
staff who can think and plan strategically and who understand the key
strategic issues. The resource-based approach is founded on the belief
that competitive advantage is obtained if a firm can obtain and develop
human resources that enable it to learn faster and apply its learning more
effectively than its rivals. Human resources are defined by Barney (1996)
as follows: ‘Human resources include all the experience, knowledge,
judgement, risk-taking propensity and wisdom of individuals associated
with the firm.’ The strategic goal will then be to ‘create firms which are
more intelligent and flexible than their competitors’ (Armstrong, 2006)
by hiring and developing more talented staff and by extending their skills
base. Resource-based strategy is therefore concerned with the enhance-
ment of the human or intellectual capital of the firm. This is especially
true for the knowledge-based enterprises. As Ulrich (1997) comments:
‘Knowledge has become a direct competitive advantage for companies
selling ideas and relationships. The challenge to organizations is to ensure

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that they have the capability to find, assimilate, compensate and retain Notes
the talented individuals they need.’
A convincing rationale for resource-based strategy has been produced by
Grant (1991):
When the external environment is in a state of flux, the firm’s own re-
sources and capabilities may be a much more stable basis on which to
define its identity. Hence, a definition of a business in terms of what it
is capable of doing may offer a more durable basis for strategy than a
definition based upon the needs (e.g. markets) which the business seeks
to satisfy.
Unique talents among employees, including superior performance, pro-
ductivity, flexibility, innovation, and the ability to deliver high levels of
personal customer service, are ways in which people provide a critical
ingredient in developing an organization’s competitive position. Barney
(1991) noted that the resources which are rare, valuable, inimitable, and
non-substitutable can provide sources of sustainable competitive advantages.
People also provide the key to managing the pivotal interdependencies
across functional activities and the important external relationships. It
can be argued that one of the clear benefits arising from competitive
advantage based on the effective management of people is that such an
advantage is hard to imitate. An organization’s HR strategies, policies and
practices are a unique blend of processes, procedures, personalities, styles,
capabilities and organizational culture. One of the keys to competitive
advantage is the ability to differentiate what the business supplies to its
customers from what is supplied by its competitors. Such differentiation
can be achieved by having HR strategies that ensure that the firm has
higher-quality people than its competitors, by developing and nurturing
the intellectual capital possessed by the business and by functioning as
a ‘learning organization.
Wright et al. (1994) further distinguished between the firm’s human re-
sources (i.e., the human capital pool) and HR practices (those HR tools
used to manage the human capital pool). In applying the concepts of
value, rareness, inimitability, and substitutability, they argued that HR
practices could not form the basis for sustainable competitive advantage
since any individual HR practice could be easily copied by competitors.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes Rather, they proposed that the human capital pool (a highly skilled and
highly motivated workforce) had greater potential to constitute a source
of sustainable competitive advantage. In order to constitute a source
of competitive advantage, the human capital pool must have both high
levels of skill and a willingness (i.e., motivation) to exhibit productive
behavior. In contrast, Lado and Wilson (1994) proposed that a firm’s HR
practices could provide a source of sustainable competitive advantage.
Coming from the perspective of exploring the role of HR in influenc-
ing the competencies of the firm, they suggested that HR systems (as
opposed to individual practices) can be unique, causally ambiguous and
synergistic in how they enhance firm competencies, and thus could be
inimitable. Boxall (1996) further expounded on the resource-based view/
strategic HRM paradigm, suggesting that human resource advantage (i.e.,
the superiority of one firm’s human resource management over another)
consists of two parts. First, it refers to the potential to capture a stock of
exceptional human talent “latent with productive possibilities.” and also,
human process advantage can be understood as a “function of causally
ambiguous, socially complex, historically evolved processes such as
learning, cooperation, and innovation.”
Thus, one major task of organizations is the ensuring that the mutuality
of interests is managed in order to create a talented and committed work-
force resulting in human capital advantage. Also, they need to develop
employees and teams in such a way as to create an organization capable
of learning within and across industry cycles to gain organizational process
advantage. There is, however, another important aspect of human resources
that needs to be kept in front by the strategists. Not all human resources
in a firm are of equal strategic value and one strategy may not help opti-
misation efforts. Also, it is important to note that the human capital pool
refers to the stock of employee skills that exist within a firm at any given
point in time. This can and does change over time in actual practice and,
therefore, must constantly be monitored for its match with the strategic
needs of the firm. Another important factor to consider the strategic aspect
of human capital pool is that of employee behavior. Distinct from skills
of the human capital pool, employee behavior recognizes individuals as
cognitive and emotional beings who possess free will and make decisions
regarding the behaviors in which they will engage. Firms may have access

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 Evolution of Strategic HRM and Its Relationship

to valuable human capital, but either through the poor design of work or Notes
the mismanagement of people, may not adequately deploy it to achieve
strategic impact. This discretionary behavior recognizes that even within
prescribed organizational roles, employees exhibit discretion that may have
either positive or negative consequences to the firm. Focus of strategic
HRM on discretionary behavior recognizes that competitive advantage can
only be achieved if the members of the human capital pool individually
and collectively choose to engage in behavior that benefits the firm.
People management systems rather than HR practices lend themselves as
more beneficial to strategic HRM ideology. Systems point the spotlight on
the need to manage multiple practices impacting employees as a whole.
And focus on people rather than HR highlights the need to look beyond
traditional HR department functions into work aspects like communica-
tion, work design, culture, leadership, and a host of others that impact
employees and shape their competencies, cognitions, and attitudes. The
important aspect of these systems is that they are the means through
which the firm continues to generate advantage over time as the actual
employees flow in and out and the required behaviors change due to
changing environmental and strategic contingencies. It is through the
people management systems that the firm influences the human capital
pool and elicits the desired employee behavior which is the basic premise
for attaining sustainable competitive advantage that strategic HRM seeks.
Thus, the firms should not only ensure that proper skills and behaviours
mutually support each other, they also need to put in place appropriate
people management systems to align with these and augment them.
Resource-based view and strategic HRM thus are enmeshed together from
a human resource perspective. The advocacy of need for core competen-
cies and dynamic capabilities is a hallmark of both. Any competency or
capability attributed to a firm is invariably grounded in its employees for
any action in any organisation can ultimately be traced back to a human
decision. Any knowledge in a firm is accumulated by its employees and
is used by them too. Though the individual accumulating and using the
knowledge may change, it is still the human component that exploits it.
Thus, both concepts stand in contrast to the earlier schools of thought
which labelled HR as a cost function and made it the scapegoat for cut-
backs at the earliest signs of distress.

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Notes
3.7 Conclusion
Effective systems for managing people evolve through unique historical
paths and maintain interdependence among the components that compet-
itors cannot easily imitate. Thus, they are a ready source of competitive
advantage. Both strategy and strategic HRM seek to optimally engage
these for long-term benefits. Resource-based view is an approach that
advocates the importance of nurturing such resources. The resource-based
view has significantly and independently influenced the fields of both
strategy and strategic HRM. More importantly, however, it has provided
a theoretical bridge between these two fields. By turning attention toward
the internal resources, capabilities and competencies of the firm such as
knowledge, learning, and dynamic capabilities, it has forced strategic
planners to invariably acknowledge the importance of understanding and
including effectiveness of various specific HR tools and techniques for
managing people, and addressing these issues with necessary specific-
ity. This internal focus also has provided the traditionally a theoretical
field of strategic HRM with a theoretical foundation from which it can
begin exploring the strategic role that people and HR functions can play
in organizations (Wright & McMahan, 1992). The resource-based view
provides the framework from which HR researchers and practitioners can
better understand the challenges of strategy, and thus be better able to
play a positive role in the strategic management of firms. This interaction
should be deeper than simply reading the other’s literature. Once uni-
fied, strategy and strategic HRM have the potential to exploit the unique
knowledge and expertise of both fields, and synergistically contribute to
the generation of new knowledge regarding the roles that people play in
organizational competitive advantage.

3.8 References
‹ ‹Andrews, K. R. (1971). The concept of corporate strategy. New York.
‹ ‹Armstrong, M. (2006). Strategic Human Resource Management: A
Guide to Action 3rd Edition, Kogan Page, London.
‹ ‹Barney, J. (1991). Firm Resources and Sustained Competitive
Advantage. Journal of Management¸17 (1), 99–120.

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 Evolution of Strategic HRM and Its Relationship

‹ ‹Barney J. (1996). The resource-based theory of the firm. Organizational Notes

Science, 7, 469.
‹ ‹Boxall, P. F. (1996). The Strategic HRM Debate and the Resource-
based View of the Firm. Human Resource Management Journal,
6(3), 59–75.
‹ ‹Bratton, J. & Gold, J. (2001). HRM - Theory and practice, Routledge,
London.
‹ ‹Grant, R. M. (1991). The resource-based theory of competitive
advantage: implications for strategy formulation. California Management
Review, 33(3), 114–35.
‹ ‹Guest, D. (1989). Personnel and HRM. Personnel management,
21(1), 48–51.
‹ ‹Hendry, C., & Pettigrew, A. (1992). Patterns of strategic change in
the development of human resource management. British Journal
of Management, 3(3), 137–156.
‹ ‹Lado, A. A., & Wilson, M. C., (1994). Human Resource Systems and
Sustained Competitive Advantage: A Competency-based Perspective.
Academy of Management Review, 19(4), 699–727.
‹ ‹Legge, K. (1995). HRM: rhetoric, reality and hidden agendas. Human
resource management: A critical text, 33.
‹ ‹McGregor, D. (1960). Theory X and Theory Y. Organization Theory,
358–374.
‹ ‹Porter, M.E. (1985). Competitive Advantage, New York: Free Press.
‹ ‹Schuler, R. S., & Jackson, S. E. (1987). Linking competitive
strategies with human resource management practices. The Academy
of Management Executive (1987–1989), 207–19.
‹ ‹Storey,J. (1989). “From personnel management to human resource
management”, in ed Storey J. New perspective on human resource
management, London: Routledge.
‹ ‹Truss, C. (1999). Soft and hard models of human resource management.
Strategic human resource management: Corporate rhetoric and
human reality, 40–58.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes ‹ ‹Ulrich, D. (1997). Measuring human resources: an overview of

practice and a prescription for results. Human Resource Management,
36(3), 303–20.
‹ ‹Walker, J. W. (1992). Human Resource Strategy, New York, McGraw
Hill.
‹ ‹Walton, R. E. (1985). From control to commitment in the workplace.
Harvard Business Review, 63(2), 76–84.
‹ ‹Wright, P. M., & McMahan, G. C. (1992). Theoretical Perspectives
for Strategic Human Resource Management. Journal of Management,
18(2), 295–320.
‹ ‹Wright, P. M., McMahan, G. C., & McWilliams, A. (1994). Human
Resources and Sustained Competitive Advantage: A Resource-based
Perspective. International Journal of Human Resource Management,
5(2), 301–326.

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 L E S S O N

4
SHRM and HR:
Relationship and
Challenges
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
4.1 SHRM and Its Relationship with HR
4.2 Challenges in SHRM
4.3 Paradox Inherent in the Strategic Partner versus Employee Champion Roles
4.4 Change Agents versus Administrative Experts
4.5 Overcoming the Challenges
4.6 Comparing HR and Line Manager Views of the HR Function
4.7 References

4.1 SHRM and Its Relationship with HR

Strategic HRM is a concept that talks about improving business performance through
strategic interventions and these strategic interventions are dependent on people for their
implementation. All organizations have to be business-oriented as they each have their
own purpose of existence, be it profits, public service or charity. The major concerns of
SHRM are to meet the business needs of the organization and the individual and collective
needs of the people employed in it. Indeed, CIPD (2016) defines it as, ‘Strategic human
resource management (strategic HRM, or SHRM) is an approach to managing human re-
sources that supports long-term business goals and outcomes with a strategic framework.
The approach focuses on longer-term people issues, matching resources to future needs,
and macro-concerns about structure, quality, culture, values and commitment.’
SHRM and HR definitely are connected in the sense that SHRM may encompass a number
of individual HR strategies, for example: to deliver fair and equitable reward, to improve
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Notes employee performance or to streamline organisational structure. In them-

selves these strategies are not strategic HRM. Rather, strategic HRM is the
overall framework that determines the shape and delivery of the individual
strategies, systematically linking people with organisations by integrating
HRM strategies into corporate strategies to deliver organisational value.
Boxall and Purcell (2003) describe strategic HRM as being concerned
with explaining how HRM influences organisational performance. In fact,
a considerable amount of research has been conducted recently on how
HRM impacts on organizational performance. Ulrich (1997) has observed
that: ‘HR practices seem to matter; logic says it is so; survey findings
confirm it. Direct relationships between investment and attention to HR
practices are often fuzzy, however, and vary according to the population
sampled and the measures used’. Thus, there is a need to establish that
a clear positive link between HRM practices and organizational perfor-
mance exists. The fuzziness in this relationship needs to be done away
with before we can move forward.
According to Armstrong (2006), the Bath People and Performance
Model discussed by Purcell (2003) is quite effective in demonstrating
the link between performance and HR. He says, ‘Central to this model
is the concept that performance is a function of Ability + Motivation
+ Opportunity (AMO). On the outside ring, 11 policy or practice ar-
eas are identified to feed into and give meaning to AMO. The second
crucial feature of the model is the central box – front-line manage-
ment – which draws attention to the fact that nearly all HR policies
are applied through and by line managers. It is these managers who
bring policies to life. Organizational commitment, motivation and job
satisfaction all lead to discretionary behaviour, which in turn generates
performance outcomes, which in themselves contribute to commitment,
motivation and job satisfaction’.
Because strategies tend to be expressed as abstractions, they must be
translated into tangibles by clearly stating objectives and deliverables.
This translation of strategy into actionables is not simple.
The term ‘SHRM’ has been downgraded by many to mean no more than
a few generalized ideas about HR policies and at other times to describe
a short-term plan.

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 SHRM and HR: Relationship and Challenges

It is imperative to understand that HR strategies are not just programmes, Notes

policies, or plans concerning HR issues that the HR department happens
to feel are important. Stopgap arrangements to achieve a short-term goal
do not constitute strategy. The problem with strategic HRM as noted by
many is that, too often, there is a gap between what the strategy states
will be achieved and what actually happens to it.
According to Gratton et al. (1999), the factors that contribute to creating
this gap include:
1. The tendency of employees in diverse organizations only to accept
initiatives they perceive to be relevant to their own areas.
2. The tendency of long-serving employees to cling to the status quo.
3. Complex or ambiguous initiatives may not be understood by employees
or will be perceived differently by them, especially in large, diverse
organizations.
4. It is more difficult to gain acceptance of non-routine initiatives.
5. Employees will be hostile to initiatives if they are believed to be in
conflict with the organization’s identity, e.g. downsizing in a culture
of ‘job-for-life’.
6. The initiative is seen as a threat.
7. Inconsistencies between corporate strategies and values.
8. The extent to which senior management is trusted.
9. The perceived fairness of the initiative.
10. The extent to which existing processes could help to embed the
initiative.
11. A bureaucratic culture that leads to inertia.
HR professionals must learn to be both strategic and operational, focusing
on the long and short term. Activities range from managing processes
(HR tools and systems) to managing people. Ulrich (1997) proposed a
two-dimensional model to explain the roles of HR professionals.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes

Figure 4.1: Ulrich’s Model of HR Roles in Strategic Context

These two dimensions in conjunction outline the four principal HR roles:
1. Management of strategic human resources.
2. Management of firm infrastructure.
3. Management of the employee contribution.
4. Management of transformation and change.
To understand each of these roles more fully, we must consider these three
issues for each of them: the deliverables that constitute the outcome of
the role, the characteristic metaphor or visual image that accompanies the
role and the activities the HR professional must perform to fulfill the role.
Role 1: Management of Strategic Human Resources
The strategic HR role focuses on aligning HR strategies and practices
with business strategy. This means that the role of HR in this instance
is more of that of a strategic partner and increasing the capacity of
business to execute its strategies to ensure their success. This translation
of business strategies into HR practices helps a business in three ways.
First, the time from the conception to the execution of a strategy is short-
ened as the business is more adaptable to change. Second, translation of
customer service strategies into specific policies and practices helps the
business better meet customer demands. Third, effective execution of
strategy results in the business achieving financial performance targets.
Thus, the deliverable from the management of strategic human resources
is strategy execution and this role is consequently given the moniker of
‘strategic partner’. HR professionals become strategic partners when
they participate in the process of defining business strategy, when they

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 SHRM and HR: Relationship and Challenges

ask questions that move strategy to action, and when they design HR Notes
practices that align with business strategy.
Role 2: Management of Firm Infrastructure
Creation of organizational infrastructure has always been a role assigned
to the traditional HR function. HR professionals are expected to design
and deliver efficient HR processes for staffing, training, appraising, re-
warding, promoting, and otherwise managing the lifecycle of employees
in the organization. As a caretaker of the corporate infrastructure, HR
professionals should ensure that these organizational processes are designed
and delivered efficiently. In the context of strategic rhetoric, this role has
been relegated to the back seat more often than not. But it is important
to note that successful execution of this role ensures strategic success in
its own way. The deliverable from the infrastructure role is administrative
efficiency and it has been given the moniker of ‘administrative expert’.
HR professionals accomplish this administrative efficiency in two ways.
Firstly, they ensure efficiency in HR processes and secondly, HR improves
overall business efficiency by hiring, training, and rewarding managers
who increase productivity and reduce waste. It can be said that the motto
of this role is to do ‘more with less’. Thus, HR professionals acting as
administrative experts ferret out unnecessary costs, improve efficiency,
and constantly find new ways to do things better. This required contin-
ual re-engineering of the work processes has led to a new concept viz.
shared services. Outsourcing HR activities has also been an attempt at
reduction of costs and improvement of quality. Information technology
too, has increased the automation potential of various administrative tasks
and this has even more potential efficiency gains in future.
Role 3: Management of Employee Contribution
The employee contributions role for HR professionals encompasses their
involvement in the day-to-day problems, concerns, and needs of employees
thereby developing this capital. HR professionals aid employees’ cause
by linking employee contributions to the organization’s success. The
deliverables from management of employee contribution are increased
employee commitment and competence and the role can consequently be
thought of as ‘employee champion’. HR function can aid the employees
by supporting their competence to do good work and their commitment
to work diligently. HR executives can be business partners by paying

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes attention to employee needs, thereby championing their cause and help
line managers make them more comfortable in an uncertain environment
that is the characteristic of today’s competitive workplaces. This role has
undergone the most transformation in the shift from traditional to strategic
HR perspective. Employee commitment is no longer predominantly the
purview of HR as in the past. Increasing the responsibility is being given
to line managers. Thus, line managers are expected to equip themselves
with skills needed to respond effectively to employee grievances and em-
ployees themselves are expected have the skills to overcome challenges.
The role of HR then becomes listening, responding, and finding ways to
provide employees with resources that meet their changing skill demands.
With employee champions who understand the needs of employees and
ensure that those needs are met, overall employee contribution goes up.
Employee contribution is a key feature that affects a business’s ability to
change, meet customer expectations, and increase financial performance.
Employee intellectual capital, in form of competent and committed em-
ployees, is a significant appreciable asset that is reflected in a firm’s
financial results.
Role 4: Management of Transformation and Change
Transformation entails fundamental cultural change within the firm; HR
professionals managing’ transformation become both cultural guardians
and cultural catalysts. Change refers to the ability of an organization to
improve the design and implementation of initiatives and to reduce cycle
time in all organizational activities; HR professionals help identify and
implement processes for change. The deliverable from management of
transformation and change is capacity for change and the HR role is that
of ‘change agent’. Traditionally, HR professionals have been distant from
the change process and even HR systems were viewed as impediments
to it. The responsibility for transformation then rests with external con-
sultants, with many firms delegating responsibility for driving change
to external consulting firms. External consultants were thought to offer
disciplined, objective approaches to transformation, with the competence
and confidence to make the change happen. HR executives act as strate-
gic business partners in a transformational context when they facilitate
change by helping employees let go of old and adapt to a new culture but
at the same time ensure that any proposed change is always grounded in

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the past. SHRM professionals may need to force or facilitate a dialogue Notes
about values as they identify new behaviors that will help to keep a firm
competitive over time. The action of change agents include identifying
and framing problems, building relationships of trust, solving problems,
and creating and fulfilling action plan. Thus, the competencies related to
managing change maybe the most important for success as an HR pro-
fessional in a strategic context. HR professionals, whether employees or
external consultants, who are change agents help make change happen;
they understand critical processes for change, build commitment to those
processes, and ensure that change occurs as intended.

4.2 Challenges in SHRM

There is a popular saying that anything worth having is not free. Similarly,
some things as potentially growth supporting as strategic interventions
are not without their own challenges. Some of the challenges are inher-
ent in the construct of strategic HRM while others are behavioural and/
or environmentally driven. Listed below are few of the challenges that
strategic HRM faces:
1. Strategy formulation is informal, politically charged and subject to
complex contingency factors. While theory and academic understanding
of the concept of strategy may portray it as a rational tool in the
hands of management, it is hardly if ever so in reality. There are
a lot of factors that subtract from the rationality of this concept.
(a) As with all human behaviour, managerial behaviour is more
likely to be uncoordinated, frenetic, ad hoc or fragmented.
This directly impacts the rational strategy as a strategy is
only as good as its implementers.
(b) Managers are but humans. Hence, managerial rationality is
limited by lack of information, time and ‘cognitive capacity’.
They do not have unlimited access to time and resources to
make the perfectly rational decisions and in actuality it may
not be required as well. The concept of bounded rationality
talks about such situations.
(c) Also, in practice, individual managers usually have to fiercely
compete for resources, status and power within the structure

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes of overall management. They are expected to rationally act

in favor of synergistic gains of overall organisation but it is
hardly ever done at the cost of their individual gains.
(d) The pursuance of specific strategies can signal changes in power
relationships among managers. Having the focus of a strategy
on certain department may be viewed as a triumph of that
department head over others instead of a rational decision to
augment organisational growth.
(e) The dynamic and unpredictable nature of environment, be it
internal or external, lends a notable lack of clarity in terms
of environmental influences and objectives.
(f) Strategic decisions are located within the context of social
practice within which it is located and as such they need to
be constantly re-communicated, monitored and reinforced until
they become embedded in action.
2. Most contingency analysis relies exclusively on external marketing
strategies (how the firm competes) and disregards the internal
operational strategies (how the firm is managed) that influence HR
practices and performance. This can lead to challenges in strategic
role of HR in managing contingencies.
3. A major limitation of a simple SHRM model is that it privileges
only one step in the full circuit of industrial capital viz. the human
resources.
4. The basic premise of the typologies of HR strategy approach is that
a dominant HR strategy is strongly related to a specific competitive
strategy. This may not always be true as each situation in the real
world is unique and theoretical constructs of anything involving
human input should always be treated as broad guidelines instead
of factual roadmaps.
5. Despite all the planning, one strategic decision and action might,
however, undermine another strategic goal. In a market downturn or
recession, for example, there is a tendency for corporate management
to improve profitability by downsizing and applying more demanding
performance outcomes at the unit level. In such cases, achieving
the goal of ‘close fit’ of business and HR strategy can contradict
the goal of employee commitment and cooperation.

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 SHRM and HR: Relationship and Challenges

6. In a pessimistic view of reality, there are external conditions and internal Notes
‘structural contradictions’ at work that will constrain management
action and hence, there is not a “single best way” of managing
these contradictions, only different routes to partial failure. This can
be the result of a failure to understand the strategic needs of the
business or inadequate assessment of the environmental and cultural
factors that affect the content of the strategies, and the development
of ill-conceived and irrelevant initiatives, possibly because they are
current fads or because there has been an ill-digested analysis of
best practice that does not fit the organization’s requirements.
7. Any SHRM initiative is bound for failure if insufficient attention is
paid to practical implementation problems. If insufficient attention
is paid to the important role of line managers in implementing
strategies then there is little use in combining all the knowledge
and resources to generate the best strategy. For even the most robust
strategy will fail when the people actually dealing with the target
base (employees) are not properly included in the same.
8. Sometimes, the strategy is good and implementation is thought out but
there is insufficient attention is paid to the need to have established
supporting processes for the initiative. This is the case when the
strategy calls for performance-based pay and rewards but there is
no supporting performance management system to provide inputs
for the same.
A most fundamental of all challenges that SHRM initiatives face is also
the paradox inherent in the multiple roles of HR described above.

4.3 Paradox Inherent in the Strategic Partner versus

Employee Champion Roles
Success in the multiple-role framework requires that HR professionals
balance the tension inherent in being a strategic partner on the one
hand and an employee champion on the other. As strategic partners with
managers, HR professionals partner with managers and are seen as part
of management. Taken to an extreme, this may alienate employees from
both HR and management. Employees at one company that was moving
its HR function into strategic partnership saw the HR professionals,

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Notes whom they felt provided the only channel through which their concerns
were voiced to management, participating in more management meetings,
becoming active in strategic planning, and becoming synonymous with
management. As a result, the employees felt betrayed and rated the HR
function as not meeting their needs.
As employee champions in partnership with managers and employees, HR
professionals ensure that the concerns and needs of employees are voiced
to management. Taken to an extreme, this may alienate the HR function
from management, who may not want to work with HR people whom
they see as insensitive to business realities and advocates of employees.
Thus, a conflict arises in the expected role of HR with respect to the
perspectives or expectations of employees and management. Resolving
this conflict requires that all parties - HR, management, and employees
recognize that HR professionals can both represent employee needs and
implement management agendas, be the voice of the employee and the
voice of management, act as partner to both employees and managers.
Shaikh (2014) provides a classic example of a successful response to
this paradox by quoting Doug Fraiser, who joined the Chrysler board of
directors in the late 1970s as part of a plan for employee investment in
the firm. When union members challenged Fraiser’s new “management”
commitment, he retorted with something like, “How can I better meet
your needs than by sitting with and influencing management?” To be a
successful partner to both employees and management requires that both
sides trust the HR professional to achieve a balance between the needs
of these potentially competing stakeholders.
When HR professionals are not called on to represent employees’ con-
cerns to management, uninformed decisions may be made. It is not un-
common, for example, for merger and acquisition decisions to be made
based solely on financial and product/strategic analyses that demonstrate
the value of the venture; only after the decision is made is HR asked
to weave the two companies together. Sadly, more ventures fail because
of cultural and human differences than because of product and strategic
differences. Where HR professionals are asked to represent employee
and organizational concerns during pre-merger diagnosis, more informed
decisions are made about all costs of merger activities, including the
merger of cultures and people.

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Notes
4.4 Change Agents versus Administrative Experts
HR professionals must also balance the need for change, innovation,
and transformation with the need for continuity, discipline, and stability.
This tension between their roles as change agents and as administrative
experts yields a number of paradoxes that must be managed. Business-
es must balance stability and change. A business must have stability to
ensure continuity in products, services, and manufacturing. Businesses
that change constantly lose identity and chase mythical successes that
never materialize. On the other hand, businesses that fail to change in
the end simply fail.
Businesses must balance the past and the future. A business must honor
its past but also move beyond it. It must recognize that past successes
ensure current survival but that only by letting go of the past will the
future arrive. Old cultures should ground new cultures, not become im-
pediments to change.
Businesses must balance the benefits of free agency and control. A busi-
ness needs to encourage free agency and autonomy in making decisions,
sharing information, and soliciting ideas. Conversely, a business requires
discipline among employees to make the value of the whole greater than
that of the parts, to forge individual efforts into team accomplishment,
and to create boundaries for freedom.
Businesses must balance efficiency and innovation. New ideas and pro-
grams require risk capital, both economic and human. HR professionals
need to encourage risk and innovation while maintaining efficiency.
Thus, risks need to be bounded, not haphazard. To resolve these and
other paradoxes, HR professionals dealing with cultural change need
to be both cultural guardians of the past and architects of the new cul-
tures. In practice, this means that in discussions with those who want to
move slowly, HR professionals need to drive for dramatic change. On
the other hand, in discussions with those who want to demolish history
and tradition, HR professionals need to be advocates of moderation and
respect for earned wisdom. It means that when working to create new
cultures, HR professionals should simultaneously consider the impact of
the new culture on administrative processes (for example, how to hire,
train, and reward employees in a manner consistent with the new culture)

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Notes and recognize the hold that the old culture retains over both employees
and company practices.
This balancing act requires that new cultures lead to new administra-
tive practices and that administrative practices support culture change.
Sometimes, advocates of dramatic culture change, not realizing the infra-
structure required to support the change, may make bold statement that
stretch credibility and exceed a business’s capacity for implementation.
Part of the role of the HR professional as change agent is to moderate
such statements. The administrative infrastructure may be the last thing
to change as companies forge ahead in new strategic directions.

4.5 Overcoming the Challenges

There are many ways to overcome the challenges that SHRM faces,
Firstly, it is necessary to: conduct a rigorous preliminary analysis of
needs and requirements of the organisation; formulate the strategy; enlist
support for the strategy; assess barriers; prepare action plans; manage
implementation; and follow up and evaluate progress so that remedial
action can be taken as necessary.
There is also a need to accept the bounded rationality of human beings
and hence the need for contingency planning in strategy. Transparency
and honest clarity within the managerial interactions also aid in achieve-
ment of the goal of acceptance of strategy by all and helps negate its
political connotations.
Before moving forward with the implementation of any strategy, it is
important to conduct a careful assessment of all the parameters like the
organisation’s business needs, existing successful strategic models in use
by others and its current and expected long-term environment is needed
in order to generate a robust SHRM policy.
Once a policy has been finalised it still needs to be scrutinised for its
robustness in the face of expected contingencies. An assessment of exist-
ing and required support systems required for successful implementation
of such strategy is also a must in order to succeed.
The multiple roles played by the HR further complicate the situation
and there is a need to carefully consider the following from the practical
SHRM perspective:

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Notes
4.6 Comparing HR and Line Manager Views of the HR
Function
Asking both HR professionals and line managers to rate the current state
of HR performance in each of the four roles yields an audit of the ex-
tent to which the two perspectives align. Examination of the results can
contribute to improved understanding of the HR function and company
expectations in a number of ways.
Matched expectations mean that HR professionals and line managers see
the HR function in the same way. Alignment of HR and line expectations
may be good news since it indicates agreement on the roles and delivery
of HR services. Alignment may, however, be bad news. Meeting low ex-
pectations implies that neither HR professionals nor line managers have a
strategic vision for HR. The multiple-role framework here presents a way
to define strategic goals to raise expectations, and to specify value-added
targets for HR professionals.
Mismatched expectations occur when the perceptions of line managers and
of HR professionals differ. The most common mismatch is HR professionals
rating themselves higher than their line managers. In these cases, HR pro-
fessionals perceived their work to be better than the clients of that work.
Such positive self-rating, isolated from correction by client perceptions,
may lead to self-deception and denial, where HR professionals believe that
their services are appropriate and add value to a firm but the clients do not.
In a number of firms, client surveys include assessments of HR not only
by line managers but also by employees. In one case, such client surveys
found the HR function to be the lowest-rated function in the firm. The
firm’s HR professionals felt they were designing and delivering excellent
services, but these services were either misunderstood by employees or
failed to meet their needs. The HR professionals had been judging their
services by their own good intentions, while their clients were judging
them by the impact and results of the services received. (Shaikh, 2014)
HR Function versus Individual HR Professionals
A business may find that individual HR professionals do not have com-
petence in all four roles, but at the same time, it should find that the
function - as an aggregate of individuals - does share a unified vision
and competency. In one company, for example, it was found that the in-

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Notes dividuals fulfilling the components of the HR function were committed

and competent; the field HR professionals were strategic partners with
business leaders; HR functional leaders were administrative experts in their
domains; employee relations experts worked effectively to understand and
meet employee need and organizational effectiveness experts appropriately
managed change. As a team, however, this group of talented individuals
was woeful. In one-on-one interviews, these HR professionals acknowl-
edged that they did not respect or even like one another. (Shaikh, 2014)
A team of HR experts needs to forge individual talent into leveraged
competencies. At the above firm, the individual HR experts began to share
their concerns, openly discuss differences, and focus on common goals and
objectives. With focus, time, and commitment, tensions and distrust were
overcome; resources and lessons were shared. They began to speak with
one voice about the purposes and value of the HR function. They began
to call on each other and leverage each other’s strengths. In brief, they
began to work as a team.
Clarifying Responsibility for Each Role
Each time a business reviews the multiple roles of HR, we must ask:
What is the line managers’ responsibility in each one? The answer is that:
Firstly, HR professionals in a business have unique responsibility and ac-
countability for ensuring that the deliverables from each role are fulfilled.
If, for example, a rating of 10 represents the complete accomplishment
of the deliverables for each role, it is HR professionals who own the
achievement of a 10 rating.
Secondly, accomplishing the goals and designing the processes for achiev-
ing the goals are different issues. While HR professionals own the ac-
complishment of each of the four roles, they may not have to do all the
work of the four roles. Depending on the process established for reaching
the goal, the work may be shared by line managers, outside consultants,
employees, technology, or other delivery mechanisms for doing HR work.
Even though in many cases, responsibility for delivering the four roles
is shared, HR professionals need to guarantee the outcome and to help
define the shared responsibility for delivering it.
Business Partners Play Multiple Roles
Ulrich et al (1997) sum it up the best when they say that HR need to
be business partners in the modern context. They argue that business
partners exist in all four roles and define it as:
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Business partner = Strategic partner + Administrative expert + Notes

Employee champion + Change agent
Strategic partners are business Partners because they align HR System
with business strategies and set HR Priorities for a business entity. Ad-
ministrative experts are the business partners because they save business
money through efficient design and delivery of HR Systems. Employee
champions are business partners because they ensure that employee
contributions to the business remains high, in terms of both employee
commitment and competence, also the Change agents are business part-
ners because they help business through transformations and to adopt to
changing business conditions.
Thus, HR is closely interrelated to SHRM and should be involved at all
levels. Also, careful assessment of all potential challenges is essential in
order to gain the maximum benefits of the strategic approach. Strategic
success is, thus, in an organisation’s own hands.

4.7 References
‹ ‹Armstrong, M. (2006). Strategic Human Resource Management: A
Guide to Action 3rd Edition, Kogan Page, London.
‹ ‹Boxall,P. and Purcell, J. (2003). Strategy and Human Resource
Management, Basingstoke: Palgrave Macmillan.
‹ ‹CIPD. (2016, Oct 4). SHRM Factsheet: Strategic human resource
management. Retrieved from https://www.cipd.co.uk/knowledge/
strategy/hr/strategic-hrm-factsheet on 16/10/2017
‹ ‹Gratton, L., Hope-Hailey, V., Truss, K. & Stiles, P. (1999). Strategic human
resource management (pp. 79–100). Oxford: Oxford University Press.
‹ ‹Purcell,J. (2003). Understanding the people and performance link:
Unlocking the black box. CIPD Publishing.
‹ ‹Shaikh, M. (2014). Essentials of strategic HRM. Lulu. com
‹ ‹Ulrich, D. (1997). Measuring human resources: an overview of
practice and a prescription for results. Human Resource Management,
36(3), 303–20.

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 L E S S O N

5
Competencies of HR
Professionals
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
5.1 Introduction
5.2 Key Definitions
5.3 Organizational and Individual Competencies
5.4 Impact of HR Competencies on HR Effectiveness
5.5 References

5.1 Introduction
Humankind has always sought to better its prospects throughout the evolutionary process.
The quest for betterment gained a distinct materialistic edge with the Industrial Revolution
and the formation of large companies that sought profits from mass production. Rapid
growth of consumerism and globalisation has further worsened the race for profits and
added impetus to the drive for competitive advantage. The industrial environment today is
characterised by ‘crisis, uncertainty, and suspense, which combine to test the ability and
performance of the manager in coordinating and controlling a diverse selection of work-
ers, over which he/she may have little direct authority’ (Dainty, Cheng & Moore, 2005).
Organisations today continue to seek newer and more effective ways to seek competitive
advantage. Competency-based human resource systems are one of the newer concepts in
a long line of such endeavours that seek to enhance managerial effectiveness and en-
hance the acceptability and justice of the performance measurement systems by focusing
on behaviours that are under control of the individual as opposed to the outcomes, the
occurrence of which may be influenced by external factors. As pointed out by Dainty et
al. (2005), ‘Using behavioural competencies to influence human resource management
decisions is gaining popularity in business organisations’.

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The term competency generates varied emotions and perceptions in people. Notes
There is confusion in definition, perception and interpretation of its various
forms. The most prominent of these variations is the perceived difference
in the terms ‘competence’ and ‘competency’. Many authors believe that the
term competence should and does refer to the functional aspects of a job role
and the term competency should refer to the behavioural aspects required
to deliver those functionalities. This means that competence is the ability to
do a job well and competency is the presence of the underlying behaviour
that enables a person to do the job well. Competency has been attributed to
both individual employees and the organisations as a whole. According to
Dainty et al. (2005), competencies are ‘an array of different characteristics,
behaviours, and traits necessary for effective job performance’. It has been
argued that a human resource system that is based on a sound and dynamic
competency framework will give sustained competitive advantage to the firm
(Lado & Wilson, 1994). The concept of organisational core competencies
is the basis for this prediction. The creation of a robust competency frame-
work has been the topic of many discourses and many methods have been
suggested to ensure feasible deployment of such systems. Firm specific,
immobile competencies are touted as the hallmarks of future success. How-
ever, there is also the irony of arguments in support of generic and mobile
competencies being the order of the day (DeFillippi & Arthur, 1994). They
argued a case for job-oriented competencies being the order of the day in the
modern context and put forward the concept of ‘boundaryless careers’. They
classified career competencies into know-why, know-how and know-whom
competencies and suggested that all three are required for career progression.
They studied the feasibility of promoting competencies aimed at assisting
realisation of ‘boundaryless careers’ but found that they were constrained by
tradition and perception. Leadership quality of a manager and their ability to
encourage their subordinates to superior levels of performance is one such
generic competency that may be useful in all contexts. Today’s dynamic
work environment ‘places demands upon managers to respond flexibly to
rapidly changing circumstances in order that they can re-plan and refocus
their strategies for meeting competing objectives’ (Dainty et al., 2005).

5.2 Key Definitions

Competence: The Oxford dictionary defines the term competence as ‘the
ability to do something successfully or efficiently’. It is in this sense
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Notes that we will be using it. It is apparent functional ability present in the
individual that translates into desired successful outcomes.
Competency: Where competence is considered to be the functional
ability to do something, the competency is defined as the underlying
behavioural aspect that allows this functional ability to manifest. There
are many works that use these words and capability interchangeably but
that is not conducive to the purpose of this work. Richard Boyatzis,
one of the pioneers in the field, defines competencies as ‘underlying
characteristics of the person that led to or caused effective or superior
performance’ (Boyatzis, 1982). Spencer and Spencer (1993) define com-
petency as ‘an underlying characteristic of an individual that is causally
related to criterion-referenced effective and/or superior performance in a
job or situation’. Thus, for our understanding, competency shall refer to
all behavioural aspects that are required to get the job done successfully.
Competency Modelling: Competency modelling is defined as the pro-
cess of writing out the results of competency identification by creating
a narrative to describe the competencies or in other words creating a
competency framework.
Competency Framework: Competency framework is the framework that
defines the competencies in clear and concise terms. It lists the levels
and associated behaviours for each competency and also links them to
various unique job roles in the organisational structure. It is an essential
starting point for all efforts that seek to incorporate competency-based
human resource management.
Competency-based Human Resource Management: Lado and Wilson
(1994) define a human resource system as ‘a set of distinct but interre-
lated activities, functions, and processes that are directed at attracting,
developing, and maintaining (or disposing of) a firm’s human resources’.
A competency-based system of human resource management is one in
which all the above-mentioned activities, functions, and processes of the
system like selection and recruitment, performance management, learning
and development and career planning etc. are driven by competencies or
rather the underlying competency framework.
The development of competency-based approach is credited to David Mc-
Clelland (1973) who was on a quest to identify reliable means for early
talent identification that were not biased against minorities, women or people

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 Competencies of HR Professionals

from lower socioeconomic classes. He is said to have been so dissatisfied Notes

with the traditional emphasis and value attached to ‘intelligence’, school
grades, academic aptitude and knowledge content tests as a way to measure
applicant’s worth that he sought validation of a completely different ap-
proach (McClelland & Boyatzis, 1980). He argued that such measures were
not a guarantee of success. Instead he advocated the use of behavior-based
concept of competency as a much more reliable indicator of future success
as competency was thought to be an inherent ability that was the part of
personality. Richard Boyatzis advanced the acceptance of competency-based
approach to assessment by authoring the first empirically based extensively
researched book called ‘The Competent Manager: A Model for Effective
Performance’ (Boyatzis, 1982). The practical usage and popularity of the
competency-based approach also owes a great deal to the researcher duo
of Lyle Spencer and Signe Spencer who co-authored a detailed book called
‘Competence at Work: models for superior performance’ in 1993 about the
theory and practice of competency modelling and also included detailed
manual like chapters for practical implementations.
The literature believes that a competency-based system of human resource
management is one in which all the activities, functions, and process-
es like selection and recruitment, performance management, learning
and development and career planning etc. are driven by the underlying
competency framework. Competencies, taken as behaviours and traits,
when used as key measurement criteria for predicting the performance
provide HR with a durable and reliable tool with which to leverage
potential. The concept of competency itself however can be understood
at multiple levels.

5.3 Organizational and Individual Competencies

Increased globalisation and opening up of world economies have vastly
mutated the concept of competition around the world. Indeed organisa-
tions continue to search for the fabled panacea for their competitive woes
and are eager to try all possibilities. Many authors have advocated the
effectiveness Resource-based View of the firm in creating a sustained
competitive advantage (Barney, 1986; DeFillippi & Arthur, 1994; Lawler,
1994). It becomes all the more relevant in the context of competency
frameworks. This is apparent in Lado and Wilson’s (1994) statement that

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Notes ‘resource-based view suggests that human resource systems can contribute
to sustained competitive advantage through facilitating the development
of competencies that are firm specific, produce complex social relation-
ships, are embedded in a firm’s history and culture, and generate tacit
organizational knowledge ... (by promoting a) set of role behaviours
that result in lowering costs, enhancing product differentiation, or both’.
He argues that sustained competitive advantage can be gained through
competencies that are ‘heterogeneous and immobile’ and further defines
heterogeneous competencies as those competencies that are differently
distributed and used across the organisation and immobile competencies
as those that cannot be perfectly copied or transferred to others. He
quotes Barney (1986) to establish the threshold criteria for organisation-
al competencies to be factors awarding competitive advantage viz. they
should be valuable to the firm against competition and that only a small
number of firms must boast of them in any given environment. Relative
immobility of any competency adds to the robustness of any competitive
advantage it bestows and existence of substitutes renders any advantage
redundant and obsolete. Some examples of such competencies are listed
in the literature as organizational culture, organizational routines and a
firm’s reputation and image. Lado, Boyd and Wright (1992) classify or-
ganizational competencies as managerial competencies, input-based com-
petencies, transformational competencies and output-based competencies
and provide a model that clearly indicates their inter-linkage with each
other and the environment.
Individual competencies like strategic vision and orientation when pres-
ent in top management or leaders and aiding their strategic actions are
referred to as managerial competencies. Such managerial competencies
are sources of sustained competitive advantage as they govern resource
handling and value generation in the organizational context. Lado et al.
(1992) include physical resources, organizational capital resources, human
resources, knowledge, skills, and abilities in the purview of input-based
competencies and believe that these can facilitate organisation’s trans-
formational process that will enhance the product and service delivery
and will improve perception of value addition by the customers. These
competencies may also enable people to take advantage of market im-
perfections. As Barney (1986) claims, ‘given information asymmetries in
the strategic factor markets, a firm whose members have unique skills

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and capabilities and/or are lucky may earn superior returns by purchasing Notes
undervalued resources and using these resources to implement strategy,
or by not buying overvalued resources’. Lado and Wilson (1994) also
advocate creation of internal labour market as a way to create input-based
competencies and states that ‘Human asset specificity refers to the unique
knowledge, skills, and abilities (KSAs) learned on the job. Because such
competencies entail nontrivial replacement costs, there exists an economic
rationale for their continued utilization in current employment’. He also
reflects on the heterogeneity in the demand and supply of human resources
faced by the organizations that highlight the variation in distribution of
KSAs in people and their abilities.
Innovation, entrepreneurship and development focus are transformational
competencies and they provide strategic advantage to the organisation that
cannot be substituted. Lado and Wilson(1994) state on innovation that
‘firms that possess the unique resources, skills, and capabilities needed
to generate Schumpeterian revolutions in the industry and/or that possess
the unique abilities to rapidly adapt to these revolutionary changes can
earn and sustain supra-normal returns relative to firms that lack these
competencies’. It is also claimed that scientific temper and learning
enhances flexibility in organisations as employees have freedom to think
and respond differently to various environmental stimulate.’
In view of these four competencies, HR systems that enhance competence
are the ones that prompt top management to address strategic issues,
champion people’s business rather than people at the strategic decision
making level, exert upward influence through regulation of information
about organizational capital and hiring employees for the firm from
a holistic view of both the firm and the employee as a person. They
also aid innovation and entrepreneurship, nurture learning and create a
positive reputation by advancing commitment and engagement in em-
ployees. Behavioural psychological perspective of HRM also provides
sturdy foundation for the HR-strategy linkage as bedrock of sustained
competitive advantage.
A competency-based system of human resource management is one in which
all the activities, functions, and processes like selection and recruitment,
performance management, learning and development and career planning
etc. are driven by the underlying competency framework.

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Notes
5.4 Impact of HR Competencies on HR Effectiveness
Han, Chou, Chao & Wright (2006) studied the impact of HR competencies
on HR effectiveness as perceived by line managers and employees of
High-tech firms in Taiwan. They theorised that effective HR managers in
their survey-based study would have three main competencies viz. Busi-
ness knowledge, Field expertise and Change management. They defined
business knowledge as knowledge about the firm’s business interests,
for instance in this case of high-tech firm it would involve technological
knowledge. Field expertise meant having good understanding and grasp of
core HR responsibilities and change management simply meant the ability
to adapt to changing environment and facilitation of change acceptance
in the organisation so as to minimise resistance. They found that field
expertise and change management had strong positive relationships with
perceived HR effectiveness after adding controls based on a firm’s size but
business knowledge was not correlated with perceived HR effectiveness.
Competencies of HR Professionals
We discussed Ulrich’s (1997) two-dimensional model for multiple roles
of HR in the earlier lesson. The four role based competencies required
in HR professionals to support SHRM were viz. Strategic partner, ad-
ministrative expert, employee champion and change agent. It is argued
that presence of all the above four role competencies was required for
optimal implementation of any SHRM initiative as HR professionals
must learn to be both strategic and operational, focusing on the long
as well as short term. Their proposed activities range from managing
processes (HR tools and systems) to managing people. Human resource
management responsibilities, thus, require an overlapping set of skills
and competencies. Apart from role-specific competencies, there are a few
generic competencies that all HR professionals must seek to inculcate in
order to achieve optimal success. Understanding and developing these is
the key to success.
From a strategic perspective, high-quality HR practitioners have advanced
skill sets in the critical competencies needed to work our most pressing talent
issues of today and to deliver HR strategy to enable businesses to evolve in
the future. Now HR professionals are expected to be valued team members
and contribute as business partners for the growth of the organization.

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In ‘Defining HR Success’, Strobel et al. (2015) provide nine critical HR Notes

competencies that practitioners need to be successful within the field of
HR and be the leaders of their organizations. These are:
1. HR Expertise (HR Knowledge)
2. Business acumen
3. Communication
4. Consultation
5. Critical evaluation
6. Ethical practice
7. Global and cultural effectiveness
8. Leadership and navigation
9. Relationship management
Let’s understand these:
Human Resources Expertise/Knowledge: Today’s job seekers have
access to more information than ever before. Therefore, the best HR
professionals must be prepared to meet these informed candidates with
industry expertise of their own. Understanding how and why individuals
enter and move within an organization is at the core of everything else
that HR managers will do in human resources. HR managers who truly
add value are always attuned to “the big picture” of how HR practices
relate to a successful business. Today’s business world is complex and
the field of HR is dynamic. Our ability to process and understand it
needs self-motivation. Growing in the job means being receptive to new
ideas, wherever they may come from. HR professionals who never stop
learning are well-positioned to translate well thought out industry trends
and data into actionable insights.
Business Acumen: Being an HR professional means being able to hire
the right talent and develop them to achieve organizational goals. Busi-
ness acumen is a must have for this. HR Knowledge will only help one
be operational. Understanding business is a must in order to be strate-
gic and a business partner. Business acumen is a core competency of
HR professional, they need to develop the keenness and quickness in
understanding and dealing with a business situation in a manner that
is likely to lead to a good outcome. They need to understand business

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Notes operations and its influencing factors (Like Political, Social, Economic,
Technological, Legal and Environmental) and align HR practices to the
organization’s vision and mission. Business acumen also helps build the
case for HR to other business professionals. In other words, market HR
within the organization and showcase how HR can have a direct impact
on organizational performance.
Communication Skills: The primary function of the typical HR pro-
fessional’s job involves facilitating discussion between employees and
employers. If a human resources manager can’t communicate clearly
they will not be successful. Both oral and written skill are required to
effectively relay information. One aspect of communication that gives
people an edge is a strong ability for conflict resolution. Even in the most
agreeable workplaces, problems arise that need a diplomatic ear, an eye
for assessment, and a hand for getting the problem settled. This particular
skill is invaluable when negotiating solutions and keeping things on track.
Consultation: As internal consultants, HR professionals provide advice,
counsel, and guidance to their organizational business partners and all
stakeholders. As trusted advisors, they help address challenges in areas
such as staffing, employee engagement, CSR, business and HR strategy
development, global workforce, and employee relations. In essence, an
HR professional needs to work in a consultative role with the organization
and business units, thus developing and executing HR activities that are
aligned to business strategies and goals.
Critical Evaluation Skills: Critical evaluation/thinking is also a sought
after ability in HR especially in a strategic context. HR professionals, in
particular, frequently need to balance complex situations and take their
time to think with a combination set-in-stone processes and outside-the-
box thinking. Employees come from a breadth and depth of backgrounds
and experiences. HR professionals need to strategically cultivate an envi-
ronment in which all can work together toward the improvement of the
business. HR practitioners are also involved in the problem-solving and
decision-making processes. This requires a thorough analysis and critical
evaluation of the issues at hand. Critical evaluation for HR professionals
means not taking anything for granted and, where necessary, challenging
propositions.

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 Competencies of HR Professionals

Ethical Practice: The importance of ethics as an HR core competency Notes

cannot be overstated. Every day, HR professionals face ethical challenges
related to everything from managing private employee information to
protecting the reputation of their organizations. Adopting an unwavering
and unilateral commitment to ethics not only helps attract top talent
while safeguarding your organization, but also fosters a culture of trust
and loyalty. Part of being ethical is truly caring about people. Empathy
for tough situations and “real life” goes a long way to setting you apart
from those who just do it “by the book”. This is where the employee
champion role takes precedence. Some ethical principles are enshrined in
law. Making sure your company’s policies and practices are in legal com-
pliance is a mainstay in the world of human resources. Laws are always
changing, sometimes incrementally, sometimes as part of a great cultural
shift. Therefore, staying up to date on national news, trends, and laws
is particularly important; ignorance of the law is not a winning defense.
Legal compliance, of course, also protects the company and its officers.
Global and Cultural Effectiveness: In a world where organizations
operate with fewer national boundaries, HR professionals must have a
global mindset and an appreciation of diversity. Having proficiency in
global and cultural effectiveness means HR professionals value the per-
spectives and backgrounds of all the parties they interact with. SHRM
states that HR professionals must be able to effectively and respectfully
interact with colleagues, customers, and clients of varying backgrounds
and cultures. This is true for not only multinational operations but also
for businesses operating in multicultural environments or dealing with
customers/employees from multiple cultures.
Leadership and Navigation: It is defined as the ability to direct and
contribute to initiatives and processes within the organization. Navigation
is understanding the most effective and efficient ways to accomplish
tasks within the parameters of organizational hierarchy, processes, sys-
tems, and policies. Irrespective of the placement of a manager on the
HR org chart, there’s a way to be a leader. The best leaders know how
to operate within their organization’s culture to get things done. This is
critical for HR managers especially in a strategic context as HR needs
to act as a business partner and be a leader in order to ably demonstrate
the strategic role of HR.

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Notes Relationship Management: HR professionals need the ability to build

strong and effective relationships with their business partners and other
stakeholders within and outside the organization. Relationship manage-
ment competency helps HR professionals in creating a positive work
environment, ensuring more support, and contributing positively to both
individual and organizational success.
Ulrich et al. (2016), too, proposed a revised model of HR competencies
that defines nine major competencies of an HR professional but in a
wholly different manner. They define them as:
1. Strategic Positioner: This domain captures the extent to which the
HR professional can evaluate both the external and internal business
contexts and translate those evaluations into practical insights that
help position the organization to be successful. The authors define
the subdomains of this competency and its key features as:
‹ ‹Interprets Business Context
‹ ‹Understands changes in organisation’s external environment
(e.g., technological, economic, political, demographic, etc.)
‹ ‹Understands who makes key decisions in your organization
(e.g., people who control important resources)
‹ ‹Understands expectations of external customers
‹ ‹Understands how organisation makes money (e.g., who, where,
how)
‹ ‹Decodes Stakeholder Expectations
‹ ‹Understands investor expectations
‹ ‹Alignsorganizational brand with customers, shareholders, and
employees
‹ ‹Knows how investors value organisation
‹ ‹Helps investors recognize the quality of leadership within
organisation
‹ ‹Understands Internal Business Operations
‹ ‹Accurately anticipates organisation’s risks
‹ ‹Contributes to creating organisation’s strategy (e.g., help shape
the vision of the future of the organization)
‹ ‹Identifies problems that are central to organisation’s strategy
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 Competencies of HR Professionals

2. Credible Activist: This domain carries over from prior studies and Notes
captures the extent to which HR professionals achieve the trust and
respect they need within the organization to be viewed as valued
and valuable partners. The authors define the subdomains of this
competency and its key features as:
‹ ‹Influences and Relates to Others
‹ ‹Shows a genuine interest in others
‹ ‹Acts with appropriate balance of confidence and humility
‹ ‹Seeks to learn from both successes and failures
‹ ‹Demonstrates personal integrity and ethics
‹ ‹Earns Trust Through Results
‹ ‹Has earned trust with key internal stakeholders
‹ ‹Frames complex ideas in simple and useful ways
‹ ‹Persists through adverse circumstances
‹ ‹Has history of delivering results
3. Paradox Navigator: HR professionals are increasingly asked to
maximize ideas and outcomes that may be inherently in opposition
with each other. These professionals must constantly manage the
paradoxes or tensions that exist in work settings. The authors define
this competency as central to the whole gamut of HR competencies
and believe its key features are that HR manager:
‹ ‹Effectively manages the tensions between high-level strategic
issues and operational details
‹ ‹Effectively manages the tensions between internal focus on
employees and external focus on customers and investors
‹ ‹Effectively manages the tension between taking time to gather
information and making timely decisions
‹ ‹Effectively manages the tensions between global and local
business demands
‹ ‹Effectively manages the tensions between the need for change
(flexibility, adaptability) and stability (standardization)
4. Culture and Change Champion: HR professionals need to manage
both change and culture. By championing both change and culture,

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Notes HR professionals help make things happen consistently. The authors

define the subdomains of this competency and its key features as:
‹ ‹Designs Culture
‹ ‹Crafts the right organizational culture to deliver organizational
results
‹ ‹Measures the influence of organizational culture on achieving
sustained organizational performance
‹ ‹Makes managing organizational culture a priority for organisation
‹ ‹Manages Change
‹ ‹Innovates HR systems based on changing business demands
‹ ‹Helps set the direction of change with clear outcomes Identifies
the key steps for initiating change
‹ ‹Helps people understand why change is important (i.e., creates
a sense of urgency)
5. Human Capital Curator: HR professionals offer integrated and
innovative HR solutions for managing people within their organization.
These HR practice areas ensure human capital. The authors define
the subdomains of this competency and its key features as:
‹ ‹Develops Talent
‹ ‹Develops talent based on organisation’s needs
‹ ‹Facilitates meaningful developmental work experiences
‹ ‹Assesses key talent Identifies and prioritizes key positions
‹ ‹Develops Leaders
‹ ‹Assesses leaders against established leadership metrics
‹ ‹A business case for investing in leaders
‹ ‹Manages succession plans for key leadership positions
‹ ‹Drives Performance
‹ ‹Establishes clear performance standards
‹ ‹Designs measurement systems that distinguish high-performing
individuals from low-performing individuals.
‹ ‹Facilitates the design of organizational structure (e.g., roles,
responsibilities)

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‹ ‹Develops Technical Talent Notes

‹ ‹Builds opportunities for promotion for technical experts
‹ ‹Provides developmental programs for technical experts
‹ ‹Differentiates leadership potential from technical expertise
6. Total Rewards Steward: HR professionals must be able to create
total reward systems which include compensation and benefits
(financial rewards) as well as meaning from work (non-financial
rewards). The authors define the subdomains of this competency
and its key features as:
‹ ‹Designs Meaningful Work
‹ ‹Helps employees improve physical health
‹ ‹Effectively balances employee well-being and business performance
‹ ‹Manages Compensation and Benefits
‹ ‹Designs non-monetary reward/recognition systems
‹ ‹Balances monetary and non-monetary rewards for employees
‹ ‹Designs appropriate benefits systems
7. Technology and Media Integrator: HR professionals must be able
to leverage technology and technological tools to support their
efforts to create high performing organizations. They also rely on
social media to recruit, retain, develop and engage human capital.
The authors define the subdomains of this competency and its key
features as:
‹ ‹Leverages Social Media Tools
‹ ‹Coordinates policies for how people use social media at work
‹ ‹Leverages social media for business purposes
‹ ‹Uses social media to enhance collaboration at work
‹ ‹Integrates Technology
‹ ‹Uses technology to facilitate remote and mobile workforce
‹ ‹Applies technology to HR practices (e.g., HRIS)
‹ ‹Incorporates new technologies that improve workforce productivity

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Notes 8. Analytics Designer and Interpreter: HR Professionals must be

able to use analytics to impact decision making. Analytics goes
beyond collecting data and having scorecards to using data to
improve business decisions. The authors define the subdomains of
this competency and its key features as:
‹ ‹Gets the Right Data
‹ ‹Accurately interprets statistics
‹ ‹Excludes low quality data from decision processes
‹ ‹Understands the limitations of data in ambiguous situations
‹ ‹Incorporates rigorous data analysis when interpreting information
‹ ‹Interprets Business Data
‹ ‹Effectively uses HR analytics to create value for organisation
‹ ‹Identifies organisation’s problems that can be solved with data
‹ ‹Translates data into useful insights for organisation
‹ ‹Uses data to influence decision making in organisation
9. Compliance Manager: HR Professionals must be able to manage the
processes related to compliance by following regulatory guidelines.
By its very definition, the compliance function varies by geography
and its key features as:
‹ ‹Ensures that HR practices comply with government laws
‹ ‹Stands up for employee rights
‹ ‹Activelyeducates employees and managers on how to stay within
legal guidelines regarding on-the-job behavior
As is evident from a comparative study of the above two proposed
models, they do not differ much in essence and basically both highlight
the importance of HR functions in facilitating use of an organisation’s
sustained competitive advantages for strategic success.
Behavioral competencies help people, specifically HR professionals, in
performing their jobs effectively and applying HR principles and practices
to the success of the organization.

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 Competencies of HR Professionals

We can, thus, conclude that competency-based systems can provide sus- Notes
tained competitive advantage to the organisations if they are developed
with care and maintained well to adapt to changing environmental cues.
As we have already discussed, sustained competitive advantage is the
hallmark of strategic HRM initiatives. Thus, formulated competencies
and the systems governing them are indispensable for the success of
strategic HRM initiatives.
Also, in order to implement and maintain these systems, HR professionals
must themselves develop or otherwise acquire certain core competencies
that will facilitate the same. These competencies can be sought at an in-
dividual level or at a functional level but they need to be all present to
some degree in a successful HR team. Although, ensuring right selection
to maintain a surplus pool of these competencies in the HR function would
be more beneficial as it will generate redundancies that will make the
organisation robust against unexpected attrition. Competencies thus are
an important tool for the strategic manager and need to be understood
at all levels viz. Individual, functional and organisational.

5.5 References
‹ ‹Barney, J. B. (1986). Organizational culture: can it be a source of
sustained competitive advantage? Academy of Management Review,
11(3), 656–65.
‹ ‹Boyatzis, R. E. (1982). The competent manager: A model for effective
performance. John Wiley & Sons.
‹ ‹Dainty, A. R., Cheng, M. I., & Moore, D. R. (2005). Competency-
based model for predicting construction project managers’ performance.
Journal of Management in Engineering, 21(1), 2–9.
‹ ‹DeFillippi, R. J., & Arthur, M. B. (1994). The boundaryless career:
A competency-based perspective. Journal of Organizational Behavior,
15(4), 307–24.
‹ ‹Han, J., Chou, P., Chao, M., & Wright, P. M. (2006). The HR
competencies-HR effectiveness link: A study in Taiwanese high-tech
companies. Human Resource Management, 45(3), 391–406.

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Notes ‹ ‹Lado, A. A., Boyd, N. G., & Wright, P. (1992). A competency-based

model of sustainable competitive advantage: Toward a conceptual
integration. Journal of management, 18(1), 77–91.
‹ ‹Lado, A. A., & Wilson, M. C. (1994). Human resource systems and
sustained competitive advantage: A competency-based perspective.
Academy of management review, 19(4), 699–727.
‹ ‹Lawler, E. E. (1994). From job-based to competency-based organizations.
Journal of Organizational Behavior, 15(1), 3–15.
‹ ‹McClelland, D. C. (1973). Testing for competence rather than for
“intelligence.” American psychologist, 28(1), 1.
‹ ‹McClelland, D. C., & Boyatzis, R. E. (1980). Opportunities for
counselors from the competency assessment movement. The Personnel
and Guidance Journal, 58(5), 368–72.
‹ ‹Spencer, L. M., & Spencer, S. M. (1993). Competence at Work:
models for superior performance. New York: John Wiley & Sons.
‹ ‹Strobel, K. R., Alonso, A., Cohen, D. J. & Kurtessis, J. N. (2015).
Defining HR Success: 9 Critical Competencies for HR Professionals.
SHRM Publishing.
‹ ‹Ulrich, D. (1997). Human Resource Champions. Harvard Business
School Press, Boston, MA.
‹ ‹Ulrich,D. (2016). 2016 HR Competency Model. Presented at the
human resource competency conference. Retrieved from: http://
www.apg.pt/downloads/file954_pt.pdf

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 UNIT - II

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 L E S S O N

6
Strategic Human Resource
Planning and Recruitment
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
6.1 Steps in the Process of Implementing Strategic Human Resource Planning
6.2 Business Strategy and HRP
6.3 Job Analysis – An Essential Prerequisite of HRP
6.4 Techniques of Data Collection for Job Analysis
6.5 Strategic Recruitment
6.6 Process of Strategic Recruitment (Guidelines for Effective Recruiting)
6.7 Sources of Recruitment
6.8 Guidelines for Improving the Effectiveness of Internal Sources
6.9 Alternatives to Recruitment
6.10 Summary
6.11 References
Human resource planning is a process that identifies current and future human resources
needs for an organization to achieve its goals. Human resource planning should serve as a link
between human resource management and the overall strategic plan of an organization. Ageing
work force population in most Western countries and a growing demand for qualified workers
in developing economies have underscored the importance of effective human resource planning.
The planning processes of most best practice organizations not only define what will
be accomplished within a given time-frame, but also the numbers and types of human
resources that will be needed to achieve the defined business goals (e.g. number of human
resources; the required competencies; when the resources will be needed; etc.).
Competency-based management supports the integration of human resources planning with
business planning by allowing organizations to assess the current human resource capacity
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Notes based on their competencies against the capacity needed to achieve the
vision, mission and business goals of the organization. Targeted human
resource strategies, plans and programs to address gaps (e.g. hiring/
staffing; learning; career development; succession management; etc.) are
then designed, developed and implemented to close the gaps.
These strategies and programmes are monitored and evaluated on a regu-
lar basis to ensure that they are moving the organizations in the desired
direction, including closing employee competency gaps, and corrections
are made as needed. Human resource planning is an ongoing process of
systematic planning to achieve the best use of an organisation’s most
valuable asset – its human resources. The objective of human resource
(HR) planning is to ensure the best fit between employees and jobs, while
avoiding workforce shortages or spares. The three key elements of the
HR planning process are forecasting labour demand, analysing present
labour supply, and balancing projected labour demand and supply.

6.1 Steps in the Process of Implementing Strategic Human

Resource Planning
1. Assessing the Current HR Capacity: Develop a skills catalogue of employees
so as to have a clear understanding of what staff currently holds.
2. Forecasting HR Requirements: Projecting what the HR needs for
the future will be based on the strategic goals of the organization.
External challenges that can affect the organization are also to be
kept in mind.
3. Gap Analysis: Identifying the current employee count and skills and
comparing with future needs.
4. Developing HR Strategies to Support the Strategies of the
Organization: 5 HR strategies that can be followed to meet
organizational goals are:
‹ ‹Restructuring Strategies: Reducing staff, regrouping tasks
to create well-designed jobs, and reorganizing work groups to
perform more efficiently.
‹ ‹Training and Development Strategies: Providing the current
staff with training and development opportunities to encompass
new roles in the organization.
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‹ ‹Recruitment Strategies: Recruiting new hires that already have Notes

the skills the organization will need in the future.
‹ ‹Outsourcing Strategies: Outreaching to external individuals or
organizations to complete certain tasks.
‹ ‹Collaboration Strategies: Collaborating with other organizations
to learn from how others do things, allow employees to gain skills
and knowledge not previously available in their own organization.

6.2 Business Strategy and HRP

Business strategy is defined as the determination of the long-term goals
and objectives of an organization and allocation of resources necessary for
carrying out these goals. An organization achieves its objectives through
its human resources. Therefore, HRP is guided by organizational goals
and objectives.
Significance of HRP
1. Projections about future manpower needs are available.
2. Allows organization to cope with change.
3. Recruitment and selection of talented personnel is possible.
4. Development of human resources to impart the required skill and
ability in employees to perform the task efficiently and effectively.
5. Proper utilization of human resources focuses on the optimum utilization
of human resource to minimize the overall cost of production.
6. Reduces the impact of uncertainty
Objectives of HRP
1. Ensure adequate supply of manpower as and when required.
2. Ensure proper use of existing human resources in the organisation.
3. Forecast future requirements of human resources with different levels
of skills.
4. Assess surplus or shortage, if any, of human resources available
over a specified period of time.
5. Anticipate the impact of technology on jobs and requirements for
human resources.

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Notes 6. Control the human resources already deployed in the organisation.

7. Provide lead time available to select and train the required additional
human resource over a specified time period.
The ultimate objective of human resource planning is to relate future
human resources to future enterprise need so as to maximise the future
return on investment in human resources.

6.3 Job Analysis – An Essential Prerequisite of HRP

Job analysis may be defined as a process of discovering and identifying
the pertinent information relating to the nature of a specific job like:
1. Identification of the job;
2. Characteristics of the job;
3. Operations involved in doing the job;
4. Materials and equipment to be used in doing the job;
5. Personal attributes required to do the job, e.g. education, training,
physical strength, mental capabilities, etc.; and
6. Relation with other jobs.
Process of Job Analysis
1. Organization Analysis: First of all, an overall view of various
jobs in the organization is obtained. This is required to judge the
linkages between jobs and the organizational goals, inter-relationships
among jobs, and the contribution of various jobs to efficiency and
effectiveness of the organization. For this purpose, background
information is collected in the forms of organization charts, class
specifications, workflow charts, etc. Organization charts show
the relation of the job with other jobs in the organization. Class
specifications describe the general requirements of the job family.
Workflow charts indicate the flow of activities involved in a job.
2. Obtaining Information about Jobs: An important preliminary step
in securing information is the gathering of full list of job titles,
arranged by departments. All job titles should then be reviewed
carefully. In many cases, similar titles do not denote similar jobs
and like jobs are often referred to by different titles. This type of

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adjustment helps jobs analysis information. Once the titles have Notes
been arranged, the next task is to go about collecting the necessary
data. The nature and amount of information shall be based primarily
upon the purpose for which this exercise is undertaken. In general,
the information should concentrate on:
(i) What does the worker do physically and mentally?
(ii) How does he do it?
(iii) Why does he do it?
(iv) Skills Involved: Job knowledge, mental applications – initiative,
ingenuity, dexterity, accuracy, etc.
(v) Physical Demands: Physical activities, working conditions,
hazards.
3. Selecting Representative Jobs for Analysis: It would be highly
time consuming and costly to analyze all the jobs. It is, therefore,
desirable to select a representative sample of jobs for the purpose
of detailed analysis. Priorities of various jobs, needing analysis,
can also be determined.
4. Responsibility for Collecting Information: Having described the kinds
of job information to be collected, two alternatives are available to
collect the information. Either trained help may come from outside
or members of the staff having relevant ability may be used. The
advantage of former choice is that competent specialists are secured
at once, but its disadvantage is that the analyst must learn about
the company and its special problems. The latter choice reverses
the advantages and disadvantages of the former. Whichever choice
is made, preliminary training is called for. Specialists must learn
about the company and members must learn about the technique.
Generally, a combination of the two is suggested to have the benefit
of both – outside expertise and internal information.
5. Collection of Data: In this step, data –on the characteristics of
the job, and qualifications, qualities, and behaviour required to do
the job effectively –is collected. Data may be collected from the
employees, who actually perform the job, or from their supervisors
or from outsider-called job analysts appointed to watch employees
performing the job. Several techniques are available for job analysis.

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Notes Care should be taken to use only those techniques which are
acceptable and reliable in the given situation.
6. Development of Job Descriptions: The information collected in the
previous step is used in preparing job descriptions. A job description
is a written statement that describes, in brief, the tasks, duties,
and responsibilities which need to be discharged for effective job
performance.
7. Preparing Job Specifications: The last step in job analysis is to
prepare job specifications for different jobs. A job specification is
a written statement which specifies the personal attributes in terms
of education, training, skills required, work experience, mental and
physical requirements, personality, etc.

6.4 Techniques of Data Collection for Job Analysis

1. Questionnaires
2. Written narratives
3. Observation
4. Log records
5. Interviews
1. Questionnaires: It is a widely used method of analyzing jobs.
A set of questions pertaining to the nature of duties, tasks and
responsibilities is developed and given to the employees, supervisors
and managers to provide the answers. The questionnaires are filled
up by the employees as well as by the supervisors/managers. The
relevant information thus collected helps in identifying the following
in respect of each job:
(i) Nomenclature of job;
(ii) Description of duties;
(iii) Machines and equipment used;
(iv) Supervision received and given;
(v) Regular contacts;
(vi) Working conditions; and

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(vii) Additional information which helps narrate the specific nature Notes
of the concerned job.
2. Written Narratives: A detailed description containing the nature of
the job can be obtained both from the jobholder and the supervisor.
In an organization where the supervisors are required to maintain
daily diary or log book in respect of their jobs are in a position to
furnish such narratives more comfortably. Under this system, the
employee keeps a daily record of major duties performed, marking
the time when each task is started and finished. This forms the basis
of narratives which are used in collecting information in relation
to various jobs.
Written narratives suffer from the limitations of being unorganized
and incomplete. Hence, there is need for supplementing it by other
methods such as observation and follow-up interview.
3. Observation: Under this method, the job analyst watches and observes
the individual performing the job and takes notes to describe the tasks
and duties performed. If a particular job is simple and repetitive,
observation may be the only technique required.

Use of the observation method is limited because many jobs do not
have complete and easily observable job cycles. For example, to
analyze the job of a pharmaceutical salesperson would demand that the
analyst follows the salesperson around for several days. Furthermore,
many managers may not be skilled enough to know what to observe
and how to analyze what they see. However, interviews coupled
with observation constitute the preferred approach. The interview
will provide information not only readily observable, but also the
verification of information obtained by means of other techniques.
4. Log Records: Under this method, a diary or a logbook is given to
each job holder. The job holder is asked to daily record the duties
performed marking the time at which each task is started and finished.
The record so maintained provides information for the purpose of
job analysis. This method is time-consuming. Moreover, it provides
incomplete data because information concerning working conditions,
equipment used and supervisory relationship is not available from
the logbook. Most employees are not disciplined enough to maintain

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Notes a regular diary. But if kept up to date, the diary would provide
useful information on the job. This method is useful for jobs that
are difficult to observe, e.g. engineers, scientists, researchers, senior
executives, etc.
5. Interviews: The interview method requires that the manager or job
analyst visits each job site and talks with the employee performing
the job. Usually a structured interview form is used to record the
information. Frequently, the employee and the employee’s supervisor
must be interviewed to obtain complete upstanding of the job. During
the job analysis interview, the manager must make judgment about
the information to be included and its degree of importance.
Job Description
‹ ‹The preparation of job description is necessary before a vacancy is
advertised. It tells, in brief, the nature of a job. In other words, it
emphasizes the job requirements. As the title indicates, the document
is descriptive in nature and constitutes a record of job facts in an
organized way.
‹ ‹Job description is a by-product of job analysis. It basically describes
the duties and responsibilities of a specific job. A job description,
broadly speaking, contains three major parts:
‹ ‹Identification Section: It deals with the employee’s job title,
department, and the reporting relationship.
‹ ‹General Summary Statement: It is a concise summarization of the
general responsibilities and components that make the job different
from others.
‹ ‹Specific Duties Section: It contains clear and precise statements
on the major tasks, duties and responsibilities performed.
Job Specification
‹ ‹A job specification, a logical outgrowth of a job description,
attempts to describe the key qualifications necessary for someone
to perform the job satisfactorily. Specific factors identified may
include education, experience, work, skill requirements, personality
requirements, mental and physical requirements, working conditions
and hazards.

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‹ ‹In writing any job specification, it is necessary to list the essential Notes
qualifications for satisfactory job performance. Only direct job-
related items which are non-discriminatory should be included.
For example, a university degree should not be required for a job
unless the job analyst can demonstrate that an individual with less
education cannot perform the job well. In some technical jobs, the
exact educational skills can be indicated, e.g. “Must have thorough
knowledge of Java.”
‹ ‹Laying down educational and professional qualifications and work
experience is a matter of controversy. One may argue: do we
necessarily need a University degree for this particular job? What
is the minimum degree of intelligence required? What experience is
required? To overcome some of these controversies, it is suggested
that each requirement be classified as ‘mandatory’ or ‘desirable’.
‹ ‹Once job descriptions and specifications are prepared, the manager
should provide feedback to the current jobholders, especially those
who assisted in the job analysis. One feedback technique is to give
employees a copy of their own job descriptions and specifications
for review. Giving the current employees the opportunity to make
corrections, ask for clarification, and discuss their job duties
with the concerned manager or supervisor is one way to enhance
manager–employee communication. Questions about how a work
is done, why it is done that way and how it can be changed are
the topics that arise. When employees are represented by a union,
it is essential that union representatives be included for reviewing
the job descriptions and specifications. Otherwise, the possibility
of future conflicts will increase.
‹ ‹An important use of the job descriptions and specifications is
to generate performance standards for each job. As performance
standards list what is satisfactory performance in each area of
job description, the employee will have a clear identification of
what is expected of him. The development of clear and realistic
performance standards can tackle some problems which often arise
when employee’s performances are appraised. The mutual setting
up of performance standards serves as the basic foundation for the
development of management by objectives system.

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Notes
6.5 Strategic Recruitment
RECRUITMENT can be defined as the process of searching potential
candidates and stimulating them to apply for jobs. Theoretically, recruit-
ment process is said to end with the receipt of applications. In practice,
it extends to the screening of applications so as to eliminate those who
are not qualified for the job.
Factors Influencing Recruitment
The process of recruitment is influenced by a number of factors. They
can be categorized as internal and external factors.
External Factors
‹ ‹Demand and Supply of Specific Skills in the Labour Market: If
the demand for a particular skill is high in comparison to its supply,
extraordinary recruiting efforts may be needed. On the contrary, if
the supply of labour is more than the demand, recruiting will be
much easier.
‹ ‹Unemployment Rate in a given Area: If such a rate is high,
the recruitment process will be simpler. On the other hand, if the
unemployment rate drops, recruiting efforts must be increased and
new sources explored.
‹ ‹Geographical Factors: Local market conditions are more dominant
in case of recruitment of non-managerial positions. In case of
managerial positions, the labour situation in an entire country, in
a region, or the world is to be seen.
‹ ‹Political and Legal Considerations: In almost every country, the
government follows the policy of giving preference to people hailing
from less advantaged sections of the society. Besides, political
leaders clamor that preference in matters of employment should be
given to the people of their respective states (known as the policy
of sons of the soil). However, such a policy comes in the way of
treating India as one country and hence, should not be encouraged.
‹ ‹Company Image: In the minds of the job seekers affects the
availability of labour, and thus recruitment.

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Internal Factors Notes

‹ ‹Recruiting Policy of the Organization: If the personnel policies
of the organization are unfavorable, they hold no attraction to the
prospective candidates. For example, a firm following preferring
internal candidates to external candidates will have not many
external applicants.
‹ ‹Policy regarding Temporary and Part-Time Employees: An
organization that follows the practice of appointing part-time
and temporary employees will not have many applicants seeking
permanent or long tenures.
‹ ‹Extent of HRP’s Use: HRP greatly facilitates recruiting efforts. An
organization not giving due importance to HRP will find it difficult
to attract candidates.
‹ ‹Size of the Organization: A bigger organization (for example
employing 1,000 employees) will find it easier to recruit than a
smaller organization (employing 100 employees).
‹ ‹Union Interference: Unions may compel management to recruit
people not on the basis of merit, but on some extraneous grounds
like friends, relatives etc.
‹ ‹Job Attractiveness: Good remuneration, good working conditions,
opportunities for promotion and career development, make the job
attractive and hence, attract good candidates.

6.6 Process of Strategic Recruitment (Guidelines for

Effective Recruiting)
An effective process of recruitment comprises five interrelated stages:
(a) Planning
(b) Strategy Development
(c) Searching
(d) Screening
(e) Evaluation and control

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Notes These stages are discussed as under:

(a) Planning: It involves translating information about job vacancies,
both in terms of number and skills required, into the number and
type of applicants to be contacted. Organizations, nearly always,
plan to attract more applicants than they will hire, as some of
those contacted will be uninterested, unqualified, or both. Type of
applicants refers to the qualifications and experience expected of
people who should be informed about job openings. Such details
depend on the tasks and responsibilities involved which can be
known through job description and job specification.
(b) Strategy Development: After determining the number and type of
recruits required, the next step is to develop strategy which involves
deciding:
Make or Buy Employees: Hire less skilled workers and impart them
training, or hire skilled and professionally qualified employees.
Geographical Distribution of Job-seekers (where to look): Generally,
companies used to look for national labour market for managerial and
professional employees, regional or local markets for technical employees,
and local markets for clerical and blue-collar employees. Such practices
may be modified in the light of factors like location of the firm, supply
status of the labour market, and size of the organization. In the final
analysis, organizations may adopt an incremental strategy where initial
efforts to recruit are concentrated at local level, gradually increased to
regional, national and international levels.
Deciding the Sources of Recruitment (where to look): There are many
sources of recruitment which can broadly be categorized as internal and
external sources. They will be discussed in detail later.
When to Recruit: Here, the Time Lapsed Data (TLD) will be highly
helpful. TLD show the average time that elapses between major deci-
sion points in the recruitment process. Suppose an organization normally
gives fifteen days to the candidates to apply, five days for invitations
for interviews to be issued, five days to arrange for interviews four days
for the concern to make up its mind, ten days for the applicants offered
jobs to make up their minds, and fifteen more days for those accepting
offers to report for work. This data suggest that job vacancies must be
advertised two months before they are required to be filled.
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(c) Searching: The third step in the recruitment process is searching, Notes
which consists of two steps: source activation, and selling.
‹ ‹Source Activation starts only after receiving requisition from
managers.
‹ ‹Selling: This step is concerned with communicating the available
job vacancies to the prospective candidates. Here, the attempt of
the organization must be to avoid both under-selling and over-
selling of jobs.
(d) Screening: Some consider screening of applications as an integral
part of the recruiting process, whereas others take it as the first step
in the selection process. Though even the definition of recruitment
excludes screening as its part, there are some valid reasons for its
inclusion in recruitment process. The selection process can begin only
after applications have been scrutinized and shortlisted. The purpose
of screening is to eliminate visibly undeserving candidates. However,
it must be done with care, so that potentially good candidates are
not lost, and special groups receive full and fair consideration.
Clear job specifications are invaluable in the correct screening of
applications. Screening techniques vary depending on the sources
and methods used for recruiting. For example, interviews and
application blanks may be used to screen walk-ins; campus recruiters
and agency representatives use interviews and resumes. Screening
can also be done with the help of reference checks.
(e) Evaluation and Control: Recruitment process involves a number of
costs, like salaries of recruiters; managerial time spent on preparing
job descriptions, job specifications, advertisements, and so forth;
cost of producing supportive literature, among other things.
The cost-benefit analysis of various heads of monetary and time expendi-
tures should be carried out. Validity of the recruitment methods and the
effectiveness of the recruitment process should be questioned particularly.
The evaluation of recruiting process can be carried out in terms of total
applications collected, the number of candidates found suitable for selec-
tion, performance of the selected candidates, the retention rate of such
selected candidates, costs of the recruiting process, length of the Time
lapsed between occurrence of job vacancy and filling it up, etc.

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Notes
6.7 Sources of Recruitment
Internal Sources
They can be of two types: Closed internal recruitment system and Open
internal recruitment system.
‹ ‹Closed Internal Recruitment System: In this system, employees
do not have the opportunity to apply for jobs formally as they
are not informed about the vacancies. The most common form
is nomination of employees by management for a specific job
opening. Though simple, this method enables the management
to favour some employees over others. Such favouritism may be
caused unintentionally as management may be ignorant about the
meritorious employees. Such mistakes and intentional favouritism
can be avoided by making such systems systematic and objective.
For instance, by introducing Recruitment Information System, which
employs a long questionnaire to be filled by employees, describing
their background and qualifications. Such updated data bank can
be used as the basis of this method.
‹ ‹Open Internal Recruitment System: Under this system, employees
are made aware of the jobs available. One such practice is known
as “job postings”, which entails informing the employees about
job openings through bulletin boards, electronic media, and such
other methods. This method attempts to remove the bottlenecks of
closed internal system, i.e. favoritism (intentional or unintentional).
However, it suffers from certain disadvantages.
Forms of Internal Sources
These include present employees, employee recommendations, former em-
ployees (retired, quitted, dismissed or retrenched), and former applicants.
(a) Present Employees: Present employees (permanent, temporary, or
casual) may be considered for filling up vacancies through promotions,
transfers, upgrading, and even demotion at times.
(b) Employee Recommendations: This method is a combination of
internal and external way of recruitment. Internal – as the probable
candidates are recommended by the existing employees – and
external, because the employees who come to work are actually

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outsiders. In this method, job openings and request for referrals are Notes
announced on the wallboards, intranets and in the bulletins of the
organization. Prizes or cash rewards are offered for referrals that
culminate in successful hiring.
When used wisely, the method of employee recommendation offers
a number of benefits:
‹ ‹A number of prospects can be reached at a very low cost.
‹ ‹Most employees know from their own experience about the
requirements of the job and what sort of persons the organization
is looking for. So, they suggest only those friends and relatives
who meet such requirements.
‹ ‹The reputation of employees who suggest some names is at
stake, so they take utmost care while suggesting the names of
their friends and relatives.
‹ ‹The need for providing training to such employees is much less.
‹ ‹The practice of rewarding current employees for successful
referrals enhances the effectiveness of this method.
(c) Former Employees: Until recently, rehiring former employees was
considered unwise as quitting was seen as a form of betrayal, retired
employees used to be considered too aged to work, dismissed and
retrenched employees were seen with suspicion that if hired back, they
might exhibit disloyalty or a bad attitude. Now, rehiring of former
employees takes place in good number as it offers the advantage
of their prior knowledge of the organization and hence less need
for orientation and socialization. However, such employees may
return with less than positive attitudes. Further, if such employees
are hired back at better positions, it may indicate a wrong signal
to the current employees that one of the ways to move up is to
leave the firm. However, to make rehiring more successful, it may
be enquired as to what they did during the time they were not
with the organization; and how they feel about coming back to the
organization. Rehired employees may be given the credit of their
earlier stay in calculating certain benefits, like vacation time, this
would positively impact their morale.

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Notes (d) Previous Applicants: This method, like employees’ recommendations

method, is a combination of internal and external sources, but more
external and less internal. This method entails that those who had
previously applied for jobs but not selected can be contacted the
second time any vacancy occurs. The use of this method is possible
only when the organization maintains a databank of unselected
candidates. This method reduces the cost and efforts of recruitment.
Advantages of Internal Sources
‹ ‹Insiders are supposed to be more committed to the organization.
‹ ‹Insiders’ skills can be judged from their actual work and hence
better judgement than those of the outsiders, who are evaluated
through tests and interviews.
‹ ‹The use of these sources improves the morale of present employees
as they see promotions as the reward for their contribution to the
organization.
‹ ‹Inside candidates require less training, both orientation and in-service
training, than outsiders.
‹ ‹The use of these sources motivates the employees to remain with
the organization.
‹ ‹The time and cost of recruitment is much less as compared to
external recruitment.
‹ ‹Industrial relations improve.
Disadvantages of Internal Sources
‹ ‹It perpetuates the old way of doing things, and thus creativity may
be hindered due to the lack of new talents.
‹ ‹Disqualified applicants may become discontented.
‹ ‹The chances of favoritism increase.
‹ ‹Choice in selection is restricted to insiders and outsiders, who may
be more talented, are not employed.
‹ ‹The existing employees may not be fully fit for some job openings;
hence the so-called benefit of less need for training may not be
available.

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‹ ‹All vacancies cannot be filled up using internal sources only. Notes

‹ ‹These sources cannot be used by a newly established enterprise.

6.8 Guidelines for Improving the Effectiveness of Internal

Sources
‹ ‹Publicizing the vacancies through job postings (discussed earlier).
‹ ‹Maintenance of Proper Personnel Records as examination of such
records can reveal those employees who are working in jobs below
their educational or skills level; employees having the potential for
further training; and employees with the right background for the
opened job.
‹ ‹Skill-banks, listing the specific skills of current employees, can
also be developed.
‹ ‹Computerization of personnel records can help in ensuring selection
of qualified inside candidates.
External Sources
External sources far outnumber the internal sources.
‹ ‹Professional or Trade Associations: Many associations provide
placement services for their members, like compiling job seekers’
lists, providing access to members during national or regional
conventions. Most of such associations publish/sponsor journals
which include classified advertisements for jobs. This source offers
the advantage of enabling recruiter to zero in on specific job seekers,
especially for hard-to-fill technical/professional posts.
‹ ‹Advertisements: Advertisements in newspapers, trade/professional
journals, television, radio, internet are widely used sources for
recruitment of different positions within the organization. The
selection of medium depends on the positions for which recruitment
is being done. For instance, the local newspapers usually the best
source for blue-collar employees, clerical employees, and lower-
level administrative employees; technical/professional journals can
be used for attracting skilled employees; and internet advertising
can be used for all types of jobs.

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Notes ‹ ‹In the present times, telecasting is becoming a good way to let the
candidates know about the availability of jobs. Special programmes
like “job watch”, “youth pulse”, “employment news”, etc., are being
telecasted. However, this source of recruitment is used mainly by
the government. Private organizations desist from using radio and
television ads mainly because:
‹ ‹High costs;

‹ ‹The ad appears for a short time, is not repeated, cannot be stored.

‹ ‹The candidates who were not watching T.V. at that time cannot
use them.
‹ ‹The candidates not having access to T.V. cannot come to know
about the availability of job.
‹ ‹The candidates may not be able to get the information because
of power failure at that time.
‹ ‹A number of factors influence the response rate, the three important
ones are identification of the organization, labour-market conditions,
and the degree to which specific requirements are included in the
advertisement. Advertisements must be effectively drafted before
publishing/releasing them. Construction of ad should be done
keeping in mind a four-point guide – AIDA – attract attention;
develop interest in the job; create desire; and propel the job seeker
into action.
Experts suggest that ads should normally contain the following
information – the contents of job (main tasks and responsibilities),
realistic description of working conditions, compensation (monetary,
non-monetary), job specifications, growth, where, to whom, and how
to apply, and so forth. Besides informative, the ad should be able
to sell the job as well as the organization. Moreover, recruitment
ads can also serve as corporate ads (ads to build up the corporate
image). Cost-wise also this arrangement suits organizations as there
is not much difference between the two.
‹ ‹Employment Exchanges: The Employment Exchanges (Compulsory
Notification of Vacancies) Act, 1959 requires all industrial establishments,
each employing 25 workers or more, should notify the vacancies before
filling them to the Employment Exchanges that have been established

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all over the country. The major functions of exchanges are to increase Notes
the pool of desirable candidates and to do preliminary screening. Thus,
these exchanges act as linking pin between the prospective employers
and prospective employees. These exchanges are particularly useful in
recruiting blue-collar workers, and technical workers.
‹ ‹Casual Callers (walk-ins, write-ins, talk-ins): Job seekers visit the
offices of some companies on their own (walk-ins). Write-ins are
those who send written enquiries. They are asked to fill application
forms for further processing. Talk-ins, becoming popular nowadays,
means aspirants are asked to meet the recruiter on a specific date
for detailed talks. No application is required to be submitted. A
waiting list of all such unsolicited candidates can be prepared to
fill, normally, temporary and lower level jobs. But nowadays, they
are also being used to fill skilled jobs. It is a very inexpensive
source of recruitment.
‹ ‹Educational and Training Institutions: Colleges, universities,
research laboratories, sports fields, and institutes are fertile grounds
for recruiters. Until recently, only Institutes of Management (IIMs) and
Indian Institutes of Technology (IITs), and postgraduate departments
used to attract recruiters. Now due to increasing talent shortage,
increasing cost of compensation to be offered to the pass-outs
of such institutions, campus recruitment has started even at the
undergraduate degree colleges, and at all the private institutions
that have emerged after the recent policy of privatization. Even
the smallest agency offering any course, like a computer course,
advertises campus placement as a way to lure candidates to seek
admission. The result of increasing popularity of campus recruitment
has resulted in almost every tertiary level educational institution
having a placement officer.
‹ ‹Consultants and Executive Search Agencies: For instance, ABC
consultants, Human Resource Consultants, Head Hunters and many
more such agencies are contacted by organizations for recruiting
managerial and executive personnel.
‹ ‹Labour Contractors: Manual workers can be recruited through
contractors who maintain close links with the sources of such workers.

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Notes ‹ ‹Acquisitions and Mergers: However, it requires a proper personnel

planning and selection process in place.
‹ ‹Competitors: Popularly called “poaching” or “raiding”, this method
involves identifying the right people in rival organizations and luring
them by offering better terms.
‹ ‹Displaced Persons: Establishment of a project in an area normally
results in displacement of inhabitants of that place. Such displaced
persons are the source of recruitment not only to the company that
caused displacement but also to other companies located elsewhere.
‹ ‹E-recruiting: Recent wave of internet is having a revolutionary
effect on recruitment practices. It enables organizations to screen
candidates’ soft skills, assess their skills, conduct their background
checks, interview the candidates through video-conferencing, and
manage the entire process with web-based software.
Benefits of External Sources
‹ ‹They make the availability of new skills, talents, and experiences
possible to the organization.
‹ ‹They enable the organization to fulfill the legal and social responsibility
of reservation for underprivileged sections of the society.
‹ ‹They enable the organization to have a wider choice in recruitment.
‹ ‹This source of recruitment never dries up and is available even to
new enterprises.
‹ ‹These sources are the best when suitable people from within are
not available.
‹ ‹There is no scope for resentment, heartburn and jealousy with
people from within.
Disadvantages of External Sources
‹ ‹They are more expensive and time consuming.
‹ ‹Detailed screening is necessary as the candidates are unknown.
‹ ‹More orientation and training are required for such personnel.
‹ ‹The motivation level of the existing staff is adversely affected if
higher level jobs are filled from outside.

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Notes
6.9 Alternatives to Recruitment
‹ ‹Overtime: If the requirement to have more employees is temporary,
present employees may be asked to work extra.
‹ ‹Employee Leasing (Staff Outsourcing): It involves paying a fee
to a consulting firm that handles payroll, employee benefits and
routine HR functions for the client company. This practice is useful
to those organizations which do not want to maintain a regular HR
staff, specifically small and medium sized enterprises.
‹ ‹Temporary Employment: Historically, temporary employment
was used to fill some temporary vacancies of semi-skilled workers
during peak periods. Today, “just-in-time” employees are used to
fill vacancies of all types – including professional, technical, and
executive positions.

6.10 Summary
Human resource planning is a process that identifies current and future
human resources needs for an organization to achieve its goals. Com-
petency-based management supports the integration of human resources
planning with business planning by allowing organizations to assess the
current human resource capacity based on their competencies against the
capacity needed to achieve the vision, mission and business goals of the
organization. Implementing strategic human resource planning requires
assessing the current HR capacity, forecasting HR requirements, analysing
the gap, and developing HR strategies to support the strategies of the
organization. HRP is significant as it determines future manpower needs,
develops ways for the organization to cope with change, and helps in
talent management. An essential prerequisite of HRP is job analysis. This
process of job analysis requires organization analysis, obtaining informa-
tion about jobs, selecting representative jobs for analysis, collection of
data, and lastly, development of job descriptions and job specifications.
Techniques of data collection for job analysis are questionnaires, written
narratives, observation, log records, and interviews.
Recruitment is a linking activity that brings together those who have jobs
to fill (organizations) and those seeking jobs. It aims at generating a pool

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Notes of potentially qualified job candidates. The process of recruitment plays

a central role in the success of an organization and is a visible function,
both inside and outside the organization. It is influenced by a number of
internal and external factors. An effective process of recruitment com-
prises interrelated stages: Planning, Strategy Development, Searching,
Screening, Evaluation and control. Recruiting involves answering two
questions: (1) Where are the suitable candidates available in required
number? The answer to it deals with sources of recruitment; (2) How
can they be informed about the availability of jobs, about the jobs, and
about the organization? The answer to this question deals with techniques
of recruitment.

6.11 References
‹ ‹https://en.wikipedia.org.“Talent Management”, updated December
2010, accessed October 2018.
‹ ‹Collings, David G. and Kamel Mellahi. “Strategic Talent Management:
A review and Research Agenda”. Human Resource Management
Review, Volume 9, Issue 4, December 2009, pp. 304–13. Accessed
in October 2018 from https://www.sciencedirect.com.
‹ ‹https://en.wikipedia.org. “Strategic Human Resource Planning”.
updated October 2018, accessed October 2018.
‹ ‹SHRM Foundation. (2016). Talent Acquisition: A Guide to Understanding
and Managing the Recruitment Process, SHRM, USA. Accessed
online at www.shrm.org in October 2018.

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 L E S S O N

7
Strategic Selection,
Training and Development
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
7.1 Strategic Selection
7.2 Types of Selection Processes
7.3 Steps in a Strategic Selection Procedure
7.4 Problem of “No Shows”
7.5 Concept of Strategic Training
7.6 Contextual Terms: Education and Development
7.7 Designing a Strategic Training Programme
7.8 Role-Based and Competency-based Training
7.9 Summary

7.1 Strategic Selection

Selection is the process of picking individuals with requisite qualifications and compe-
tence out of the pool of job applicants to fill jobs in the organization. Right selection is
strategically important as:
‹ ‹The performance of the superior as well as the organizational performance depends
on the performance of the subordinates.
‹ ‹Recruitment and selection are costly processes. So they should be done effectively.
‹ ‹There are many laws governing the selection of employees. For example, representation
of minority and underprivileged sections of the society in India. Selection has to be
done considering all such Acts.
‹ ‹Right selection increases the stability of the workforce by reducing labour turnover.
‹ ‹It increases job satisfaction and decreases absenteeism.
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Notes
7.2 Types of Selection Processes
Selection process can be of two kinds, mentioned hereunder:
‹ ‹Discrete Selection Procedure: Normally followed more often, this
process is designed in such a manner that rejection in each stage/
hurdle puts the candidates out of the race.
‹ ‹Comprehensive Selection Procedure: Discrete selection procedure
may not be the most effective selection procedure for every job,
as it can lead to elimination of potentially good employees, simply
because they receive a poor evaluation, even if at one single selection
step. In comprehensive selection, all the applicants are put through
every step in the selection process and the final decision is based
on the comprehensive evaluation of the results in each stage.
Selection process consists of a number of steps, though how many steps
will be taken and in what order will vary with every organization and
job requirement. In other words, there is no standard selection procedure
for all the jobs in all the organizations. Differences in selection tech-
niques occur because of differences in the sizes of organizations, nature
of businesses, kind and number of persons to be employed, government
regulations to be adhered to, etc. A normal selection procedure has the
following steps:
‹ ‹Preliminary Interview
‹ ‹Application Form
‹ ‹Written Examination
‹ ‹Employment Interview
‹ ‹Medical Examination
‹ ‹Reference Checks
‹ ‹Final Approval

7.3 Steps in a Strategic Selection Procedure

Strategic selection procedure is designed with a long-term focus in mind.
1. Preliminary Interview: Preliminary Interview is a short process in
which interested candidates are given the necessary information about

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the nature of the job and the organization. Necessary information Notes
is also elicited from the candidates about their education, skills,
experience, expected salary, etc. These interviews are also known
as stand-up interviews or sizing up of the candidates, or screening
interviews. The purpose of such interviews is to eliminate obviously
unqualified candidates. However, due care is required so that desirable
workers are not eliminated. Selected candidates are then asked to
fill the application form.
2. Application Form: Also known as application blank, an application
form is a traditional and widely accepted medium for securing
information from prospective candidates. Organizations follow
different practices regarding the designing of forms. Small firms may
decide not to design any specific form at all; they ask the candidates
to leave the required information on a blank page; medium-sized
organizations design a form used for all the jobs; while big ones
design different forms for different jobs. Generally, an application
form contains – personal information, salary and other benefits
expected, references, miscellaneous, i.e. extra-curricular activities,
hobbies, games and sports, membership of professional bodies, etc.
3. Screening of Applications: A screening committee is formed for
screening of applications. The forms can be screened using two
methods – clinical method and weighted method.
‹ ‹Clinical Method: This method takes the help of psychology to
analyse application forms to get clues about the candidate’s leadership
ability, emotional stability, assertiveness, writing ability, and attitude
towards co-workers, superiors, subordinates and the organization.
‹ ‹Weighted Method: Weights are assigned to different types of
information provided in the application form according to their
importance for the success of the employees.
Successful candidates at this stage are issued letters for employment tests.
4. Employment Tests: Different types of written examinations are
conducted to measure the candidates’ ability in arithmetical calculations,
to know their attitude towards the job, to measure their aptitudes,
reasoning skills, knowledge in various disciplines, general knowledge,
and English language. Intelligence tests, aptitude tests, trade or
proficiency tests, interest tests, and personality tests are used for
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Notes this purpose. These tests are based on the presumption that job-
related traits of an individual can be measured. These tests also
reduce favoritism in selection.
Tests help to reduce bias in selection by serving as a supplementary
screening device. They help in better matching of the candidate and the
job, and may reveal information which remains covered up in application
form and preliminary interview.
Types of Tests
(a) Tests of Cognitive Abilities: They can be of two types – general
reasoning ability (intelligence) tests and tests for specific mental
abilities like memory and inductive reasoning.
‹ ‹General Reasoning Ability (Intelligence) Tests: are tests of
general intellectual abilities. They measure not a single trait, but
a range of abilities like memory, vocabulary, verbal fluency, and
numerical ability. They are also called IQ tests which measure
intelligence as a quotient. For example, if a candidate’s age is
20 years and he answers questions as a 25-year-old might, his IQ
would be 25 (his mental age) divided by 20 (his chronological
age) multiply by 100, or 125.
‹ ‹SpecificMental Abilities Tests: measure specific mental abilities,
such as inductive and deductive reasoning, verbal comprehension,
memory, and numerical ability. They are also called “aptitude
tests” as they purport to measure the aptitude for the job in
question.
(b) Tests of Motor and Physical Abilities
‹ ‹Testsof motor abilities measure abilities such as finger dexterity,
manual dexterity, and reaction time. They are used for screening
applicants for jobs such as designers, drafts-people, or engineers.
‹ ‹Tests of physical abilities include tests for static strength (such as
lifting weight), dynamic strength (like pull-ups), body coordination
such as jumping rope, and stamina. For example, a candidate before
being hired as a lifeguard must prove he knows how to swim.
(c) Personality and Interest Tests: A person’s cognitive and physical
abilities alone can seldom explain the performance he/she delivers.
For that, a person’s personality and interests too are to be measured.

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Personality Tests: These tests are given to measure the results that a Notes
prospective employee will show in a particular working environment. They
measure the many basic aspects of an applicant’s personality, namely,
introversion versus extroversion, emotional stability versus moodiness,
friendliness versus criticalness, extent of motivation, concern for people
versus concern for production, etc. The lengths of these tests vary de-
pending on how important it is to measure personality; they can have
from four to five items up to 300 items. Industrial psychologists often
emphasize on five personality dimensions – extroversion, emotional
stability, agreeableness, conscientiousness, and openness to experience.
These personality tests are also of three types:
‹ ‹Objective Tests: They are measured objectively. The candidate has
to say yes/no, true/false, or rate items on certain scale. Items like
dominance, attention to detail, empathy, openness, trust, etc.
‹ ‹Projective Tests: An ambiguous stimuli (like an ink-blot or clouded
picture) is presented to the candidate and his reactions are sought.
His values, motives and personality get reflected in the way he
responds. Closely resembling a projective test is a “graphology
test” (handwriting analysis), which assumes that handwriting
closely reflects basic personality traits like lack of control, inner
disturbance, etc. Though studies suggest that use of graphology
is not valid, some organizations still use (even swear by) it. It is
suggested that graphology tests can be used as an additional device
as it can provide rich insights into all those facts about a candidate
that conventional interview selection techniques cannot reveal.
‹ ‹Situation Tests: They measure a candidate’s reaction when placed in a
peculiar situation, his ability to undergo stress, and his demonstration
of ingenuity under pressure. For example, a problem is posed to a
group which is leaderless and solutions are sought. Group discussion
and in-basket methods are used to judge the personality.
5. Employment Interview: Generally, application blank and employment
tests do not provide sufficient information to decide the selection or
rejection of candidates. Employment interview helps the organization:
‹ ‹To find out the suitability of the candidate,
‹ ‹To cross check the information obtained through application
and tests,
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Notes ‹ ‹To seek more information about the candidate,

‹ ‹Togive him an accurate picture of the job requirements, terms
and conditions of the job, and some idea about the organization’s
policies,
‹ ‹To establish friendly relations between the employer and the
candidate, so as to motivate the successful applicants to work
for the organization,
‹ ‹Interviewis an essential element of selection and no selection
procedure is complete without one or more personal interviews.
6. Medical Examination: The last step before final selection or
rejection in most cases may be having the applicant take a physical
examination. For most of the jobs, this is a screening device in
the selection process; that is, the results of such examination
can only be used to reject candidates as the fitness of candidates
who pass the earlier stages is presumed. Sometimes organizations
require the candidates to produce medical fitness certificate in the
first or initial stages itself so that the cost of selecting an unfit
employee can be avoided. Currently, the vast majority of physical
examinations are required to meet the minimum standards for the
organization’s group life and medical insurance plans. The purpose
is also to provide base data in case of workers’ compensation claims
in future. However, exceptions are there where the job requires
rigorous medical examination to be conducted, for example in the
police, semi military and military.
Physical examination should disclose the physical characteristics of
the individual that are important for the performance of the current
job that may be assigned to him or the future jobs to which he may
be promoted or transferred. A proper medical examination results in
reduced absenteeism, accidents, and labour turnover, and thus ensures
higher standard of health and physical fitness of the employees.
A proper physical examination also helps in preventing spread of
communicable diseases.
7. Reference and Background Checks: Many application forms require
references (names, telephone numbers, and addresses), normally
two, for the purpose of verifying information or gaining additional

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background information of the applicant. Normally, these references Notes

are not checked and cannot be much reliable, as they tend to be
biased in favour of the applicant. When the labour market conditions
are tight (supply is less than the demand), these references may not
be checked at all.
Previous employers, known public figures, university professors, neigh-
bors or friends can act as references. In India, applications in government
and public sector organizations are to be routed through the present
employers of the applicants. The referees can be approached either by
mail or telephone. The telephone contact has the advantage of soliciting
immediate candid comments, and attitudes can sometimes be inferred
from hesitations and inflections in speech.
While seeking information from referees, they are assured of the confi-
dentiality of the information that they provide.
Final Selection
After a candidate has crossed all the hurdles, he/she is offered the em-
ployment. Normally, such candidates are shortlisted by the human resource
department, but finally approved by the line managers of the concerned
department which had made the requisition. Employment is offered in the
form of an appointment letter mentioning the post, the rank, the salary
grade, the date by which the candidate should join and other terms and
conditions in brief.

7.4 Problem of “No Shows”

Currently, a new development of “no shows” has become a serious con-
cern for HR managers. “No shows” are the individuals who pass through
the selection process, receive employment offers, but fail to report to
duties. It so happens as talent is becoming scarce, and every talented
candidate sits on multiple job offers, out of which he chooses one while
disappointing others.
HR managers need to understand “how people choose jobs” to increase
the probability that selected people join. Here, the knowledge of person-
ality and goals of individuals selected become important:

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Notes ‹ ‹Personality: Research indicates that people like to match their

work with their personality. For example, social individuals like
jobs in clinical psychology, foreign service, social work and the
like; careers in management, law, public relations are liked by
enterprising people; investigative individuals are compatible with
jobs in biology, mathematics, oceanography, and so on.
‹ ‹Personal Goals: People desire to work where their expectations
are positive and where they believe their goals can be achieved.
So job offers should be made to those individuals whose personality and
goals match with the jobs that are offered to them.

7.5 Concept of Strategic Training

Corporate strategy’s execution requires synchronized HR strategies. After
acquisition, human resources require strategic training, which can involve
change in skills, knowledge, attitudes or social behavior. It can also be
defined as the acquisition of knowledge, skills and competencies as a
result of the teaching of vocational or practical skills and knowledge that
relate to specific useful competencies.

7.6 Contextual Terms: Education and Development

The terms training, education, and development differ from one another
in many ways, though at times that difference blurs.
The difference between education and training can be depicted as shown
in Figure 7.1.

Figure 7.1: Difference between Training and Education

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Despite the above differences, training and education are complemen- Notes
tary to each other. For example, an employee who undergoes training
is presumed to have had some formal education. Further, no training is
complete without an element of education nowadays as more and more
employees are expected to exercise independent judgement to job prob-
lems. So, their horizon is broadened by imparting education.

Table 7.1: Difference Between Training and Development

Point of Distinction Training Development

Meaning Imparting specific skills Developing skills
Contents Technical and mechanical Conceptual and philo-
sophical knowledge
Participants Operative employees Managerial personnel
Objective Improve job performance Attitude development
Duration Short term one time affair Long term continuous
development
Role of trainer Extensive as initiative Limited as internally
is form the management initiated
Nature Reactive — to meet Proactive — to meet
current needs future needs

While concluding, it may be said that training is offered to operatives,

development to managerial personnel and education is common to all
employees.

Need of Strategic Training

(a) Employees have to adapt themselves to turbulent technological changes
occurring in the business environment.
(b) Organizations have to stay competitive (improve organizational viability)
in the ever-increasing competition in the contemporary business
environment. For that, products have to be improved continuously as
product life is becoming very short; quality of service, both sale of
service and after-sale service, has to be improved; and productivity
has to be boosted.

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Notes (c) Training is also required to enable employees to work in teams.

It requires skills in team-building, team decision-making, and
communication skills.
(d) Training is also required to update computer skills.
(e) The need of training is being felt increasingly to enable human
resources to play a strategic role in the management of enterprises.
HR manager sits with top management and has a say in the laying
down of strategic objectives, and then it is seen whether human
resources are equipped with skills to attain them. If not, the gap
is filled with training.
(f) The need of training is also felt to facilitate internal mobility, i.e.
transfer of a person from job to job.
(g) In addition to the basic training required for a trade, occupation
or profession, there is a need to continue training beyond initial
qualifications to maintain, upgrade and update skills throughout
working life. It is sometimes referred to as professional development.
Strategic Importance of Training
Importance of training can be discussed from the viewpoints of both employer
and employee. Employer stands to gain in terms of: (a) Higher productivity,
(b) Less learning periods, (c) Better quality of work, (d) Less supervision,
(e) Reduction in costs, (f) Low rate of accidents, (g) Increased morale of
employees, (h) Reduction in employees’ dissatisfaction, complaints, absen-
teeism, and turnover, (i) Provides career path to employees, (j) Effective
training leads to better management as training needs of employees are to
be spotted, which, in turn, requires effective discharge of managerial duties
to plan, organize, direct, etc. Employees gain in terms of: (a) Increase in
self-confidence, (b) Acquisition of new skills, (c) Increased chances of
promotion, (d) Increased earnings, (e) Increased adaptability to changing
conditions, and (f) Reduced rate of accidents.
Principles of Learning
(a) Making learning meaningful at the start of the training provide a
bird’s eye view of the material to be presented as it facilitates
learning. Also use a variety of familiar examples and use as many
visual aids as possible.

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(b) Learning is enhanced when the learner is motivated. A learner can Notes
be motivated to learn by providing realistic training (which can
be practiced), letting them learn at their own pace, letting them
perceive that they need training, scheduling training conducive to
learning (normally half-day training should be enough as the learning
curve goes down after that), and providing immediate reinforcement
(positive).
(c) Make transfer learning easy, from the learning site to the job site,
through maximizing similarity between training situation and work
situation, providing adequate practice, labelling or identifying each
feature of the machine or step in the process, and directing trainee’s
attention to the important aspects of the job, etc.

7.7 Designing a Strategic Training Programme

It involves the following steps:
1. Identification of training needs
2. Setting training objectives
3. Organization of training
4. Evaluation of training outcomes or results
1. Identification of Training Needs: Training needs can be identified
by trying to find out the answers to five questions:
(a) What are the organizational goals?
(b) What tasks must be completed to achieve such goals?
(c) What are the skills, abilities, and behaviours required of human
resources to perform the needed tasks?
(d) What skills and abilities are possessed by the present employees
and the behaviour displayed by them?
(e) What are the deficiencies, if any, in the skills, knowledge, or
attitudes required to perform the tasks?
The answer to the fifth question determines the extent and type of train-
ing needs.

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Notes Reasons for Identifying Training Needs

(a) Adoption of new techniques in an organization and introduction
of modern working methods. For Example, computerization of the
office.
(b) Poor performance by the workers, reflected by low output, lack of
initiative, incompetence, and bad decisions.
(c) Wide gaps between what workers should be doing (desired behaviour)
and what they are doing (actual behaviour).
(d) Analysis of the strengths and weaknesses of an organization may
reveal the areas of weakness of an organization, which need to be
handled seriously.
Process of Identifying Training Needs
Training needs can be identified through the following types of analysis:
(i) Organizational analysis
(ii) Task analysis
(iii) Manpower or Human Resource analysis
(i) Organizational Analysis: It is a systematic study of the organization in
terms of its objectives, resources, resource allocation and utilization,
growth potential and its environment. Its purpose is to determine
where training emphasis should be placed in the organization for
increasing organizational effectiveness. Organizational analysis
involves the following elements:
(a) Analysis of Objectives: The long-term and short-term objectives
and their relative priorities should be properly analyzed. Specific
goals for various departments should be stated, which will serve
as means for achieving the overall organizational objectives.
The management would have to examine the specific training
inputs that would contribute towards the achievement of such
objectives.
(b) Resource Utilization Analysis: The allocation of human and
physical resources and their efficient utilization in meeting the
operational targets should be analyzed. In order to examine
the need for training, the following questions need to be
answered: Whether adequate number of personnel are available

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to ensure the fulfillment of the goals? Whether the personnel Notes

performance is upto the required standards?
(c) Climate Analysis: Organizational climate reflects the attitudes of
organizational member as regards trust, loyalty, openness, and
commitment to organizational goals. Analysis of organizational
climate should aim at determining whether the environment
in different departments is conductive to fulfillment of their
goals. This will help in knowing areas where training is needed
to improve the climate of the organization.
(ii) Task Analysis: It is a systematic analysis of jobs to identify job
contents, knowledge, skills and aptitudes required to perform the
job. Particular attention should be paid to the tasks to be performed,
the methods to be used, the way employees learn these methods and
the performance standards required in employees. Questionnaires,
interviews, personnel records, observation and other methods can
be used to collect information about jobs in the organization.
In task analysis, the main focus is on the job or task. Task analysis
requires the study of various types of skills and training required
to perform the job effectively.
(iii) Manpower Analysis: The quality of manpower required by the
organization has to be done in the light of both, internal and external
environment of the organization. The economic, social, technological
and political environment of the organization should be properly
scanned to determine the quality of human resources desired. To
achieve these quality standards, specific training needs should be
determined on the following lines:
(a) The capability of present workforce to learn new skills and
behaviours,
(b) The time frame within which training must be imparted, and
(c) Job designing and redesigning, introduction of new work
methods and technology.
2. Setting Strategic Training Objectives: Once the training needs are
identified, the next step is to set training objectives in concrete
terms and to decide the methods to be adopted to achieve these
objectives. The overall aim of any training programme is to increase

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Notes organizational effectiveness. However, each training programme must

also have specific objectives, such as to increase productivity, to
improve quality, better human resource planning, better health and
safety, prevention of obsolescence and enhanced personal growth.
These objectives contribute to organizational effectiveness as
explained in the beginning of the chapter. The relationship between
specific objectives and overall purpose of training is shown in
Exhibit below.

3. Organization of Training Programme: Every training programme

includes trainees, trainers, a training period and training material.
These constituents of training are discussed below:
(a) Selection of the Trainees: The proper selection of trainees is
of major importance if permanent and gainful results are to be
obtained. A trainee should be trained for the kind of job he likes
and is fit to perform. In this respect, training is closely related
to the selection of personnel. Careful screening of candidates for
training will raise the effectiveness of the training programme.
While giving training to an employee, the first step is to
attempt to place him at ease. It is generally seen that many
people are somewhat nervous when approaching an unfamiliar
task. The instructor should not forget the newness of the
training programme to the trainee. In addition to minimizing
any possible apprehension, the trainer should emphasize the
importance of the job, its relationship to the work-flow and

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the importance of rapid and effective learning. Thus, the Notes

trainee must be given proper background information before
he learns the new skills and knowledge.
In case of supervisory training, it is better to include all the
supervisors and other employees who are considered suitable
for promotion to such posts. Excluding some employees
on the basis that they do not need the training or that they
are already doing their work satisfactorily is a poor policy.
Even outstanding persons benefit from well-managed training
programmes and their presence assists the other trainees in
many ways.
(b) Preparation of the Instructor: The instructor or trainer is a key
figure in an effective training programme. He can contribute
immeasurably to its success. Qualified instructors may be
obtained from inside or outside the organization. However,
many insiders are not good instructors because they may not
possess the ability to teach the skills. A trainee needs many
qualifications besides knowing how to do the work. He must be
able to divide the job into logical parts so that he may take up
one part at a time, without losing his perspective of the whole.
He must be tolerant and patient. He must be able to appreciate
the value of training for the enterprise and an understanding
of what the employees would go through in order to acquire
the skills and knowledge as envisaged by the programme.
The trainer needs professional expertise in order to fulfill his
responsibility. If he is ill-informed about the training process,
or if he knows little about possible connection between training
and good management, then he may indeed deserve the casual
treatment that he frequently receives. Therefore, it is desirable
that the trainer must have at least the basic knowledge about
the job for which he is going to instruct the trainees.
An effective instructor or trainer can present the operations
involved in doing a particular job by various ways. In most
of the cases, method of explanation is favoured. In addition,
an instructor may illustrate various points through the use of
pictures. Demonstrations on-the-job is an excellent device.

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Notes While demonstrating the operation, the trainer should stand

beside the trainee rather than in front of him so that the latter
may better adopt the movements of the trainer. The trainer
should explain and demonstrate the operations step by step,
and should allow the trainees to repeat these operations. He
should also encourage questions from the trainees in order to
be sure that the trainees understand the job.
(c) Determination of Training Period: The length of the training
period depends on the skill to be acquired, and the trainees’
learning ability. For instance, a simple indoctrination programme
for clerks may require an hour a day over a period of one
week, while a course in computer programming may be given
two hours a week for 15 weeks. The use of effective and
visual material usually helps to reduce the training time. To
maintain interest and secure maximum accomplishment, no
single session should last longer than two hours.
Additionally, if the training is given during working hours,
productivity will suffer, and the organization will have to pay
for this time. But if the training is arranged after the working
hours, employees may not be able to make full use of training
programmes, because they are already tired. So, any personnel
manager should try to reconcile these situations. It is beyond
doubt that a trained employee is an asset for the organization.
A big organization can afford to send their employees for
full time training on full pay. The cost incurred on training
an employee will be more than compensated by the benefits
obtained from training in the form of increased productivity,
less wastage, heightened morale, etc.
(d) Training Methods and Materials: There are several on-the-
job and off-the-job methods of training as discussed later in
this chapter. The choice of any method would depend upon
the specific objectives of the training programme.
To increase the effectiveness of training, some written material
is usually desirable as a basis for instruction, review and
reference. The training section of the HR department may
prepare the training material with the help of line supervisors

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to be used for different jobs. A complete outline of the whole Notes

course should be made with the main topics included under each
heading. The training material should be distributed among the
trainees well in advance so that they may come prepared in
the lecture classes, are able to understand the subject quickly
and can clarify their doubts by asking questions.
4. Evaluation of Training: Training is indispensable for both, the
organization and the employees. At the same time, it is a very costly
and time-consuming process. It is essential to determine its effectiveness
in terms of achievement of specific training objectives. Individuals
like to know how much they have learnt or how well they are doing.
The sooner employees know the results of a quiz or test, the sooner
they can assess their progress. The sooner employees receive positive
feedback from the trainer, the less time they will waste.
Self-graded tests and programmed learning kits provide the necessary
feedback to a person about his progress on a particular subject.
This principle does not necessarily mean frequent testing, but the
more immediate the feedback on learning, the more motivating it
is likely to be.
Evaluation of training would provide useful information about the
effectiveness of training as well as about the design of future training
programmes. It will enable an organization to monitor the training
programmes, and also to modify its future programmes of training.
The evaluation of training also provides useful data on the basis of
which relevance of training and its integration with other functions
of human resource management can be determined. Evaluation of
training has been discussed in detail later in this chapter.
Types of Training
1. Orientation Training (To Adjust New Employee to the Work
Situation): It consists of familiarizing the new employee with the
work environment, which consists of rules and regulations to be
followed, the work to be done, the team (superior, subordinate,
peers), facilities at the work place, etc. It helps the employee in
overcoming the initial jitters of the new place.
2. Job Training: It is provided to increase the knowledge and skills
of an employee for improving performance on the job.
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Notes 3. Safety Training: Teaching of correct methods of handling equipment

and machines to reduce accidents, wastage of materials and damage
to machinery.
4. Promotional Training: It refers to the training provided to the
employees before their promotion so that they are able to shoulder
the higher responsibilities of the new position.
5. Refresher Training: It is intended to revive and refresh the knowledge
to update the skills of the existing employees. It is needed to avoid
obsolescence of knowledge which may occur due to rapid changes
in technology and work methods.
6. Remedial Training: Such training is imparted as a way of remedy to
correct the behaviours and styles of working of some of the employees.
Methods of Training
The most popular training methods used by the organizations can be
classified as either “on-the-job” training methods or “off-the-job” training
methods. Though some methods may be classified as being either of the
above, it is very difficult to categorize them. The list of such methods
is very long, but some of them are discussed as under:
On-the-job Training
It involves learning by doing. Employees learn in actual work situations.
It is very suitable for those jobs which are either difficult to stimulate or
easy to learn by observing and doing. The advantage of these methods is
that actual work does not suffer when employees learn. Problems relating
to transferability of learning from the place of learning to the place of
work do not arise. However, these methods suffer from certain drawbacks
also. Namely, low productivity when employees are learning, damage to
machinery, and wastage of raw materials. Still, these demerits get offset
by the merits of these methods when the personnel are limited or costly,
and where it is desirable for the employees to learn on-the-job. On the
job training can be either formal or informal.
The procedure for informal on-the-job training is:
1. At the beginning of or during the training, no specific goals or
objectives are developed;

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2. Trainers usually have no formal qualification or training experience Notes

for training;
3. Training is not carefully planned or prepared; and
4. The trainers are selected on the basis of technical expertise or area
knowledge.
Methods of on-the-job training are Job Instruction Training (step by step
learning), Understudy (the superior gives training to a subordinate as his
understudy or assistant), Position Rotation (the trainee is periodically
rotated from job to job), Apprenticeship Training is given to people who
seek to enter skilled trades to become for example, plumbers, electricians,
or ironworkers.
On-the-job training is the most effective method of training the employees
because it is in complete accord with the three basic laws of learning:
(i) The law of readiness (as the learner has to do learn, (ii) The law of
exercise, (he gets the opportunity to apply the learning, and (iii) The law
of effect (learner will be more satisfied as he/she is not left to learn by
trial and error).
Vestibule Training
The term ‘vestibule training’ is used to designate training in a class-
room for semi-skilled jobs. It is more suitable where a large number of
employees must be trained at the same time for the same kind of work.
Where this method is used, there should be well qualified instructors in
charge of training programmes. Here, the emphasis tends to be on learn-
ing rather than production. It is frequently used to train clerks, machine
operators, typists, etc.
Off-the-Job Training
It requires the worker to undergo training for a specific period away
from the workplace. They are concerned with imparting both knowledge
and skills in doing certain jobs. The advantages of these methods are
that workers are free from the tensions of work when they are learning,
no damage to machinery, and no excessive wastage of raw materials.
However, these methods suffer from difficulty of transferring the learning
from the place of learning to the place of work. Some such methods are:
special lecture cum discussion, audio-visuals, simulation.

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Notes
7.8 Role-Based and Competency-based Training
Role Based Training puts the training in the context of the role and what
it takes to perform that role. You can look at a role as it correlates to a
defined work activity to which the staff member has been assigned. These
staff members also have to follow processes, procedures, use enterprise
tools and adhere to reporting structures and cycles. A competence-based
programme needs to focus on building the knowledge and skills needed
in a particular job.
Evaluating Training Effectiveness
Training needs to be evaluated from three perspectives:
(i) In terms of effectiveness of costs;
(ii) In terms of learning on the part of learners; and
(iii) In terms of change or impact it has made on the individual’s and
organizational performance.
Most commonly, following methods are used to evaluate the effectiveness
of training:
(a) Reaction Method: Most typical evaluation of training programmes
across organizations, it involves asking some managers and a group
of trainees their opinions about training effectiveness through a
questionnaire. Such reactions, while easy to acquire, are the least
valid as they are affected by the subjectivity of those who give
such information. Such opinions are influenced by factors which
have little to do with the training’s effectiveness. The other three
approaches which are an improvement over subjective assessment
are as under:
(b) Test-retest Method: Participants are given a test before they begin
the programme. After completion, the participants retake the test.
Improvement in test scores is taken as indicative of effectiveness
of training. Four problems arise here: First, tests may not be valid.
Secondly, increase in test scores may be due to causes other than
training given. Third, difficulty arises in attempting to substantiate
that changes in the test scores will be reflected in performance.
Fourthly, attributing the change fully to the instruction may be a
fallacy.

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(c) Pre-post Performance Method: This approach attempts to correct Notes

the flaws of the first approach. In this method, each participant is
evaluated prior to training and rated on actual job performance.
After instruction is complete, the participant’s performance is
re-evaluated. As with test-retest method, the increase is assumed
to be attributable to the training. However, in contrast with test-
retest method, pre-post performance method deals directly with job
behaviour.
(d) Experimental-control Group Method: This is the most sophisticated
evaluation approach. Two groups are established – comparable as
to skills, intelligence, and learning abilities – and evaluated on
actual job performance. Members of the control group work on
the job, but do not undergo training. The experimental group is
given the training. At the conclusion of training, the two groups
are re-evaluated. If the training is really effective, the experiment
group’s performance will have improved, and its performance will
be substantially better than that of the control group. This approach
attempts to correct factors other than the training programme that
influence job performance.
Of the four methods mentioned above, the experimental-control group
method is preferred. But costs, time, and questions about the ethical activ-
ity of withholding training from some employees may make this method
inappropriate. Does this mean one should use subjective methods? The
answer is “no”. The opinions should be kept as the base, implying that
a combination of different methods should be used.
Training Process Outsourcing
Organizations most successful in outsourcing their training function follow
some variation of an industry recognized seven (7) steps process. The
“Seven (7) Stages of the Outsourcing Process” include finding potential
partners, gathering and sharing data necessary for structuring a deal, ne-
gotiations and documentation of a contract, handing over the assets and
resources to the partner and the ongoing management of the relationship.
Managerial Development
Management development is the overall concept that describes the many
ways in which organizations help employees develop their personal and

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Notes organizational skills, either as managers in a management job or with an

eventual management job in mind.
Guidelines for Effective Management Development
1. A person’s development is 90 percent the result of “on-the-job”
experience.
2. The three most effective development tools are clearly defined
responsibility, parity of authority and responsibility, and the necessary
feedback of one’s performance.
3. A person grows and develops to the extent he or she exercises
increasingly refined control over his or her thought processes,
actions and behaviour, bringing their performance closer to some
acceptable standards.
4. The focus of management development should be on an individual’s
work, rather than on personality.
5. Management development programmes aim at creating an environment
in which executives can grow.
6. Either people develop according to the particular demands of their
lives and in line with their potential, or they do not develop at all.
7. The methods and tools used are not as important as a sincere
interest, both of the organization and of its employees.
8. Education courses, when properly designed and presented, can help
executives learn job related skills quickly and easily.
9. There is no panacea, miracle, or shortcut method for the development
of management ability.
Reasons for Management Development are Ever Changing Business
Environment, Developing Technical Specialists to Become Generalists,
Younger Manager must be Developed Sooner, Increasing Professional-
ization of Management, Warding off Obsolescence, New Researches in
the Area of Learning.

7.9 Summary
Selection is the process of picking individuals, out of the pool of job
applicants, with requisite qualifications and competence to fill jobs in the

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organization. Selection process consists of a number of steps, though how Notes

many steps will be taken and in what order, will vary with each organization
and job. Job seekers who pass the screening and preliminary interview are
called for employment tests, which are also called psychological tests, as
they are designed by psychologists. A selection process uses interviews
as selection device twice – one initially (preliminary interview) and one
at a later stage towards the end of the process. Interview is a formal,
in-depth conversation conducted to evaluate the applicant’s acceptability.
It is considered to be an excellent selection device, basically because of
its flexibility. There are several problems which are often encountered by
interviewers while using interviews as a selection technique. There are
two ways to avoid the interview problems. First is very obvious – keep
them in mind and avoid them (e.g., interviewers should guard their own
behaviour). The second one is not so obvious. It involves structuring
the interview and following some guidelines for effective interviewing.
Training refers to the methods used to give new or present employees the
skills they need to perform their jobs. The terms training, education, and
development differ from one another in many ways, though at times, that
difference blurs. Though training had always been necessary in every kind
of organization for every kind of job, to improve the job-related skills of
an employee, today its importance has increased due to turbulent changes
in the environment. Every stakeholder stands benefitted from training
in many ways. As training is a learning experience, some principles of
learning should be kept in mind while designing and imparting training.
Training needs can be identified by trying to find out the answers to
certain questions. Besides, there are some indicators in the environment
that help in identifying the need of training, like drop in productivity or
inadequate job performance. There are many methods for determining
training needs. Observation and analysis of job performance in one such
method. Training programme may be of different types, depending on the
reason for which it is required, like orientation training, job training, etc.
The most popular training methods used by organizations can be classified
as either on-the-job or off-the-job training.
Training designed may be either role-based or competency-based. Eval-
uation of training is a must and there are many methods of doing it.
Still, many problems are faced in such evaluation. Certain steps to be

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Notes followed for effective outsourcing of training function have also been
discussed in the chapter.
The three terms “management education”, “management training” and
“management development” are used interchangeably in practice, though
their literal meanings differ. Most business leaders agree that management
development is a necessary requirement for the long-term success of their
organization. There are a number of methods of executive training and
development. However, certain guidelines are required to be followed to
make their full use.

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 L E S S O N

8
Reward and Compensation
Strategy
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
8.1 Meaning of Strategic Compensation Management
8.2 Meaning of Compensation Strategy
8.3 Aims of Compensation Strategy
8.4 Features of Compensation Strategy
8.5 The Structure of Compensation Strategy
8.6 The Contents on Compensation Strategy
8.7 Developing Compensation Strategy
8.8 Considerations in Developing Strategies for New Salary Programmes
8.9 Strategic Elements of Compensation
8.10 Strategic Compensation Alternatives (Choices)
8.11 Factors Affecting Formulation of Compensation Strategy
8.12 Summary
8.13 Self-Assessment Questions
8.14 References

8.1 Meaning of Strategic Compensation Management

Armstrong & Helen (2005) have defined strategic compensation management as the pro-
cess of looking ahead at what an organisation needs to do about its reward policies
and practices in the future.
Strategic compensation management deals with both ends and means.
As an end, it describes a vision of what reward policies will look like in a few years’ time.
As a means, it shows how the vision will be realised. Therefore, strategic compensation

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Notes management is also called visionary management. However, it is also

called empirical management, which decides how, in practice, it is going
to get there.
Strategic reward management, according to Armstrong et al, is concerned
with:
(i) understanding the needs of the organisation and its employees;
(ii) understanding how such needs can best be satisfied;
(iii) developing the values of the organisation on how people should be
rewarded; and
(iv) formulating guiding principles that will ensure that these values are
followed.
The fundamental idea behind strategic compensation management is to match
compensation policies and strategies with business strategy as any incon-
gruence between the two affects the organisational performance adversely.

8.2 Meaning of Compensation Strategy

Compensation or reward strategy can be defined as all that an organisation
wants to do in the long term to develop and implement reward policies
practices, and processes that will further the achievement of its goals. It
is a declaration of intent, which establishes priorities for developing and
acting or reward plans that can be aligned to business and HR strategies
and to the needs of the people in the organisation.
According to D. Brown (2001), reward strategy is ultimately a way of
thinking that can be applied to any reward issue arising in the organisa-
tion resulting in value creation.
Reward strategy is also being defined as a plan for allocating reward re-
sources in a manner that directs the business to the successful execution
of its objectives. There are three main factors involved in developing
and managing this plan:
(i) a thorough understanding of the total value of all of an organisation’s
reward elements vis-a-vis its stated market competitive objective
(money),
(ii) the strategic allocation and distribution of money to each element
(mix),
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(iii) and the articulation and delivery of specific and deliberate expressions Notes
to employees about what a company values and expects (messages).
These three defining dimensions of Total Rewards Strategy are explained
as follows:
1. Money: This is the “what” dimension, or the elements that are
considered to be rewards in the marketplaces where you compete
for talent, and the competitive levels that you establish for yourself
in those marketplaces. This is the content and level of rewards, and
it is where Total Rewards in the employment contract are defined.
2. Mix: This is the “how, who, when, and where” dimension. It determines
how programme eligibility is established, who participates in the
plans, and how rewards are delivered. It organizes rewards into the
most efficient means of delivery. Money and mix together are the
architecture of rewards, and they are used to create the blueprint
for developing reward plans.
3. Messages: Messages are the “why” dimension, conveying the
value and expectations that need to be delivered through rewards.
Purposefully articulating specific messages allows a company to
steer the focus of employees on desired business outcomes and the
competencies to be successful. Messages forge alignment of both
plans and people’s efforts.

8.3 Aims of Compensation Strategy

Reward strategy is an undertaking about what is going to be done in the
future. It is concerned with the direction that should be followed in de-
veloping the right mix and levels of financial and non-financial rewards
to support the business strategy. It will set out:
(i) The underlying guiding principles (the reward philosophy);
(ii) The Intentions: What is proposed;
(iii) A Rationale: Why is it intended to be done; and
(iv) A Plan: How we propose to do it.
According to Henry Mintzberg et al. (1988), there are five different meanings
that can be attached to strategy:
(i) Plan: A unified, comprehensive, integrated plan designed to ensure
that the objectives are achieved;
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Notes (ii) Ploy: A maneuver to outwit on opponent or a competitor;

(iii) Pattern: Consistency in behaviour over time;
(iv) Position: How the organisation wants to be seen in the marketplace,
whether as a leader or a follower; and
(v) Perspective: An organisation’s fundamental way of doing things.
Also called the corporate culture, it permeates internally within the
organisation so that all employees see the strategy and feel a part
of it.

8.4 Features of Compensation Strategy

The features of reward strategy are as follows:
1. Reward is characterised by diversity. Though aspects covered in
reward strategies are the same, they are treated differently in
different organisations according to their contexts, overall strategies
and cultures.
2. Reward strategy helps a firm in gaining competitive advantage over
its competitors. Human resources are the only resources that can
give an organisation such an edge. Through reward policies, it can
be ensured that:
(a) the firm has higher quality people than its competitors;
(b) the unique intellectual capital possessed by the business is
developed and nurtured; and
(c) a culture is created that encourages commitment.
3. Reward strategy is a main and important component of HR strategy. It
affects all other aspects of human resource management, right from
human resource planning until the employee leaves the organisation.
4. Reward management is increasingly becoming line managers’
responsibility, though HR still initiates policies. Therefore, it is
becoming HR and reward specialists’ responsibility to develop line
management capability.
5. Strategy has to take account of the mutual expectations of both the
management and the employees.

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Notes
8.5 The Structure of Compensation Strategy
The basic strategic planning questions that need to be answered while
developing the structure of a reward strategy are:
(i) Where are we going?
(ii) How are we going to get there?
(iii) Why do we want to get there?
(iv) What values or guiding principles should be adopted in implementing
the strategy?
The structure of a reward strategy could be built around the four pillars
as follows:
1. A Definition of Guiding Principles: The values that are believed
to be necessary in formulation and implementation of strategy.
2. A Statement of Intentions: The reward initiatives that are proposed
to be undertaken.
3. A Rationale: The reasons why the proposals are being made, how
they will meet the business needs, and how people issues would
be addressed.
4. A Plan: How, when and by whom the reward initiatives will be
implemented. The plan should take account of resource constraints
and the need for communications, involvement and training. The
priorities attached to each element of the strategy should be indicated.

8.6 The Contents on Compensation Strategy

Strategic rewards embrace everything that employees value in the employ-
ment setting, and the term refers to the complete bundle of all employee
reward elements. What makes these rewards strategic is the care employers
must take to align their design and effects with strategic objectives. One
view of Strategic Rewards as depicted here shows four quadrants of a
strategic rewards framework:
The top two quadrants, compensation and benefits, cover the areas that
we traditionally think of as rewards the employer provides. These are

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Notes sometimes referred to as transactional rewards because they include the

tangible results of the agreement between the employee and employer.
In this agreement, or transaction, the employee agrees to provide time,
labour and skills in return for salary and benefits. Therefore, these re-
wards are readily viewed in terms of having a monetary value, such as
the employee’s base salary or the Federal Employees Health Benefits
Program. Transactional rewards play an important part in an employee’s
decision about where to work and whether to stay with an organisation.
The bottom two quadrants – development and learning, and the work
environment – cover areas that are increasingly recognized as critical
contributors to employee satisfaction. They are sometimes referred to as
relational rewards because they tend to represent the relationship (vs the
transaction) between the employee and employer.
A reward strategy may be broadly stated indicating the general direction
for the reward management to follow. Or it may be laid down in specific
terms for different aspects of reward management as discussed below:
1. Broadly Stated Strategy (Broad-brush Reward Strategy): It may
commit the organisation to the pursuit of a total reward policy.
Some examples are:
(a) Strategy to achieve an appropriate balance between financial
and non-financial rewards;
(b) Encouraging continuous personal development and spelling out
career opportunities;
(c) Developing a more flexible approach to reward, including the
reduction of artificial barriers as a result of over-emphasis on
grading and promotion;
(d) Generally rewarding people according to their contribution;
(e) Supporting the development of a performance culture and
building levels of competence; and
(f) Clarifying what behaviours will be rewarded and why.
2. Specific Reward Strategy: The selection of reward initiatives and
the priorities attached to them will be based on an analysis of the
present circumstances of the organisation and an assessment of the
needs of the business and its employees in future. The following

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are examples of possible specific reward initiatives, one or more Notes

of which might feature in a reward strategy:
(a) The replacement of present methods of contingent pay with
a pay for contribution scheme;
(b) The introduction of a new grade and pay structure, e.g., broad-
banded or job family structure;
(c) The replacement of an existing decayed job evaluation scheme
with a scheme that more clearly reflects organisational values
and needs;
(d) The improvement of performance management processes so
that they provide better support for the development of a
performance culture and more clearly identify development
needs;
(e) The introduction of a formal recognition scheme;
(f) The development of a flexible benefits system;
(g) The conduct of equal pay reviews with the objective of ensuring that
work of equal value is paid equally.
(h) Communication and training programmes designed to inform
everyone about the reward policies and practices of the
organisation and ensure that those who conduct performance
reviews or make, or influence pay decisions have the necessary
skill.

8.7 Developing Compensation Strategy

Armstrong et al have described formulation of corporate strategy as a
logical step-by-step process for developing and defining a sense of di-
rection. This incorporates ample provision for consultation, involvement
and communication with stakeholders; these include senior managers as
the ultimate decision makers as well as employees in general, and line
managers in particular.
In practice, however, reward strategy is hardly formulated, following
the linear and logical process as shown in the figure. Therefore, anoth-
er concept stated is that of “logical incrementalism”, which states that
strategy evolves in several steps rather than being perceived as a whole.

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Notes Another view is that strategy formulation is not necessarily rational and
continuous. Though normally, strategic planner should first formulate
strategy and then implement, but often, he may act first, then think, i.e.
those formulating reward strategies have to keep taking note of changes
occurring in the organisation’s internal and external environment. The
financial considerations of affordability and profitability loom large in
the minds of chief executives and financial directors.
Compensation strategists must also track emerging trends and may modify
their strategies accordingly. It is necessary to have reward strategies laid
down as a basis for planning and communication. But such strategies
should be changed according to changes taking place in the environment.
There are certain criteria that can be used to determine whether the present
strategy will be effective in the present form only or some change is
required:
1. They have clearly defined goals and well-defined link to business
objectives;
2. There are well designed pay and reward programmes, tailored to
the needs of the organisation and its people, and consistent and
integrated with one another; and
3. There are effective and supportive HR and reward processes in
place.

8.8 Considerations in Developing Strategies for New Salary

Programmes
The entire area of compensation and benefits is changing dramatically
due to increased globalisation and fast-changing environment in which an
organisation operates. Mary F. Cook (2001) suggests that the following
points should be considered while developing strategies for new salary
programmes:
1. Find more tangible ways of linking employee productivity goals
to corporate profits so that pay-for-performance objectives can be
actualised.
2. The move to multiple compensation objectives allows a company to
save in some areas by putting that money into programmes that will

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provide a better return on investment. For example, an organisation Notes

might decide to move to a third quartile pay level in “hard to fill
technical jobs” but remain at first quartile pay levels in “staff” jobs
where the first quartile is externally competitive.
3. Many companies are moving to multiple policy lines in salary
programmes. For example, there may be one policy line for hourly
non-exempt employees, another for salaried exempt professionals,
and a third for executives.
4. There is a trend to pay salaries instead of wages, even in manufacturing
plants. The purpose is to increase self-worth and self-esteem of the
employees. However, overtime may be paid on hourly wages basis.
5. There is an increasing trend towards innovative pay-for-performance
programmes. Scheduled pay increases are being linked to specific
measurable productivity improvements, even in a profession like
teaching.
6. Deferred compensation is becoming more popular. Management
employees, and professionals, given the option, prefer to defer
taking pay increases until retirement.
7. Gain sharing is replacing profit sharing. Gain sharing supports the
idea of affordability and makes sense in many businesses.
8. Comparable worth claims are becoming more frequent as more women
enter the workforce. The companies that employ large number of
low-paid female workers have to keep it in mind.
9. High-tech industries are often more innovative in terms of pay,
benefits, and perks. These innovations are likely to enter other
organizations due to high mobility of labour.
10. The practice of one-time lump-sum pay increases that do not
increase base pay has been accelerating at an incredible rate in
some industries.
11. There is a move by many organisations to follow two-tier pay in
labour contracts. It involves paying new workers much less than the
old workers. Though labour unions and employees do not approve
this system; the companies that have implemented such programmes
justify them as being necessary to remain in business.

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Notes Armstrong et al. conclude that these trends indicate that compensation
programmes are no longer market driven. The key issue is affordability.
The whole compensation and benefit scene is a collage of changing,
innovative thought and programming. They further suggest that as a
result of payments related to profit, performance or skill acquisition, an
individual’s contribution to organisational success can be rewarded.

8.9 Strategic Elements of Compensation

T. Flannery et al. (1996) write, “An effective reward strategy can be
critical in effectively harnessing the forces of change and moving the
organisation forward.”
John Stredwich (2000) has tabulated a number of areas where major
changes have taken place as shown in Exhibit 11.2 “Changing Nature
of Pay and Rewards.”
According to Stredwick, the reward strategies can be so designed which
facilitate the organisation to incorporate such changes as shown in
Exhibit 11.2. The following measures can be taken:
1. Achieving Competitive Advantage
(a) Reward structure can be set at the top of the market range to
encourage the best people to join. Although pay becomes a
major expense, this is out-weighed by the benefits obtained
from employing the best talents available. Employee retention
under such a strategy generally remains high, saving on
recruitment costs.
(b) The strategy of paying high performance premiums to the
staff for on-time project completion, leading to customer
satisfaction and repeat business.
(c) Schemes covering groups or teams of employees such as gain-
sharing increase their commitment and involvement and help
the teams to work together for the benefit of the organisation,
its customers and all the employees.
Due to globalisation and the resultant increased competition, the proportion
of contingent pay (pay for performance) has risen in comparison to base
pay. In many organisations, the guaranteed annual increase (increment)
has been replaced by an increase based on individual performance.
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2. Emphasise Performance: The costs and revenues of a firm can be Notes

influenced by a few HR practices. For example, Continental Airlines,
as part of its turnaround strategy, introduced an incentive system
known as on-time bonus, where each employee would get a bonus
of $65 every month for ensuring on-time flight operations. This
bonus has a strong influence on financial performance of the firm
in terms of decreased costs and increased revenues and at the same
time placed the company first in the industry in on-time performance.
Though the company paid $51 mn in the form of bonuses, it saved
$75 mn by saving on accommodation costs associated with missed
connections. On-time bonus enhanced the morale of the employees
and motivated them to provide better service to the customers. The
company was also able to increase its market share because of on-
time operations of its flights.
3. Encourage Flexibility in Working Practices: The increased movement
towards a greater use of flexibility has led to the introduction of
rewards for those employees who increase their skills and competences,
which allow them to carry out a wider range of jobs.
4. Support Key Competences: Rewards can be used to encourage
specific competences, as for example, innovation and creativity.
5. Encourage Local Decision-making: Pay decisions used to be made
at headquarters, but the need to respond to local conditions has led
to decisions on pay being delegated to localized units.

8.10 Strategic Compensation Alternatives (Choices)

While designing a compensation strategy, several options may be explored
by the management. The major options are discussed below:
Fixed versus Variable Pay
Traditionally, fixed pay plans have been quite popular in most of the
organisations, but now variable pay programmes are widely followed by
many organisations and for all levels of employees. Widespread use of
various incentives plans, team bonuses, profit sharing plans have been
implemented with a view to link growth in compensation to results. Of

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Notes course, while using variable pay systems, management must look into
two issues carefully:
‹ ‹Should performance be measured and rewarded based on individual,
group or organisational performance?
‹ ‹Should the length of time for measuring performance be short-term
or long-term?
Internal and External Pay Equity
Most of the compensation systems aim at achieving internal and external
pay equity. It may be noted that pay equity is achieved when the compen-
sation received by an employee is equal to the value of the work done.
Compensation policies are internally equitable when employees believe
that the wage rates for their jobs approximate the job’s worth to the or-
ganisation. Perceptions of external equity exist when the firm pays wages
that are relatively equal to what other firms are paying for similar work.
Job versus Individual Pay
Many organisations decide the minimum and maximum values of each
job, independent of individual workers (who are placed in between these
two extremes), ignoring their abilities, potential and the ability to take
up multiple jobs. Such job-based pay systems may, in the end, compel
capable employees to leave the company in frustration. To avoid such
unfortunate situations, knowledge-based pay systems (or skill-based ones)
have been followed increasingly in many modern organisations. In this
case, employees are paid on the basis of the jobs they can handle or the
talents they have that can be successfully exploited in various jobs and
situations.
Below Market versus Above Market Compensation
Small firms having no unions of employees may follow below market
compensation. But they will have to face higher rate of labour turnover.
Many large dynamic companies like Infosys, Wipro, TCS, etc., pay above
market compensation to employees of certain groups in order to attract
(and retain) ‘the cream of the crop’. To grow rapidly and to get ahead
of others in the race, especially in knowledge-based industries, leading
companies prefer to pay above market salaries. Above market pay policy
is also followed in well-established manufacturing units operating in a
highly competitive environment.

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Competency Base Pay versus Broadbanding Notes

A company following a skill-based or competency-based pay system may
use broadbanding to structure its compensation payments to employees.
Broadbanding simply compresses many traditional salary grades (say 15 to
20 grades) into a few wide salary bands (three or four grades). By having
relatively few job grades, this approach tries to play down the value of
promotions. Depending on changing market conditions and organizational
needs, employees move from one position to another without raising objec-
tionable questions, (such as when the new grade would be available, what
pay adjustments are made when duties change, etc.). As a result, move-
ment of employees between departments, divisions and locations becomes
smooth. Employees with greater flexibility and broader set of capabilities
can always go in search of jobs in other departments or locations that allow
them to use their potential fully. Broadbanding further helps reduce the
emphasis on hierarchy and status. However, broadbanding can be a little
unsettling to a new recruit when he is made to roll on various jobs. Most
employees still believe that the existence of many grades helps them grab
promotional opportunities over a period of time. An organisation having
fewer grades may be viewed negatively, as having fewer upward promotion
opportunities. Moreover, some of the employees may not want to move
across the organisation into different areas.

8.11 Factors Affecting Formulation of Compensation

Strategy
Reward strategy addresses the organisation’s need to obtain, retain, and
motivate committed, competent, experienced and loyal employees. The
organisation’s freedom to formulate reward strategy and set salary and
wage rates is constrained by internal and external influences and obliga-
tions. Out of all such factors, it is the organisation’s ability to pay and
sustain high pay levels. Some other factors are:
(i) trade union pressures and bargaining position,
(ii) productivity,
(iii) government policies,

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Notes (iv) changes in technology, economy, labour market,

(v) cost of living increases, and
(vi) levels of skill and competence required.
Edward E. Lawler III lists nine strategic issues to be considered by or-
ganisations while making strategic choices about their total compensation.
These issues are discussed below:
1. Development of a Compensation Philosophy: An important strategic
decision is whether to develop a compensation philosophy, and if yes,
what to include in it. A well-developed philosophy can provide an
important stability to the compensation practices of an organisation,
which in turn increases the effectiveness of the system by giving
it the necessary integrity and credibility. For example, salaries do
not typically keep up with inflation because organisations usually
tie the amount of pay increases to changes in the compensation
market rather than to inflation. This approach is always difficult for
organisations to explain and justify, but it is easier when they have
a consistent well-articulated policy of meeting the market rather
than meeting inflation. Generally, the following major issues form
part of an organisation’s compensation philosophy statement:
(i) Goals of compensation system
(ii) Communication policy
(iii) Decision making approach to the compensation issue
(iv) Desired market position
(v) Centralisation and Decentralisation in compensation policy
formulation and administration
(vi) Desired mix between benefits and cash
(vii) Role of performance-based pay
(viii) Performance appraisal
(ix) Fit of compensation system with overall management philosophy
of an organisation
(x) Approach to change in compensation policy and practice.
2. Process versus Mechanics: It involves deciding relative weight to
be put on the process issues and ‘the mechanistic issues involved.

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Too often, the major weight seems to go into the development of Notes
the correct mechanics for administering pay. The problem with this
approach is that there are no objectively right answers to what an
individual should be paid, as people’s reactions to their pay and its
fairness are subjective. Therefore, process issues like communication
policy and participation in the design and administration system can
have an important impact on people’s perceptions of their pay and
their behavioural reactions to the pay system.
3. Paying the Job versus Paying the Person: Almost all job evaluation
systems are keyed to determining the total compensation levels
for jobs. In many cases, it is a reasonable approach, but it can be
dysfunctional in many cases, such as:
(i) It can decrease people’s motivation to acquire new skills and
abilities,
(ii) It can encourage people to try to acquire more subordinates and
more resources, even if they do not need them, just because
job evaluation systems are often based on the size of people’s
budgets and the number of people who report to them.
Therefore, total compensation levels should be decided in the light
of skills and abilities a person has.
4. Means–End Relationship: Very often, compensation system becomes
an end in itself, rather than a means to achieve organisational
objectives. There is no magic formula for preventing the pay system
from becoming an end, rather than a means. However, there is a
strategic approach that can help. It involves the flexibility of the
compensation system and its permanency. A measured displacement
is likely to occur when a compensation system has been in place
or a long period of time, and individuals have a particularly strong
interest in seeing that it is maintained. This suggests at a strategic
level that fairly frequent changes, adaptations, and updating of the
compensation system are needed, and it should always be treated as
a system that is open to change. It should go on to point out that
the pay system will be evaluated regularly to ensure it produces
desired outcomes – which are attraction, retention, and effective
performance – rather than such pay a system which assures internal

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Notes equity and well developed policies and procedures. Finally, it should
stress that it needs to fit the environment in which the organisation
operates.
5. Internal versus External Equity: Employees of an organisation compare
their pay with people both inside and outside the organisation. The
organisation has to decide what weightage is to be given to external
equity and how much weightage to internal equity, as striving for
both internal and external equity can result in individuals being
overpaid further, leading to increase in total cost. Strategically,
unless there is some particular need for internal equity to be
exceptionally high, it would seem advisable for organisations to
emphasize external pay comparisons. Though, both internal and
external inequity have serious consequences for the organisation, the
consequences of external in equity (e.g. turnover and absenteeism)
are more severe compared to those of internal inequity (requests for
internal transfers to better paying jobs, complaints, etc.) However,
in practice, internal equity often gets more than its fair share of
attention because of its immediacy in the organisation.
6. Surveying the Right Markets: Establishing external equity demands
good market data. The key is to gather market data on those jobs
that the individuals, whose jobs are being evaluated, might move to.
This is no simple task because people tend to make very different
comparisons and have very different mobility opportunities. Depending
on the individuals and their level in the organisation, it might be
one of a very small number of jobs in a local community, or it
might be a large number of jobs located all over the country, or
even the world. Typically, instead of one survey, a set of surveys
is needed covering the range of jobs which exist.
As a strategy, therefore, organisations should use a wide range of
surveys and should be open to individuals bringing in surveying
data that are relevant to their particular technical speciality. The
survey data may also be made public within the organisation so that
such data can be understood, and comments and suggestions may
be received from people to whom such data is going to be applied.
In other words, salary survey process should be demystified and
made open to participation.

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The participatory survey can reduce the negative consequences Notes

of surveying the wrong markets, i.e. either over-compensating or
under-compensating. It may also help to disabuse some individuals
of the view that “all these other companies are paying a lot more”.
7. Centralisation versus Decentralisation: The compensation system,
like most other aspects of large organisations, can be designed and
implemented either on centralised or decentralised basis. The choice
between these two approaches is an important one for organisations.
Each one has its unique advantages and disadvantages. The effectiveness
of different approaches is determined by the environment in which
the organisation operates and by the business strategy of the
organisation. For example, the decentralised approach seems to be
advisable in large organisations that are in multiple businesses and
that operate in multiple locations. A centralised approach is usually
quite appropriate in small organisations, and in large ones that are
in a single business and in a single centralised location.
8. Role of Performance in Determining Total Compensation: Whether
performance has a key impact on total compensation is a very
important strategic issue. Normally, performance does not play a
role in determining an individual’s total compensation.
In many organisations, performance plays a very minor role. It is
because either performance is not used to determine pay changes,
or because the only thing that is determined by performance is pay
raise and the variance between the best and the worst performer
is too small to be significant. Instead of performance, seniority is
more important in determining compensation.
Not relating pay to performance eliminates its role as a motivator. A
high performer will try to leave the organisation, a low performer
will continue to perform poorly, and a good candidate from outside
would not like to join such organisation.
9. Compensation Mix: Employees are concerned not only with total
compensation, but its break-up (as discussed in Chapter 2) as well.
Even if total compensation remains the same, the behaviour of
employees gets affected by its break-up. Therefore, organisations

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Notes vary widely in the percentage of their total compensation costs that
are allocated to cash and fringe benefits because there are large
individual differences in people’s preference for benefits and cash.
One approach to solving this problem is cafeteria approach, as it
gives wide choice to people in how they receive their compensation.

8.12 Summary
The compensation system of any organisation is composed of many stra-
tegic decisions. The above discussion points out that there is no simple
approach that works for all organisations. Each organisation needs to
design its own compensation system to fit its own situation.

8.13 Self-Assessment Questions

1. Explain the meaning of Strategic Compensation Management.
2. Define compensation strategy. What are its aims?
3. Explain the features of reward strategy.
4. Discuss the structure of reward strategy.
5. Explain the meaning and contents of reward strategy.
6. How is a reward strategy developed? Explain.
7. Discuss the factors affecting strategy formulation.
8. Examine the alternatives in formulating compensation strategy.
9. Write short notes on the following:
(a) Fixed vs. Variable Pay.
(b) Competency Pay vs. Broadbanding.
(c) Below Market vs. Above Market Compensation.

8.14 References
‹ ‹Armstrong, Michael and Murlis Helen. (2005). Reward Management.
Kogan Page India, New Delhi, pp. 30–47.
‹ ‹Borwn D. (2001). Reward Strategies: From Intent to Impact. CI
PD, London, pp. 327–28.

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‹ ‹Cook, Mary F. (2001). The Complete Do-It-Yourself – Human Notes

Resource Department. Prentice- Hall, New Jersey.
‹ ‹Curie Donald. (1997). Personnel in Practice. Blackwell, U.K., p. 257.
‹ ‹Flannery T, Hofrichler, D. and Platten, P. (1996). People, Performance
and Pay. The Free Press, pp. 20–21.
‹ ‹Lawler, Edward E. “Determining total Compensation: Strategic
Issues” in Foulkes Fred K (ed.) (1986). Strategic Human Resource
Management, Prentice- Hall, New Jersey, pp. 216–27.
‹ ‹Mintzberg, H., Quinn J. B., and James, R. M. (1988). The Strategy
Process, Concepts, Contexts and Cases. Prentice-Hall, Englewood,
Cliffs, NJ.
‹ ‹Stredwick, John. (2000). An Introduction to Human Resource
Management. Butterworth Heinemann, Oxford, pp. 274–78.
‹ ‹Rothwell, William J. and Kazanas H. C. (2003). Planning and
Managing Human Resources, HRD Press Inc., Massachusetts, p. 455.
‹ ‹Wheelen, Thomas L., and Hunger, J. David. (2002). Strategic
Management and Business Policy, Pearson Education Asia, Singapore.
‹ ‹www.hrsource.org

‹ ‹www.altavista.com

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 L E S S O N

9
Corporate Strategy; Career
Development; Organization
Development Industrial
Relations; Workforce
Diversity
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
9.1 Corporate Strategy
9.2 Career Development
9.3 Organization Development
9.4 Industrial Relations Strategy
9.5 Main Stakeholders in Industrial Relations
9.6 Managerial Perspectives’ Impact on IR Strategies
9.7 Workforce Diversity
9.8 Challenges
9.9 Summary
9.10 References

9.1 Corporate Strategy

A corporate strategy entails a clearly defined, long-term vision that organizations set,
seeking to create corporate value and motivate the workforce to implement the proper
actions to achieve customer satisfaction. In addition, corporate strategy is a continuous

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process that requires a constant effort to engage investors in trusting Notes

the company with their money, thereby increasing the company’s equity.
Organizations that manage to deliver customer value unfailingly are those
that revisit their corporate strategy regularly to improve areas that may
not have delivered the aimed results. Corporate strategies may pertain
to different aspects of a firm, yet the strategies that most organizations
use are cost leadership and product differentiation.
Cost leadership is a strategy that organizations implement by providing their
products and services as low as consumers are willing to pay, thereby be-
ing competitive and realizing a volume of sales that allows them to be the
leaders in the industry. Typical examples of cost leaders are Walmart in the
retail industry, McDonald’s in the restaurant industry, and Ikea, the furniture
retailer that offers low-priced, yet good quality home equipment by sourcing
its products in emerging markets, thereby having a high-profit margin.
Product differentiation refers to the effort of organizations to offer a unique
value proposition to consumers. Typically, companies that manage to differ-
entiate their products from the competition are gaining a competitive edge,
thereby realizing higher profits. Often, competitors employ cost leadership
to directly compete with these companies; yet, customer satisfaction and
customer loyalty are the factors that eventually make or break a strategy.
Other examples of corporate strategies include the horizontal integration,
vertical integration, and the global product strategy, i.e. when multinational
companies sell a homogenous product around the globe.
Corporate strategies are always growth-oriented, seeking to retain a com-
pany’s existing customer base while attracting new customers.
In brief, corporate strategy means a company’s vision and tactics to
outperform its competition.

9.2 Career Development

Career development is indispensable for implementing career plans. It
consists of activities undertaken by the individual employees and the
organization to meet career aspirations and job requirements. The most
important requirement of career development is that every employee must
accept his/her responsibility for development.

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Notes Steps in Career Development:

1. Challenging Initial Jobs: Generally, employees who receive challenging
job assignments early in their careers do better on latter jobs.
Apparently, initial challenges, particularly if they are successfully
met, stimulate a person to perform well in subsequent years.
2. Dissemination of Career Option Information: As managers identify
career paths that successful employees should follow within the
organization, they should make this information available. If, for
example, the organization prefers candidates for middle management
position to have some job exposure in the manufacturing side of
the business, this information should be disseminated throughout
the organization.
3. Job Postings: To provide information to all employees about job
openings, management can use job postings. The posting lists
the abilities, experience and seniority requirements to qualify for
particular vacancies. Job posting provides a channel by which the
organization lets employees know what jobs are available and,
for future reference, what requirements they will have to fulfil to
achieve the promotions to which they may aspire.
4. Assessment Centres: By putting people through assessment centres,
managers can obtain observable evidence of their ability to do
certain jobs. In this role of an assessor, individuals learn how to
observe behaviour carefully, to make inference from observations,
and to give feedback to the assessees. It shows the importance of
performance appraisal. It makes assessors more aware of what is
involved in the process of development and this awareness can
provide valuable insights into their own career development.
5. Continuing Education and Training: The education and training in
an effective career development programme could include on-the-job
training, educational or skill course offered within the organization
or outside courses provided by colleges, universities or specialized
institutes.
6. Career Development Workshops: By bringing together groups
of employees with their supervisors and managers, problems and
misconceptions can be identified and resolved. Discussion can focus

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on those areas where mismatches are identified. These workshops Notes

frequently include self-diagnostic activities for employees, diagnosis
of the organization, etc.
7. Periodic Job Changes: Job changes can take the form of vertical
promotion, lateral transfer or assignments. Varied experiences present
new tests to the individual, which, if successfully surmounted,
build confidence and provide positive feedback that can encourage
accepting new challenges and greater responsibilities.
8. Sabbaticals (Leave granted at Intervals): An extended leave
can allow time for attending executive development conferences,
uninterrupted reading, accepting a visiting lectureship at a university,
or other such activities that may enhance one’s career development.
A period of time away from the organization may allow such
individuals to develop new, non-work related interest, to come to
terms with the levelling of their career, and to put their work into
a life perspective.
For employees at lower levels in the organization, the idea of sabbaticals
lies in continuing education and training to facilitate the learning of new
skills that will make career advancement feasible.

9.3 Organization Development

While career development talks about individual employees, organization
development (OD) is the study of successful organizational change and
performance. OD emerged from human relations studies in the 1930s,
during which psychologists realized that organizational structures and
processes influence worker behaviour and motivation. More recently, work
on OD has expanded to focus on aligning organizations with their rapid-
ly changing and complex environments through organizational learning,
knowledge management and transformation of organizational norms and
values. Key concepts of OD theory include: organizational climate (the
mood or unique “personality” of an organization, which includes attitudes
and beliefs that influence members’ collective behaviour), organizational
culture (the deeply-seated norms, values and behaviours that members
share) and organizational strategies (how an organization identifies prob-
lems, plans action, negotiates change and evaluates progress).

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Notes
9.4 Industrial Relations Strategy
An IR Strategy is an expression of an enterprise’s capacity to develop
and implement a sound industrial relations management plan which en-
sures that industrial relations issues and risks are identified, assessed
and managed. The IR Strategy should demonstrate the integration of
industrial relations requirements with the normal procedures, practices
and performance standards of the enterprise.
It involves an enterprise:
‹ ‹Developing a policy statement on industrial relations management
that has the total support of management.
‹ ‹Defining responsibilities for industrial relations management within
the enterprise.
‹ ‹Identifying resources and procedures for implementing required
industrial relations management measures.
‹ ‹Having planning processes and procedures in place that enable
identification of potential industrial relations issues, and facilitate
the development of measures to minimize impacts.
‹ ‹Outlining methods used to assess the capacity of subcontractors to
understand and comply with their industrial relations responsibilities,
and
‹ ‹Establishing procedures to review and monitor the implementation
of measures which support the IR Strategy and to initiate corrective
action when required.
Factors Affecting Employee Relations Strategy
Two sets of factors, internal as well as external, influence an IR strategy.
The internal factors are:
1. The attitudes of management towards employees and unions.
2. The attitudes of employees towards management.
3. The attitudes of employees towards unions.
4. The inevitability of the differences of opinion between management
and unions.

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5. The extent to which the management can or wants to exercise Notes

absolute authority to enforce decisions affecting the interests of
employees.
6. The present and likely future strength of the unions.
7. The extent to which there is one dominating union or the existence
of multiple unions leading to inter-union rivalry.
8. The extent to which effective and agreed procedures for discussing
and resolving grievances or handling disputes exist within the
company.
9. The effectiveness of managers and supervisors in dealing with
problems and disputes related to IR.
10. The prosperity of the company, the degree to which it is expanding,
stagnating or running down and the extent to which technological
changes are likely to affect employment conditions and opportunities.
The external factors affecting IR strategy are:
1. The militancy of the unions, nationally or locally.
2. The effectiveness of the union and its officials, and the extent to
which the officials can and do control the activities of supervisors
within the company.
3. The authority and effectiveness of the employer’s association.
4. The extent to which bargaining is carried out at national, local or
plant level.
5. The effectiveness of any national or local procedure agreements
that may exist.
6. The employment and pay situation, nationally and locally.
7. The legal framework within which IR exists.

9.5 Main Stakeholders in Industrial Relations

IR is a complex system comprising inter-relation among workers (Em-
ployees), Managers (Employers) and Government.
1. Employees: Employees with their various characteristics (Skills,
knowledge, commitment, attitude, etc.) affect and are affected by
the system or IR. They perceive IR as a means to improve their
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Notes conditions of employment, sort out their grievances and exchange

their ideas with the management, thus, participate in organizational
decision making.
2. Employees: Employees with their various characteristics (skills,
knowledge, commitment, attitude, etc.) affect and are affected by
the system of IR. They perceive IR as a means to improve their
conditions of employment, sort out their grievances and exchange
their ideas with the management, thus, participate in organizational
decision making.
3. Employers: IR helps developing machinery to avoid disputes,
creating and sustaining employee motivation, ensuring employees’
commitment, achieving higher efficiency, negotiating terms and
conditions of employment, sharing decision making with employees.
4. Government: Role of the government changes with the change in
industrial environment and management perspectives. Till 19th century,
the government had adopted the policy of laissez faire, but towards the
end of 19th century, the government started intervening in the matters
of IR. Today, the government has a regulatory role and uses machinery
of labour courts, industrial tribunals, enquiry committees, etc.
Considering all these three parties to formulate IR strategy is called
Tripartite Approach.
Strategies for Improving IR
1. Impact of Trade Unionism: Unions have a crucial role to play in
IR. Unions have broad objectives, which are:
(a) To redress the bargaining advantage of the individual worker
vis-a-vis the individual employer, by substituting joint or
collective action for individual action,
(b) To secure improved terms and conditions of employment for
their members and the maximum degree of security to enjoy
these terms and conditions,
(c) To obtain improved status for the worker in his or her work,
and
(d) To increase the extent to which unions can exercise democratic
control over decisions that affect their interests by power
sharing at the national, corporate and plant levels.
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The union power is exerted primarily at two levels – at the industry Notes
level, to establish joint regulation on basic wages and hours with
an employer’s association or its equivalent; and at the plant level,
where the shop stewards’ organizations exercise joint control over
some aspects of the organization of the work and localized terms
and conditions of employment. Unions are a party to national, local
and plant level agreements which govern their actions to a greater or
lesser extent, depending on their power, and on local circumstances.
Employers are also directly involved in any dispute between them
and the employees. Employers are endowed with certain inalienable
rights vis-a-vis labour. The management has the right to hire and fire
any worker, notwithstanding union restrictions. It is not just firing
a worker here or there, but the management’s ability to control the
economic destiny of the workers that matters. The management has
the right to relocate, close, merge, take over or sell a particular
plant. These actions affect workers’ interests. The management
has another powerful weapon – introducing or threatening to use
technological change. Technological change can displace labour or
annihilate skills.
Armed with these rights, the management resorts to several tactics
to break a strike, some of them even unethical. The management
is known to adopt dubious means to forego a strike, call off a
strike, or tone down union demands. The management often breaks
a powerful union, sets one faction against another, and favours the
more satisfied and the less militant workers. Loyal workers from
sister concerns are brought in on the pretext of a factory visit, and
are induced into the plant and advised to break the strike.
2. Grievance Procedure: A Step-by-Step Management: Grievance
procedure is a formal communication between an employee and
the management designed for the settlement of a grievance. These
grievance procedures differ from organization to organization.
The 15th session of Indian Labour Conference held in 1957 emphasized
the need of an established grievance procedure for the country which
would be acceptable to unions as well as management. In the 16th
session of Indian Labour Conference, a model for grievance procedure
was drawn up. This model helps in creation of grievance machinery.

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Notes According to it, workers’ representatives are to be elected for a

department or their union is to nominate them. Management has to
specify the persons in each department who are to be approached
first and the departmental heads who are supposed to be approached
in the second step. The draft Model Grievance Procedure was
accepted by the labour conference in 1958. It specifies the details
of all the steps that are to be followed while redressing grievances.
These steps are:
(a) An aggrieved employee shall first present his grievance verbally
in person to the officer designated by the management for this
purpose. The response shall be given by the officer within
48 hours of the presentation of the complaint. If the worker
is not satisfied with the decision of the officer or fails to
receive the answer within 48 hours, he will, either in person or
accompanied by his departmental head, present his grievance
to the head of the department.
(b) The head of the department shall give his answer within 3 days,
or if action cannot be taken within this period, the reason
for delay should be recorded. If the worker is dissatisfied
with the decision of the departmental head, he may request
that his grievance be forwarded to the Grievance Committee.
The Grievance Committee shall make its recommendation
to the manager within 7 days of the workers’ request. If a
decision cannot be given within this period, the reason should
be recorded. Unanimous decision of the committee shall be
implemented by the management. If there is a difference of
opinion among the members of the committee, the matter
shall be referred to the manager, along with the views of the
members and the relevant papers for final decision.
(c) In either case, the final decision of the manager shall be
communicated to the employee within three days from the
receipt of the Grievance Committee’s recommendations.
(d) If the worker is not satisfied even with the final decision of the
manager, he may have the right to appeal to the manager for
revision. In making this appeal, he may take a union official
with him to facilitate discussion with the management. The

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management will communicate the decision within 7 days of Notes

workman’s revision petition.
(e) If worker is still not satisfied, the mater may be referred to
voluntary arbitration.
(f) Where a worker has taken a grievance for re-address under the
grievance procedure, the formal conciliation machinery shall
not interview till all steps in the procedure have exhausted. A
grievance shall be presumed to assume the form of a dispute
only when the final decision of top management is turned
down by the worker.
The Grievance Committee shall consist of 4 to 6 members.

3. Disciplinary Procedure: Maintenance of harmonious human relations

in an organization depends upon the promotion and maintenance
of discipline. No organization can prosper without discipline.
Discipline has been a matter of utmost concern for all organizations.
Maintenance of effective discipline in an organization ensures the

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Notes most economical and optimum utilization of various resources,

including human resources. Thus, the objective of discipline in an
organization is to increase and maintain business efficiency. Effective
discipline is a sign of sound human and industrial relations and
organizational health.
Approaches to Discipline
1. Human Relations Approach: The employee is treated as a human
being and his acts of indiscipline will be dealt from the viewpoint
of values, aspirations, problems, needs, goals behaviour, etc. Under
human relations approach, the employee is helped to correct his
deviations.
2. Human Resources Approach: The employee is treated as a resource
and the acts of indiscipline are dealt by considering the failure in
the areas of development, maintenance and utilization of human
resources group discipline approach.
3. The Leadership Approach: The group as a whole sets the standards
of discipline and punishments for the deviations. The individual
employees are awarded punishment for their violation under the
group discipline approach. Every superior administers the rules of
discipline and guides, trains and controls the subordinates regarding
disciplinary rules.
4. Judicial Approach: In this approach, in-disciplinary cases are dealt on
the basis of legislation and court decisions. The Industrial Employment
(Standing Orders) Act, 1946, to a certain extent, prescribed the correct
procedure that should be followed before awarding punishment to
an employee in India. No other enactment prescribed any procedure
for dealing with disciplinary problems. But over a period of time, a
number of principles regarding the basic formalities to be observed in
disciplinary procedures emerged, gradually resulting from the awards
of several Industrial Tribunals, High Courts and the Supreme Court,
and the Principles of Natural Justice.

9.6 Managerial Perspectives’ Impact on IR Strategies

1. Unitary Systems Approach: The organization is perceived as an
integrated and harmonious system, viewed as one happy family. A

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core assumption of unitary approach is that management and staff, Notes

and all members of the organization, share the same objectives,
interests and purposes; thus working together, hand-in-hand, towards
the shared mutual goals. Furthermore, unitary has a paternalistic
approach, where it demands loyalty of all employees. Trade unions
are deemed as unnecessary and conflict is perceived as disruptive.
2. Pluralistic Approach: The organization is perceived as being made
up of powerful and divergent sub-groups – management and trade
unions. This approach sees conflicts of interest and disagreements
between managers and workers over the distribution of profits as
normal and inescapable. Consequently, the role of management
would lean less towards enforcing and controlling and more
toward persuasion and co-ordination. Trade unions are deemed
as legitimate representatives of employees. Conflict is dealt by
collective bargaining and is viewed not necessarily as a bad thing,
and if managed, could in fact be channelled towards evolution and
positive change. Realistic managers should accept conflict to occur.
There is a greater propensity for conflict rather than harmony.
3. Marxist Approach: This perspective focuses on the fundamental
division of interest between capital and labour, and sees workplace
relations against this background. It assumes that conflicts are a
by-product of a Capitalist system. It is concerned with the structure
and nature of society and assumes that the conflict in employment
relationship is reflective of the structure of the society. Conflict is
therefore seen as inevitable and trade unions are a natural response
of workers to their exploitation by capital.
4. Psychological Approach: Psychologists are of the view that problems
of industrial relations are deeply rooted in the perception of attitude
of focal participants. Management and labours perceive each other
differently and consider the other as less dependable and more
deficient in thinking about the emotional characteristic and inter-
personal relations. Conflict emerges as a result of negative perception
of behaviour of the actors (management and workers). Interpersonal
and intergroup relations breed disharmony in the system.
5. Sociological Approach: Differences in personal factors like education,
attitude, culture, behaviour, emotions, etc., create conflicts and

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Notes competition among members of the industrial society. Industrial

relations are shaped by society, as there are many factors inside
and outside industry that affect Industrial Relations. Moreover, the
process of change makes IR more complex, which would further
complicate with time.
6. Socio-ethical Approach: Good IR can be maintained only when
both, labour and management realize their moral responsibility
in contributing to the said task through mutual cooperation and
greatest understanding of each other’s problem. Both goals of
labour-management relations may be stated as maximum productivity,
adequate understanding among parties to IR regarding the roles that
other parties play, and willingness among parties to cooperate as
partners in IR.
7. Human Relations Approach: When resources are not managed
properly, problem of Industrial Relations surfaces, which can only
be managed by understanding and managing the dynamics of human
behaviour at individual, group and organizational level. A common
denominator in all conflicts is the dissatisfied needs of individual.
The approach also stresses that human needs keep on changing,
right from basic needs to self-actualization, and attention needs to
be drawn to them. At the same time, suitable motivational strategies
should be used for optimum employee satisfaction.
8. HRD Approach: It recognizes employees as the greatest assets
in an organization, and believes that they can be developed to
unlimited extent with proper incentives, atmosphere and treatment.
The methodology used in HRD approach includes diagnosis of
the problem and designing interventions to bring about necessary
changes.
9. Gandhian Approach: It is based on the fundamental principles of
truth, non-violence and non-possession. If employers follow the
principle of trusteeship, there is no scope for conflict. Workers
should seek redressal through collective action. Workers can resort
to ‘Satyagraha’ to have their grievances redressed. Gandhiji accepted
that workers can go on strike, but this should be exercised in a
peaceful and non-violent manner, and this should be the last resort.

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Notes
9.7 Workforce Diversity
Workforce diversity is a workforce consisting of broad mix of workers
from different racial and ethnic background of different ages and gen-
ders and of different domestic and national cultures. It refers to policies
and practices that seek to include people within a workforce who are
considered to be, in some way, different from the dominant group in the
organization.
Dimensions of Workforce Diversity
1. Primary Dimension: It mainly includes inborn differences like age,
race, ethnicity, gender, physical ability, and sexual orientation.
2. Secondary Dimension: It mainly includes education, religion, beliefs,
marital status, family background, work culture, citizenship status,
military/civilian service, and mental and physical conditions, as
well as other distinct differences between people.
Goals of Workforce Diversity
1. To identify, attract and retain the best people of each group,
2. To create a workplace where talent can perform at its best to
maximise shareholders’ value,
3. To assess and understand the diversity of the marketplace.
Factors that Motivate Organizations to Diversify Workforces/Benefits
of Diversity, both to Employees and Employers
1. Fulfillment of Social Responsibility: As many of the beneficiaries
of good diversity practices are from disadvantaged groups of society.
2. As an imperative resource: Available talent is now overwhelmingly
represented by people from a vast array of backgrounds and
experiences. Competitive organizations cannot allow discriminatory
preferences and practices to impede them from attracting the best
available talent within that pool. So, workforce diversity helps in
attracting and retaining highly talented people.
3. As an Economic payback: Many groups of people who have been
excluded from workplaces are consequently reliant on government
funded (i.e. tax funded) social service programmes. Diversifying the

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Notes workforce through initiatives like affirmative actions (in USA) and
reservations (in India) in public sector organizations, can effectively
turn tax users into tax payers.
4. As a Legal Requirement: Many private sector organizations are
now under legislative mandates to be non-discriminatory in their
employment practices. Non-compliance with Equal Employment
Opportunities or Affirmative Action (USA) and reservations to
certain categories in India, can result in and/or loss of contracts
with Government agencies. In the context of such legislations, it
makes sense to utilize a diversified workforce.
5. As a Marketing Strategy: In today’s global economy, buying power
is represented by people from all walks of life (ethnicities, races,
ages, abilities, genders, etc.). In this varied customer environment,
it becomes imperative for organizations to hire people from all
walks of life for their specialized insights and knowledge to ensure
that their products and services are designed to appeal to diverse
customer base. Thus, diversity enables more successful marketing
to different types of customers.
6. As a Communication Strategy: All organizations are seeing a
growing diversity in the workforce around them, their vendors, partners
and customers. Organizations that choose to keep homogeneous
workforces will likely find themselves increasingly ineffective in their
external interactions and communications. So, diversified workforce
is able to communicate effectively with different stakeholders of
the organization.
7. As a Capacity-building Strategy: In the present business climate,
company’s property depends on the capacity to effectively solve
problems, rapidly adapting to new situations, readily identifying
new opportunities and quality capitalizing on them. The capacity
can be measured by the range of talent, experience, knowledge,
insight and imagination available in the workforces, which is more
if the workforces are diversified.
8. Highly Motivated and Committed Workforce: The act of recognizing
diversity also allows for those employees with these talents to feel
needed and have a sense of belonging, which in turn increases their

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commitment to the company and allows each of them to contribute Notes

in a unique way.
9. Helps organizations in Globalizing: Diversity provides organizations
with the ability to compete in global markets. Simply recognizing
diversity in a corporation helps link the variety of talents within
the organization.
10. It strengthens cultural values within the organization.
11. It enhances corporate reputation.
12. It enhances service levels and customer satisfaction.

9.8 Challenges
Workforce diversity also brings with it a number of challenges.
1. People who spend significant amounts of energy coping with an alien
environment have less energy left to do their jobs. It also decreases
the productivity of organizations.
2. Managing diversity is more than simply acknowledging differences in
people. A major challenge is miscommunication within an organization.
There are competencies, however, which help to develop effective
communication in diverse organizational environments. These skills
include self-monitoring, empathy, and strategic decision-making.
(a) Self-monitoring refers to a communicator’s awareness of how
his/her behaviour affects another person along with his/her
willingness to modify this behaviour based on knowledge of
its impact.
(b) Empathy enables the receiver to go beyond the literal meaning
of a message and consider the communicator’s feelings, values,
assumptions, and needs.
(c) In diversified cultures, a message meaning can never be
completely shared because no two individuals experience
events in exactly the same way. Each interprets messages and
discerns meanings based on their unique standpoint.
3. Maintaining a culture which supports the idea of employee voice
especially for marginalized group members. When the organizational
environment is not supportive of dissenting viewpoints, employees
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Notes may choose to remain silent for fear of repercussions, or they

may seek alternative safe avenues to express their concerns and
frustrations such as on-line forums and affinity group meetings.
Disadvantages of Workforce Diversity
It may be difficult to bring together employees of different cultures due to:
‹ ‹Communication barriers,
‹ ‹Resistance to change, and
‹ ‹Negative attitudes towards diversity.
Meetings and discussions are to be arranged while dealing with what
should be a simple issue, i.e. communication.
Strategies to Manage Diversity
Managing diversity in the workplace presents a set of unique challenges
for HR professionals. These challenges can be mitigated if an organiza-
tion makes a concerted effort to encourage a more heterogeneous envi-
ronment through promoting a culture of tolerance, open communication
and creating conflict management strategies to address issues that may
arise. All the approaches to managing diversity can be divided into two
categories: Individual Approaches which can be learning and Empathy;
and Organizational Approaches in the form of testing, training, and men-
toring. Tips for managing diversity in the workplace are:
‹ ‹Prioritize Communication: To manage a diverse workplace,
organizations need to ensure that they effectively communicate with
employees. Policies, procedures, safety rules and other important
information should be designed to overcome language and cultural
barriers by translating materials and using pictures and symbols
whenever applicable.
‹ ‹Treat Each Employee as an Individual: Avoid making assumptions
about employees from different backgrounds. Instead, look at
each employee as an individual and judge successes and failures
on the individual’s merit rather than attributing actions to their
background.
‹ ‹Encourage Employees to Work in Diverse Groups: Diverse
work teams let employees get to know and value one another on

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an individual basis and can help break down preconceived notions Notes
and cultural misunderstandings.
‹ ‹Base Standards on Objective Criteria: Set one standard of rules
for all groups of employees, regardless of background. Ensure that
all employment actions, including discipline, follow this standardized
criteria to make sure each employee is treated the same.
‹ ‹Be Open-minded: Recognize, and encourage employees to recognize,
that one’s own experience, background, and culture are not the
only things with value to the organization. Look for ways to
incorporate a diverse range of perspectives and talents into efforts
to achieve organizational goals.
‹ ‹Although the standpoint of the dominant group will often carry
more weight, a transformational leader will encourage conflicting
standpoints to coexist within an organization, which will create a
forum for sanctioned conflict to ensue. No organization can prosper
without discipline.

9.9 Summary
A corporate strategy entails a clearly defined, long-term vision that
organizations set, seeking to create corporate value and motivate the
workforce to implement proper actions to achieve customer satisfaction.
Corporate strategies may pertain to different aspects of a firm, yet the
strategies that most organizations use are cost leadership and product
differentiation. Career development is indispensable for implementing
career plans. Organization Development (OD) is the study of successful
organizational change and performance. Grievance procedure is a formal
communication between an employee and the management designed for
the settlement of a grievance.

9.10 References
‹ ‹Parvathy (April 2013), Industrial Relations. Accessed at www.
slideshare.net/Parv32/industrial-relations in October 2018.
‹ ‹Tutorialon IR Strategy in Industrial Relations Management. Accessed
at www.wisdomjobs.com in October 2018.

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Notes ‹ ‹Patwardhan, Vivek S. (March 2017), “Strategic Industrial Relations

for Competitive Advantage”. The SHRM SouthAsia Blog. Accessed
at http://blog.shrm.org in October 2018.
‹ ‹Rastogi, Savita. Management of Human Resource. New Delhi:
Classical Publishers.
‹ ‹Kumudu. (2011). Workforce Diversity. Accessed at www.slideshare.
net/kumudu737sjp/workforce-diversity in October 2018.
‹ ‹Dyson, Eric. (2017). Getting Right Understanding Managing Diversity
in Workplace. Accessed at www.peoplescout.com in October 2018.

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 L E S S O N

10
Employee Separation,
Retrenchment and
Retention
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
10.1 Definition
10.2 Reasons for Separation
10.3 Managing Separations
10.4 Conclusion
10.5 Summary
10.6 References

10.1 Definition
Employee separation has been defined as negative recruitment. It may be in the form of
resignation, dismissal or discharge, suspension, retrenchment or lay-off. Employee sepa-
ration constitutes the final stage in the staffing process of an organization.
Types of Separation
Separation is classified basically into three types.
Compulsory Separation: The employee is separated due to the expiration of an employ-
ment contract.
Employment-at-will Doctrine: In the absence of a specific contract, either an employer or
employee could sever the employment relationship at any time. These can be of two types:
Voluntary separation refers to the separation of employees on their own request. This is
the most common form of employee separation, particularly during boom periods.

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Notes Involuntary separation means the separation of employees for organizational

reasons which are beyond the control of the employees. In recessionary
times, involuntary separation or the act of asking the employee to leave
by management is quite common.
The difference in voluntary and involuntary forms of separation is that for
voluntary exits, the employee stands to get most of the benefits and perks
due to him or her, whereas when an employee is asked to leave, he or she
might get a separation package or in instances where disciplinary or perfor-
mance related exits take place, the employee might not get anything at all.

10.2 Reasons for Separation

Voluntary Separation
Voluntary separations are initiated by employee (often those the company
would prefer to keep). Voluntary separation, which normally begins after
a request is placed in this regard by the employee, can be of two types –
avoidable and unavoidable. Further, they can be professional reason and
personal reasons.
Professional Reasons: Employees may seek separation when they decide
to seek better positions, responsibilities and status outside the present
organization. Efficient employees would seek to expand their realm of
knowledge and skills continuously by working in different capacities/
positions in various organizations. In their quest for greater responsibil-
ity, power and status, they may seek separation from the organization.
Personal Unavoidable Reasons: The important personal reasons for
voluntary separation are relocation for family reasons, like marriage
and health crisis of family members, maternity and child-rearing. For
instance, when working women get married, they often prefer to settle
in the partner’s place of occupation. Similarly, an employee may seek
voluntary separation to look after the child or parent.
Personal Avoidable Reasons: Lack of growth, internal pay equity, man-
agement, workload, etc.
Some of the common reasons for employees to leave organizations can
include the following:
A Poor Match between the Job and the Skills of the Employee: This
issue is directly related to the recruitment process. When a poor match
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occurs, it can cause frustration for the employee and for the manager. Notes
Ensuring the recruitment phase is viable and sound is a first step to
making sure the right match between job and skills occurs.
Lack of Growth: Some employees feel “stuck” in their job and don’t
see a way to have upward mobility in the organization. Implementing a
training plan and developing a clearly defined path to job growth is a
way to combat this reason for leaving.
Internal Pay Equity: Some employees, while they may not feel dissatis-
fied with their own pay initially, may feel dissatisfaction when comparing
their pay with others.
Management: Many employees cite management as their reason for
leaving. This can be attributed to over-managing (micromanaging) people,
managers not being fair or playing favourites, lack of or poor communi-
cation by managers, and unrealistic expectations of managers.
Workload: Some employees feel their workloads are too heavy, resulting
in employees being spread thin and lacking satisfaction from their jobs,
and possibly, lack of work-life balance as a result.
Involuntary Separation initiated by the organization (often among
those who would prefer to stay). An involuntary separation is caused by
factors which remain beyond the purview of the employees. However,
these factors may be classified broadly into health problems, behavioural
problems and organizational problems.
Health Problems: Major health problems crippling the employees may
make them invalid or unfit to continue in the profession. For instance,
accidents causing permanent disabilities and illness of the employees like
brain stroke and other terminal illnesses can lead to their involuntary
separation. Death of employees is another factor which results in their
involuntary separation.
Behavioural Problems: An employee’s objectionable and unruly behaviour
within the organization may also lead to his involuntary separation from
the organization. When the employee’s behaviour is unethical or violates
the code of conduct in force, the organization may initiate disciplinary
actions, which may eventually result in his termination. This may constitute
an act of involuntary separation. Consistent failure to reach performance
goals by an employee can also result in his involuntary separation.

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Notes Organizational Problems: Organizational problems are another important

factor that contributes to the involuntary separation of employees. The poor
financial performance of an organization may cause it to terminate the ser-
vices of some of its employees as part of cost control measure. Such termi-
nations are also classified as involuntary separation. Similarly, automation,
organizational restructuring and rationalization can also result in employee
termination, discharge or lay-off, broadly called involuntary separation.
Components of the Employee Voluntary Separation Process
The employee separation process starts from the time the employee gives
notice to his or her employer about the intention to quit. This is usually
called “putting in one’s papers”, because in earlier times, an employee was
required to submit a formal resignation letter, though in recent times, this
is being done by email. Once the employee gives notice, all the financial
transactions and records of the employee are “frozen” by the HR department
and the employee’s manager is tasked with the process of ensuring proper
handover and closure of work tasks allotted to the employee. Usually, the
notice period ranges from a month to two to three months, depending on the
level at which the employee is working. Further, there has to be a well-de-
fined handover plan drawn up by the employee’s manager that covers all
aspects of closing out on the work that the employee is performing.
Participants in the Employee Voluntary Separation Process
Typically, the employee separation process proceeds along two parallel
tracks. One involves the employee and the manager and is concerned with
the handover of work and other tasks. The other track is by the separa-
tions team and deals with the employee benefits accruing as a result of
separation as well as other benefits like PF (Provident Fund), Gratuity (if
applicable), etc. The HR manager is needed at all steps of this process
and in the final exit interview that is conducted to assess the reasons for
the employee leaving the company and taking the employee’s views on
work and the company in general as well as any “de-motivating” factors
that might have caused the employee to resign.

10.3 Managing Separations

Employee separation is a sensitive issue for any organization. To compete,
organizations must ensure that good performers are motivated to stay and

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chronically low performers are allowed, encouraged, or if necessary, forced Notes

to leave. The permanent separation of employees from an organization
requires discretion, empathy and a great deal of planning. Each organization
must have comprehensive separation policies and procedures to treat the
departing employees equitably and ensure a smooth transition for them.
Attrition is economically damaging to the organizations as replacement
employees have to be hired and trained at a cost. Further, losing employees
who are well versed with the organizational culture can mean a loss of
valuable resources that lead to a situation where the organization stands
to miss the potential value adding activities of the employees. It is for
this reason that HR managers and organizations take attrition seriously
and consider ways and means to curb the same. Employee retention is
a set of actions designed to keep good employees once they have been
hired as that is beneficial for the organization.
In HR, we can separate the costs associated with turnover into indirect
costs and direct costs. Direct turnover costs include the cost of leaving,
replacement costs, and transition costs, while indirect turnover costs
include the loss of production and reduced performance. The following
are some examples of turnover costs (see Table 10.1):
‹ ‹Recruitment of replacements
‹ ‹Administrative hiring costs
‹ ‹Lost productivity associated with the time between the loss of the
employee and hiring of the replacement
‹ ‹Lost productivity due to a new employee learning the job
‹ ‹Lost productivity associated with co-workers helping the new employee
‹ ‹Costs of training
‹ ‹Costs associated with the employee’s lack of motivation prior to
leaving
‹ ‹Sometimes, the costs of trade secrets and proprietary information
shared by the employee who leaves
‹ ‹Public relations costs
To avoid these costs, development of retention plans is an important func-
tion of the HR strategic plan. Retention plans outline the strategies the
organization will use to reduce turnover and address employee motivation.

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Notes Table 10.1: Turnover Costs

Direct Indirect
Recruitment costs Lost knowledge
Advertising costs for new position Loss of productivity while new em-
ployee is brought up to speed
Orientation and training of new Cost associated with lack of motivation
employee prior to leaving
Severance costs
Testing costs
Time to interview new replace- Cost associated with loss of trade secrets
ments
Time to recruit and train new hires
Managing Compulsory Separations: As compulsory/auto separation is
occurring due to expiry of employment contract, either the time period
is over or the work for which hiring was done, is either completed or
has become impossible to implement, nothing much is required to be
done to manage such termination. Still, exit interviews can be taken of
such leaving employees and employee assistance programmes (mentioned
later) can also be offered.
Managing Involuntary Separations (Retrenchment): Retrenchment is
something akin to downsizing. When a company goes through retrenchment,
it reduces expenditures in an attempt to become more financially solvent.
Corporate downsizing is the process of reorganizing a company’s structure
in a manner that brings about lay-offs of a portion of the company’s work-
force. It may be due to economic downturns or business loss. A severance
agreement is a contract, or legal agreement, between an employer and an
employee that specifies the terms of an employment termination, such as a
layoff. Sometimes this agreement is called a “separation” or “termination”
agreement or “separation agreement general release and covenant not to
sue.” Like any contract, a severance agreement must be supported by “con-
sideration”. Consideration is something of value to which a person is not
already entitled that is given in exchange for an agreement to do, or refrain
from doing, something. Violence in the workplace caused by involuntary
turnover has become a major organizational problem in recent years. A
standardized, systematic approach to discipline and discharge is necessary.

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 Employee Separation, Retrenchment and Retention

In such situations, Employee Assistance Programmes should be developed. Notes

These programmes can be in the form of outplacement counselling which
helps displaced employees manage the transition from one job to another,
provides services such as job search support, résumé critiques, job interviewing
training and networking opportunities may be provided in-house or through an
outside source, aims at helping people realize that other opportunities exist.
Managing Voluntary Separations (Retention)
Plans should be developed to address employee turnover, resulting in a
more effective organization. Organizations should never harass the employ-
ees, especially in the case of voluntary separation, just because they are
quitting the organization. In fact, a quitting employee of the organization
must be seen as a potential candidate of the future for the organization
and also the brand ambassador of its HR policies and practices. Howev-
er, many organizations are still treating their employees as “expendable
resources” and discharging them in an unplanned manner whenever they
choose to do so. Some steps required to be taken are:
The Red Lists and Risk Management
In many organizations, managers are asked to identify potential cases of
attrition before the employee actually puts in his or her papers. For instance,
many multinationals have the practice of asking their managers to prepare
lists of potential employees who are likely to quit. This “red list” is then
sent to the managers’ supervisor and the HR manager so that when the em-
ployee actually quits or even does not quit, the organization is prepared for
the quitting event or counselling the employee against quitting. The latter
scenario happens when the employee is deemed valuable to the organization
and the manager identifies such attrition as being a loss to the company.
Further, attrition is also managed by the HR department organizing periodic
one-on-one sessions with the middle management and the managers having
the same one on one session with their employees. The rationale for such
sessions is that the employees would vent their frustrations or lack of com-
fort with the manager or with the organization and hence, ways and means
can be found to address the employees’ concerns.
Grievance Redressal
Any employee retention strategy would necessarily include a plan for
redressing employee grievances and ways and means to address employee
issues. This would mean that the employees would be enabled to take their
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Notes issues regarding pay, their work, their role, etc., to the HR manager for
each division and expect to get a fair hearing in the process. There should
be a plan where the HR manager in conjunction with the manager of the
employee who has raised the issue works towards resolving the issue.
Conducting Employee Satisfaction Surveys
Any type of survey can provide information on the employee’s satisfaction
with their manager, workload, and other satisfaction and motivational
issues. However, a few things should be considered when developing an
employee satisfaction survey as:
Communicate the purpose and goal of the survey.
Once the survey is complete, communicate what changes have been made
as a result of the survey.
Assure employees their responses will be anonymous and private.
Involve management and leadership in the survey development.
Ask clear, concise questions that get at the root of morale issues.
If, in any case, employee decides to leave, exit interviews of employees
who are leaving the organization should be conducted. They can provide
important retention information. An exit interview is an interview performed
by HR or a manager that seeks information as to what the employee liked
at the organization and what they see should be improved. Exit interviews
can be a valuable way to gather information about employee satisfaction
and can serve as a starting point for determining any retention issues
that may exist in the organization. However, the exit survey data should
be reviewed over longer periods of time with several employees, so we
can be sure we are not making retention plans based on the feedback of
only a few people.
Sample Exit Interview Questions
What is your primary reason for leaving?
What did you like most about your job?
What did you like least about your job?
Did you feel there was room for growth in your job?
What incentives did you utilize while at our company?

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Which incentives would you change and why? Notes

Did you have enough training to do your job effectively?
A retention plan is to be developed based on exit interview analysis,
survey results, any current plans and strengths and weaknesses of those
plans, the goal of the retention plan, and finally, the specific strategies
to be implemented. There can be different retention strategies.
An effective retention strategy would focus on preventing as well as ad-
dressing grievances. Though it is not the contention that all grievances
can be prevented, they can be “pre-empted” by actively listening to the
employees from time to time. This strategy of “listening” to the employ-
ees would revolve around a concept of “one-one” meetings between the
employees and the manager and employees and the HR representative for
the unit or division. The idea of the regular “one-one” meetings would
be to identify potential causes of friction among the employees and any
issues they may have vis-à-vis their job and benefits. These issues need
to be brought out into the open before they become contentious result-
ing in the employee feeling frustrated and quitting the job. Hence, all
efforts must be made to identify sources of employee dissatisfaction and
“hygiene factors” that must be taken care of for proper functioning of
the employees.
Some Ways to Improve Motivation Are:
(a) Job Rotation: Job rotation is the practice of moving the employees
around divisions and within divisions with a clear emphasis on
making sure that they operate in domains other than the ones
assigned to them initially. This would mean that the employees get
trained on competencies beyond that of their assigned role and this
would lead to greater motivation to pick up additional skills and
motivate them to perform better.
(b) Job Dissatisfaction Should be Reduced: Job satisfaction is a
pleasurable feeling that results from the perception that one’s job
fulfils one’s important job values.
A High Performance Work System (HPWS) is a set of systematic HR
practices that create an environment where the employee has greater
involvement and responsibility for the success of the organization. The
overall company strategy should impact the HPWS the HR develops in

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Notes regard to retention. Management theorists often emphasise the fact that
one of the reasons for low employee morale in organizations is the fact
that the employees often feel alienated and cut off from the larger pur-
pose. The contention is that the employees feel themselves to be part
of an impersonal setup and perceive themselves to be unable to make
a difference to the whole unit. Hence, there is a need to involve the
employees in the larger picture and provide them with perspective on
the bigger picture. Dissatisfied individuals enact a set of behaviours in
succession to avoid their work situation which are: behaviour change,
physical job withdrawal; and psychological job withdrawal. There are
many motivational theories developed by management thinkers.
A Synthesis of Employee Motivation Theories
1. Need Theories of Motivation: Need theories attempt to pinpoint
internal factors that energize behaviour. Needs as defined previously
are physiological or psychological deficiencies that arouse behaviour.
These needs can be strong or weak and are influenced by environmental
factors.
2. Equity Theory: Equity theory recognizes that individuals are concerned
not only with the absolute amount of rewards they receive for their
efforts, but also with the relationship of this amount to what others
receive. Based on one’s inputs, such as effort, experience, education,
and competence, one can compare outcomes such as salary levels,
increases, recognition and other factors. When people perceive an
imbalance in their outcome-input ratio relative to others, tension is
created. This tension provides the basis for motivation, as people
strive for what they perceive as equity and fairness (Robbins,
1993). One of the prominent theories with respect to equity theory
was developed through the work of J.S. Adams. Adams’ theory is
perhaps the most rigorously developed statement of how individuals
evaluate social exchange relationships (Steers, 1983). The major
components of exchange relationships in this theory are inputs and
outcomes.
Some Principles of Justice
Outcome Fairness: The judgement that people make regarding outcomes
received relative to outcomes received by others with whom they identify.

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 Employee Separation, Retrenchment and Retention

Procedural justice: focuses on methods used to determine the outcomes Notes

received.
Interactional justice: refers to the interpersonal nature of how the out-
comes were implemented.
3. Expectancy Theory: “Expectancy theory holds that people are
motivated to behave in ways that produce desired combinations of
expected outcomes”. Essentially, the expectancy theory argues that
the strength of a tendency to act in a certain way depends on the
strength of an expectation that the act will be followed by a given
outcome and on the attractiveness of that outcome to the individual
(Robbins, 1993). Expectancy theory states that motivation is a
combined function of the individual’s perception that effort will
lead to performance and of the perceived desirability of outcomes
that may result from the performance.
4. Job Design: This theoretical approach is based on the idea that the
task itself is a key to employee motivation. Specifically, a boring
and monotonous job stifles motivation to perform well, whereas
a challenging job enhances motivation. Variety, autonomy, and
decision authority are three ways of adding challenge to a job. Job
enrichment and job rotation are the two ways of adding variety and
challenge.
The critical factors among the respective motivation theories and
the implications for developing and implementing employee retention
practices
‹ ‹Needs of the Employee: Employees have multiple needs based
on their individual, family, and cultural values. In addition, these
needs depend on the current and desired economic, political, and
social status; career aspiration; the need to balance career, family,
education, community, religion, and other factors; and a general
feeling of one’s satisfaction with the current and desired state of
being.
‹ ‹Work Environment: Employees want to work in an environment
that is productive, respectful, provides a feeling of inclusiveness,
and offers friendly setting.

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Notes ‹ ‹Responsibilities: Given that one feels competent to perform in a

more challenging capacity and has previously demonstrated such
competencies, an employee may feel a need to seek additional
responsibilities and be rewarded in a fair and equitable manner.
‹ ‹Supervision: Managers and other leaders, more frequently than
others, feel a need to teach, coach, and develop others. In addition,
these individuals would seek to influence the organization’s goals,
objectives and the strategies designed to achieve the mission of
the organization.
‹ ‹Fairness and Equity: Employees want to be treated and rewarded
in a fair and equitable manner, regardless of age, gender, ethnicity,
disability, sexual orientation, geographic location, or other similarly
defined categories. With increased effort and higher performances,
employees also expect to be rewarded more significantly than
counterparts who provide output at or below the norm. The employee’s
effort and performance at a particular level is influenced by her/
his individual goals and objectives and which would vary with each
individual. An outcome or reward that is perceived to be highly
significant and important can result in a higher level of effort and
performance by the individual employee.
‹ ‹Effort: Even though employees may exert higher levels of effort
into a position based on a perceived significant reward, this could
be a short-term success if the task itself does not challenge or
provide satisfaction to the employee.
‹ ‹Employees’ Development: Employees prefer to function in environments
that provide a challenge, offers new learning opportunities, significantly
contributes to the organization’s success, offers opportunities for
advancement and personal development based on success and
demonstrated interest in a particular area.
Feedback: Individuals prefer to have timely and open feedback from
their supervisors. This feedback should be an ongoing process during
the year and not limited to formal performance reviews once or twice
per year. In addition, the feedback should be from both the employee
and the supervisor.

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 Employee Separation, Retrenchment and Retention

Notes
10.4 Conclusion
Given the emphasis within organizations on retaining its critical employ-
ees, the author has summarized some of the most widely used employee
retention practices as cited in the respective literature sources and the
causes for employee turnover. Nevertheless, in most cases, these practices
are developed and implemented without understanding the theory that
explains the practice and why it may be effective.
Retrenchment: The Legal Aspect
The above is a very informal definition of retrenchment. Retrenchment
has more to it than just termination of employment by an employer. There
are a host of legal provisions which govern the practice of retrenchment.
Section 2(oo) of the Industrial Disputes Act, 1947 defines Retrenchment as–
“The termination by the employer of the service of a workman for any
reason whatsoever, otherwise than as a punishment inflicted by way of
disciplinary action, but does not include –
voluntary retirement of the workman, or
retirement of the workman on reaching the age of superannuating if the
contract of employment between the employer and the workman concerned
contains a stipulation in that behalf; or
termination of the service of the workman as a result of the non-removal
of the contract of employment between the employer and the workman
concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein; or
termination of the service of a workman on the ground of continued
ill-health.
Some Real World Case Studies
Attrition has become a challenge for companies like the Indian IT major
Infosys that has seen unprecedented attrition among its employees in
recent months. The situation has deteriorated to the extent that the com-
pany is having to address investor and analyst queries about this issue
and has had to come up with a plan to tackle the same. The point here
is that attrition in well-known companies affects their brand value and

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Notes their brand image, and considering the fact that companies like Micro-
soft and Unilever as well as P&G are respected globally for their HR
practices, attrition in these companies dents the carefully crafted image
of being people friendly. This is the reason why blue chip companies
take attrition seriously and to the point where Steve Balmer (the former
head of Microsoft) is reported to have gone through all the exit interview
forms of the employees.

10.5 Summary
In recent years, with the high levels of attrition in the service sector,
it has become imperative for firms to have a structured separation plan
for orderly exits of employees. Of course, the concept of “pink slips”
or involuntary exits are another matter altogether and involve some
bitterness that results because of the employee losing his or her job. In
conclusion, it is our view that employee separations must be handled
in a professional and mature manner, and though attrition is a fact that
concerns everyone in the industry, once an employee decides to leave,
the separation must be as smooth as possible. Separation is classified
basically into three types:
Compulsory Separation: The employee is separated due to the expiration
of an employment contract.
Voluntary separation refers to the separation of employees on their own
request. This is the most common form of employee separation, partic-
ularly during boom periods.
Involuntary separation means the separation of employees for organizational
reasons which are beyond the control of the employees. In recessionary
times, involuntary separation or the act of asking the employee to leave
by management is quite common.
While nothing can be done to control compulsory separations, voluntary
and involuntary separations need to be managed while keeping them
at a minimum. Employees Assistance Programmes (EAPs) attempt to
ameliorate problems encountered by workers who are drug dependent,
alcoholic, or psychologically troubled. EAPs are usually identified in
official documents published by the employer. There are several issues
in controversy regarding EAPs.

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 Employee Separation, Retrenchment and Retention

Notes
10.6 References
‹ ‹Tutorialon Severance Pay. Accessed at www.whatishumanresource.
com in October 2018.
‹ ‹Tutorialon Employee Separation. Accessed at www.whatishumanresource.
com in October 2018.
‹ ‹Ricio, Daniel Edward. (2011). Employee Separation and Retention.
Accessed at www.slideshare.net in October 2018.
‹ ‹Aly. (2017). Employees Retention and Separation. Accessed at www.
slideshare.net in October 2018.
‹ ‹Juneja, Prachi. Employee Separation Process. Management Study
Guide. Accessed at www.managementstudyguide.com in October 2018.
‹ ‹Juneja, Prachi. Employee Retention Strategies. Management Study
Guide. Accessed at www.managementstudyguide.com in October 2018.
‹ ‹Business Dictionary. Definition of Retrenchment Strategy. Accessed
at www.businessdictionary.com in October 2081.
‹ ‹Business Jargons. Definition of Retrenchment Strategy. Accessed
at www.businessjargons.com in October 2018.
‹ ‹Chapter 7: Retention and Motivation, in Human Resource Management.
Accessed at www.saylordotorg.github.io in October 2018.
‹ ‹Ramlall, Sunil. (2014). “A Review of Employee Motivation Theories
and their Implication for Employee Retention within Organizations”,
in Journal of American Academy of Business. Accessed at www.
issuu.com in October 2018.
‹ ‹Maertz, Carl P. Jr. and M. A. Campion. (1998). “25 Years of Voluntary
Turnover Research: A Review and Critique,” in International Review
of Industrial and Organizational Psychology, vol. 13, ed. Cary L.
Cooper and Ivan T. Robertson, London: John Wiley, pp. 49–86.

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 UNIT - III

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 L E S S O N

11
Identifying Strategic
Positions
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
11.1 Meaning
11.2 Steps Needed for Effective Workforce Differentiation
11.3 Approaches to Identifying “A” Positions
11.4 Characteristics of “A”, “B,” and “C” Positions
11.5 Conclusion
11.6 Summary
11.7 Answers to In-Text Questions
11.8 Self-Assessment Questions
11.9 References

11.1 Meaning
The strategic position of an organization forms an integral part of the strategic management
process. It informs the strategic choices that need to be made and subsequently implemented.
Strategic choices can be of two kinds – 1) with respect to the external environment; 2) with
respect to the internal environment. In this chapter, discussion will concentrate on strategic
choices within an organization. With respect to Strategic Human Resource Management, it refers
to identifying strategic positions by workforce differentiation to maximize profitability. Many
companies spend too much time and money on low performers with the aim of improving their
performance. On the other hand, high performers do not get necessary resources, development
opportunities, or rewards. So, it is necessary that workforce differentiation takes place.

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Notes
11.2 Steps Needed for Effective Workforce Differentiation
1. CLARIFYING firm’s strategy and the strategic capabilities needed
to execute it, is a crucial first step in the process of developing a
differentiated workforce.
2. The next step in the process is to identify the strategic positions essential
for delivering the firm’s strategic capabilities, as well as the specific
employee competencies and behaviors needed in these roles.
The process of identifying “A” positions begins with the development of
a clear statement of the firm’s strategic choice (how will we compete?)
as well as the firm’s strategic capabilities (what must we do exceptionally
well to win?). Once these two factors are clarified, one can identify “A”
positions. Then, the process of improving the performance of employ-
ees in the firm’s most critical roles can begin. The key elements of this
process are outlined in Table 11.1.
Strategic positions have a significant impact on one or more of the firm’s
strategic capabilities. And, perhaps surprisingly for many managers, they
might exist at almost any level in the organization. So, strategic positions
may be R&D scientists focused on new product development, or the dis-
tribution and logistics specialists that make the firm’s vaunted processes
work effectively & so on.
In addition to their direct impact on the firm’s strategic capabilities,
strategic positions are characterized by a significant amount of variability
in the performance of the employees holding those jobs. Performance
variability means that the difference between high and low levels of
performance in a given job is substantial. For example, many managers
are familiar with the wide variations in the performance of salespeople;
a top salesperson might easily sell ten or twenty times more products
than an average salesperson might. But such variations in performance
can appear almost anywhere in an organization, and when they do, they
have the potential to be an important driver of strategic success.
Strategic or “A” jobs provide the context for significant performance
improvement, while variability in the incumbents’ performance gives the
specific opportunity for improvements in business performance. If every-
one in a job were performing at a very high level, there would be little

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 Identifying Strategic Positions

chance for significant performance gains. But in reality, this situation is Notes
the exception and not the rule, especially in strategic positions.
In a single-product firm or division with few products, identifying strategic
positions is usually straight forward. The few strategic jobs are usually
apparent to managers (once they begin to look). When a job (strategic
or otherwise) affects multiple capabilities, matters get more complicated.

Table 11.1: Creating a Differentiated Workforce

Plan ac-
tions for
Determine Identify Assess all players
Strategic Strategic Identify Strategic Players in in Strategic
Choice Capabilities Positions Positions Positions
• Operational • List possi- • List positions • Develop • Remove
excellence ble strategic within each stra- “A,” “B,” “C” posi-
• Product capabilities tegic capability “C” criteria tions
leadership • Review • Assess each • Apply “A,” • Remove
• Customer strategic position on pres- “B,” “C” “C” play-
intimacy capability ent and future criteria to ers from
criteria wealth-creation all posi- “A” posi-
• Assess each potential tions tions
for present • Identify strategic • List all • Put “A”
and future positions’ perfor- positions players in
wealth- mance variability by “A,” “A” posi-
creation • Finalize strategic “B,” “C” tions
impact positions designation • Develop
• Determine • Review other • Assess all “B” play-
3–5 strate- positions (not in employees ers in “A”
gic capabil- strategic capa- in positions positions
ities bilty for wealth- • Determine into “As”
creation percentage
potential) of “A,”
“B,” and
“C” play-
ers in all
positions

Exec team

Line
managers
HR function

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Notes It is recommended that managers spend time thoroughly understanding

the strategic capabilities and the jobs most critical to ensure their firm’s
strategic success. They might be pressured to jump ahead in the process
and name a certain group of jobs as key or strategic because they are
obvious. But in the long run, this approach is shortsighted, as managers
often misdiagnose the truly strategic positions. Managers might place
too much emphasis on senior positions and not enough on the entry-level,
customer-facing positions. It is suggested that managers follow process as
mentioned in 3-1 to ensure that they identify the truly strategic roles in
their businesses, not just obvious ones.
Once the critical jobs are identified, the next step is to specify, in clear
behavioral terms, the employee actions and deliverables that constitute
“A” performance in these positions. Performance differentials between
“A” and “C” players can be on the order of twenty to one or more. So fo-
cusing intervention and improvement efforts first and foremost on the “A”
positions is important, because it is where both the need and the payoffs
are the greatest.
The approach to identifying strategic jobs and the staffing and development
processes for ensuring that “A” players are placed in “A” positions, sug-
gested here, is quite different from the processes most organizations use. In
the next section, contrast between the traditional process and this approach
is discussed.

11.3 Approaches to Identifying “A” Positions

Traditional Approaches
1. People traditionally have determined the relative value of jobs in
an organization in one of two ways. Human resource professionals
typically focus on the level of skill, effort, and responsibility a job
entails, together with working conditions. For example, the Hay System
for job evaluation, prices jobs based on the relative value of skill,
effort, responsibility, and working conditions of a particular job. The
typical job-evaluation process allocates points to benchmark jobs; then
the remaining jobs are placed in the hierarchy. This process drives a
number of organizational decisions, most notably, compensation. From

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this point of view, the most important positions are those held by the Notes
most highly skilled, hardest-working employees, exercising the most
responsibility and operating in the most challenging environments. But
recently, job responsibilities have broadened considerably, and the pace
at which jobs change, has also increased dramatically. So, much like
conventional accounting systems that are primarily focused on tangible
instead of intangible assets, conventional job-evaluation systems are
now much less useful than they used to be while the conventional
approach might be effective in a world of stable companies, jobs,
and (local) labor markets, in the current competitive environment, a
new and much more strategic approach to the design of work and
the valuation of jobs is needed based on future value creation and
strategic job worth.
2. Economists, by contrast, generally believe that people’s wages reflect
the value they create for the company and the relative scarcity of
their skills in the labor market. Thus, the most important jobs are
those held by the most highly paid employees.
Problems with Traditional Approaches
Both of the above approaches merely identify which jobs the company
is currently treating as most important. They do not identify which are
actually more important. To do that, one must start forward from strategy
rather than working backward from organisation charts.
Consider what some senior HR executives have to say about the
importance of identifying strategic positions in the box that follow,
“Differentiating Strategic Positions.” The quotes in the box point to
the potential problems associated with conventional approaches to job
valuation, which we believe to be too slow, inflexible, and primarily
focused on internal equity at the expense of strategic capabilities, value
creation, and market competitiveness.
Differentiating Strategic Positions
“We must evolve new guidelines about how to manage our workforce to
assure our future competitiveness, both within the U.S. and Europe.”
—Dan Phelan, senior HR vice president, Glaxo Smith Kline

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Notes “In Telecom Italia Group, we are focused on ensuring that a good
proportion of ‘A’ people fill the positions, particularly the ‘A’ po-
sitions. Our ‘Management Review’ process is designed to do that.”
—Carlo Bertelegni, vice president of HR, Telecom Italia Group
“Merely identifying strategic positions is not enough. You must as-
sure a disproportionate representation of top talent in these strategic
positions through recruitment, selection, development and rewards,
as well as let them know how much we value them so we can retain
them.”
—Ray Carson, senior HR vice president, Wyeth Healthcare.

Because the impact of history and inertia on job composition is substan-

tial—job responsibilities, once set, are notoriously intractable in many
organizations—it is important to re-examine periodically how jobs and
work are designed. But most firms don’t do this. The problem is exac-
erbated when strategy and the external environment are changing much
more quickly than companies are adapting on the inside. Most need to
be more adaptive in how they design and structure work. The question
is how?
Contemporary Approaches
Firms should move from conventional approaches toward a model in which
job value is determined by the specific strategic capabilities needed to
execute strategy. Then they need to invest disproportionately in the most
strategic positions, ensuring that “A” players are in “A” positions for “A”
customers. They must also manage “B” and “C” positions effectively.
They must quickly remove “C” players from “A” positions (replacing
them with “A” players). It must also be ensured that “B” players in
“A” positions improve their performance. Similarly, “A” players in “B”
positions might move into roles (“A” positions) that capitalize on their
unique skills and abilities.
The workforce is the most expensive yet poorly managed asset in most
organizations. In an era of global competition, both for talent and share
of customer wealth, companies need a new way to manage talent. We

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believe that an inevitable trend toward increasing levels of differentiation Notes

in organizations is growing, and we are observing a movement from
equality norms to equity (the quality of being fair and impartial) norms.
Over time, organizations lose their focus on the importance of a job or
position, and bureaucracy takes over. Over time, they tend to standardize
and routinize HR processes and systems and iron variance out of the
system. Firms focus on process improvement at the expense of strategic
value. Six sigma* processes contribute to this trend. The consequences
are that workforce strategy becomes more homogenous and disconnected
from business strategy.
How can this process be interrupted? As can be seen in Table 11.2, firms
that are successful in workforce differentiation have a clear, widely shared
view of the importance of identifying “A” positions and an action plan.
For this, one needs to know the key characteristics of “A,” “B,” and
“C” positions.

Table 11.2: Successful Workforce Differentiation Management

View of “A”
Firm Positions Firm’s Action Comment
American � Explicit workforce � Strategic position Rigorous perfor-
Century and position identification mance and rewards
Investments differentiation � Rigorous systems concentrate
performance on investment
evaluation of positions and as-
strategic talent suring “top talent”
in these positions.
� Action plans to
resolve gaps

* Six Sigma is a measurement-based strategy for process improvement. It’s a methodology,

which aims at improving process and increasing customer satisfaction (Both internal
and external). The concept behind this approach is to reduce the variation in processes.
This reduction leads to consistent and desired outcomes from processes. Hence,
Continuous process improvement with low defects is the goal of this method.

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Notes View of “A”

Firm Positions Firm’s Action Comment
Biogen- � Not every position � Succession planning Differential invest-
Idec contributes emphasized for ment and rewards are
to strategic strategic positions related to position
capabilities � Development and value.
succession of those
with potential in
strategic positions
are emphasized and
carefully tracked
Cisco � Historically � Focus leadership on “All executives must
reviewed “C” strategic customer- meet customer goals
players and facing positions or incentives will
removed them and redesigned not be paid” –CEO
� Focus of evaluation incentive system to John Chambers. Ex-
of managers and elicit wealth-creating plicit recognition in
executives in customer behaviors a “techie” industry
customer success/ that customer solu-
wealth-creating tions, not technical
positions solutions, are the real
wealth-creating posi-
tions.
Colgate � Clear identification � Explicit career Investment in career
of strategic development development mod-
capabilities and models for strategic els appears to have
strategic positions positions within significant payoff in
strategic capabilities assuring strategic tal-
� Rigorous assessment ent in strategic posi-
of career progress tions (e.g., consumer
� Line managers know insight).
strategic positions
Diageo � Explicit focus on � Refocused role of Strategic positions,
strategic positions HR generalists to largely in marketing,
focus primarily on consumer insight,
strategic positions and supply chain,
have been identified.
LOB HR managers
are responsible for
delivering dispropor-
tionate capability in
these positions and
are evaluated on how
well they deliver stra-
tegic talent in these
positions.

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 Identifying Strategic Positions

View of “A” Notes

Firm Positions Firm’s Action Comment
General � Originator of � Use explicit “A”, “We can’t afford ‘A’
Electric “A”, “B”, “C” “B”, “C” players players in all po-
players concept evaluation sitions.” Therefore
(“organizational � Corporate owns GE is moving, in
vitality”) strategic positions one of five groups,
� Begin to focus on (e.g., leadership M to focus on “A”
strategic positions & A, etc.) positions and re-
aligning workforce
strategy around
these positions.

Firm Issue Firm’s Action Comment

Glaxo � Workforce � Have identified– To determine and lever-
Smit Kline philosophy makes � Corporate strategic age workforce invest-
strategic positions positions ments in talent, a se-
explicit quential assessment of
� LOB strategic strategic capabilities,
positions strategic positions,
� Line managers have and strategic players
explicit workforce is used.
accountabilities
Honey- � Brought the � Rigorous assessment Differentiation is the
well GE models to of “A” positions with mother’s milk of a high
Honeywell GE criteria resulted performance culture”–
in retention of “A” CEO Larry Bossidy.
players–not the “new Assessing the value of
broom sweeps clean” the position as well as
the player are decisions.
IBM � Strategic talent � Explicit recognition Building workforce
flexibility well of change in strategic agility around strategic
beyond “lifetime talent requirements and support positions,
employment” � Recognition that IBM clearly acknowl-
strategic talent is edges that the nature of
available externally strategic work changes
over time and workforce
flexibility is essential to
have the strategic talent
instantly and continu-
ously available without
building expensive, em-
bedded workforce plat-
forms,

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Notes
11.4 Characteristics of “A”, “B,” and “C” Positions
To execute strategy with a differentiated workforce, organizations must
clearly understand which positions are strategic and which are not. Un-
derstanding each position’s level of impact on business success is the
first step. While a number of factors contribute to a position’s relative
strategic impact, the most important are its strategic impact and level of
performance variability (see Table 11.3).
Primary Characteristics of Strategic (“A”) Positions
Two elements are critical to the identification of a strategic or “A” position:
First, the work must have strategic impact and directly affect one of the
firm’s primary strategic capabilities.
Second, there must be a high level of performance variability among
incumbents in those positions.
Strategic Impact: Jobs are strategic when they have a disproportion-
ate impact on a firm’s ability to execute business strategy through its
strategic capabilities. For example, in a pharmaceutical firm focused on
new products, a strategic capability at the firm level is likely to be R&D
acumen, and the associated key jobs are likely to be research scientists.
However, not all R&D scientists are likely to hold “A” jobs, just those
associated with new product development in a particular domain (e.g.,
heart disease). Similarly, in a software firm, programmers associated with
the development of the firm’s core products are likely to have a greater
impact on the firm’s strategic capabilities than will programmers elsewhere
in the firm (i.e., the firm’s own internal IT operations).
As we mentioned in the first chapter, all a firm’s jobs are important, but
not all jobs are strategic; this distinction is critical for the design and
implementation of effective workforce management systems. Strategic jobs
are the very few (typically less than 15 percent) that directly enhance a
firm’s strategic capabilities. Strategic positions can appear at any level
throughout the organization and affect one or more strategic capabilities.
Jobs that affect more than one capability are:

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Table 11.3: Which jobs make the most difference? Notes

An “A” position can be defined primarily in terms of its impact on
strategy and by the range in the performance level of the people in the
position. From these two characteristics flow a number of other attributes
that distinguish “A” positions
Defining “A” Position “B” Position “C” Position
Characteristics Strategic Support Surplus
Scope of authority Has direct strategic Has an indirect strate- May be required
impact and exhibits gic impact by support- for the firm to
high-performance ing strategic positions function but has
variability among and minimizes down- little strategic im-
those in the posi- side risk by providing pact.
tion, representing a foundation for stra- Little discretion
upside potential. tegic efforts, or has in work
Autonomous deci- a potential strategic
sion making. impact, but exhibits
little performance
variability among
those in the position.
Specific processes or
procedures typically
must be followed.
Primary determi- Performance Job level Market price
nant of compen-
sation
Effect on value Creates value by Supports value-creat- Has positive eco-
creation substantially en- ing positions. nomic impact.
hancing revenue
or reducing costs.
Consequences of May be very costly, May be very costly Not necessarily
mistakes but missed revenue and can destroy value. costly.
opportunities are a
greater loss to the
firm.
C o n s e q u e n c e s Significant expense Fairly easily remedied Easily remedied
of hiring wrong in terms of lost through hiring of re- through hiring of
person training invest- placement. replacement.
ment and revenue
opportunities.

Source: Adapted from Mark A. Huselid, Brian E. Becker, and Richard W. Beatty, “‘A
Players’ or ‘A Positions’? The Strategic Logic of Workforce Management,” Harvard
Business Review, December 2005.

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Notes Especially important, as they have the potential to have a leveraged or

synergistic impact on the firm’s performance.
Performance Variability: The second key driver of position importance
is performance variability, which means that the gap between low and
high performers in this role is substantial. While strategic impact pro-
vides the context, performance variability provides the opportunity for
improvement. If all employees perform at a very high level within a given
role, then there is little opportunity for real strategic impact through more
effective workforce strategy and management. But if a job has a direct
impact on strategic capabilities and there are dramatic differences in
the performance of job holders, managers can have a significant impact
on firm performance through more effective workforce management. As
Nathan Myhrvold, former chief scientist at Microsoft, commented, “The
top software developers are more productive than average software de-
velopers not by a factor of 10X or 100X, or even 1,000X, but 10,000X.”
Few jobs exhibit the enormous variation on performance cited by Myhrvold.
But differences in performance of twenty to fifty to one are common,
especially in knowledge intensive roles, or in jobs with a substantial span
of control or sphere of influence (i.e., where an employee’s performance
affects the performance of either subordinates or peers elsewhere in the
value chain). Capturing the potential gains associated with this level of
variation means that first we need to identify the key positions and then
manage them differentially. But differentiation based on what? We focus
on employee performance because there are often large differences from
the lowest to the highest employee in any given role, and there are often
large differences from the average to the top employees.
The impact of variability in workforce performance on firm-level out-
comes is not just limited to highly complex jobs such as computer pro-
grammers or R&D scientists. Figure 3-2 gives an example from Gallup
that describes the importance of developing a clear understanding of the
processes through which variance in workforce performance creates value.
An important conclusion from the data is that firms would be better
off paying the bottom 10 percent of the workforce to stay home! At an
estimated $35,000 per employee per year in total compensation, the bot-
tom 10 percent of the workforce (458 employees) generates cost to the
business of over $16 million per year. Better yet, as the study’s author

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 Identifying Strategic Positions

noted, they destroy so much value, you should consider paying them to Notes
go to work for your competitors!
Performance variability is Critical for a Position to be Strategic
Impact on Customer Attitude Scores
This company, highly regarded for its customer service, surveyed about
45,000 customers to gauge the impact of its 4,583 service reps. It dis-
covered that the top 10% had a positive effect on customer attitudes with
71% of the customers they talked to; the top seven reps created a positive
effect with every customer. In sharp contrast, the bottom 10% had a net
negative impact of 14% on customer attitude scores, while the bottom
three employees alienated every customer they spoke with.

Figure 11.1
(Source: Glen Phelps, “The Fundamentals of Performance Management,”
Gallup Management Journal, February 10, 2005:1–4)

Based on our experience with thousands of practicing managers and a

careful reading of the academic literature, we believe that there is more
variability in employee performance than many managers realize. More-
over, given the significant role of talent in the strategic success of most

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Notes firms, we believe this gap is destined to increase. Just as the impact of
the workforce on the firm’s strategic success is increasing, so too is the
variability in employee performance. As employee discretionary effort and
knowledge continue to play a larger part in the creation of wealth within
firms, the importance of managing these assets strategically increases
as well. This means that managers will increasingly need to focus on
managing the variability in employee performance.
To further complicate matters, not only are the average levels of vari-
ability increasing and the amount of variability differing substantially
across roles, but the impact of workforce performance variability on firm
performance can in many cases be asymmetrical; that is, the impact of
an increase in workforce performance on firm performance can be either
much larger or much smaller than the impact of a decrease in workforce
performance. So, as the relative value of the workforce has increased,
so too has the relative importance of high and low levels of employee
performance. The very best employees (especially in strategic roles) are
much more valuable, while the worst employees are more costly than
ever in terms of lost profits.

Secondary Characteristics of Strategic (“A”) Positions

Strategic or wealth-creating positions meet the criteria that we have out-
lined—they impact one or more of the firm’s strategic capabilities, and
the employees in those roles exhibit wide swings in performance. The
strategic position identification process is partly empirical and partly
clinical. Some key points to remember about strategic positions include:
‹ ‹Strategic positions are those in which top talent significantly enhances
the probability of achieving the business strategy.
‹ ‹Employees are hard to get; top talent is difficult to attract and retain.
‹ ‹Positions create wealth (by substantially enhancing revenue or
reducing costs).
‹ ‹Mistakes may be very costly, but missed revenue opportunities are
a greater potential loss to the firm.
‹ ‹Selection of the wrong person is expensive in terms of lost training
investment and especially lost revenue opportunities.
‹ ‹Poor performance is immediately detected.

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 Identifying Strategic Positions

‹ ‹Strategic positions have major revenue-enhancing or cost-reducing Notes

impact on the firm.
‹ ‹Strategic positions have strategic impact on the firm’s customers.
‹ ‹Substantial performance variability is possible, depending on the
incumbent.
‹ ‹These positions usually comprise less than 15 percent of the firm’s
positions.
‹ ‹Strategic positions are not determined by placement in the firm’s
hierarchy.

Primary Characteristics of Support (“B”) Positions

In contrast to high-impact strategic roles, “B” positions generally support
or enable performance in “A” or strategic roles. World-class performance
in these roles has only a neutral or modestly positive effect on firm per-
formance. In addition, some positions are defined not so much by the
wealth that they create but by the wealth that they can destroy. It can
be said that although a business cannot win with “B” positions, but can
certainly lose with them, if they not manned properly.
For example, imagine the case of a quality inspector in a pharmaceutical
manufacturing plant. This is certainly an important role; an impurity or
other manufacturing defect in a medicine that causes a product recall
could cost the firm billions of dollars. Assuming that the job is structured
correctly, however, an increase in the performance of quality inspectors,
say from the seventieth to the ninety-fifth percentile, is unlikely to have
much effect on the likelihood of a product recall (because the base rate
is already so low). However, allowing job performance to fall below
proficiency could be extremely costly.

Secondary Characteristics of Support (“B”) Positions

In addition to the primary characteristics noted earlier, “B” positions can
exhibit a number of secondary characteristics. No position is likely to
have all these attributes, but the pattern of results is consistent with the
following elements.
‹ ‹“B” positions support wealth-creating positions.
‹ ‹Mistakes may be very costly in that they can destroy wealth.

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Notes ‹ ‹Selection of wrong person is fairly easily remedied.

‹ ‹Poor performance may be detected.
‹ ‹Specific processes or procedures must be followed.
‹ ‹Job level is the best predictor of compensation.
‹ ‹Performance beyond a point has little potential for wealth creation
or even diminishing returns to the firm.
‹ ‹Performance variability may be substantial, but performance beyond
“standard” has little strategic value.
‹ ‹Usually most of the firm’s positions are “B.”

Primary Characteristics of Surplus (“C”) Positions

Organizational success depends on both strategic success and operational
excellence. Many “C” jobs, while having a small influence on strategic
success, can be critical to operational excellence. A company might not
even want to label them as “C” jobs or they may divide them into two
categories: the jobs that contribute to strategic success and the jobs that
primarily influence operational excellence. In any case, “C” jobs have
the following characteristics:
‹ ‹The work may be required in order for the firm to function, but it
has little strategic impact.
‹ ‹There is low performance variability in these positions.
‹ ‹Secondary Characteristics of Surplus (“C”) Positions
‹ ‹“C” or surplus positions exhibit the following secondary characteristics:
‹ ‹“C” positions have little economic impact.
‹ ‹Employee mistakes and errors are not costly.
‹ ‹Selection of the wrong person is easily remedied.
‹ ‹Poor performance is often tolerated.
‹ ‹There is little discretion in work, and procedures may be dictated
by regulation.
‹ ‹Market price is the best predictor of compensation.

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Notes
11.5 Conclusion
While conventional wisdom does suggest that the firms with the most
talent win, but given the financial and managerial resources needed to
attract, select, develop, and retain high performers, companies simply
cannot afford to have A players in all the positions. Rather, more prac-
tical belief is that the firms with the right talent win. Businesses need to
adopt a portfolio approach to workforce management, placing the very
best employees in strategic positions, good performers in support posi-
tions, and eliminating nonperforming employees and jobs that don’t add
value. One thing to keep in mind is “Effective management of A positions
requires intelligent management of B and C positions, as well.” It has
been argued that strategic impact provides the context and performance
variability provides the opportunity for creating shareholder wealth. The
quickest route to increasing shareholder wealth is to increase employee
performance in strategic positions.

IN-TEXT QUESTIONS
1. Strategic or “A” jobs provide the context for significant performance
improvement. (True/False)
2. Performance variability means that the difference between high
and low levels of performance in a given job is substantial.
(True/False)
3. The need to increase levels of differentiation in organizations
is increasing. (True/False)
4. The two elements critical to the identification of “A” positions
are Strategic Impact and high performance. (True/False)
5. “B” positions generally support/enable performance in “A”
positions. (True/False)
6. Steps needed for effective workforce differentiation are _______.
(a) Two
(b) Three

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Notes 7. Strategic positions have a significant impact on enterprise’s

_________ capabilities.
(a) Strategic
(b) Administrative
8. Economists believe that most important jobs are held by the
most _________ paid employees.
(a) Lowly
(b) Highly
9. Two main characteristics of “C” positions are _________
strategic impact and _________ performance variability.

11.6 Summary
An organization’s talent should be taken as an investment to be managed
like a portfolio if strategy execution is to take place effectively. Many
companies fall into the trap of spending too much time and money on
low performers, while high performers do not get the necessary resources,
development opportunities, or rewards. Management thinkers recommend
that workforce should be managed like a portfolio - with disproportionate
investments in the jobs that create the most wealth. For this, management
has to rise above talent management’s “best practice”. The emphasis of
management will be to create a differentiated workforce that cannot be
easily copied by competitors. For creating differentiated workforce, a
manager should
(i) Differentiate those capabilities in the company that are truly strategic
(ii) Identify wealth-creating “A” positions
(iii) Create a new relationship between HR and line managers,
(iv) Articulate the role each plays in a differentiated workforce strategy.
(v) Develop the right measures for his organization.
The Differentiated Workforce gives an organization the tools to translate
talent into strategic impact.

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Notes
11.7 Answers to In-Text Questions
1. True as by improving A jobs, significant improvement takes place
2. True
3. True
4. True
5. True
6. (a) Two. First of the two steps is clarifying firm’s strategy and
strategic capabilities and the second is identifying strategic
capabilities and specific employee competencies
7. (a) Strategic (i.e. what must be done exceptionally well to win
8. (b) Highly (because people’s wages reflect the value they create
for the company)
9. Little, Low

11.8 Self-Assessment Questions

1. Discuss the two steps needed for effective workforce differentiation.
2. Discuss traditional approaches to identify “A” position.
3. Explain the problems associated with traditional approaches to identify
“A” position.
4. Differentiate equality from equity with respect to wage payments.
5. Explain primary characteristics of “A” positions.
6. Describe the secondary characteristics of “A” positions
7. Explain primary characteristics of “B” positions.
8. Describe the secondary characteristics of “B” positions
9. Explain primary characteristics of “C” positions.
10. Describe the secondary characteristics of “C” positions
11. How is an ‘A’ Position identified?
12. How is a ‘B’ Position identified?
13. How is a ‘C’ Position identified?

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Notes
11.9 References
‹ ‹https://www.sciencedirect.com/science/article/abs/pii/S1053482209000461

‹ ‹http://www.thedifferentiatedworkforce.com/pdfs/TDW-Chapter3.pdf

‹ ‹Mark A. Huselid Richard W. Beatty Brian E. Becker. “A Players”

or “A Positions”?: The Strategic Logic of Workforce Management,
HBR, vol December 2005 as retrieved from https://hbr.org/2005/12/a-
players-or-a-positions-the-strategic-logic-of-workforce-management
on 20/10/2018
‹ ‹Mark A Huselid. Differentiated workforce as retrieved from https://
www.amazon.in/Differentiated-Workforce-Transforming-Talent-Strategic/
dp/142210446X on 18.10 18

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 L E S S O N

12
HR Analytics
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
12.1 Learning Objectives
12.2 Meaning
12.3 Importance/Benefits of HR Analytics
12.4 Ways to Increase Business Value of Talent Analytics
12.5 Process of HR Analytics
12.6 The 8 HR Analytics Every Manager Should Know About
12.7 Ten Major Trends in the Field of HR Analytics for the Near Future
12.8 Indian Companies use Analytics Tools to Spot Talent and Troubles
(Namrata Singh/TNN/Oct. 11, 2016, 9:39 IST)
12.9 HR Analytics India Summits
12.10 Challenges in HR Analytics
12.11 Summary
12.12 Answers to In-Text Questions
12.13 Self-Assessment Questions
12.14 References

12.1 Learning Objectives

1. Meaning of HR analytics.
2. Importance/Benefits of HR Analytics.
3. Ways to Increase Business Value of Talent Analytics.
4. Process of HR Analytics.
5. The 8 HR Analytics Every Manager Should Know About.

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Notes 6. Ten Major Trends in the Field of HR Analytics for the Near Future.
7. Analytics Tools Used by Indian Companies to Spot Talent and
Troubles.

12.2 Meaning
Employees are the greatest asset of a company, but if the company’s hir-
ing decisions go wrong, employees could also be the company’s greatest
expense. Therefore, recruiting the right people and retaining and promoting
the best, while identifying and addressing under-achievers, is critical. Many
organizations spend a lot of time and efforts on human resources’ matters
but do not have sufficiently detailed data to help them fully understand
their employees. They also lack information regarding challenges that can
affect workforce planning, development and productivity.
HR analytics can help to address these challenges. Also called talent an-
alytics, HR analytics, is the application of considerable data mining and
business analytics techniques to human resources data. It is an area in the
field of analytics that refers to applying analytic processes to the human
resource department of an organization. It is hoped that it would result
in improving employee performance and therefore getting a better return
on investment. HR analytics does not only deal with gathering data on
employee efficiency. Instead, it aims to provide insight into each process
by gathering data and then using it to make relevant decisions about how
to improve these processes, operational performance and organizational
performance through high quality talent related decisions.
In sum, HR analytics refers to the analysis and application of a compa-
ny’s people data to formulate HR strategies. It correlates business data
and people data, which can help establish important connections later
on. The goal of human resources analytics is to provide an organization
with insights for effectively managing employees so that business goals
can be reached quickly and efficiently.
Key Aspects of HR Analytics
‹ ‹Providing data on the impact, the HR department has on the
organization as a whole.
‹ ‹Establishing a relationship between HR and the business outcomes.
‹ ‹Creating strategies based on the above information.
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Even if HR analytics is not used, businesses spend a significant amount of Notes

money on HR functions. But the use of HR analytics helps in predictive
analysis to make and execute the decisions in a rational way.

12.3 Importance/Benefits of HR Analytics

Analytics is always an important topic and trend in every part of business and
HR is also not far behind. Today many organizations are looking for metrics
or analytics in HR which are not just related to people but also on processes
such as recruitment, retention, compensation, succession planning, benefits,
training and development, performance and appraisal and many others. In
short Talent analytics is becoming more popular these days as companies
are doing lot of efforts to cultivate and align Human Capital Management
(HCM) with core business objectives in order to achieve a competitive fringe.
Some typical benefits and uses of HR analytics are as follows:
‹ ‹Improvement in organizational performance through high quality
talent related decisions.
‹ ‹Improvement in the accuracy of forecast workforce requirements
and utilization.
‹ ‹Optimization of talents’ management through development and planning.
‹ ‹Identification of the primary reasons for attrition.
‹ ‹Provide the source of competitive platform for the organizations
‹ ‹Manages applicants in better way by matching job requirements
for specific positions.
‹ ‹Recognizing the factors which turn the employee satisfaction into
productivity.
‹ ‹Determining individual’s KPIs (Key performance Indicators) on
the business.
‹ ‹Enabling HR to demonstrate its contribution to achieving corporate
goals.
Above points explain the reasons for increased use of HR Analytics by
HR departments. Supporters also argue that big data*† analytics can help

* 
Big data is the collection of data sets so large and complex that it becomes difficult
to process using traditional data-processing applications (Big data has been explained
in detail later in this chapter).
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Notes to provide evidence to de-bunk commonly held assumptions about em-

ployees that are wrong and based on biases.

12.4 Ways to Increase Business Value of Talent Analytics

Leading HR executives make four types of investments to increase the
business value of talent analytics:
(a) First, they invest in strategy to align the vision of talent analytics
with internal clients’ needs.
(b) They invest in execution by sourcing and practicing the use of
analytics to solve critical business challenges.
(c) They invest in analytics application skills and HR’s technological
capacity. And
(d) Finally, they invest in infrastructure by building effective relationships
with HR partners, business leaders and vendors.

12.5 Process of HR Analytics

1. Research Relevant Data: Only that data is to be researched which is
relevant to the goals of the business. It can be done by looking at the
direction that manager wants the business to head towards and the
key performance indicators that fit alongside those. Whatever data
is to be analyzed, needs to be of strategic value to the organization
or it will be a waste of time and energy. The ability to find the
right answer for a business question increases when manager’s
maturity, in statistics, data mining, machine learning tools, survey
management and strategic workforce management, is high.
2. Experiment with Different Analytical Tools: With more and more
tools becoming available on the market that enable users to merge
successful data mining techniques, data transformation techniques
and data visuals with a user friendly self-service interface, it is
now easier than ever to explore data quickly and get an action plan
together to proceed forward. So the historical issues related to HR
analytics of lack of adequate investment in HR/Talent Analytical
Systems and inaccurate, inconsistent or hard to access data which

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required too much manual manipulation, can be easily addressed Notes

with the right analytical system and support.
3. Create an Action Plan: By having access to analytics and teaming
that data with prior experience and intuition, the manager will have
the key ingredients to create a strong action plan. Human Resource
leaders are urged to apply big data and predictive analytics to talent,
leadership, and organizational capabilities. People generally need
to see evidence of why something is happening or needs to change
so to have an action plan in place can really benefit by helping
people to understand the reasons.
4. Ensure Analytical Data Gathered is Legally Compliant: The data
that is planned to be gathered and analyzed is approved by a legal
team or representative and confirmed to be compliant with the law
ahead of starting any analytical HR project. It would also be wise
to have the finished result approved before it is used in business
to avoid any damaging risks to the organization.
Anonymity and data protection carry strict laws and as such, a
sound business reason is to be provided for collating and analyzing
such data. Therefore, make it a priority to check legal compliance
throughout the whole process from start to finish.
5. Streamline the Process: Analytics can range from simple data collation
to complex projects depending on what outcome is desired. Some
decisions are required to be made initially to agree on the intended
model and strategy before one can proceed and mine the data. Then
the quality of the data is to be checked and clean everything up so
it is in a readable and understandable format. The people analytics
revolution is gaining speed.
Apparently these steps can take up approximately 75% of the
time required for the whole project, so it may take some time to
eventually be in the position to streamline a clear process that is
user friendly.
Patrick Coolen suggests a 4-step approach that includes Intake and
Design, Data Cleaning, Data Analysis, and Sharing Insights. It may
not be an exact fit to the strategy in every organization, but it is
a tried and tested model that would be a good place to start.

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Notes 6. Have the Right Skill-Set: Certain set of capabilities is required for
HR analytics to be conducted correctly and some of the main skills
that should be mandatory are: An understanding of business objectives
and timeframes; Knowledge of HR/Organizational processes; and
IT skills
Alongside the above, people with very curious and inquisitive mind
are required who are not afraid to ask the right questions and chase
the factual answers.
Further, people who are able to translate the analytical HR data
into an understandable format to the rest of the organization play
a key role in how effective the outcome of applying analytics to
HR processes will be.
7. Focus on the Facts: Having a fact based HR organization is a concept
in which one is able to prove the effectiveness of organization’s
HR policies and procedures in supporting the overall goals of the
business. This not only makes organization’s HR function more
credible when delivering data and forecasting results, but also effective
when changes need to be made, so one should push HR to be more
reliant on the facts and figures rather than simply measuring Key
Performance Indicators (KPI’s) or Return on Investments (ROI’s).
8. Create your HR Business Strategy: After obtaining data, knowing
how to understand and translate the information in a clear way, the
next step is to create HR business strategy. Many experts believe
that HR has a holistic perspective on talent alignment to the business
strategy
9. Use HR Tech to Support the Process: With analytics set to play a
large role in the HR function going forward, technology is a vital
component to support the management of the analytical data and
reduce accuracy errors.
With the right HR technology in place, having real-time data and
data management accessible from anywhere with a wi-fi signal,
applying analytics into organization’s HR processes will get a whole
lot easier.

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To sum up, hopefully with these steps one will be able to implement Notes
analytics into HR processes and be on the way towards a culture
of a more fact based HR organization.
Just to recap, the top 9 steps on how to apply analytics into HR pro-
cesses are:
1. Research relevant data
2. Create an action plan
3. Experiment with different analytical tools
4. Ensure analytical data gathered is legally compliant
5. Streamline the process
6. Have the right skillset
7. Focus on the facts
8. Create your HR Business Strategy
9. Use HR technology to support the process

12.6 The 8 HR Analytics Every Manager Should Know

About
Capability Analytics
Capability analytics is a talent management process that: (i) identifies the
required and desired capabilities or core competencies in a business; (ii)
compares them with the capabilities that a business has at present; and
(iii) Identify the gaps, if any. Capabilities are not just about qualifications
and skills; they can also include capabilities that may not be formally
recognized, such as interpersonal skills (i.e., the ability to develop and
maintain relationships).
Competency Acquisition Analytics
Competency acquisition analytics involves: (i) identifying the core com-
petencies that a business requires now and in the future; (ii) assessing
the current levels of these competencies within the business and iden-
tify any gaps; (iii) monitoring how effectively these competencies are
developed in-house or recruiting candidates with those competencies.
Effective competency acquisition analytics requires focusing on a small
set of core competencies.

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Notes Capacity Analytics

Capacity analytics tries to establish how operationally efficient people
are in a business. For example, to study “are people spending too much
time on administrative work and not enough on more profitable work”?
It also allows businesses to establish of how much capacity they have to
grow as capacity leads to profits? The important part, here, is establishing
a system to track capacity without creating huge administrative burdens
and without alienating employees with a ‘big-brother’ approach. Big data
and sensor system can be very effective here.
Employee Churn Analytics
Employee churn analytics is the process of assessing staff turnover rates
in an attempt to predict the future HR requirements and reduce employ-
ee churn. Employee churn can be identified through tools such as the
employee satisfaction index, employee engagement level, surveys and
exit interviews.
All employee churn is not bad. It is important to identify a healthy level
of churn and the ‘regrettable’ churn.
Corporate Culture Analytics
Corporate culture analytics is the process of assessing and understanding
more about corporate culture or the different cultures that exists across an
organization. Corporate culture is essentially the collective (often unspo-
ken) rules, systems and patterns of behaviour that embodies a business.
One way to assess culture is through the analysis of customer service
conversations, which can provide a rich data to assess corporate culture.
Through such analytics, HR manager can identify required changes in
culture, understand how the culture is changing, create early warning
systems to detect toxic cultures and ensure management is recruiting peo-
ple who would be able to blend their culture with the corporate culture.
Recruitment Channel Analytics
It is the process of finding out where the best employees come from and
which recruitment channels are the most effective. Recruitment channel
analytics will involve some historical assessment of employee value using
KPIs (Key Performance Indicators) such as human capital value added
and return per employee. Surveys and entry interviews are also useful
sources of data.

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Aggregator sites like glassdoor.com operate like Trip Advisor for re- Notes
cruitment and can provide companies with independent reviews of their
recruitment process.
Leadership Analytics
Leadership analytics discloses various dimensions of leadership perfor-
mance through data to identify the good, the bad and the ugly. Data about
leadership performance can be obtained through the use of surveys, focus
groups (a group of people assembled to provide feedback), employee
interviews or ethnography.
As few employees would feel confident or safe talking about their leader
or manager if they knew that person could or may have access to their
opinion, it is advisable to make the data collection anonymous.
Employee Performance Analytics
Employee performance analytics seeks to assess individual employee
performance. The resulting insights can identify who is performing well
and who may need some additional training or support in order to raise
their game. Today, there are many innovative ways of collecting and
analyzing performance, from crowd sourced performance assessments to
big data analytics.
Companies should move away from the classic and outdated performance
reviews. With modern data capture techniques, it is possible to analyze
performance more holistically and less focused on specific parts of a job
that might cause employees to skew their behaviour.

12.7 Ten Major Trends in the Field of HR Analytics for

the Near Future
Workforce analytics is developing and maturing. According to Tom Haak,
the following are the 10 major trends for the near future.
(a) From One-Time Exercise to Regular Exercise: Many workforce
analytics efforts start as a consultancy project through one question
“How do our employees experience their journey?” Many people
are interviewed, data is gathered, and with the help of the external
consultants a nice report is written and many follow-up projects to
redesign the employee journey are defined.

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Notes Though one-time exercise is nice, but it might be more beneficial

to develop ways to gather regular feedback from the candidates,
employees and other relevant groups. Approaches used are:
‹ ‹The detailed annual or bi-annual employee survey.
‹ ‹Weekly,monthly or quarterly surveys to gather more frequent
feedback. A few questions, often varying the questions per cycle.
‹ ‹Some more advanced pulse survey solutions are adaptive. They
ask more questions to people when they sense there are issues
otherwise not. For example, the question is “How was your
week?” If the answer is “Very Good”, the survey is finished, if
the answer is, “Not so good”, there are some follow-up questions.
Pulse surveys can also be easily connected to the important
“moments that matter” for the employee experience.
‹ ‹Continuous real-time mood measurement. Innovative solutions
in this area are still scarce, especially if one wants to measure
in a passive non-obtrusive way.
(b) From People Analytics to Workforce Analytics: Currently, the
general opinion seems to be that people analytics is a better term
than HR analytics. However, increasingly the workforce is consisting
of more than just people. Robots and chatbots are entering the
workforce. If an organisation analyses robots, the more appropriate
term would be workforce analytics.
(c) More Transparency: This overview of workforce analytics trends
cannot be complete without a reference to GDPR. Privacy is fad
nowadays. Many project works are jeopardized by ethics and
privacy concerns. This number will only increase if companies do
not comply with the new European privacy regulation, the General
Data Protection Regulation (GDPR) which is enforceable from 25
May 2018 onward.
GDPR is fuelling a lot of positive developments, one of them being
a lot more transparency. About what kind of data is collected, how
it is used, and how algorithms are used to make decisions about
people.
The issue of data ownership is related. It is expected that employees
will no longer accept that they cannot own their own personal

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data. Employees need to have the possibility to show their data to Notes
their potential next employer as evidence for their productivity and
engagement.
(d) More Focus on Productivity: Another approach is, to focus more
on increasing the productivity of the existing employees, instead
of hiring additional staff, and on improving the selection criteria.
Using workforce analytics, one can try to find the characteristics of
top performing people and teams, and the conditions that facilitate
top performance.
These findings can be used to increase productivity and to select
candidates that have the characteristics of top performers. When
productivity increases, an organisation needs less people to deliver
the improved results.
(e) What is in it for me?: If the focus of workforce analytics efforts is
primarily on efficiency and control, employees will doubt if there
are any benefits for them.
Though overall there is a shift to more employee-centric organizations,
still sometimes one can doubt seriousness of the efforts to improve
the employee experience.
Asking the question: “How will the employees benefit from this
effort?” is a good starting point for most workforce analytics projects.
(f) From Individuals to Teams to Networks: Workforce analytics can
help to improve the way teams and networks function in and across
organizations. The rise of Organizational Network Analysis is one of
the promising signs. Still, many workforce analytics projects today
are focused on individuals like “What are the characteristics of
our top performers? How can we measure the individual employee
experience? How can we decrease absenteeism?” etc.
(g) Cracks in the Top-down Approach: The tendency to implement changes
top-down, is still common to adhere to uniformity and standardization.
However, in line with the trend called “the consumerization of HR”,
employees are expected to take more initiative. For example, if an
employee wants feedback, he can easily organize it himself using
Slack plug-in Captain Feedback. A simple survey to measure the
mood of the team is quickly built with Polly (view: “How to measure

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Notes the mood in your team with Slack and Polly”). Many employees
are already tracking their own fitness with trackers like Fitbit and
the Apple Watch.
Many teams are primarily using WhatsApp and Slack as communication
tools to avoid the officially approved communication channels. HR
should also go with the flow instead of trying to promote standardized
channels.
Workforce analytics can benefit from the data gathered by their
employee’s own devices if the benefits of such sharing is clear to
employees.
(h) Ignoring the Learning Curve: Workforce analytics can be of two
kinds - descriptive and predictive. The third kind is also said to
be continuous analytics. Generally, the highest level is predictive
analytics.
As predictive analytics seems to be the holy grail, many HR teams
want to jump immediately to this level skipping operational reporting,
advanced reporting and strategic analytics. However, ignoring the
learning curve does not seem to be a sensible strategy.
(i) Give us Back Our Time!: This fad is concerned with performance
management. In an organization, it was calculated that all the work
around the performance management process for one employee costed
manager and employee around 10 hours (preparation, two formal
meetings per year, completing the online forms, meeting with HR
to review the results etc.).
By simplifying the process (no mandatory meetings, no forms,
no review meetings, just one annual rating to be submitted per
employee by the manager), HR could give back many hours to the
organization – to the relief of both managers and employees.
Workforce analytics can help a lot in the “give-us-time-back” projects,
for example by some simple measurement of the time, a sample
of managers, employees, and HR professionals spend on different
activities, and estimate the value these activities contribute towards
optimization of the core activities of the organization (e.g., serving
clients and bringing in new clients).

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(j) Too High Expectations: The expectations from workforce analytics Notes
are often too high, but two elements must be considered. In the first
place, human behaviour is not so easy to predict, even if one has
access to loads of people data and good performance is very well
defined, as for example in football, it is very difficult to predict
the future success of young players.
Secondly, the question is to what extent managers, employees and
HR professionals behave in a rational way as human behaviour is
subject to cognitive biases.
A more general thought is replacing ‘Workforce analytics’ with
‘Science’? But again the problem is that there are many scientific
findings that have been available for a long time but that are hardly
used in organizations. Example: it has been proven repeatedly, that
the (unstructured) interview is a very poor selection instrument.
But still, most organizations still rely heavily on this instrument
(as people tend to overestimate their own capabilities). So, why
would organizations rely on the outcomes of workforce analytics,
when they hardly use scientific findings in the people domain?

12.8 Indian Companies use Analytics Tools to Spot Talent

and Troubles (Namrata Singh/TNN/Oct. 11, 2016, 9:39 IST)
Several companies in India have begun using Predictive Index (PI) which
creates a behavioural profile and is believed to provide an accurate de-
piction or pattern of people’s core drives and work preferences.
According to Vinay Bansal, Co-founder, Predictive Strategy Group, “Pre-
dictive Index is like a blood test—getting to know about a disease even
before the symptoms have become visible to all. It involves a quick and
simple psychometric test to assess the natural behaviour of an employee.
The results are reviewed and assessed by trained analysts and the report
gives a summary of the strong behaviour a person is likely to display
along with a elaboration of the management and influencing style. Since
it is data driven, predictive HR analytics makes the process objective.”
Amway, the Direct Selling Company, relied on PI to make more informed
decisions. During internal job postings, they were able to zero in on a

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Notes candidate even two levels below than the desired position because PI
indicated behavioural indices of the person fitted well with the desired
profile.
HCL technologies was also found using HR analytics tools. Start-ups
were found to be using HR analytics in a big way.
In India, the concept is still catching up. In the west, it has been in use
for the past 30 years. Even China is much more open to adopting tech-
nology in the area of hiring as compared to corporates in India.

12.9 HR Analytics India Summits

The new report on the Global Workforce Analytics Market from Grand
View Research (GVR) predicts that the market will grow at a 16% CAGR
from $430.9 million in 2015 to touch $1.87 billion by 2025. The report
also reveals that workforce analytics will be more widely adopted to
help optimize workforce, develop workforce performance metrics, reduce
operational costs, and stimulate market growth. HR analytics, a discipline
that started as a small technical group that analysed engagement and re-
tention, has now gone mainstream. Predictive analytics tools from many
HR technology vendors have arrived, making it possible to analyse data
regarding recruitment, performance, employee mobility, and other factors.
While widespread adoption might be limited, HR analytics has grown
from a technical specialist group to a serious business function that must
meet the needs of many stakeholders throughout the company.
India had been holding Summit on HR Analytics from 2017 onwards,
the 4th was organised in November, 2019 which brought together stirring
sessions, prudent panel discussion and forward looking keynotes to help
managers strategize workforce planning.
HR Analytics Courses in India
There are a number of institutes and educational institution which are
offering formal educative courses in HR analytics like BITS Pilani, XLRI
and IIMs. Such courses are also available online.

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Notes
12.10 Challenges in HR Analytics
The challenge of human resources analytics is to identify what data
should be captured and how to use the data so that the organization
gets an optimal return on investment on its human capital. Over the
last 30 years the volume of data and metrics available for HR to re-
port on has increased exponentially. However most companies are not
realizing the value from their analytics investments. Human resources
departments have been slow to get on board with big data, and it is
not just a lack of forward thinking. They face big challenges when
implementing HR data analytics, both of logistics and mindset. Some
such challenges are:
1. Bringing Together Data from Many Different Places: A big data
initiative requires HR to acquire data from all the different departments
within the business. They have to acquire, sanitize, unify, and analyze
data from multiple departments as well as from multiple business
functions, including payroll and finance. The problem gets even
bigger for HR departments venturing outside their companies into
the world of unstructured data and predictive analytics. They need
people who have the skills to gather and prepare data for analysis
in addition to performing analysis.
2. Lack of Data Analytics Skills within HR: Only one out of three
HR managers describes their big data proficiency as either “good”
or “excellent.” For many managers, the problem goes all the way
to back to graduate school where some are taught HR Management
specifically while others did not. Also, most companies start by
hiring quantitative analysts for departments directly related to money,
finance, and forecasting. Big data for HR has been an afterthought,
not just for HR managers but also for the C-suite. C-Suite gets its
name from the titles of top senior executives which tend to start
with the letter C, for chief, as in chief executive officer (CEO),
chief financial officer (CFO), chief operating officer (COO), and
chief information officer (CIO). Also called C level executives.
3. Insufficient IT Resources for HR Data Analytics: Data analysis
is resource-intensive for IT, and many smaller companies simply
don’t have the infrastructure for analytics programs. Public cloud

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Notes resources can be a great help for SMBs* that want to analyze their
own data, but an SaaS solution—from a company that’s already
done unstructured data analysis—can be even better for companies
that lack time, infrastructure, and in-house expertise.
*(Stands for “Server Message Block. Is a network protocol used by
Windows-based computers that allows systems within the same network
to share files). Software as a service (SaaS) is a software distribution
model in which a third-party provider hosts applications and makes
them available to customers over the Internet. SaaS is one of three
main categories of cloud computing. The other two being “Infrastructure
as a service (IaaS) and platform as a service (PaaS)”.
4. Worries about Privacy and Compliance: When HR collects data on a
candidate, particularly data from outside the company, the department
has to consider privacy. Collecting sensitive information, such as
personal health information or information about sexual orientation,
can put HR in murky territory related to protected characteristics.
Laws related to the Fair Credit Reporting Act in the U.S. also come
into play. Also, privacy laws in other countries, particularly EU
countries, can become a minefield for HR data. Unlike the European
Union, India does not currently have a separate data protection law
for individuals. ... Recently, in a landmark case, in 2017 however,
the constitution bench of the Indian Supreme Court has held Right
to Privacy as a fundamental right, subject to certain reasonable
restrictions.!
5. Taking the “Human” out of Human Resources: To many HR
managers, the idea of implementing people analytics equals letting
computers decide whom to hire. Although the desire to be ethical
by sidelining computers is commendable, it is to be kept in mind
that using all available tools to hire the right people for the right
jobs in the right companies is the ultimate ethical achievement for
HR. It’s best for employees, shareholders, society—everyone.
Big data and predictive analytics support hiring, and they help us
understand what makes candidates truly successful. But human
beings still make the final decision. Thanks to data, they make
better decisions.

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IN-TEXT QUESTIONS Notes

1. Psychological knowledge is essential to success with people

analytics. (True/False)
2. All humans are prone to cognitive biases. (True/False)
3. HR analytics refers to the analysis and application of a Company’s
__________ data to formulate HR strategies.
4. HR analytics helps in __________ analysis to make and execute
the decisions in a rational way.
5. Companies face challenges of __________ and __________ while
implementing HR data analytics.

12.11 Summary
The main role of HR analytics is to provide data on the impact of the
HR department on the organization as a whole. HR analytics establish-
es a relationship between the role of HR department and the business
outcomes– and then creates strategies based on that information. Some
typical benefits of HR analytics are: Improved organizational perfor-
mance through high quality talent related decisions; Increased accura-
cy in forecast of workforce requirements and utilization for improved
business performance; Optimization of talents through development and
planning; Identify the primary reasons for attrition and identify high-value
employees for leaving; Provide the source of competitive platform for
the organizations; Manages applicants in better way on basis of qual-
ification for a specific position; Recognize the factors which turn the
employee satisfaction into productivity; To determine the individuals
Key Performance Indicator (KPIs) on the business; and Enabling HR
to demonstrate its benefaction to achieving corporate goals. The 8 HR
Analytics Every Manager Should Know About are: Capability analyt-
ics; Competency acquisition analytics; Capacity analytics; Employee
churn analytics; Corporate culture analytics; Recruitment channel
analytics; Leadership analytics; and Employee performance analyt-
ics. some major trends for the near future in the field of HR analytics
are: From one time effort to real-time effort, From people analytics
to workforce analytics, More transparency, More focus on productivity,

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes employees ask “What is in it for me?”, From individuals to teams to

networks, Cracks in the top-down approach, Ignoring the learning curve,
and Too high expectations.
Though, Indian companies use analytics tools to spot talent and troubles,
the concept is still catching up. Challenges in HR Analytics are Bring-
ing Together Data From Many Different Places, Lack of Data Analytics
Skills Within HR, Insufficient IT Resources for HR Data Analytics,
Worries About Privacy and Compliance, and Taking the “Human” out
of Human Resources.

12.12 Answers to In-Text Questions

1. True
2. True
3. People
4. Predictive
5. Lack of Data Analytics Skills and Insufficient IT Resources

12.13 Self-Assessment Questions

1. Define the term “HR analytics”
2. Explain the key aspects of HR analytics.
3. Explain the benefits of HR analytics.
4. “Human behavior is not easy to predict” Comment.
5. What is predictive index?
6. What is HR analytics? Discuss its importance. How can the business
value of talent analytics be increased?
7. State the process of HR analytics.
8. Explain different types of analytics which, if conducted, can increase
the effectiveness of HR analytics.
9. Discuss major trends in the field of HR analytics that can occur in
the near future.

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 HR Analytics

10. Describe the challenges before HR manager in the field of HR Notes

analytics.

12.14 References
‹ ‹https://www.techopedia.com/definition/28334/human-resources-analytics-
hr-analytics
‹ ‹https://www.google.co.in/search?q=hr+analytics&rlz=1C1CHZL_
enIN723IN724&oq=hr+ANA&aqs=chrome.0.0j69i60j69i57j0l2j69
i60.12964j0j4&sourceid=chrome&ie=UTF-8
‹ ‹Bernard Marr as retrieved from https://www.forbes.com/sites/
bernardmarr/2016/03/01/the-8-hr-analytics-every-manager-should-
know-about/#5b07d7ac788f on 24.10.18.
‹ ‹Tom Haak retrieved from https://www.analyticsinhr.com/blog/10-
trends-in-workforce-analytics/ as on 20.11.2018.
‹ ‹Arnold Birkhoff, 9 Ways the GDPR will Impact HR Data & Analytics
as retrieved from https://www.analyticsinhr.com/blog/general-data-
protection-regulation-gdpr-impact-hr-analytics/ as on 20.11.2018
‹ ‹https://www.linkedin.com/pulse/why-psychological-knowledge-essential-
success-people-andersen/?irgwc=1
‹ ‹Ananya Bhattacharya. “Complying with Europe’s GDPR will be a
“matter of survival” for Indian IT firms” posted on May 24, 2018
retrieved from https://qz.com/india/1286271/complying-with-europes-
gdpr-is-a-struggle-for-indian-it-firms/ on 20.11.2018.
‹ ‹http://timesofindia.indiatimes.com/articleshow/54790024.cms?utm_
source=contentofinterest&utm_medium=text&utm_campaign=cppst
retrieved as on 20.11.2018.
‹ ‹https://www.financialexpress.com/industry/hr-analytics-rise-of-the-
machines-in-hr/149687/ retrieved as on 20.11.2018
‹ ‹http://www.hranalyticsindia.com/

‹ ‹https://www.sociallyawareblog.com/2015/04/03/big-data-and-human-
resources-letting-the-computer-decide/

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Notes ‹ ‹Posted on October 28, 2015 by Alessandra Swerdlow https://startups.

sap.com/how-analytics-are-becoming-important-for-hr/retrieved on
16.12.2018.
‹ ‹https://www.sociallyawareblog.com/2015/04/03/big-data-and-human-
resources-letting-the-computer-decide/ as on 22.11.2018.
‹ ‹https://www.roedl.com/insights/india-eu-gdpr-data-privacy-law as
on 22.11.2018.
‹ ‹Lee Jacqueline. “Predictive Analytics, Employer Branding, Recruitment
Strategy” posted on June 8, 2015 and retrieved on 20.11.2018 from
https://www.hirevue.com/blog/5-reasons-hr-struggles-with-using-big-
data/
‹ ‹ROBYN South. “Analytics in HR: 9 Steps on How to Apply Analytics
into Your HR Processes” posted on August 17, 2017 https://blog.
cake.hr/analytics-hr-8-steps-apply-analytics-hr-processes/ retrieved
on 16.12.2018.
‹ ‹Patrick Coolen accessed on 16.12.2018 at https://www.linkedin.
com/pulse/10-golden-rules-hr-analytics-crowd-version-patrick-
coolen?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_
post_details%3Bm%2BcsY4o0SSqWZC5rlCDnHQ%3D%3D

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 L E S S O N

13
What is Employee
Engagement?
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
13.1 Meaning of Employee Engagement
13.2 Employee Engagement is not the Same as Employee Satisfaction
13.3 Importance of Employee Engagement
13.4 How is Employee Engagement Measured? (Measure what Matters)
13.5 When Should Employee Engagement be Measured?
13.6 Components of Employee Engagement
13.7 Beyond the Two Core Engagement Factors
13.8 Who Should be Involved in Employee Engagement Initiatives?
13.9 Employee Engagement Dynamics (Drivers of Engagement – What Matters Most?)
13.10 Problems of Disengagement
13.11 Employee Engagement Activities that Organizations Can Undertake
13.12 Commitment to Taking Action, Not Just Measurement
13.13 Employee Engagement Practices in Indian Organizations
13.14 Summary
13.15 Answers to In-Text Questions
13.16 Self-Assessment Questions
13.17 References

13.1 Meaning of Employee Engagement

Employee engagement is the extent to which employees feel intense about their jobs,
are committed to the organization, and put voluntary effort into their work. Employee
engagement is much more than involving employees in activities, games, and events.

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Notes
13.2 Employee Engagement is not the Same as Employee
Satisfaction
Employee Satisfaction only indicates how happy or contented employees
are. It does not address their level of motivation, involvement, or emo-
tional commitment. For some employees, being satisfied means collecting
salary while doing as less work as possible.
When organizations focus on improving employee satisfaction, changes will
not 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 to be held accountable for delivering results, whereas low
performers avoid accountability, cling to the status quo, and resist change.

13.3 Importance of Employee Engagement

(a) Employee engagement drives their performance.
(b) Organizations with an engaged workforce outperform their competition.
They have higher earnings per share (EPS) and recover more quickly
after recessions and financial setbacks.
(c) 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.
(d) Engagement is a key differentiator when it comes to growth and
innovation.
(e) 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. Expectations of employees have changed.
Mobile professional careers are much more common than “job for
lifers”.
(f) It is a huge opportunity to gain long-term commitment and discretionary
effort from team. That effort will ultimately lead to higher sales
and fewer mistakes.

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 What is Employee Engagement?

(g) Improving employee engagement can significantly improve company Notes

performance across a number of key areas, such as; profitability,
productivity, customer satisfaction, innovation, health and safety,
sickness and absence, turnover and wellbeing.
But, in order to achieve above benefits, engagement efforts have to be
aligned with overall business strategy. Implementing unplanned ideas and
activities that manager think might help, without monitoring or measuring
their impact, is a waste of time and resources.

13.4 How is Employee Engagement Measured? (Measure

what Matters)
Engagement can be accurately measured with short surveys that con-
tain just a few questions. But such short surveys can only provide an
indication of whether employees are engaged. They do not explain why
employees are engaged or disengaged because details are lacking. Due
to insufficient information, an organization cannot develop meaningful
activities, training programs, strategies, and initiatives to raise levels of
engagement.
In order to get an exhaustive picture of employee engagement, a survey
should include about 50 to 80 questions that cover a complete range of
relevant topics. There should also be open-ended questions for deeper
diagnosis of potential engagement problems in a company.

13.5 When Should Employee Engagement be Measured?

There is no one best time to conduct an employee engagement survey.
It can be done anytime. Though the timing of an engagement survey
will have an effect on survey results, but it is always a good practice to
have a better understanding of how engaged your employees are. Steps
to be taken are:
(a) Create a Readiness Assessment: A readiness assessment identifies
the potential challenges that might arise when implementing new
procedures, structures, and processes within a current organizational
context.

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Notes (b) Communicate the reasons for doing the engagement survey to
employees;
(c) Communicate results, and
(d) 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.

13.6 Components of Employee Engagement

There are two primary factors that drive employee engagement. These
factors are based on statistical analysis. They are also widely supported
by industry research.
Engagement with the Organization measures how engaged employees
are with the organization as a whole, and also when extended, how they
feel about senior management. This factor assess employees’ confidence
in organizational leadership as well as trust, fairness, values, and respect -
i.e. how people like to be treated by others, both at work and outside
of work.
Engagement with “My Manager” is a more specific assessment tool
of how employees relate to their direct supervisors. Assessment aspects
include feeling valued, being treated fairly, receiving feedback and
direction, and generally, having a strong working relationship between
employee and manager based on mutual respect.

13.7 Beyond the Two Core Engagement Factors

Besides the above two factors, high performance organizations and highly
engaged employees, also stand out in the following areas:
Strategic Alignment: 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 get wasted.
Managing Execution: The most effective managers excel at managing
people through inter personal skills, but they are also good at execution.
They execute well by providing clear expectations, holding people ac-
countable, and staying focused on achieving results.
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 What is Employee Engagement?

Leader and Manager Competency are measured as part of the employee Notes
survey using upward feedback. For a more complete assessment of man-
ager competency, 360 Degree Feedback Survey is recommended.

13.8 Who Should be Involved in Employee Engagement

Initiatives?
HR can lead the charge to create an effective employee engagement
strategy, but it needs to be adopted by the entire organization.
The optimism of upper management always differs from what middle
managers experience with their teams.
To understand the overall organization picture, it is 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 success to the organization. Organizations that succeed are
able to comprehend and communicate what success looks like – as indi-
vidual employees, teams and departments, and the company as a whole.
This results in increasing engagement organization-wide.

13.9 Employee Engagement Dynamics (Drivers of

Engagement – What Matters Most?)
After assessing whether employees are engaged or disengaged, managers
also need to be able to take action on the results. They need to understand
what drives engagement and disengagement. They need to be strategic so
as to be able to plan activities or initiatives that will have the greatest
impact on increasing engagement.
The elements that drive engagement are usually similar across most or-
ganizations, but the specific concerns and level of importance are unique
and specific in every organization and even in different demographic
subgroups within an organization.
The following two techniques can be employed by a manager to identify
the key drivers of engagement in an organization. These techniques also
help him to understand what to focus on and how to improve in those
key areas.

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Notes 1. Priority Level: A study of the statistical patterns across all groups in
the organization can help in determining which items are impacting
overall engagement within each demographic group. Items that are
strongly linked to engagement, but have low scores are the areas
where a manager will want to focus his change initiatives and
engagement strategy.
2. Virtual Focus Groups: Employees are asked specific follow-up
questions at the end of the survey to provide specific problems as
well as suggestions for improvement. Once such areas which need
improvement are identified, manager can take up the comments
where he will often find detailed information that provides the
specific what, why, and how any specific action can be taken.
Pockets of Discontent: Identify “at-risk” demographic groups within
the company
Even organizations with high overall levels of engagement will have areas
with low levels of such engagement. These localised problem areas can
have a big effect on any organization’s overall performance due to high
levels of localized employee turnover and apathy.
Understanding what is happening in these different demographic groups
within the organization is as important as the overall level of engagement.
When an area or group where engagement is low is identified, one can
quickly disaggregate and look at the specific issues and dynamics within
that group.

13.10 Problems of Disengagement

Disengagement is not just a problem of having a few unhappy employ-
ees. It can lead to serious problems within an organization. Some such
problems are:
1. Spread of Negativity: Disengaged employees impact both co-workers
and customers as disengagement often causes friction.
2. Lower Performance: Disengaged employees do not perform at
the same level as engaged employees do. This reduced individual
performance can lower production and company performance as a
whole.

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 What is Employee Engagement?

3. Higher Turnover Rate: The turnover rate is higher among disengaged Notes
employees and therefore, a loss to the organization as the costs and
time have to be spent on recruiting and training new employees.
4. Reduced Commitment: Another problem of losing young talent is
that new employees do not connect with the organization so easily.
5. Poor Employee Health: Poor workforce engagement can be detrimental
to organizations because it results in decrease in employee well-
being and productivity.
6. Higher Employee Dissatisfaction: High engagement group
employees demonstrate higher psychological well-being and personal
accomplishment, whereas low engagement group employees exhibit
higher emotional exhaustion and depersonalization.

13.11 Employee Engagement Activities that Organizations

Can Undertake
1. Involve Employees in Business Planning Process: Every 6 months,
or even quarterly, the most important issues in the organization and
the actions taken to address those issues, should be presented to the
employees. Team members should be involved in planning ahead,
assessing opportunities and coming up with improvement ideas
for the business strategy. By promoting transparency and offering
employees a strategic insight into how the organization is being
managed, loyalty will be fostered and leadership abilities will be
developed.
2. Create a Knowledge Creation System: High employee turnover rate
results in the loss of essential information. A knowledge sharing
system helps the organization avoid such cost, to some extent,
and it can also be a great engagement driver for newcomers. It
can be done through a mentorship program by pairing experienced
employees with newly hired ones. Create a learning program guide
that they should follow, giving them enough space to test their own
learning methods. Give them a timeframe, a set of objectives and
the engagement will unfold on its own.

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Notes 3. Encourage Knowledge Sharing in a Creative Way: Teams are often

so isolated within their own project and their own workspace, that
they have no idea what the rest of the organization is doing. So,
an open sharing space should be created once every 2 months or
so, where every team can present updates on their project and key
learning points. Teams will develop much more rapidly, using the
knowledge shared and the different experiences on every project.
To minimize the risk of this turning into a boring, mandatory two-
hour meeting, make it fun and creative. One can have a theme for
each sharing session. One should also try the Happiness at Work
Card Game for teams! The game consists of over 50 common
workplace scenarios and over 100 science-based solutions. Each
scenario identifies and provides context for a common workplace
situation, followed by a concise scientific justification for why
it is a problem at work. Each solution falls within one of four
categories: Practice Positivity, Subdue Stress, Flow to Goals, and
Revitalize Relationships. The cards provide many unique practice
opportunities that meet the needs and working styles of diverse
teams. Card game is designed as a tool for team performance and
employee engagement.
4. Show Financial Statements to the Employees: A quick presentation
of the financial state of the organization should be presented to the
employees every quarter or at the end of the year. Show them how
everyone’s efforts are linked together, set bold objectives for the
next months and get everyone involved in meeting those objectives.
Employees should be encouraged to take responsibility for the
success of the company so that they put in their voluntary effort.
5. Encourage and Provide Learning Opportunities: An organization
can create its own Academy, where employees can access the
knowledge and development opportunities that they need. Lack of
learning prospects is one of the top reasons why employees quit
organizations. Assess their needs and their preferences, create a
curriculum and set up 1-2 classes per week. Get them involved in
deciding how those learning initiatives should be scheduled (during
or after working hours). Make it engaging and rewarding with a
ceremony, caps and flowers and even a fun night out.

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6. Healthy Mind in a Healthy Body: A Manager can have his own Notes
Office Olympics where everyone can get involved and have fun.
It promotes well-being and the benefits of a healthy lifestyle in a
funny, yet competitive environment.
Employees get to know each other in a different environment and
connect with people with the same interests. It’s a great chance
to get some of those chair-numbed-muscles going and bond in a
friendly competition. Prizes and embarrassing photos are a must.
7. Have a Hack Night (Informal Social Event backed by Technology):
Break monotony with an ambitious working night. Set a clear
objective, create your own set of rules (breaks, music, snacks,
etc.) and try to be as productive as possible in just one night. Get
everyone together and test your creative and operational limits. It
is fun. However, sometimes it is linked with hacking and hence,
illegality.
8. Create Excitement about Upcoming Opportunities: Communicate
upcoming opportunities on a regular basis. This will make employees
excited and striving for the next always. It should be done in the
internal newsletter, face-to-face or during a general update meeting.
It has to be kept in mind that a career process should be driven by
individual potential as well as current opportunities.
9. Let Them Create Their Own On-boarding Experience: Create a
self-guided onboarding experience. People are much more likely to
remember and assimilate information that they get on their own. Set
the ground rules; give them basic instructions, a list of objectives
and a timeframe. For example a 60 days plan, with some basic
milestones.
Let them swim on their own. Oftentimes, onboarding processes fail
to provide actual value and initiate a dialogue. Let new employees
create their own onboarding experience and figure out their work
preferences.
10. Make Orientation Day a Fun: The term used is “a scavenger hunt
on-boarding”. Turn information that is usually considered boring
or useless into company trivia and learning how to use tools and
systems, such as the internal communication system. Include other

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Notes people in the game. For example, have some of the older employees
provide answers and get to know the new hires.
11. Create Your Own Internal Magazine: Create internal employee-
focused magazine with fun columns, news, featured stories and
opportunities. It can have such features like the cover of the magazine
being photo and name of the employee with title “Employee of the
Month”. It can be an online magazine or a printed one. It can also
be both, a monthly online issue and a quarterly printed one.
12. TEDx: [Insert Company Name Here] Sounds good right?
A manager should have own company’s TEDx-like Talks where he
gets to share ideas, boost creativity and encourage innovation. Make
workplace less about work and more about the people there-- their
ideas, experiences and aspirations. Give them a chance to be the
source of their own inspiration, boosting morale and creativity for
everyone in the company. It can be made an event of its own or
be included in another event that is being already planned in the
organization.
13. Create a League of Extraordinary Managers: Managers are a key
business component and an equally important engagement driver.
Create a coaching program for managers and teach them to really
care. Coach them towards maximum contribution and satisfaction,
align them with the organization’s strategy, mission and values and
show them how to recognize attitude, effort and results.
14. Encourage Employees with the Slogan “I am my own hero”:
Encourage individuals to design and own their career paths, instead
of relying on the company or on their manager. Employees need to
take initiative and set a career goal for themselves. Ask employees
to write their goal on a piece of paper. Put it in an envelope and
close it. Then, after 6 months or a year, the sealed envelopes should
be given back to them to see if they have realized that goal. For
this activity, managers have a guiding role. They can understand
and help align employees’ aspirations with the organization’s career
development point of view.
15. Create the Feeling of “Give back”: Employees are to be involved
in social and charity initiatives. Giving back creates a positive

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 What is Employee Engagement?

mentality. It also fosters pride and loyalty. Get the team together, Notes
have everyone pitch a cause and pick the one he wants to support.
It is important that such a cause is made personal. One can donate
either time and involvement, or money, or both. Usually, giving
time is more rewarding than giving money, especially for Gen Y
employees, who are highly oriented towards social involvement.

13.12 Commitment to Taking Action, Not Just Measurement

Most companies that measure employee engagement do little beyond
that measurement. In order to obtain all of the benefits of employee en-
gagement, management have to commit to taking action. Taking action
means ensuring that all employees understand the company vision and
its strategic direction, as well as their individual role in achieving the
same. It also means engaging managers by developing their leadership
skills, and living the company values on a day-to-day basis.
Employee engagement is an organizational effort that requires a long-term
vision in a business strategy context, if it is to improve productivity and
retention rates. HR manager has to identify what the company needs. And
then develop the right strategy. Only then focus should be brought on
how to measure employee engagement and what activities to implement.

13.13 Employee Engagement Practices in Indian

Organizations
1. Gen-Y Meets Gen-Z under Gen-X’s Watch: Some organizations
have not yet found answers for engaging their Gen-Y workforce,
and now here comes Gen-Z. Some of Gen-Y employees will be in
managerial positions, trying to steer the careers of Gen-Z. Just like
any generation, Millennials will negatively stereotype Gen Z’s as
being laid back. This is bound to lead to friction at the workplace.
On the positive side, engaging and involving multiple generations
of employees, will require a transformation in policies, workplace,
rewards, and more focus on personal aspirations of individuals.
2. Employee Engagement in the World of Agile and DevOps: Agile
and DevOps (DevOps is a set of practices that automates the

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes processes between software development and IT teams, in order that

they can build, test, and release software faster and more reliably).
It will be a way of life in the workplace. Agile means relating to
or denoting a method of project management, used especially for
software development. It is characterized by the division of tasks
into short phases of work and frequent reassessment and adaptation
of plans. For e.g., “agile methods replace high-level design with
frequent redesign.”
DevOps is the combination of cultural philosophies, practices, and
tools that increases an organization’s ability to deliver applications
and services at high pace. It results in evolving and improving
products at a faster pace than organizations using traditional software
development and infrastructure management processes.
But now, these words are applicable not only in software industry
but in all kinds of organizations. This indicates a massive shift in
the way employees think and behave. Experiential learning and
internal communication programs will have to be created to help
employees embrace the new agile world and ensure that mind-shift
happens rapidly.
3. More Women at the Workplace: This is perhaps, the best of all
the developments that is happening and will increase. Due to the
culture shift and organizational policies, more women are expected
to join the workforce. It will also pose new challenges – pushing
organisations for better workplace practices that are diversity friendly
and inclusive. Managing a healthy and engaging workplace will be
the key.
4. Whose Culture is it Anyway: With organisations spreading globally,
and creating workplaces that have locally relevant policies, the old
notion of organizational culture, is in danger of ceasing to exist.
The years ahead will see several cultures mushrooming in each
organization, and would evolve or devolve into being relevant at
a team level, rather than an organization wide being. A kind of
tribal culture of individual groups will come into being. The team
manager will be influential in creating the culture and driving it.
Organisations may define an outline, but it is these tribal cultures
that set the future of the workplace. Internal Communications and

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Employee Engagement functions will need to be more dynamic to Notes

address concerns and issues at these levels.
5. Employee Experience and Personalization: In future, there would
be a great shift in the way employers invest in personalizing their
employee communication. Several digital companies will emerge
with the typical big data and collaboration pitch, but still, the
employer will not know what employees really want. More expert
knowledge will be required to manage this aspect.
6. Automation Resources vs. Human Resources: Automation will
take over in a big way in future. Automation in already lean, and
barely staffed companies, will certainly lead to concern and confusion
among employees. No organization can stay away from automation,
but at the same time will have to ensure that the existing and new
generation employees are either re-skilled or moved to other roles. It
is vital for HR, Internal Communication, and Employee Engagement
to enable this transition in a win-win way so that the organization
does not lose important talent.
7. Flexibility is the Enemy: Global, connected, flexible, collaborative
are all the buzzwords used in defining the corporate workplace
today. All these employee friendly strategies (which employees
don’t think so) will work against the organization from a team
productivity perspective – and hence organizational performance
and success. Teams who do not meet each other regularly, who do
not work under the same roof (even for a few days in a week),
who do not enjoy and celebrate together, and who do not share the
same vision, cannot work as one unit. Seeing all the team members
together, at least once a week is a rarity today. Team building is
too far away.
8. Compete with your Own Talent: Start-up culture is taking big
leap across India. Organizations have started to realize that the
“entrepreneurial bug” has been biting far too many employees.
“Empowerment” and “entrepreneurial spirit” has been promoted
among employees, and not wrongly, so much that everyone is looking
forward to the opportunity of starting an enterprise of their own.
Organizations are rapidly losing their most valuable talent. Not only
this, the people who are going out, are poaching other employees

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Notes too. Organizations, in a nutshell, will start competing with their

own talent. This is not a new phenomenon, just that the number
of entrepreneurs quitting well paying jobs, have grown at least
10X in the last few years. This is a nightmare that any Employee
Engagement and Human Resources would want to avoid.
9. Trumped: If most of the H1B and other employees in international
locations return and if the reverse brain drain happens – it will be
a challenging time for HR and Employee Engagement teams. All
people who are returning, though Indians, will carry a different
culture and mindset. Adjusting to the realities of an Indian workplace
and local company policies, not to mention a change in lifestyle,
will be like a shock. Managing such situations and helping them
gel well with local employees needs to start from the ground up.

IN-TEXT QUESTIONS
1. Employee engagement is same as employee satisfaction. (True/
False)
2. The best time to conduct an employee engagement survey is
any time. (True/False)
3. Strategic alignment ensures that employees have clarity of purpose
and direction. (True/False)
4. Even companies with high overall levels of engagement will
have struggling areas. (True/False)
5. Disengaged employees have no real effect on business’s bottom
line. (True/False)
6. Employee engagement can be increased even without involving
employees at planning stage. True/False
7. Employee engagement can only be increased through money
offers. (True/False)
8. Organizations with an engaged workforce __________ their
competition.
9. Engagement is a key __________ when it comes to growth and
innovation.
10. Employee engagement surveys must be __________ against other
organizations for providing fruitful results.

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 What is Employee Engagement?

11. __________ can lead the charge to create an effective employee Notes
engagement strategy.
12. All efforts of employee engagement need to be __________ in
nature to have greater impact.
13. Most companies that measure employee engagement do __________
beyond that measurement.
14. Employee engagement is an __________ effort that requires a
long-term vision.

13.14 Summary
Employee engagement is the extent to which employees feel passionate
about their jobs, are committed to the organization, and put discretionary
effort into their work. Employee engagement is not the same as employee
satisfaction as the latter only indicates how happy or content your em-
ployees are. It does not address their level of motivation, involvement,
or emotional commitment. 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 organi-
zations are value-driven with employee-centric cultures. The best way
to find strategies to improve employee engagement is by conducting a
survey that has been developed specifically for this purpose.
There are two primary factors that drive employee engagement–Engage-
ment with The Organization, and Engagement with “My Manager”.
High performance organizations, and highly engaged employees, also
excel in the areas of strategic Alignment and managing execution.
HR can lead the charge to create an effective employee engagement
strategy, but it needs to be embraced by the entire organization. Disen-
gagement is not just a problem of having a few unhappy employees. It
has a real effect on organizations and, if not addressed head on, can lead
to serious problems within a company. Some such problems are spread
of negativity, reduction in productivity and increase in labour turnover.
Therefore, the aspect of employee engagement should be addressed as
soon as possible.

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Notes
13.15 Answers to In-Text Questions
1. False
2. True
3. True
4. True
5. False
6. False
7. False
8. Outperform
9. Differentiator
10. Benchmarked
11. HR
12. Strategic
13. Little
14. Organisational

13.16 Self-Assessment Questions

1. Define employee engagement. Differentiate it from employee satisfaction.
2. Discuss the importance of employee engagement.
3. How is employee engagement measured?
4. When should an organization measure engagement of its employees?
5. Explain primary components of employee engagement.
6. Who should be involved in employee engagement initiatives
7. Explain the dynamics of employee engagement.
8. Explain “Happiness at work” Card Game for teams.
9. Explain all the components/factors of employee engagement
10. Discuss the high cost of employee disengagement.

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 What is Employee Engagement?

11. Discuss different employee engagement activities that an organization Notes

can undertake.
12. Discuss some recent trends in employee engagement practices.

13.17 References
‹ ‹https://www.custominsight.com/employee-engagement-survey/what-
is-employee-engagement.asp
‹ ‹https://www.custominsight.com/employee-engagement-survey/what-
is-employee-satisfaction.asp
‹ ‹https://www.custominsight.com/employee-engagement-survey/benchmark-
data.asp
‹ ‹https://www.custominsight.com/blog/measuring-employee-engagement.
asp
‹ ‹https://www.custominsight.com/360-degree-feedback/

‹ ‹https://www.custominsight.com/employee-engagement-survey/employee-
survey-sample-compare.asp
‹ ‹https://www.custominsight.com/blog/employee-engagement-
disengagement-elephant-in-the-boardroom.asp
‹ ‹https://perspectives.eiu.com/ retrieved as on 21.11.2018.
‹ ‹https://journals.sagepub.com/doi/abs/10.1177/1548051813494240
retrieved as on 25.12.2018
‹ ‹https://gethppy.com/employee-engagement/15-employee-engagement-
activities-can-start-now/ retrieved as on 1.1.2019.
‹ ‹(https://blog.hubspot.com/blog/tabid/6307/bid/33369/How-to-Create-
200-Hours-Worth-of-Marketing-Content-in-One-Night.aspx) retrieved
as on 1.01 2019.
‹ ‹(Dr Martin Reddington DBA, Academic Fellow CIPD, Sourced from
https://home.kpmg.com/uk/en/home/insights.html on 21.11.2018).
‹ ‹https://www.dfrens.com/employee-engagement-trends-in-india-2017/

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Notes ‹ ‹https://www.google.com/imgres?imgurl=https://www.dfrens.com/wp-
content/uploads/2016/12/Employee-Engagement-Trends-2017-Dfrens.
jpg&imgrefurl=https://www.dfrens.com/employee-engagement-trends-
in-india-2017/&h=940&w=1280&tbnid=5_A1I0IGwMRREM:&q=em
ployee+engagement+activities+in+indian+companies&tbnh=160&tb
nw=218&usg=AI4_-kQby2OMZ2itxe4SWKEPuvrEMYj0mw&vet=12a
hUKEwjf-f7N3uXeAhVOAHIKHQmuDtsQ9QEwAHoECAYQBg..i&doc
id=-7NvutQuKeZowM&sa=X&ved=2ahUKEwjf-f7N3uXeAhVOAHIKH
QmuDtsQ9QEwAHoECAYQBg TOP 9 EMPLOYEE ENGAGEMENT
AND TEAM BUILDING TRENDS FOR 2017 IN INDIA (posted by
Sachid Tharayil, Dec 21, 2016) retrieved on 20.11.2018.
‹ ‹https://www.google.co.in/search?q=devops&rlz=1C1CHZL_
enIN723IN724&oq=DevOps&aqs=chrome..0.0l6.7793j0j8&
sourceid=chrome&ie=UTF-8

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 L E S S O N

14
Matching Culture
With Strategy
STRUCTURE
14.1 Learning Objectives
14.2 Meaning of Organizational Culture
14.3 What is Strategy
14.4 Organizations Must Change and Adapt Repeatedly
14.5 Agile Organizations (Both in Terms of Culture and Strategy)
14.6 Difficulties in Changing Organizational Culture
14.7 Steps in Organizational Culture Change
14.8 The Relationship between Culture and Strategy
14.9 What is More Important: Strategy or Organizational Culture?
14.10 Need/Benefits of Strategy, Capabilities and Culture Alignment
14.11 Business Impact of a Weak or Misaligned Organizational Culture/Consequences
of Culture-Strategy Misalignment
14.12 Symptoms of Misalignment
14.13 Causes of Misalignment
14.14 Steps to Realign Corporate Culture
14.15 Summary
14.16 Answers to In-Text Questions
14.17 Self-Assessment Questions
14.18 References

14.1 Learning Objectives

‹ ‹What is Organizational Culture?

‹ ‹What is Strategy?

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Notes ‹ ‹Why Alignment between Strategy and Culture is Required?

‹ ‹What are the Benefits of Such Matching?
‹ ‹What are the Problems Caused Due to Misalignment?
‹ ‹How to Make Such Alignment More Effective?

14.2 Meaning of Organizational Culture

Corporate culture means different things to different people. It is emotional,
ever-changing, and complex. Culture is human, vulnerable, and as moody
as the people who define it. One of the most important building blocks
for a highly successful organization and an extraordinary workplace is
“organizational culture”. The most important thing about culture is that
it’s the only sustainable point of difference for any organization. Anyone
can copy a company’s strategy, but nobody can copy their culture. Culture
is driven by leadership. How leaders behave, what they say, and what
they value, drives culture. But what is organizational culture?
Characteristics of Culture
‹ ‹Culture is how organizations do things;
‹ ‹It defines the values and behaviors that contribute to the unique
social and psychological environment of an organization;
‹ ‹Organizational culture defines a jointly shared description of an
organization from within;
‹ ‹Organizational culture is the sum of values and rituals which serve
as “glue” to integrate the members of the organization;
‹ ‹Organizational culture is a system of shared assumptions, values,
and beliefs, which governs how people behave in organizations;
‹ ‹Organizational culture is civilization in the workplace;
‹ ‹Organizational culture refers to the philosophies, attitudes, beliefs,
behaviors and practices that define an organization;
‹ ‹Culture is the organization’s immune system; and
‹ ‹A big organization will not only have culture but subculture too.

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Notes
14.3 What is Strategy
Strategy, at its core, is rational and logical, clear and simple. It should
be easy to comprehend and to talk about. Without a clear strategy, a
company is lost. Strategy is a high-level plan to achieve one or more
goals under conditions of uncertainty. Strategy is important because the
resources available to achieve these goals are usually limited. Strategy
generally involves setting goals, determining actions to achieve the goals,
and mobilizing resources to execute the actions. A strategy describes how
the ends (goals) will be achieved by the means (resources). Strategy can
be intended or can emerge as a pattern of activity as the organization
adapts to its environment or competes. It involves activities such as
strategic planning and strategic thinking.

14.4 Organizations Must Change and Adapt Repeatedly

Perhaps the greatest challenge business leaders, face today is how to stay
competitive amid constant turbulence and disruption. The time has come
to rethink strategy in terms of:
‹ ‹Will our strategy work in this environment?
‹ ‹What must we change, and what must we not change?
‹ ‹Do we need a new business model?
‹ ‹What is our core?
‹ ‹How is today’s unprecedented environment changing our customers
and their behavior?
‹ ‹Is our industry being deeply restructured, and if so, how will it
affect us?
Companies most likely to be successful in making change work to their
advantage are the ones that no longer view change as a discrete event to
be managed, but as a constant opportunity to evolve the business. Three
things are necessary:
‹ ‹Change Awareness: A company’s ability to redefine itself as necessary
‹ ‹Change Agility: A company’s ability to engage people in pending
changes

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Notes ‹ ‹Change Reaction: A company’s ability to appropriately analyze

problems, assess risks, and manage the reactions of employees

14.5 Agile Organizations (Both in Terms of Culture and

Strategy)
Agility does more than allow companies to adapt. It makes them adapt-
able and proactively nimble as part of their culture. Agile organizations
are optimistic in the face of challenge, never rest on their success, and
regularly seek to improve even when they are successful. Agile companies
focus on the ability and capacity to implement changes, both incremental
and discontinuously, as well as the ability to verify the contribution of
execution to performance. In today’s business environment, organizational
agility is no longer a luxury, but a necessity.
Common Traits of Agile Organizations
‹ ‹They never rest on their success and regularly seek to improve even
when they are successful.
‹ ‹There is clarity and alignment around the mission, vision and values.
‹ ‹They embrace failure as a learning opportunity; have a strong
purpose, a vitality and a learning mindset.
‹ ‹Rapid decision-making happens every day and not just during a crisis.
‹ ‹Agile organizations has strong ability to execute, high levels of
accountability, customer-centric thinking and strong cross-organizational
synergy.
Competitive advantage requires the ability to move quickly, efficiently,
and decisively. It also requires quickness in sensing, responding and
exploiting change in the business environment. Organizational agility is
needed as it is the capacity to be infinitely adaptable without having to
change. Agile organizations strive to develop a built-in capacity to shift,
flex, and adjust, either alone or with alliance partners, as circumstances
change, and to do so as a matter of course.
Being infinitely adaptable is crucial here. There is really only one way
to do that. Create the culture that has the built-in capacity for agility.
The leaders of the future will be those who can out-change both the
competition and external forces.

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Notes
14.6 Difficulties in Changing Organizational Culture
‹ ‹Culture determines how everything else in the organization unfolds.
The culture of an organization is practically its DNA.
‹ ‹The organization and its culture are interdependent and reciprocal.
The organizational overall culture affects the organization, its design
and strategies and vice versa.
‹ ‹The culture of an organization reflects its deepest values and beliefs.
Trying to change it can result in changing everything the organization
holds dear, often without that conscious intention.
‹ ‹The organizational culture is deeply embedded in the entire organizational
system. Each little change affects every layer of that system.
‹ ‹The culture of an organization evolves over time. The culture is
the identity of an organization as it is deeply linked to its history
and development.
Any effort to change the organizational culture can be compared with
changing the course of a large ship. The ship takes time to manoeuvre
and whilst the engines are pushing one way the tides and winds are push-
ing another. Concisely, the culture of an organization creates its unique,
complex face and character. As such, it is as difficult to change in its
entirety as the whole personality of a human being or that of a nation.
Organizational culture is like an iceberg with most of its weight and bulk
below the surface. Changing a culture is a large-scale undertaking, and
eventually all of the organizational tools for changing minds will need
to be put in play.

14.7 Steps in Organizational Culture Change

Although changing can be compared with rolling rocks uphill, it will
likely result in increased growth and revenue. Organizational cultures
are formed over years of interaction among participants in the orga-
nization. It usually takes a significant event for people to consider
culture change.

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Notes Three major steps are involved in changing an organization’s culture.

1. Understand Current Culture: Ways to Understand culture are:
(a) Recognition of the Existence of Such Culture: Every organization
has company culture, whether intentionally cultivated or not. In
short, it refers to the combination of values, goals, ethics, and
expectations that govern and influence employee behaviours.
(b) Analysis of Organization’s Priorities: To understand
organizational culture, organization’s priorities should be looked
into. These goals and initiatives reveal what the organization
values and what it does not (both explicitly and implicitly).
Is it one with a workforce that’s engaged, empowered, and
encouraged to innovate and improve? Or a culture where the
bottom line is often prioritized? Culture transformation should
be tried if the organization’s priorities require pausing and
rethinking.
(c) Inquire About Company Culture: An organization’s culture is
made up of behaviours, those that are encouraged, permitted, and
hindered. To understand what kind makes up an organization,
it is best to go directly to the source that is the employees.
Feedback should be taken regarding behaviours that currently
serve the company well and which need to be discouraged or
changed to elevate the organization. Gather feedback from all
levels of employees, from executives to front-line managers.
Surveys, company-wide assessments, and focus groups can
all help create a clearer picture of the behaviours that define
current organization’s culture. Again, the key is to engage
every employee as you ask for feedback because the sum
total of all employee contributions and behaviours are what
make up your culture.
(d) Identify Leaders: While every employee contributes to
organization’s culture, leaders have more impact and influence.
Leadership sets the tone for what’s permissible and encouraged
in the organization and what is not.
2. Plan the Desired Organizational Culture: Develop a picture of
organization’s desired future. Examine the mission, vision, and

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values for both the strategic and the value-based components of Notes
the organization. Questions to be answered are:
(a) What are the five most important values management would
like to be represented in organization’s culture?
(b) Are these values compatible with the current organizational
culture? Do they exist now? If not, why not? If they are so
important, why aren’t those values being attained?
(c) Are the mission, vision, and values clearly articulated and
disseminated so that employees have a clear understanding
of the organization’s direction and where they fit within it?
(d) What cultural elements support the success of the organization,
and what elements of the current organizational culture need
to change?
3. Change the Organizational Culture: The two most important
elements for creating organizational cultural change are executive
support and training.
Executive Support
‹ ‹Executives must support the cultural change in ways beyond verbal
assent. They must show the support for the cultural change by
changing their own behaviours.
Provide Training
‹ ‹Culture change depends on behavior and belief change. Members
of the organization must clearly understand what is expected of
them and how to actually do the new behaviours. Use training to
communicate expectations and new behaviors. Mentoring will also
help employees learn and change.
Additional Ways to Change the Organizational Culture
Communication, employee involvement, and a willingness to learn and
adapt are main instruments to keep organizational change on track.
Create Value and Belief Statements
Ask employees’ focus groups to put the company’s mission, vision, and
values into words that state the impact on each employee’s job. For exam-
ple, for one job, the employee stated, “I live the value of quality patient

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Notes care by listening attentively whenever a patient speaks.” This exercise

gives all employees a common understanding of the desired culture.
Practice Effective Communication
Keep all employees informed about the organizational culture change
process to ensure commitment and success.
Review Organizational Structure
The physical structure of the company may have to be changed to align
with the desired organizational culture. For example, a small company
with four distinct business units competing for a product, customers, and
internal support resources may not support an effective organizational
culture and the overall success of the business.
Consider moving Employees and Teams
The sense of cohesion and camaraderie among groups that must work
together must be created to serve customers. So, people who must work
closely together must be moved into the same space.
Redesign Organization’s Approach to Rewards and Recognition
The reward system must be changed to encourage behaviors vital to
the desired organizational culture. For example, if employees are to be
encouraged to work as cohesive teams, they must be rewarded for their
success as team players.
Review All Work Systems
Systems such as employee promotions, pay practices, performance man-
agement, and employee selection should align with the desired culture.
It is more difficult to change the culture of an existing organization
than to create a culture in a brand-new organization or team. When an
organizational culture is already established, people must unlearn the old
values, assumptions, and behaviors before they can learn the new ones.
But with time, commitment, planning, and proper execution, can change
organizational culture to support the accomplishment of key business
goals and needed outcomes.

14.8 The Relationship between Culture and Strategy

Too often a company’s strategy, imposed from above, is at odds with the
ingrained practices and attitudes of its culture. Leaders may underestimate

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how much a strategy’s effectiveness depends on its cultural alignment. But Notes
the fact is that organizational culture shapes and sustains both employee
productivity and business results. The relationship between culture and
strategy can be stated as under:
‹ ‹Strategy drives focus and direction while culture is the emotional,
organic habitat in which a company’s strategy lives or dies.
‹ ‹Strategy is just the headline on the company’s story – culture needs
a clearly understood common language to embrace and tell the
story that includes mission, vision, values, and clear expectations.
‹ ‹Strategy is about intent and ingenuity and culture determines and
measures desire, engagement, and execution.
‹ ‹Strategy lays down the rules for playing the game, and culture fuels
the spirit of how the game will be played.
‹ ‹Strategy is imperative for differentiation, but a vibrant culture
delivers the strategic advantage.
‹ ‹Culture is built or eroded every day. How you climb the hill and
whether it’s painful, fun, positive, or negative defines the journey.
‹ ‹When culture embraces strategy, execution is scalable, repeatable
and sustainable.
‹ ‹Culture is a clear competitive advantage.
‹ ‹Culture must be monitored to understand the health and engagement
of an organization.

14.9 What is More Important: Strategy or Organizational

Culture?
Corporate culture is an incredibly powerful factor in a company’s
long-term success. No matter how good a strategy is, people always
make the difference. Culture can be intimidating and frustrating, often
leaving leaders dodging it, neglecting it, or discounting it. Because so
many companies are run by people whose expertise is heavily skewed
to the rational, financial, and legal side of the equation, culture is often
subordinated, misunderstood, or unappropriated. While many studies
show there is a direct correlation between a healthy, productive culture
and a company’s bottom line, the majority of companies spend little time

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Notes thinking, let alone doing anything about, this topic – even when they’re
spending lots of time thinking about their business strategy. But the fact
is Organizational culture is eating what it kills – such as strategy, change
management, innovation, operational efficiency, lean process and even
including vision and mission. Culture trumps strategy every time.

14.10 Need/Benefits of Strategy, Capabilities and Culture

Alignment
There is a powerful triumvirate in corporate transformations – Strategy,
capabilities and culture. All three need to be designed together, aligned
and enabling of each other to create true organizational transformation.
The most critical element in any strategy is its translation into reality.
The only true measure of success is in its execution. And one of the
key determinants of successful strategy implementation is organizational
alignment. Organizational alignment is the absolute compatibility between
the strategic and cultural paths. For example, successful rowing eights
operate as a unit. Ever watched a “rowing eights” event? To achieve suc-
cess, the rowers must stroke at the same pace with the blades of every
oar pulling at the same depth in the water. They all know the overall
game plan for success and they are ready to respond to the orders of
the coxswain (who’s job it is to quarterback the execution of the race
strategy and communicate the adjustments that keep the boat on course
in changing wind and water conditions) as individuals and as a cohesive
unit. Each member of the team knows what their job is during the race
and that they can rely on their coaching, training, boat, and equipment,
and the skills, technique, and commitment of their teammates while the
race is on. When team alignment and cohesion is off, the boat strays
off course, essentially wasting time, energy, and the resources that were
invested in trying to achieve the goal of winning the race.
It’s very much the same for an organization. Without alignment, the best
strategic plan will never be fully achieved because organizational align-
ment is the glue that makes strategy execution excellence happen. An
aligned organization gets things done faster, with less effort, and with
better results, and is more agile and responsive to changing business con-
ditions. Ultimately, a high level of organizational alignment is essential

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for achieving increasingly better business performance results now and Notes
in the future! That’s why organizational alignment is so important for
achieving better performance results.

14.11 Business Impact of a Weak or Misaligned

Organizational Culture/Consequences of Culture-Strategy
Misalignment
Optimal performance will be impossible to sustain when corporate culture
does not align with the strategic goals of the company. Just as a garden
must be carefully tended to keep weeds from taking it over, culture must
be consciously maintained to prevent it from turning into something
unintended. Allowing culture and strategy to fall out of alignment can
bring leaders face-to-face with far-reaching consequences. These include:
‹ ‹Lost Sense of Mission: When strategy and a strong culture are
aligned, employees get a sense of clarity and a mission that guides
their actions and decisions. In situations of misalignment or non-
alignment, many employees turn to self-serving behaviors and the
motive of mission is lost.
‹ ‹Disoriented Employees: When employees get mixed signals from
leaders preaching one set of values but rewarding a different set
of behaviors, it can leave them feeling confused and out of touch
with the organization’s goals. For example, an organization may
emphasize on individual performance reviews but rewards teamwork.
‹ ‹Damaged Public Image: When culture and strategy are aligned,
day-to-day operations tend to fall into sync with a company’s brand
and image. But in situations of non-alignment or misalignment,
organization can appear deceitful to those observing it—especially
to customers.
‹ ‹Increased Turnover: A culture well-aligned with strategy inspires
loyalty in all levels, from company leadership to entry-level hires.
When that alignment fails, the sense of loyalty can be nearly
impossible to maintain—and employees will tend to seek it elsewhere.

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Notes
14.12 Symptoms of Misalignment
It is extremely important to identify strategic misalignment as early as
possible. Uncorrected problems compound quickly and lead to serious
damages within the organization. Precisely what damage will occur and
where, is difficult to predict because of two reasons: (i) business organi-
zations behave much like living organisms which are difficult to predict;
(ii) they are made up of inter-dependent systems that cause reactions
to differ from case to case. Some symptoms of strategic misalignment,
which can help an early diagnosis, are as under:
(a) Missed Financial Projections: While projections can be missed due
to many reasons, often the root cause is strategic misalignment.
This is because different areas of the organization are reacting to
different stimuli differently.
(b) Stalled Growth: When organizations begin to fail due to misalignment,
initiatives required to support and sustain profitable growth get
into trouble. It is because, despite their best intentions, they cannot
sufficiently coordinate efforts on their own to correct the course.
(c) Reactive Spending and Duplication of Initiatives: Reactive spending
and duplicity of initiatives, due to inter-dependent initiatives, might
occur as a result of low quarterly or annual results. It poses a
pressure on limited resources.
(d) Cultural Erosion and Morale Problems: Misalignment leads to
organizational chaos which is not liked by both leaders and workers
alike. Human nature is such that we thrive on stability, predictability
and feelings of accomplishment and success. Pressure mounts with
the increased workload and stress of failure. Morale among workers
is infectious. When it is good, the good feelings spread to others.
Unfortunately, the reverse is true as well. This makes the morale symptom
damaging to the organization’s culture and overall performance.
(e) Decreased Revenue/Profitability: Revenue decreases can occur for a
variety of reasons, most of which can be traced back to misalignment.
When new services or products are delayed in roll-out because the
initiatives to bring them to market are unsuccessful, revenue takes a
hit and overall competitive positioning can be eroded. Profitability
suffers as a result of any of the symptoms discussed thus far.

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Notes
14.13 Causes of Misalignment
There are many ways that strategy misalignment can creep into an orga-
nization. Some of them are listed hereunder:
(a) The Planning Process: A big cause of strategy misalignment is the
lack of developed strategic planning process. An underdeveloped
process does not adequately define plan goals to make them concise
and measurable. Underdeveloped planning processes also neglect
detailed planning at the operations level and overlook communications
and change management.
(b) Governance: Strategy misalignment is likely to creep in when plan
governance is missing. Strong governance instils leadership and
worker accountability to planned goals. Governance helps avoid
strategy misalignment not only by defining accountability, but by
empowering employees.
Strategy governance helps create employee empowerment. It does
so by directly defining:
‹ ‹Who can do what?
‹ ‹Under what circumstances?
‹ ‹What are the metrics for evaluation?
To practice “strategy misalignment avoidance”, governance can and
should be broad enough in scope to orchestrate many programs that
support planned goals. Orchestration involves:
‹ ‹Managing and tracking the budget allocations related to the
strategic goals.
‹ ‹It involves coordinating planning at the operational levels.
‹ ‹It also involves managing the overall strategic plan and the
operations plans below that.
‹ ‹Proper governance will guide the organization firmly away from
strategic misalignment and towards plan goal achievement.
(c) Miscommunication: Strategic plans must be communicated very
effectively. Common communication issues related to strategy
misalignment include failure to determine:

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Notes ‹ ‹Who needs to know about plan information?

‹ ‹What do they need to know about the plan?
‹ ‹When do they need to know it?
‹ ‹What should the information mean to them?
‹ ‹What is it that the organization expects them to do with the
information?
‹ ‹How will they be communicated with?
This means that during planning, above topics and many others must
be addressed initially during strategic plan development and throughout
operational planning. During plan refresh cycles, the communication
strategy should always be reviewed and updated as necessary.

14.14 Steps to Realign Corporate Culture

Examine the Hiring Process: Take an in depth look at the employees
while hiring and promoting. Are they a good fit with the organization’s
strategy and purpose? For example, persons who like to work alone are
not good for an organization that relies strongly on teamwork.
Examine Systems: Organization’s systems should be examined to find
out whether they support or conflict with the cultural values? For in-
stance, if trust is one of primary values of an organization, it should be
checked whether the system permits most of the senior executives to
approve large expenditures.
Examine Communication Systems: In terms of:
What words are the organizational leaders using to communicate with
the people?
What principles are they talking about?
What milestones and events are they choosing to commemorate?
Are these communication choices supporting a culture that reinforces
organizational strategy?
By examining all aspects, an organization can conquer cultural problems
to achieve high performance.

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Initial Steps to Correct Misalignment: Though it does take time to Notes

address strategy misalignment, the following interim actions and planning
philosophies can be taken:
(a) Plan Bi-directionally: Strategy misalignment begins to occur when
there is a lack of connect between the strategy-making body of
the organization and the business operational managers who are
responsible for tactical execution and making day-to-day decisions
within the business. Misalignment between strategy and execution
is more likely to take place when organizations focus primarily on
strategy but fail to plan operationally. A bi-directional planning
process better assures that hard links exist between goals and tactics.
One directional (top-down approach emphasising planning) process
only creates an “us against them” mentality. Instead top-down/
bottom-up (bi-directional) planning approach involves operational
leaders in the planning process. Bi-directional planning leads to
more realistic and measurable goals because a healthy amount of
disagreement enters into the strategy process, due to the mix of
perspectives offered from the managers now providing input.

IN-TEXT QUESTIONS
1. Strategy is a high level plan to achieve goals under conditions
of certainty. (True/False)
2. Change is to be viewed as a constant opportunity to evolve the
business and not as a discrete event to be managed. (True/False)
3. Agile organizations are pessimistic in the face of challenge.
(True/False)
4. Agile organizations rest on their successes. (True/False)
5. An organization’s identity is not based on its culture. (True/False)
6. Executives need not support the cultural change in ways beyond
verbal assesnt. (True/False)
7. Organizational culture does not deliver strategic advantage. (True/
False)
8. Culture is the only sustainable point of __________ for any
organization.

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Notes 9. A strategy defines how the __________ will be attained by the

__________.
10. The greatest challenge being faced by organizations is how to
stay __________ amid constant turbulences.
11. Agile organizations strive to develop a built in __________ to
shift.
12. Peter Drucker said: “Culture eats strategy for __________.
13. The organization and its culture are __________ and interdependent.
14. The culture of an organization is embedded in the entire
__________ system.
15. Organizational culture is like an __________ with most of its
weight and bulk below the surface.
16. Organizations must create plans to ensure that the desired
organizational culture becomes a __________.
17. Strategy drives focus and direction while culture is __________.
18. Strategy lays down the __________ for playing the game while
culture __________ the spirit.

14.15 Summary
This chapter discusses the meaning of culture, meaning of strategy and
the need of alignment between the two. Organizational culture is defined
as the underlying beliefs, assumptions, values and ways of interacting
that contribute to the unique social and psychological environment of
an organization. Strategy is a high-level plan to achieve one or more
goals under conditions of uncertainty. Strategy culture misalignment can
be a serious problem, and likely exists to some extent in almost every
organization. Getting control of the problem will allow organization’s a
chance to accomplish their goals and function at a higher level.

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Notes
14.16 Answers to In-Text Questions
1. False
2. True
3. False
4. False
5. False
6. False
7. False
8. Difference
9. Goals, Resources
10. Competitive
11. Capacity
12. Breakfast
13. Reciprocal
14. Organizational
15. Iceberg
16. Reality
17. Emotional
18. Rules, Fuels

14.17 Self-Assessment Questions

1. Define culture. Explain its characteristics.
2. Define strategy.
3. Why should organizations change and adapt repeatedly to environment?
4. Define agile organizations. What are their common traits?
5. Discuss the relationship between strategy and organizational culture.
6. Explain the benefits of strategy and culture alignment.

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Notes 7. Discuss the consequences of misalignment between organizational

culture and strategy.
8. Explain the symptoms of misalignment between organizational culture
and strategy.
9. What are the causes of misalignment?
10. How can organizational culture be changed?
11. Discuss the procedure of realigning corporate culture with organizational
strategy.

14.18 References
‹ ‹https://www.torbenrick.eu/blog/culture/organizational-culture/ retrieved
on 24.11.2018
‹ ‹https://www.torbenrick.eu/blog/culture/broken-organizational-culture/
Posted by Torben Rick | March 18, 2016 | Corporate Culture,
retrieved on 24.11.2018.
‹ ‹https://www.torbenrick.eu/blog/category/strategy/retrieved on 25.11.2018.
‹ ‹Torben Rick. “Why Focus on an agile organization”, posted on
February 26, 2018 at https://www.torbenrick.eu/blog/culture/agile-
organizational-culture/ retrieved on 29.11.2018.
‹ ‹https://www.torbenrick.eu/blog/culture/why-is-organizational-culture-
change-difficult/ retrieved as on29.11.2018.
‹ ‹Susan M Heathfield. “You Can Consciously Change Your Corporate
Culture—Your culture should—and can—reflect your company’s needs”
updated on October 3, 2018 retrieved on 29.11.2018 from https://
www.thebalancecareers.com/how-to-change-your-culture-1918810.
‹ ‹“what is the relationship between corporate culture and strategy”
posted by Torben rick, June 7 2013at https://www.torbenrick.eu/
blog/strategy/relationship-between-culture-and-strategy/retrieved
on 21.11.18
‹ ‹h t t p s : / / w w w. t o r b e n r i c k . e u / b l o g / p e r f o r m a n c e - m a n a g e m e n t /
organizational-alignment-is-the-glue/ posted on October 10, 2014
retrieved on 30.11.2018.

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 Matching Culture With Strategy

‹ ‹https://www.torbenrick.eu/blog/culture/value-statements-can-be-real- Notes
business-drivers/ as on 24.11.2018.
‹ ‹(https://www.torbenrick.eu/blog/culture/organisational-culture-eats-
strategy-for-breakfast-lunch-and-dinner/)
‹ ‹https://www.torbenrick.eu/blog/culture/corporate-culture-will-need-
to-be-both-resilient-and-agile/posted on October 3, 2016 retrieved
on 30.11.2018.
‹ ‹https://www.torbenrick.eu/blog/culture/business-impact-of-a-weak-
or-misaligned-organizational-culture/ retrieved as on 25.11.2018.
‹ ‹Reed Deshler. “The Dangers of a Misalignment Between Culture
and Strategy”.
‹ ‹Posted on November 7, 2017 retrieved from https://playbook.amanet.
org/training-articles-misalignment-culture-strategy/ on 29.11.2018.
‹ ‹Hatim Abukhames, “Strategy Misalignment: The Symptoms, Dangers
and Treatment” Published on April 19, 2015 at https://www.linkedin.
com/pulse/strategy-misalignment-symptoms-dangers-treatment-hatim-
abukhames/ retrieved on 29.11.2018.

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 L E S S O N

15
Behavioural Issues in
Strategy Implementation
STRUCTURE
15.1 Learning Objectives
15.2 Introduction
15.3 What Is Strategic Implementation
15.4 Key Elements of Strategy Implementation
15.5 Components of Strategy Implementation
15.6 Importance of Strategic Implementation
15.7 Basic Features
15.8 The Strategic Five Stages of the Management Process
15.9 Common Mistakes in Implementation
15.10 How to Make It Effective
15.11 Behavioural Issues in Strategy Implementation
15.12 Summary
15.13 Answers to In-Text Questions
15.14 Self-Assessment Questions
15.15 References

15.1 Learning Objectives

‹ ‹What is Strategic Implementation.
‹ ‹Key Elements of Strategy Implementation.
‹ ‹Components of Strategy Implementation.
‹ ‹Importance of Strategic Implementation.
‹ ‹Basic Features.
‹ ‹Five Stages of Strategic Management Process.

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 Behavioural Issues in Strategy Implementation

‹ ‹Common Mistakes in Implementation. Notes

‹ ‹How to Make it Effective.
‹ ‹Behavioural Issues in Strategy Implementation.

15.2 Introduction
Business Strategy can be described as the plan which guides orga-
nizations in the selection and application of resources that will help
them obtain a competitive advantage. It is more concerned with how
a business competes in a particular market. It consists of strategic
decisions about the choice of products, meeting the needs of custom-
ers, exploiting/creating opportunities, etc. In simple terms, it can be
defined as a plan that says where a business/organization wants to go
and how it envisages getting there.
Often the difference between the market leaders and other players in the
industry is the reflection of the difference between the ability to execute
strategy. Much of strategy implementation involves managing change. So
the behavioural issues involved, must not be overlooked.

15.3 What Is Strategic Implementation

Strategic implementation is a term used to describe the various activities
within an organization to manage the execution of a strategic plan. It is a
process that puts plans and strategies into action to reach desired goals.
It is a written document that details the steps and processes needed to
reach plan goals. It includes feedback and progress reports to ensure that
the plan is on track.

15.4 Key Elements of Strategy Implementation

Absence of required elements at the implementation stage often results
in failure of promising strategies because their implementation does not
include all the required elements. Such elements are:
Organization
One has to adjust the strategy to match the organizational structure of the
business. A strategy that requires quick action at the working level and

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Notes decisions by working-level employees needs an organizational structure

that delegates authority. On the other hand, a strategy that relies on tight
control from the upper management levels works best in a hierarchical
structure with centralized authority.
Planning
Implementing strategy requires a series of activities (plan), through which
an organization is able to meet its targets and achieve overall goals. Man-
agers should identify the individual tasks that make up each activity, place
them in the correct sequence and arrange them in a schedule. This plan
forms the basis for implementation and for further monitoring and control.
Resources
After completing implementation plan process, manager can start assigning
employees to the individual tasks. Some tasks require additional resourc-
es, like computer software, promotional materials and money to cover
special expenses. Manager should ensure necessary number of people
on the team to carry out all the tasks and enough other resources for a
successful and complete strategy implementation.
Communication
The details of the strategy and its implementation plans have to be com-
municated to the selected team. It can be done through written descrip-
tions, procedures, images and drawings. Online collaboration tools such as
those found in office productivity software can help foster a cooperative
working relationship among team members.
Monitoring
Managers’ focus should shift from initiating implementation to monitoring
once the team starts working. It is to be made sure that work is on track
and on schedule according to the planning documentation. When tasks
are late or assigned resources are found insufficient, corrective steps are
required to be taken.

15.5 Components of Strategy Implementation

The important elements of strategy can also be discussed in the form of
components of strategy implementation which are Organizational Struc-
ture, Control, and Culture.

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 Behavioural Issues in Strategy Implementation

(a) The first component of strategy implementation is organizational Notes

structure, which assigns employees to specific tasks and specifies
how those tasks link together to realize a competitive advantage. The
purpose of organizational structure is to coordinate and integrate the
efforts of all employees at the corporate, business, and functional
levels, and across functions and business units, so that they work
together to help the firm achieve its strategies successfully.
(b) Another component of implementation is a strategic control system,
which provides the incentives that motivate employees to help the
firm achieve its strategies. Control systems also provide performance
feedback to managers so that corrective action can be taken if
needed.
(c) Organizational culture is another important component of strategy
implementation, and it consists of the values, norms, beliefs, and
attitudes that are shared by people in an organization. Culture guides
the way that employees interact with each other and with stakeholders
outside the organization, and thus will have an important impact
on the implementation of an organization’s strategies.

15.6 Importance of Strategic Implementation

Strategic implementation is critical to a company’s success, addressing
who, where, when, and how of reaching the desired goals and objec-
tives. It focuses on the entire organization. Implementation occurs after
environmental scans, SWOT analyses, and identifying strategic issues
and goals. Implementation assigns individuals to tasks with timelines so
that an organization reaches its goals. Through a series of action-based
phases and tasks, the implementation process is a fundamental step in
turning a company’s vision of a project into reality.
Importance as a Function: Without strategic implementation, a project
would not be able to get off the ground, since strategic implementation
functions as a project’s blueprint. The implementation process identifies
what tasks need to be completed, and when. Strategic implementation is
action-based and uses a variety of tools to keep the project team on track:
(a) Provides a Work Breakdown Structure: A work breakdown
structure is an asset to any project team because it illustrates the

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Notes order of operations for project implementation. Work breakdown

structures identify all the steps that need to be taken to get from
one implementation phase to the next. Work breakdown structures
are designed in a hierarchal structure, and break a project down
into smaller, and more manageable, components.
(b) Develops Implementation Schedule: Another valuable application
that strategic implementation is responsible for is developing an
implementation schedule. Implementation schedules are similar to time
lines in that they dictate start and end dates for when project tasks
and phases should be completed. Project implementation schedules
are often broken down into charts that map out the duration of how
long a task should be performed before it’s on to the next phase.
(c) Does Cost: Allocation Strategic implementation is important because
it evaluates project costs and determines cost allocation to fund
the project from start to finish. By planning ahead, and conducting
financial studies and projections, the strategic implementation process
can save projects money in the end, because unforeseen costs can
be reduced or eliminated.
(d) Determines Evaluation Methodology: The strategic implementation
process will determine the evaluation methodology for a project.
Evaluations are done to study how close a project is to being
completed, and if the project team has met important milestones.
Evaluations consist of measuring a project’s progress, and comparing
that against what the targeted goal is. This will tell the project team
whether or not they are on track with the projected time frames
and projected funding.
(e) Effective strategy implementation allows the company to be more
successful in pursuing a cost leader or differentiation strategy.
(i) Strategy implementation aids firms in pursuing a cost leader
strategy, because it can help them reduce expenses in all
functions through improved coordination and control.
(a) Managers must choose the combination of structure, control,
and culture that will lead to the lowest costs.
(b) Managers must continuously monitor their structure, control,
and culture to ensure that costs are continuously driven
down.
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(ii) Strategy implementation aids firms that are pursuing a differentiation Notes
strategy, because it helps the company to add value and
uniqueness to its products.
(a) A differentiation strategy requires a broad product line,
leading to high bureaucratic costs. Thus an effective
coordination mechanism is especially important.
(b) To successfully pursue a differentiation strategy, a company’s
functions must work cooperatively together. Behavior
controls and culture are more effective than output
controls in a cooperative situation, because it’s hard
to measure the relative contribution of different groups
when they are cooperating.
(c) Thus, differentiators tend to have a very different culture
than cost leaders. Differentiators tend to have a collegial
or professional culture, based on expertise and cooperation.

15.7 Basic Features

A successful implementation plan will require:
‹ ‹A very active leader who remains visible, such as the CEO, as he
communicates the vision, excitement and behaviours necessary for
achievement.
‹ ‹Everyone in the organization should be engaged in the plan.
‹ ‹Performance measurement tools are helpful to provide motivation
and allow for follow up.
‹ ‹Implementation often includes a strategic map. It identifies and maps
the key ingredients that will direct performance. Such ingredients
include finances, market, work environment, operations, people
and partners.

15.8 The Strategic Five Stages of the Management Process

The strategic management process is more than just a set of rules to fol-
low. It is a philosophical approach to business. Upper management must
think strategically first, then apply that thought to a process. The strategic

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Notes management process is best implemented when everyone within the business
understands the strategy. The five stages of the process are goal-setting,
analysis, strategy formation, strategy implementation and strategy monitoring.
A. Clarify the Vision
The purpose of goal-setting is to clarify the vision for business. This
stage consists of:
(a) Identifying detailed and realistic short- and long-term objectives in
the light of vision
(b) Identifying the process of how to accomplish them,
(c) Customizing the process for the staff,
(d) Give each person a task with which he can succeed, and
(e) Write a mission statement that succinctly communicates business
goals to shareholders as well as employees.
B. Gather and Analyze Information
Gather and analyse information to identify the strengths and weaknesses
of the organization as well as any threats and opportunities that may
arise along the path.
C. Formulate a Strategy
Formulation of strategy requires:
(a) Reviewing the information gathered from the analysis;
(b) Determine what resources the business currently has that can help
reach the defined goals and objectives;
(c) Identify any areas for which the business must seek external resources;
(d) The issues facing the company should be prioritized by their importance
to success;
(e) Formulate alternative strategies
(f) Choose strategy
D. Implement Strategy
Successful strategy implementation is critical to the success of the business
venture. Everyone within the organization must be made clear of their
responsibilities and duties, and how that fits in with the overall goal.
Additionally, any resources or funding for the venture must be secured

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at this point. Once the funding is in place and the employees are ready, Notes
plan should be executed.
E. Evaluate and Control
This step includes performance measurements, consistent review of in-
ternal and external issues and making corrective actions when necessary.
Strategic evaluation is an important tool to reflect on achievements and
shortcomings, and for re-examining the goals themselves which may have
been set at a different time, under different circumstances.
Any successful evaluation of the strategy requires:
‹ ‹Defining the parameters to be measured in such a way that they
reflect goals set in stage 1;
‹ ‹Determine progress by measuring the actual results versus the plan;
‹ ‹Monitoring internal and external issues will also enable the manager
to react to any substantial change in the business environment.
‹ ‹If it is determined that the strategy is not moving the company
towards its goal, take corrective actions.
‹ ‹If those actions are not successful, then the strategic management
process should be repeated. Because internal and external issues
are constantly evolving, any data gained in this stage should be
retained to help with any future strategies.

15.9 Common Mistakes in Implementation

Here are some common issues with plan implementations:
(a) Lack of Ownership: The most common reason a plan fails is lack of
ownership. If people don’t have a stake and responsibility in the plan,
it’ll be business as usual for all but a frustrated few. Employees not
given sufficient authority and other means to implement the plan.
(b) Lack of Communication: The plan doesn’t get communicated to
employees, and they don’t understand how they contribute.
(c) Getting mired in the Day-to-day: Owners and managers, consumed
by daily operating problems, lose sight of long-term goals.
(d) Out of the Ordinary: The plan is treated as something separate and
removed from the management process.

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Notes (e) An Overwhelming Plan: The goals and actions generated in the
strategic planning session are too numerous because the team failed
to make tough choices to eliminate non-critical actions. Employees
don’t know where to begin. Plans that are overwhelming and need
to be pruned to be made achievable.
(f) A Meaningless Plan: The vision, mission, and value statements are
viewed as fluff and not supported by actions or don’t have employee
buy-in.
(g) Annual Strategy: Strategy is only discussed at yearly weekend
retreats. Strategic plans are treated as separate from daily operations.
(h) Not Considering Implementation: Implementation isn’t discussed
in the strategic planning process. The planning document is seen
as an end in itself.
(i) No Progress Report: There’s no method to track progress, and the
plan only measures what’s easy, not what’s important. No one feels
any forward momentum. Insufficient progress reports: Achievement
of benchmarks always needs to be noted.
(j) No Accountability: Accountability and high visibility help drive
change. This means that each measure, objective, data source, and
initiative must have an owner.
(k) Lack of Empowerment: Although accountability may provide strong
motivation for improving performance, employees must also have
the authority, responsibility, and tools necessary to impact relevant
measures. Otherwise, they may resist involvement and ownership.
It is easier to avoid pitfalls when they are clearly identified.

15.10 How to Make It Effective

To successfully implement strategy, several items must be in place:
(a) Paying the Costs: Nearly all strategic plans come with a cost. Yet,
most strategic plans are rolled out without any direct connection to
budgeting. An unfunded strategic plan is only a wishlist. Implementation
requires an understanding of plan costs and institutional commitment
to its funding. Plans need to come with funding in place.
(b) Relation to External Conditions strategic plan is responsive to
external conditions, directly or indirectly. Changes in external
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 Behavioural Issues in Strategy Implementation

conditions – the economy, supply costs, labor or other issues – can Notes
make the plan’s implementation unnecessary, no longer strategic or
impossible to achieve. Acknowledgment of these parameters should
be built into the plan’s rollout so that everyone knows that the plan
includes responses to external conditions.
(c) Establishing Benchmarks: Every plan has objectives, but not all
plans contain enough information about achieving them. Two common
deficiencies are: Establishment of benchmarks and Establishment of
oversight practices. The two are closely related. Oversight confirms
that benchmarks are being achieved according to schedule. The
presence of monitoring activities also sends employees a message
that the plan is still in place and remains important.
(d) Building in Updates and Revisions: One way of insuring that a
strategic plan continues to be relevant is to build periodic reviews of
all the plan’s essential features into the implementation of the plan:
goals, benchmarks and monitoring. A plan shouldn’t be evergreen;
it needs to be viewed as a contemporary document. Strategic plans
work best when they are time-limited, with a major review, often
with a new rollout, at least once a year.
(e) Unlearn the Past: Often past strategies stand in the way. So unlearning
is important.
(f) Increase Commitment at Lower Levels: People at lower levels
in an organization are often skeptical about the practical utility of
a strategic plan. Without taking the lower level employees along,
strategy implementation is difficult.
(g) Avoid Over-Ambitious Strategies: Functional managers are used
to a way of working. They may not be able to adjust suddenly to
a new strategy.
(h) Identify Responsibilities and Milestones: The list of specific tasks
each function must perform, specific milestones and the names of
the individuals who accept responsibility for each major functional
program, must be identified.
(i) Communicating Downward is as Important as Communicating
Upward: It is the functional and lower level operating managers
who hold the key to the successful implementation of a strategy.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes Half-hearted commitment from functional managers can thwart the

goals set for the business.
(j) Using one of the Strategic Plan conception and implementation
templates available on the internet removes a lot of uncertainty
and makes it easier to benchmark and monitor plan progress. Some
are free in exchange for your contact information; others have either
a one-time fee or a monthly charge.
(k) Sample Strategic Assessment Plans: Numerous sites and reference
works offer sample strategic plan documents. For example, “The My
Strategic Plan website”, offers a step-by-step plan for implementation
that includes assessing necessary personnel, aligning the budget and
producing various versions of the plan for individual groups. Several
of these sample strategic plans’ documents allow for tracking the
plan and managing the system with rewards. Typically, the plan
is presented to the entire organization and includes a schedule of
meetings, annual review dates for reporting progress and a means
of modifying current assignments or adding new assessments.
As companies try to both increase product differentiation and reduce costs
simultaneously, strategy implementation becomes much more complex.
This leads to new forms of structure and control systems:
‹ ‹To cope with the complexity of producing many products for many
market segments, companies can adopt a product structure.
‹ ‹To implement a product structure, a company must first group its
products into categories targeted at specific groups of customers
and managed by one set of managers.
‹ ‹Support activities from the value chain are centralized to keep
costs low. However, sub-groups within each function specialize in
meeting the needs of a particular product group.
‹ ‹The organization then develops a control system that examines each
product group separately. This creates ability to rapidly spot problem
areas, and also a way to give rewards for high performance.
‹ ‹However, rewards still are closely tied to organizational, and not
group, performance, to ensure that managers work together across
units as needed.

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 Behavioural Issues in Strategy Implementation

Notes
15.11 Behavioural Issues in Strategy Implementation
Behavioural implementation deals with those aspects of strategy imple-
mentation that have impact on behaviour of people in the organization.
Since human resources form an integral part of the organization, their
activities and behaviour need to be directed in a certain way. Any de-
parture may lead to the failure of strategy.
The key to execution is shaping the attitudes and behaviour of people. A
culture of trust and commitment motivates people to execute the agreed
strategy. People’s minds and hearts must align with the new strategy so
that they embrace it willingly, going beyond compulsory execution to
voluntary cooperation.
To build people’s trust and commitment, Chan Kim and Renee Maubor-
gne emphasize the importance of getting people’s buy-in, building trust
and creating a perception that a level playing field exists. Only then will
people cooperate voluntarily in implementing strategic decisions. This
approach called Fair process has three main components: engagement,
explanation and expectation clarity.
Strategic implementation requires support, discipline, motivation and hard
work from all managers and employees. It is vital to bear in mind that
organizational change is not an intellectual process concerned with the
design of ever-more-complex and elegant organization structures. It is to
do with the human side of enterprise and is essentially about changing
people’s attitudes, feelings and above all else– their behaviour. The be-
haviour of the employees affects the success of the organization. Ways
in which such support can be obtained are:
(a) Influence Tactics: The organizational leaders have to successfully
implement the strategies and achieve the objectives. Therefore the
leader has to change the behavior of superiors, peers or subordinates.
For this they must develop and communicate the vision of the future
and motivate organizational members to move into that direction.
(b) Power: it is the potential ability to influence the behavior of others.
Leaders often use their power to influence others and implement
strategy. Formal authority that comes through leaders position in

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes the organization (He cannot use the power to influence customers
and government officials) the leaders have to exercise something
more than that of the formal authority (Expertise, charisma, reward
power, information power, legitimate power, coercive power).
(c) Empowerment as a Way of Influencing Behavior: The top executives
have to empower lower level employees. Training, self-managed
work groups eliminating whole levels of management in organization
and aggressive use of automation are some of the ways to empower
people at various places.
(d) Political Implications of Power: Organization politics is defined
as those set of activities engaged in by people in order to acquire,
enhance and employ power and other resources to achieve preferred
outcomes in organizational setting characterized by uncertainties.
Organization must try to manage political behavior while implementing
strategies. They should;
‹ ‹Define job duties clearly.
‹ ‹Design job properly.
‹ ‹Demonstrate proper behaviors.
‹ ‹Promote understanding.
‹ ‹Allocate resources judiciously.
(e) Leadership Style and Culture Change: Culture is the set of
values, beliefs, behaviors that help its members understand what the
organization stands for, how it does things and what it considers
important. Firms’ culture must be appropriate and support their firm.
The culture should have some value in it. To change the corporate
culture involves persuading people to abandon many of their existing
beliefs and values, and the behaviors that stem from them, and to
adopt new ones. The first difficulty that arises in practice is to
identify the principal characteristics of the existing culture. The
process of understanding and gaining insight into the existing culture
can be aided by using one of the standard and properly validated
inventories or questionnaires that a number of consultants have
developed to measure characteristics of corporate culture. These offer

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 Behavioural Issues in Strategy Implementation

the advantage of being able to benchmark the culture against those Notes
of other, comparable firms that have used the same instruments.
The weakness of this approach is that the information thus obtained
tends to be more superficial and less rich than material from other
sources such as interviews and group discussions and from study
of the company’s history. In carrying out this diagnostic exercise,
such instruments can be supplemented by surveys of employee
opinions and attitudes and complementary information from surveys
of customers and suppliers or the public at large.
(f) Values and Culture: Value is something that has worth and importance
to an individual. People should have shared values. This value keeps
everyone from the top management down to factory persons on the
factory floor pulling in the same direction.
(g) Ethics and Strategy: Ethics are contemporary standards and a principle
or conducts that govern the action and behavior of individuals
within the organization. In order that the business system functions
successfully the organization has to avoid certain unethical practices
and the organization has to be bound by legal laws and government
rules and regulations.
(h) Managing Resistance to Change: To change is almost always
unavoidable, but its strength can be minimized by careful advance.
Top management tends to see change in its strategic context. Rank-
and-file employees are most likely to be aware of its impact on
important aspects of their working lives. Some resistance planning,
which involves thinking about such issues as: Who will be affected
by the proposed changes, both directly and indirectly? From their
point of view, what aspects of their working lives will be affected?
Who should communicate information about change, when and by
what means? What management style is to be used?
(i) Managing Conflict: Conflict is a process in which an effort is
purposefully made by one person or unit to block another that results
in frustrating the attainment of the others goals or the furthering
of his interests. The organization has to resolve the conflicts.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes IN-TEXT QUESTIONS

1. Strategic implementation process does not map out the life cycle
of a project. (True/False)
2. Strategic implementation schedule does not specify start and end
dates for different tasks of the project. (True/False)
3. Strategic implementation process does not result in reduced costs.
(True/False)
4. Strategic plan is not affected by external conditions. (True/False)
5. Strategic plans need major review at least once a year. (True/
False)
6. Strategy implementation is difficult without involving the high
level employees. (True/False)
7. Organizational change is an intellectual process only. (True/False)
8. Strategic __________ is a process that puts plans and strategies
into action to reach desired goals.
9. Effective strategic implementation requires its matching with the
__________ structure of the business.
10. Main three components of strategy implementation are Organizational
structure, control and __________.
11. Strategic implementation often includes a strategic __________
which identifies key ingredients.
12. There are __________ stages in the strategic management
process.
13. Organizations need to have resources, both __________ and
__________, to successfully implement the strategy.
14. Numerous sites and reference works offer __________ strategic
plan documents.
15. Strategic plan implementation becomes much more complex
when product differentiation is to __________ and cost is to
__________.
16. The key to strategy execution is shaping the __________ and
behaviour of people.

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 Behavioural Issues in Strategy Implementation

Notes
15.12 Summary
Business Strategy can be described as the plan which guides organiza-
tions in the selection and application of resources that will help them
obtain a competitive advantage. Often the difference between the market
leaders and other players in the industry is the ability to execute strategy.
Strategic implementation is a term used to describe the various activities
within an organization to manage the execution of a strategic plan. Key
elements of implementing a business strategy are planning, organizing,
collecting resources, communicating and monitoring. Elements, expressed
in terms of components are organizational structure, strategic control
systems and organizational culture. Strategic implementation is important
as it functions as a project’s blueprint, provides a Work Breakdown
Structure, develops Implementation Schedule, does Cost Alloca-
tion, determines Evaluation Methodology, and Effective strategy
implementation allows the company to be more successful in pursuing
a cost leader or differentiation strategy. Basic features of a successful
implementation strategy are a very visible leader, such as the CEO,
employees feel engaged, Performance measurement tools are helpful to
provide motivation, and Implementation often includes a strategic map,
which identifies and maps the key ingredients that will direct performance.
Such ingredients include finances, market, work environment, operations,
people and partners. The five stages of the process are goal-setting, anal-
ysis, strategy formation, strategy implementation and strategy monitor-
ing. Some common mistakes in implementation are Lack of ownership,
getting mired in the day-to-day operation, plan too overwhelming and
meaningless etc. Strategy implementation can be done more effectively
by adopting measures like Commitment and Consensus, Plans need to
come with funding in place, Benchmarks to be established, plan should
be reviewed from time to time, past should be Unlearnt.
Behavioural implementation deals with those aspects of strategy imple-
mentation that have impact on behavior of people in the organization.
Since human resources form an integral part of the organization, their
activities and behavior need to be directed in a certain way. Any depar-
ture may lead to the failure of strategy.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes
15.13 Answers to In-Text Questions
1. False
2. False
3. False
4. False
5. True
6. True
7. False
8. Implementation
9. Organizational
10. Culture
11. Map
12. Five
13. Time, Money
14. Sample
15. Increase, Decrease
16. Attitudes

15.14 Self-Assessment Questions

1. Define business strategy.
2. Define strategic implementation.
3. Discuss the key elements of strategy implementation.
4. Explain the components of strategy implementation.
5. How does strategy implementation help in reducing the project costs?
6. How does strategy implementation help firms in pursuing differentiation
strategy?
7. Discuss the basic features of a successful strategic implementation
plan.
8. How is a strategy formulated?

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 Behavioural Issues in Strategy Implementation

9. Explain the stage of strategy evaluation and control in the strategic Notes
management process.
10. Explain the Fair Process Approach To strategy implementation.
11. Describe the importance of strategic implementation.
12. Discuss different stages in the strategic management process.
13. Discuss the common mistakes that can occur in the strategy management
process.
14. How can strategic implementation be made more effective?
15. Discuss the behavioural issues in strategy implementation.

15.15 References
‹ ‹https://www.slideshare.net/PranavKumarOjha/behavioural-
implementation?next_slideshow=1 retrieved on 4.12.2018.
‹ ‹https://www.slideshare.net/karpagam93/strategy-implementation-53420785
as on 4.12.2018.
‹ ‹https://www.researchgate.net/publication/291991105_The_role_of_
strategy_implementation_in_organization_development as on 4.12.2018.
‹ ‹https://www.encyclopedia.com/management/encyclopedias-almanacs-
transcripts-and-maps/strategy-implementation as on 4.12.2018.
‹ ‹Erica Olsen at https://onstrategyhq.com/resources/avoid-the-11-
strategic-implementation-pitfalls/retrieved on 6.12.2018.
‹ ‹h t t p s : / / w w w. m b a k n o l . c o m / s t r a t e g i c - m a n a g e m e n t / s t r a t e g y -
implementation/as on 8.12.2018.
‹ ‹https://www.mbaknol.com/strategic-management/behavioural-issues-
in-strategy-implementation/
‹ ‹Kyra Sheahan; Updated September 26, 2017 https://bizfluent.com/
about-6453292-importance-strategic-implementation.html retrieved
on 5.12.2018.
‹ ‹Kristie Lorette; Updated June 30, 2018. “What Is Strategic Implementation?”
on https://smallbusiness.chron.com/strategic-implementation-5044.html
Retrieved on 3.12.2018.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes ‹ ‹Devra Gartenstein; Updated June 29, 2018, Importance of Strategic

Evaluation, The https://smallbusiness.chron.com/importance-strategic-
evaluation 13127.html retrieved on 3.12.2018.
‹ ‹Bert Markgraf. “Key Elements of Business Strategy Implementation”
on https://smallbusiness.chron.com/key-elements-business-strategy-
implementation-63668.html as on 3.12.2018.
‹ ‹http://www.managementparadise.com/balajiv.ganesh/documents/5840/
behavioural-issues-in-strategy-implementation/ as on 5.12.2018.
‹ ‹Patrick Gleeson, Ph. D., Updated June 30, 2018, The Implementation Process
of Strategic Plans, at https://smallbusiness.chron.com/implementation-
process-strategic-plans-4514.html, retrieved on 3.12.2018.
‹ ‹Multimedia University at https://www.coursehero.com/file/p2akrur/
Behavioural-implementation-deals-with-those-aspects-of-strategy-
implementation/Retrieved on 4.12.2018).
‹ ‹June 29, 2018. The Strategic Five Stages of the Management Process
at https://smallbusiness.chron.com/five-stages-strategic-management-
process-18785.html retrieved on 3.12.2018.

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 UNIT - IV
SHRM and Business
Performance

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 L E S S O N

16
Strategic Human
Resource Management for
Competitive Advantage
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
16.1 Learning Objectives
16.2 Introduction
16.3 Key Concepts
16.4 Role of Strategic Human Resource Management for Competitive Advantage
16.5 Alignment of SHRM with Corporate Strategy
16.6 Case Study: Strategic Human Resource Engagement for Competitive Advantage
16.7 Summary
16.8 Answers to In-Text Questions
16.9 Self-Assessment Questions
16.10 References

16.1 Learning Objectives

‹ ‹Understanding the Concept of Business Performance.
‹ ‹Meaning of Competitive advantage and the Importance of its sustainability.
‹ ‹Role of Strategic Human Resource practices that can lead to attaining competitive
advantage and maintaining the same.
‹ ‹Alignment of SHRM with Corporate Strategy.
‹ ‹How the strategic approach to human resource management differs from the traditional
functional approach with respect to giving a competitive advantage to the business
enterprise.
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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes
16.2 Introduction
In the previous units of this course we have:
‹ ‹Gained a sound understanding of the theory behind strategic human
resource management.
‹ ‹Understood its relation to various human resource roles in practice.
‹ ‹Comprehended the importance of strategic human resource management
in broad organizational structure and its role in various human
resource functions.
This chapter attempts to provide an in-depth understanding of the impor-
tance that the strategic orientation of human resource management plays
in the performance of businesses and how it helps support or increase
their competitive advantage. In simple words, this means that we will
learn how we can apply the concepts and practices of strategic human
resource management to the business functions in order to create sustained
competitive advantage for continued returns.
From HRM to SHRM
Human resource management has come a long way since its evolution as
a separate managerial function. In its nascent days, personnel manage-
ment considered employees as resources to be utilized to gain advantage
and was not concerned with their potential for development as human
beings and long-term resources of the organization. With the growth of
awareness in the post-industrialization unionised era and evolving global
markets, human resource management emerged as an alternative to such
rustic views about labour regulation. It considered the employees as
resources to be developed both for their personal advancement and for
the long-term gains of the organization. For the first time, a need was
felt for specialist knowledge of the field and more focus was shifted to
individual development and motivation (Becker & Huselid, 2010).
Thus, we can say that the transformation from personnel management
to human resource management was a milestone that laid the foundation
for the exponential growth in this ever-changing field. Emergence of the
strategic aspect of human resource management is another such milestone
that has the ability to transform the business environment. Indeed, the
concept is not exactly new and has been around for quite some time but

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 Strategic Human Resource Management for Competitive Advantage

it has recently garnered much attention and therefore has a greater chance Notes
of achieving its full potential. Strategic human resource management seeks
to understand and exploit the broader business picture for optimizing the
business environment. The strategic nature of this view helps businesses
proceed towards their broad goals in every aspect be it internal or external.
SHRM in the Contemporary Business Environment
In the ever-growing and highly competitive business environment of
current times, any practice that has the potential to provide a source of
sustained competitive advantage is a practice that the management can
ill-afford to ignore. No business can exist in a state of isolation or vacuum.
There are always internal and external factors that influence or have the
potential to influence its performance. This can best be understood with
the aid of a SWOT matrix. The strengths and weaknesses are internally
driven aspects that can help or harm a business and they are generally
best known and understood by the business itself. The opportunities and
threats are external factors and thus may not be fully comprehensible or
predictable. However, this makes it all the more important for the orga-
nizations to better understand their environment in order to put their best
foot forward while trying to attain maximum performance. The importance
of strategic human resource management lies then not only in internally
driven processes as discussed in the previous chapters but capability of
reduction in potential risk due to external factors and the ability to har-
ness the best available opportunities also makes it a must have practice.
SHRM and Business Performance
Business performance and competitive advantage are deeply interconnected.
In today’s cut-throat business environment, any factor that gives us the
winning edge must not only be managed but also sustained in a consistent
manner (Lin & Shih, 2008). Businesses are constantly looking for ways to
increase profits. They may talk about it directly by aiming for maximum
profit or they may seek it indirectly by other means like decreasing costs,
increasing sales, attracting more customers and creating loyal (and inclined
to repeat) customer base among other such ways. Any factor that gives an
advantage in achievement of any of these aims is a competitive advantage.
It is important that it be exploited for better performance but most of such
factors are not always sustainable in the sense that they do not remain as
advantages for long. This means that a business cannot always expect to

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes maintain the advantage it gained without a clear strategy. For example, let
us say that firm A enjoys a low cost advantage that helps them have lower
priced products. Then what happens when firm B enters the market with
abundant initial capital and sells similar products at lower prices than A.
In this case firm A lost the advantage that it had in the market. Similarly,
there can be many factors that give an advantage to a firm over others but
factors that are a source of sustained or inimitable competitive advantages
are fewer. Strategic human resource management is seen as one such factor
which when implemented correctly has the ability to provide an advantage
that is sustainable and not easily imitable or replicable. We will discuss
this entails in the following paragraphs.

16.3 Key Concepts

16.3.1 Business Performance

Business performance, in simple words, refers to the degree of achieve-
ment of overall business outcomes against the goals set by the manage-
ment. The goals may differ in nature and can be as diverse as the firms
that exist in the current business market. Just as we as individuals have
different priorities, so do businesses. The goals are as driven by internal
factors as they are influenced by external ones. Hence, we can easily say
that performance of a business is driven and influenced by a multitude
of factors both internal and external. Some of these may be easily mea-
surable while others may prove to be difficult to gauge. Still, just as we
academics like to test and quantify learning using various kinds of tests
and scores, the business fraternity also likes to measure and compare its
performance against past self and other competitors.
All of us definitely have seen marketing initiatives where a firm declares
itself to be on top or some other level as compared to others. For ex-
ample, a look at the Economic Times list of top businesses in India for
the year 2020 (Economic Times, 2020) reveals:
‹ ‹Reliance Industries Ltd. has been ranked number one;
‹ ‹State Bank of India is the top bank at number four; and
‹ ‹Tata Consultancy Services is the top IT company at number nine.
‹ ‹The above three pointers can further be analysed like this:

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 Strategic Human Resource Management for Competitive Advantage

If the goal of State Bank of India was to be the number one bank then it Notes
has performed admirably and its business performance can be said to be
excellent however, if the goal was to be the top business in India then there
is still scope for improvement as RIL has been ranked one (the first pointer).
‹ ‹Similarly, Reliance Industries Ltd. may be at the top in India but
if its goal was to be the best in the world then it still needs to
improve the performance.
‹ ‹So to summarise what we just discussed, performance can be evaluated
by determining the extent to which the goals are achieved. Next
we will try and understand the concept of competitive advantage.

16.3.2 Advantage and its Sustainability

Meaning of Competition
Before we tackle competitive advantage, let us first try and understand
the concept of competition. Lexico dictionary (n.d.) defines the verb
‘compete’ as “strive to gain or win something by defeating or establish-
ing superiority over others” and the noun competition as “the activity or
condition of striving to gain or win something by defeating or establish-
ing superiority over others”. In the context of businesses, the keywords
would be gain and superiority. As we may already know, there are always
limits to any resource in this world. Resources in this context can be raw
materials, manpower, infrastructure, market size or customer’s buying ca-
pacity. These limits then, by their very nature, pit businesses looking for
similar resources against each other and create rivalry. Thus, we can say
that the businesses compete with each other to gain the desired share of
required resources. Since the main aim of any business is said to be profit
generation, any competition is also ultimately aimed at gaining the upper
hand in profit generation. Competition for cheaper raw material, more
engaged workforce, more satisfied customers and bigger market share are
all ultimately pursued in order to increase the bottom line i.e. the profit.
Meaning of Competitive Advantage
Thus, any factor that positively affects a firm’s chances of winning the
competition against others is Competitive Advantage. It can be anything
that gives us an edge over others. It can be inherited, created, achieved
or acquired. It can be temporary, short-term or long-term. It can be a big

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Notes factor or small. Its impact or the edge it gives may be major or minor. It
can be anything but it has to positively influence the chances of win for
the advantage holder. As seen above, competitive advantage can manifest
itself in many forms.
Kinds of Competitive Advantages
There are many kinds of competitive advantages that have been observed
and documented. They have been broadly categorized as cost-based com-
petitive advantages and differentiation-based competitive advantages. Also
depending on the scope being considered, they can be considered as cost
focus in niche fields and differentiation focus in niche fields.
We will take some examples to understand this further.
‹ ‹A firm can be said to have a distinct competitive advantage if it has
access to natural resources that are not available to its competitors. In
this case the firm will be able to control the supply and availability of
the resource in the market thereby gaining a distinct edge over others.
‹ ‹In a similar vein, a unique geographic location has the potential to
become a competitive advantage if it helps the firm either access
unique resources or reduce costs.
‹ ‹New technologies are also advantageous as long as they are not
imitated.
‹ ‹Patent knowledge is an example of a clear competitive advantage
that is protected by laws.
‹ ‹Highly or uniquely skilled labour becomes an advantage when they
help differentiate a firm’s products or services from its competitors.
‹ ‹Not the least is the advantage that is enjoyed by any firm whose
products or services are recognized by its name or in other words,
when customers recognise its brand name easily. These brand names
may be linked to
‹ ‹Trust,

‹ ‹Quality,

‹ ‹Cost efficiency and

‹ ‹Honesty.

These brand names are the mental links that have the ability to link a product
or service with an experience in our minds. For instance, brand names like
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 Strategic Human Resource Management for Competitive Advantage

Xerox, Surf and Colgate became so popular that they became synonymous Notes
with their actual products viz. Photocopy, detergent and toothpaste. This
becomes an advantage as the customers indifferent to brands are now more
likely to ask for these products using their specific brands rather than generic
product names. Quality is a differentiating factor that helps firms develop
a loyal repeating customer base consisting of those who are now willing to
spend for that quality. They understand that quality requires a premium to be
paid. For example, Samsung has an image of being a manufacturer of high
quality electronics in the Indian market. It is the largest consumer durables
provider in the market. It enjoys this advantage even though its products
are priced higher than new entrants from China and other Asian countries.
So we understand that competitive advantage may be gained by a mul-
titude of factors that can be as different as new patent knowledge and
old brand loyalty.
In short, anything that can help us perform better than our competi-
tors is a competitive advantage for our business.
Sustained Competitive Advantage
As discussed above, competitive advantage is any factor that helps a firm
perform better than its competitors. However, this definition does not
specify the duration for which that advantage exerts influence. This is
because sustainability of an advantage may be quantified in multiple ways.
One straightforward method would be to determine the time duration for
which the advantage can be reasonably expected to last. In this case the
advantage has a fixed expected life cycle and is sustained for the same
with almost no extra effort on part of the organisation. While it can be a
positive if the organisation has other advantages planned for the future,
it may not be so useful if there is no long-term follow-up plan. Another
way of determining whether an advantage is sustainable or not could be
to look at its inimitability. As long as an advantage remains inimitable,
it will continue to be a source of benefit for the organization.

16.4 Role of Strategic Human Resource Management for

Competitive Advantage
As we have seen in the above discussion, competitive advantages are
mostly the result of great efforts on part of organizations. The firm, as

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Notes a unit, has to formulate and implement processes that result in these
advantages for whatever duration they may exist. Current market forces
have created a need for speed and flexibility that is the hallmark of a
skilled and motivated workforce. This, in turn, has assigned a marked
advantage to the practice of strategic human resource management.
Strategic human resource management is being touted as the latest source
of sustained competitive advantage more so because the traditional sources
of competitive advantage like quality, quantity and technology have be-
come increasingly easier to imitate (Campbell, Coff & Kryscynski, 2012).
Increased efficiency of the systems regulating these traditional sources
have also left them prone to easy imitation. It can be understood from the
following examples:
‹ ‹We see an abundance of technologies in the market today that were
deemed to be path breaking just a few months ago. The rapid and
even exponential increase in the embedded chip-set technology is
the prime example of technology being copied and rapidly improved
upon by the competitors.
‹ ‹A more direct example of this can be seen in the mobile handsets
that are being used today as compared to say ten years ago. Mobile
phone technology itself was considered to be revolutionary at the
onset of the new millenium. We are still in the first quarter of the
millennium and have already introduced fifth generation mobile
phones, have rendered voice calls from telecom service providers free
and internet calling commonplace. Mobile phones have become one
one-stop solutions for all our day-to-day needs. This is true for all
mobile phone brands and telecom service providers. This shows that
technology is no longer a source for sustained competitive advantage.
‹ ‹Similarly globalization, easy availability of distant resources and
free trade policies have rendered economies of scale to be of very
low significance in most industries.
‹ ‹Thus, the modern day organizations have been shifting their focus
to the ‘people’ or the human capital in their hands to generate the
source of sustained competitive advantage. The need for long-term
perspective and strategic handling of human resources has been felt
by many. The strategic view of human resource management supports
the creation of human resource systems that focus on operational

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problem solving and alignment with corporate strategy. It does not Notes
view human resources as cost centers and seeks to move away from
their traditional role of transactional and compliance activities.

16.5 Alignment of SHRM with Corporate Strategy

SHRM is in essence the practice of aligning a firm’s human resource
management practices with its corporate strategy both short and long-term.
Every facet of human resource management can be strategically aligned
with an organization’s goals. If we consider the broad functions of a
typical human resource manager as aspects of an employee life cycle,
they may be categorized as human resource planning, recruitment and
selection, performance management, learning and development, rewards
and recognition, compensation and benefits, and exit management. Let
us take each of these functions and try to understand how they can be
strategically linked with corporate policy and aims in the long term.
‹ ‹Human resource planning, as the name suggests, refers to the function
where all the expected human resource needs of an organization are
consolidated and then moulded into decisions regarding how to fulfill
those needs. An organization may choose to hire, enhance existing
skill sets or re-train current employees to fit their projected needs.
As we can see from this, the decision taken by the firm at this
stage will not only impact its current employees but also influence
the future composition of its workforce. If a firm has adopted a
strategy of innovation as its path to sustained competitive advantage,
then, in that case, it makes sense for them to invest more in the
development of their existing skill sets and retention. Thus, we can
say that human resource planning when done in synchronization with
overall organizational strategy and is geared towards the fulfillment
of long-term objectives then it will definitely be an advantage to
the organisation.
‹ ‹Similarly, if the hiring process of new employees or the skill
development of existing ones takes into account present as well
as future skill requirements then the organization would be better
prepared for long-term goals and gain an advantage especially in
today’s intellectually oriented workspaces.

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Notes ‹ ‹Performance measures that strategically reward behaviors useful for

achievement of organisational vision will see the workforce realise
an organization’s commitment to its stated goals and values.
‹ ‹An organization may choose to be seen as a benevolent employer,
an aggressive innovator or a profit focussed firm but it needs to
consistently and strategically reinforce this image at each and every
stage of an employee lifecycle along with each interaction with
external customers.
This strategic alignment would then result in a unique process that
would generate inimitable human resources which in turn could pro-
vide sustained competitive advantage to the firm.
Let us take a look at how a specific organization handled their en-
gagement program and converted it into a competitive advantage.

16.6 Case Study: Strategic Human Resource Engagement

for Competitive Advantage
So far it is hoped that we have gained a sound understanding of the concepts
like firm performance, competitive advantage and strategic human resource
management in a theoretical concept. In addition to this we will now try
to augment the same with an example of an organization where the core
human resource practices when strategically aligned with corporate vision
has resulted in a clear sustainable competitive advantage for the business.
We take a detailed look at the case of well-known hospitality brand, J
W Marriott Hotels before summarizing it at the end into points for better
understanding (SHRM India Knowledge Center & Great Place To Work
Institute, 2012). In order to understand the context we must first under-
stand that this firm belongs to the hospitality industry which is tradition-
ally marked by a customer oriented management, glamorous luxurious
workplaces, long work hours, shifts, low pay and high attrition among
employees. Let us now take a look at the case of J W Marriott Hotels. In
terms of business, the Marriott’s bouquet comprises over 7600 managed
or franchised properties across 30 brands in 133 countries and territories
spanning six continents. In 2020, Marriott had reportedly 121,000 Asso-
ciates and reported assets of nearly $24.7 Billion. The business model of
Marriott is a hotel management oriented model. It does not own the hotel

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properties but takes the responsibility for running them through long-term Notes
contracts with owners of the respective properties. Marriott employees
called ‘Associates’ then become the single most important factor for
consistent service excellence across the chain and its consequent success.
Marriott plans, budgets and focuses heavily on training, developing and
mentoring its employees for future growth in the organisation. Marriott
recognises that engagement leading to long-term employment has the
potential to significantly impact business outcomes.
Marriott has ‘People first’ as its core value. Its founder Mr. J. W. Mar-
riott famously stated, “When you take good care of your people, they
will take good care of the customers, the customers will come back and
the business will take care of itself”. It is important to understand that
this is the kind of strategic human resource practice that focussed on the
employee engagement in the short term while being equally conscious
of the long-term gains in terms of customer loyalty leading to optimum
profit generation. Let us see how the firm implements this vision of its
founder.
Across all its properties, the “Marriott Culture” is driven through serv-
ing the Associates, the customer and the community. The organisation
believes that the key element in managing Associates lies in defining
simple values, which can be executed in their day-to-day work. People
first — the Core Value of Marriott’s corporate culture is responsible
for its success of over 80 years because it recognises that Associates
are not only important to the business but they also give it an edge in
a very competitive environment. The organisation-wide initiatives focus
on ensuring that the values translate into practices that can be followed
and Associates across the globe live the defined values (SHRM India
Knowledge Center & Great Place To Work Institute, 2012).
Marriott’s definition of engagement is ‘Engagement is the state of emo-
tional and intellectual commitment to an organisation or group producing
behaviour that will help fulfil an organisation’s promises to customers -
and, in so doing, improve business results’.
They categorise these observable behaviours as:
Stay: When employees have an intense desire to be a part of and stay
with the organization.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes Say: When employees advocate the organisation by referring potential

employees and customers, are positive with co-workers and are construc-
tive in their criticism; and
Strive: When employees exert extra effort and engage in behaviours that
contribute to business success.
To achieve this level of commitment amongst Associates, Marriott has
identified five factors that influence employee engagement. These are
Leadership Excellence, Personal Growth, and Quality of Life at Work,
Teamwork and Total Rewards. Marriott’s engagement framework seam-
lessly connects its engagement drivers and the organisation’s financial
performance. The Associate engagement and loyalty translates into two-
pronged benefits of guest satisfaction and employee retention. These then
in turn translate into overall improvement in the organization’s financial
performance. Let us briefly take a look at these drivers.
At Marriott, an open door policy where any Associate can reach out to
senior management with their ideas and suggestions is not just a policy
on paper but care is taken to ensure that the policy is executed by putting
in place special channels of communication where Associates can actually
contact and communicate with senior managers. This is then supported
by giving leaders the responsibility to respond to the Associates and then
tracking and monitoring the communication to ensure that Associates are
informed about the course of action. In an industry where hierarchy is
strong, this practice enables associates to feel valued and important. The
practice of addressing General Managers of properties by their first name
also adds to this value. Leaders constantly coach and mentor Associates
at the next level and potential candidates for leadership positions with
a focus on ‘growing our own people.’ This is another value, which is
applied across all properties. The rapid growth of Marriott has led to a
pressing requirement for a pipeline of leaders who understand the cul-
ture and values of the organisation. It is a critical need for Marriott to
maintain consistent quality of service across various properties. Marriott
firmly believes that employees who have grown through the organisation
will be able to live the values, effectively sustain growth and add to the
organisation’s bottom line.
Training programmes for every employee are given a high priority in
Marriott. As a policy, every hotel in the Marriott chain compulsorily

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contributes a fixed amount per manager, per year, into a fund, which Notes
is controlled by the corporate office. Seventy six hundred hotels with
approximately 100 managers in each hotel contributing per manager, per
year, translate into a phenomenal budget available exclusively for training
purposes. Major training programmes are centrally created and rolled out
across the globe. It is ensured that every Associate at Marriott from the
General Manager downwards gets a minimum of two full weeks of training
every year. The core value of “Growing your Own” is lived through this
practice. Considering that the industry benchmark for training of two full
weeks every year happens only for around 20-25 percent of employees
of its competitors, this practice is a strong differentiator in Marriott.
The organisation also deputes teams of employees from one hotel prop-
erty to another for cross exposure. The aim is to encourage sharing
of expertise and learning from within the organisation. The deputation
ranges from one to ten weeks. When Marriott came into India, it real-
ised that Associates in India look for growth not only in India but also
globally. Marriott also realised that competitors could not deliver on this
need, either because they did not have a presence around the world or
because they simply restricted their focus to growth within the country.
At Marriott, an Associate may move from India to Indonesia, China or
anywhere else after a certain time of being in the organisation. This has
had a strong and positive effect on talent attraction for the organisation.
When Marriott entered India, the biggest challenge was to provide As-
sociates work life balance in a profession and industry where to achieve
results one has to work 24x7. Marriott was the first in the industry to
mandate a five-and-a-half-day work week in India. This means every
other week, Associates are able to take two days off. When Marriott
entered Hong Kong and introduced the practice of a five-day workweek
in a country where the hotel industry traditionally worked for six days
a week, the Hotel Association did not approve. However, Marriott stood
its ground as it had done in most countries, including India. Now, most
hotels in Hong Kong have a five-day work week. This value of providing
its employees with an environment where they are able to experience
work-life balance influenced other hotels to follow suit thereby creating
a larger impact on the industry.
What works for Marriott is the autonomy given to every Associate to make
a decision that affects a customer directly. Even a front desk, line level As-
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Notes sociate has the authority and power to give a free room to a customer who
has experienced major service issues in their interaction with the Marriott
group of hotels. This autonomy to make important decisions leads to im-
mediate action where the customer is attended to at the earliest. Although
employees may make mistakes while making a decision, they are empowered
with the responsibility to think through the situation consciously and judi-
ciously. This empowerment enables and encourages employee engagement.
Marriott defines the success of the organisation by how well it is viewed
in the community. It promotes teamwork by encouraging Associates to
engage with the community as core teams. The spirit to serve the com-
munity is demonstrated every day by associates and the organisation by
supporting local, national and global initiatives, through its CSR pro-
grammes. For instance, the Marriott Chennai property is associated with
a home for around 180 children, whose parents have been affected by
leprosy. The mission is to educate the children and train them for possible
employment with the properties after their school programme. All Hotels
also contribute monetarily to these programmes. The best practice is the
belief that CSR engagement as teams, enables Associates to bond with
each other as “community citizens” while working towards a larger goal,
which in turn builds engagement and teamwork. This unique practice is
in addition to other popularly used interventions for team building.
The rewards programme at Marriott is structured towards rewarding ho-
listic performance and not just the achievement of financial targets. This
includes guest and Associate satisfaction. The assessment of a manager’s
guest satisfaction scores and Associate satisfaction scores carry equal
weightage. Marriott conducts an annual online Associate Opinion Sur-
vey across its properties worldwide. The objective of this survey is to
get Associate feedback on the various dimensions that predict Associate
Engagement and thereby improve unit performance. Marriott, along with
Hewitt Associates, has designed a new survey to ensure a high level of
consistency, respondent confidentiality, and data security. The survey
measures Associate opinion on the five engagement drivers of Leadership
Excellence, Personal Growth, and Quality of Life at Work, Teamwork,
and Total Rewards. The Associate Opinion Scores (AOS) feed into reward
practices and future development plans at a unit or property. Low Asso-
ciate satisfaction scores for a manager affect the bonus of the managers
and executive members who run the business concerned.
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Marriott leverages the reward programmes as a way to ensure that As- Notes
sociates achieve the business standards and still feel rewarded. It begins
with simple things like ensuring that housekeeping Associates who clean
rooms or serve food are able to guarantee that they meet certain minimum
standards of cleanliness or food quality. As part of its reward programme,
Marriott has put in place a practice that provides an opportunity for every
Marriott Associate to stay with their family at one of its properties on
their birthday or anniversary. The idea is when Associates actually stay
at the hotel with their family they are more critical of what is missing
from a service or cleanliness point of view. These inputs and sugges-
tions are shared with fellow Associates and lead to an improvement on
current standards and service provided at the hotel. The AOS scores are
leveraged at Marriott to continuously improve its engagement practices
in a measurable manner. Every year, after the AOS scores, Rap sessions
are conducted at every unit to discuss the scores based on which “Ac-
tion Plans” are created and documented, appropriate action is taken and
periodically tracked. If a property has very low AOS scores, a review
or Rap session is conducted within six months rather than on an annual
basis for closer monitoring. Progress on the action plans and employee
satisfaction is monitored on an annual basis through improvement on the
AOS scores. If this fails, an investigation is conducted and appropriate
action is taken on the management at the property.
This strategic and consistent focus on employee engagement has reaped
sustained benefits for Marriott as well. In an industry characterised by
high attrition due to disillusionment of glamour seekers, Marriott not only
attracts the best talent but also has the distinction of having employee
life spans ranging from 20 years to over 50 years which is nothing short
of a miracle.
The above case has been summarised as under
Environment and the firm:
‹ ‹Marriott is a part of the hospitality industry
‹ ‹It works on a hotel management model, i.e. it manages the properties
through long-term contracts with the owners
‹ ‹Hospitality industry is perceived to be very glamorous due to
luxurious workplaces and high living styles visible there.

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Notes ‹ ‹It works round the clock and thus employees have long work hours,
shifts and maybe expected to take on work shifts at any time 24x7.
‹ ‹Industry is notorious for low pay and high attrition.
‹ ‹Training policies though great on paper are seldom implemented
consistently.
‹ ‹Strong hierarchical system is present.
‹ ‹Marriott known for its ‘People first’ or ‘TakeCare’ culture.
Actions by the firm:
‹ ‹Calling employees as ‘Associates’.
‹ ‹Giving more autonomy and decision making power to frontline
employees.
‹ ‹Training focus on ‘grow our own people’ supported by coaching
and mentoring culture.
‹ ‹Phenomenal training budget, globally rolled out training programs
and mandatory training weeks for every employee.
‹ ‹Effective open door policy to communicate with senior management.
‹ ‹Culture of asking the Associates to address General Managers of
properties by their first names in an hierarchy driven industry creates
a perception of value.
‹ ‹Rewards like ‘customer experience’ to employees by giving free stay.
‹ ‹Action plans guided by feedback received from these stays.
‹ ‹Emphasize teamwork by making Associate satisfaction a part of
managers assessment scores.
‹ ‹Strong focus on work life balance and adherence to five or five
and a half work weeks despite industry censure also endears it to
both current and prospective employees.
Results seen:
‹ ‹Employees feel valued and important.
‹ ‹Very high levels of employee loyalty in an industry marred by high
attrition.
‹ ‹Employee tenures ranging from 20 to beyond 50 years.

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‹ ‹Ownership of tasks amongst employees. Notes

‹ ‹Long-term employment leading to a more consistent customer
experience and family feel for employees.
‹ ‹Employee engagement embedded in the organizational culture.
‹ ‹High customer satisfaction and repeat business leading to high
business performance.
Thus, we can see that taking a strategic approach to human resource
management not only results in more satisfied and happy employees but
it can translate into sustained competitive advantage for the business as
well.

IN-TEXT QUESTIONS
1. Human resource management is always strategic in nature. (True/
False)
2. It is very easy to create a competitive advantage. (True/False)
3. Maintaining a competitive advantage is easier than creating it.
(True/False)
4. Human resource department was a cost function for top management.
(True/False)
5. SHRM creates everlasting competitive advantage. (True/False)
6. J W Marriott Hotels put their customers first in order to gain
their loyalty. (True/False)
7. SHRM does not guarantee success. (True/False)
8. SHRM is a long-term concept and requires alignment of human
resource strategy with overall organizational goals and objectives.
(True/False)
9. Only big firms can create a competitive advantage. (True/False)
10. The concept of SHRM is very new and thus not much researched.
(True/False)
11. Human resource management evolved from __________ management.

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Notes 12. Strategic human resource management was first found in literature
in __________.
13. Competitive advantage can be __________.
14. SHRM can help create __________ advantage for the firm.
15. SHRM can help the business __________ its current and
__________ objectives.

16.7 Summary
In the earlier chapters we had discussed what SHRM is and how it can
be implemented in various systems of an organization. In this chapter we
have further delved into the concept of strategic human resource man-
agement but from a more holistic viewpoint. We have tried to understand
how SHRM influences an organization in its larger environment and how
this can lead to sustained competitive advantages over others.
Strategic human resource management at its most fundamental level is
just simple common sense of aligning whatever a firm does with what
its goals and visions are for the long term. It is about creating long-
term plans and then strategically deriving short-term goals from them
and to implement policies that would ensure that all their practices, hu-
man resource oriented or otherwise, are geared towards the same. Firms
by their very nature seek to gain or maintain advantages against their
competitors in order to survive and achieve their aims. These advantag-
es are however only beneficial in the long term if they are consistent
or sustainable. We saw this in the case of J W Marriott Hotels that its
founder’s vision of employee satisfaction was encapsulated in a strategy
of employee oriented work practices that were then instated as part of
the organization’s culture and ultimately lead to a significant advantage
over other industry players. This kind of advantage that has its roots
entrenched in an organization’s culture is not only sustainable but also
it is very difficult for the competitors to imitate without very significant
efforts and expenditure of time and other resources.

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Notes
16.8 Answers to In-Text Questions
1. False
2. False
3. False
4. True
5. False
6. False
7. True
8. True
9. False
10. False
11. Personnel
12. 1980s
13. Cost advantage/first mover advantage/brand loyalty/innovation/etc.
14. Sustained competitive
15. Align, Long term

16.9 Self-Assessment Questions

1. Define human resource management.
2. Define strategic human resource management.
3. What is business performance?
4. What is meant by competitive advantage?
5. What is meant by sustained competitive advantage?
6. What is the relationship between strategic human resource management
and business performance?
7. How can strategic human resource management be a sustainable
competitive advantage for a firm?
8. How can strategic human resource management help generate
competitive advantages for a firm?
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Notes As is the case with most real life concepts, there are no right or wrong
answers to the above questions. However, there are many different view-
points that have been expounded upon by scholars and the same have
been discussed in this lesson. It is our expectation that the students un-
derstand these perspectives and form a reasonably sound point of view
and reflect the same in their answers.

16.10 References
‹ ‹Becker, B. E., & Huselid, M. A. (2010). SHRM and job design:
Narrowing the divide. Journal of Organizational Behavior, 31(2/3),
379–388.
‹ ‹Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking
sustained competitive advantage from human capital. Academy of
Management Review, 37(3), 376–395.
‹ ‹“Definition of compete”. Oxford University Press. Lexico.com. 5
September 2021. https://www.lexico.com/definition/compete
‹ ‹Lin, H. C., & Shih, C. T. (2008). How executive SHRM system
links to firm performance: The perspectives of upper echelon and
competitive dynamics. Journal of Management, 34(5), 853–881.
‹ ‹SHRM India Knowledge Center & Great Place To Work Institute.
(2012). SHRM India Best Workplaces: Case Studies on HR Best
Practices. SHRM India. https://www.shrm.org/hr-today/trends-and-
forecasting/research-and-surveys/Documents/SHRMIndiaBestworkplaces.
pdf
‹ ‹The Economic Times list of Top 500 companies. (2020). The
Economic Times. https://economictimes.indiatimes.com/et500

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 L E S S O N

17
High Performance Work
Systems and Strategic
Human Resource
Management
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
17.1 Learning Objectives
17.2 Introduction
17.3 Key Concepts
17.4 Strategic Human Resource Management and High Performance Work Systems
17.5 Summary
17.6 Answers to In-Text Questions
17.7 Self-Assessment Questions
17.8 References

17.1 Learning Objectives

‹ ‹Provides the clarity about the concept of work system.
‹ ‹Provides the make-up of a high performance work system.
‹ ‹Provides both conceptual and practical understanding of the importance of strategic
orientation of human resource management in creating and maintaining a high
performance work system.
‹ ‹Discuss how a high performance work system supports and underlines the strategic
outlook towards human resource management.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes ‹ ‹Understand interrelationship and interdependence between high

performance work system and strategic human resource management.

17.2 Introduction
We discussed the concept of human resource management and more im-
portantly, strategic human resource management in the last lesson. We
discussed:
‹ ‹How the practice of strategic human resource management can provide
a competitive advantage that is unrivalled in today’s increasingly
globalised world where no knowledge can be expected to remain
inimitable for long.
‹ ‹The difference that a strategic outlook towards human resource
management makes in the long-term sustained success of an
organization.
Consistent high performance is the cornerstone of sustained success in
any business enterprise. High performance work systems are systems
involving forward looking long-term work practices that are implemented
in an organization in order to attain a consistently high level of perfor-
mance. The first and most basic keyword that needs to be understood in
this concept is ‘system’ as it implies that this is both a long-term and
structural effort. The practices that a firm needs to or will adopt in or-
der to implement a high performance work system, by definition, need
to be future oriented and focus on creating self-sustaining structures in
order to create an environment that fosters conditions conducive to high
performance. There are many aspects that have been deemed essential
for a high performance work system by various scholars.
Expenditure on Human Resources—a Cost or Investment?
Caldwell and Floyd (2014) enumerated seven practices that they consid-
er to be foundation stones of a robust high performance work system
(discussed later in this chapter). They envisioned a high performance
work system to be one in which human resources were considered to
be a capital and nurtured with sufficient investment of time and money.
They observed that this view is in contrast with the lean management
view where spending any resource, though not undesirable, is a cost and
needs to be justified with near instant gratification in terms of benefits.

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 High Performance Work Systems and Strategic Human Resource Management

In simple words this means that at present in most work environments, Notes
though the human resources are treated as resources instead of mere
tools, they are just considered to be resources that need to be nurtured
to the extent that they can provide immediate tangible benefits to the
organizations. Growth potential of human resources is thus limited to
their current job profile and is not expected to care much about their
potential as individual human beings.
A high performance work system on the other hand fosters such a type
of work environment in which there is increased focus on enriching the
human capital as both resources for future and individual human beings.
It propagates the view that these initiatives be viewed as investment in
the future of employees in order to realize their full potential both in-
dividually and also to match future requirements. This theory maintains
that the level of employee engagement generated through such an outlook
would far outstrip the costs of undertaking such a long-term and expen-
sive effort. This is because a high performance work system does not
seek immediate gratification through tangible results, instead it relies on
long-term intangible benefits that result from such farsighted investments.
Strategic human resource management, as we have discussed in earlier
lessons, also proposes a strategic view of human resources and sees
them as more than mere tools to deliver present tasks efficiently. Human
resource management has come a long way from its nascent days. Yet,
the current focus of conventional human resource managers remains to
be immediate performance, in other words they are much too concerned
with the present needs to take due care of the future ones. While finding
the ‘right fit’ for present needs may be important to generate desired re-
sults, it is also equally important for the forward looking human resource
manager to align the employee skill set with long-term goals of the or-
ganization and help install systems that maintain those skills. Strategic
human resource management is about creating a pool of human resources
that not only cater to the present requirements of the business but also
support the future goals of the organization and thereby underline its
sustained competitive success.
In this sense we can see harmony in the perspectives espoused by both
a high performance work system and practice of strategic human re-
source management. Both practices strongly support long-term views

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes when looking at human resources and champion the cause of employee
cultivation as a means of sustaining high performance in order to ensure
continued success. This lesson deals with these two concepts and how
they influence and interact with each other. We will first discuss the aims
with which we undertake this lesson and then discuss the theories and
their applications in detail.

17.3 Key Concepts

17.3.1 System
In today’s technology oriented world, we often hear the term ‘system’ in
multiple contexts. There are many examples of systems around us such
as the education system, IT systems, even the systems in our body and
many others. So, what exactly is a system? A system according to its
very basic definition refers to a collection of related parts that together
perform a predefined function. It is important to note that though this
definition may seem simple, every word has an important meaning in the
same. The parts of a system, each perform certain tasks and are related
to each other in some way. And together the parts contribute these tasks
to perform a well-defined function.
Let us take a few examples to understand this concept further. Let us
first take the example of a familiar system namely our nervous system.
As the name suggests, it comprises our nerves, spinal cord and brain. Its
most important function is to guide and govern the actions and functions
of all parts of our body. Here we have taken a very simplified view of a
very complicated system in order to highlight the common components of
a system like related parts and shared functions. Let us now take a more
elaborate example. The education system for instance can be said to be
composed of not only the students and teachers but also the administra-
tors and the policy makers that govern the rules to be followed and the
procedures to be maintained. The students need to study and participate
in education, the teachers need to teach as per the stipulated guidelines,
the administrators need to facilitate the student-teacher interaction and also
implement and report on the policy adherence. The policy makers also need
to first provide policy guidelines for many things like curriculum, rules

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 High Performance Work Systems and Strategic Human Resource Management

of interaction, assessment among others. They then need to consistently Notes

improve the devised framework by collecting feedback from other stake-
holders. There may be many more stakeholders in any given system than
are apparent. In the above example, the parents would also be stakeholders
and not in the least because they primarily are the source of funding for
the education. The society also has a stake in how the future of our society
is being educated as the quality of education input given today is a huge
indicator of the quality of work output received in the future.
Thus, we understand from this example that a system can have many
parts and that they can overlap but need to be related in some manner.
All parts each have different tasks to be performed but together all these
tasks combine to perform one or more predefined functions. Let us now
take a look at work systems.

17.3.2 Work Systems

As the name suggests, work systems are systems that exist in the work-
space. Atler (2013) defines a work system as a system in which human
participants and/or machines perform work (processes and activities)
using information, technology, and other resources to produce specific
products/services for specific internal and/or external customers. So we
can consider that a work system is basically a system that defines the
interdependencies of various units in the work environment such as the
human resources, machines, customers, policies and goals among others.
The function of a well-defined work system is mainly to produce goods
or services. Also, the customers that the system seeks to satisfy may be
internal or external. In simple words, all of these definitions try to tell
us that any part of a business that perform a series of related tasks in
order to fulfill a function may be considered to be a work system. Also,
as we can see from the definition, involvement of human resources is
not a must for creating a system. A fully automated technology-based
system that performs a certain function in the workspace is still a bon-
afide work system.
Atler (2013) specifically mentions certain specific work systems like
information systems that exist for solely processing information, fully
automated systems that function independently once created and installed,

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Notes projects as temporary systems, self-service work systems such as online

banking and supply chains as inter-organizational work systems in order
to highlight the diverse configurations that can make up a work system.
A work system goes through many stages and its makeup depends on
the stage in which it currently exists. A work system can be seen as
static when considering specific periods of time when the components
are relatively stable. A work system can also be considered dynamic
when we think of how it changes over time. Thus we can conclude that
a work system is a very wide concept that can be applied to multiple
settings from multiple perspectives. We will now consider the term high
performance work system in detail.

17.3.3 High Performance Work Systems

A high performance work system, as the name suggests, must pertain
to a work system that aims to generate an above average level of per-
formance as one of its goals. High-performance work systems have also
been defined as “a group of separate but interconnected human resource
practices designed to enhance employees’ skills and effort” (Takeuchi,
Lepak, Wang, & Takeuchi, 2007, p. 1069). Becker and Huselid (1998)
in their text on relationship between high performance work system
and firm performance envision a high performance work system to be
an inimitable resource for applying corporate strategy and achievement
of operational goals. This point of view is an extension of the previous
lesson on competitive advantage. Earlier the people or human resources
in the organization were viewed as costs that needed to be minimized
in order to gain maximum profit. Investments in procurement and devel-
opment of human resources needed justifications that were more project
or short-term oriented. However, the recent trends have shifted towards
a more long-term perspective of investment in human capital.
The recent interest in ‘people’ and new-age concepts like intellectual
capital and knowledge workers also reflects this shifting paradigm that
views people as a source of sustainable competitive advantage. In the same
vein, the high performance work system strategy focuses on people and
their performance as a source of sustainable competitive advantage that
should be nurtured instead of considering them as a cost to be minimized.

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Indeed, Caldwell and Floyd (2013) call it an investment and explicitly Notes
pitch it opposite frugal concepts like ‘lean and mean’ management. This
acknowledgement is however alongside a qualifier that the research still
supports this investment as wise despite inherent costs. In their words,
aligning human resource practices to treat employees as valued owners
and partners adds value and optimizes opportunities to create and maintain
competitive advantage. This is how they envision the implementation of
a high performance work system. The ownership transfer to employees
fosters commitment and leads to better performance which then in turn
increases profitability and thus is an advantage to the organisation. We
will discuss the construct of this concept in detail below.

17.4 Strategic Human Resource Management and High

Performance Work Systems
The concept of strategic human resource management has been discussed
in depth in the earlier lessons and we can safely state now that we un-
derstand the whats and hows of this current big favorite of popular per-
spective. What we are trying to understand in this chapter is the nature of
the relationship between strategic human resource management and a high
performance work system and how, if at all, they influence each other.
If we compare the above-mentioned definition of a high performance
work system as “a group of separate but interconnected human resource
practices designed to enhance employees’ skills and effort” (Takeuchi,
Lepak, Wang, & Takeuchi, 2007, p. 1069) and the definition of strategic
human resource management by Uysal (2015) where he believes that
strategic human resource management establishes individual performance
as the moderator between HRM and firm performance, we will find that
the two different concepts are actually well synchronized and support each
other very well. On one hand, a high performance work system aims at
increasing employees skills and efforts and on the other hand strategic
human resource management provides the impetus to the management
to adopt high performance work system processes in order to leverage
individual performance for firm performance. This synergy is evident
from the definitions of these concepts themselves. But now we will try
and see how these concepts are constructed in literature and how these
components interact.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes The seeds of a high performance work system are embedded in the culture
of the organization itself. Involvement, empowerment and commitment
are the buzzwords of this practice as opposed to the controlling nature
of traditional work systems. Employees are encouraged to be involved
and empowered in their roles. The focus of management is also creating
a committed workforce. This culture however also emphasizes the pursuit
of excellence and expects employees to be well-qualified, highly com-
petent, and constantly engaged in improving the organization. Caldwell
and Floyd (2013) identified seven human resource practices for producing
higher profits through engaging employees as full owners and partners
in an organization’s success and believed these to be the cornerstones of
an effective high performance work system.
We discuss these seven practices and their implications in the text below
and then we will discuss the strategic nature of the same.
1. Ensuring Employee Security: The prevalent trend of many businesses
to engage in downsizing and hiring part-time and contract employees
to avoid creating obligations to employees may be seen as prudent
in the short term but evidence has shown that organizations who
engage in these practices are never consistently able to create wealth
or sustain the improvements in their bottom line in the long term.
High performance work system systems advocate creating high-trust
partnerships with employees that build commitment and promote
extra-mile and extra-role behavior that are critical for success in
the modern organization.
The Japanese work environment is famous for its lifelong employment
culture which has been credited as being the reason for their resounding
success. Lincoln Electric, a successful electric company, adopted
a program years ago that guaranteed employment to workers after
three years on the job. Guaranteed employment policies demonstrate
a commitment to employees and their welfare. However, they
work best when combined with the careful selection and hiring of
employees who are the right fit for the needs of organizations and
who match their job requirements. It has been seen that policies
that ensure employee security build trust with the new hires and
result in employees performing better and being more committed
to their organization’s success.

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This is also in line with the core of SHRM. SHRM envisions long- Notes
term strategic alignment in human resource policies and organizational
needs and objectives. Job security allows the employees to spread
their metaphorical wings and feel valued enough to deliver their
best. They are assured that the strategic future being discussed
will have a role for them. This not only boosts their commitment
but also ensures that they are more open to take ownership of the
processes. Thus, SHRM benefits from the practice of providing
secure employment.
2. Selective Hiring: We studied in Civics that every fundamental right
has an inherent fundamental duty attached to it. This is equally
applicable to employees and organizations. When we talk about
assured employment we must also talk about being careful about
whom to grant this right. In other words, for an organization to
ensure job security, it must first be completely assured about the
usefulness of the resource and their long-term worth in the larger
scheme of things. Carefully evaluating new hires requires that
organizations are precise in identifying the critical skills and attributes
of their employees in the first place. Hiring to fit requirements of
the job makes more sense than simply hiring candidates with the
best academic pedigrees or who look the best on paper. Identifying
attributes like character, respect for others, and a service orientation
that do not change through training actually improves employee
retention and long-term fit.
Enterprise Rent-A-Car, now the largest car rental company in the
United States, has successfully used selective hiring to identify
“people” from “the half of the college class that makes the upper
half possible.” Their focus on hiring former college athletes and
fraternity or sorority members with excellent interpersonal skills has
helped Enterprise to succeed in creating its superb customer service
reputation which has helped the company to earn its top position
in the car rental industry. Focusing on hiring the right people has
been cited by management scholar Jim Collins as a key difference
in those companies that are “great” rather than simply “good.”
SHRM also talks about orienting the human resource practices towards
the broader picture in the long term. It emphasises best long-term

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes fit as being more important than getting the absolute best. Selective
hiring is thus critical to creating a strategically aligned pool of
human resources who will then implement the strategy and create
a culture to sustain the same in the long run.
3. Decentralized Decision-Making: Organizations that establish high
performance work system cultures recognize the importance of
clearly identifying goals and objectives. In implementing those
goals, high performance work system companies delegate decision-
making throughout the organization and empower their employees
to deliver outstanding service to customers and achieve optimal
organization results. Incorporating well-trained and supported self-
managed teams that enjoy autonomy and broad discretion in making
decisions demonstrates the high trust in employees that characterizes
high performance work systems. Rights and duties must always
go hand in hand for any effective implementation of the same for
rights without duties lead to chaos and entitlement clashes whereas
duties without rights are oppressive and lead to resentment and
discontent. Similarly, creating self-managed teams can lead to
greater initiative, but effective self-managed teams require extensive
training, accountability in reporting the progress of assignments,
and ongoing support to optimize their effectiveness. Effectively
using company work teams that are well trained and supported
by an organization’s top management team creates accountability
at the organizational level. This is where accountability among
interdependent team members is most important and where vital
customer-related work gets done. Creating a culture of collaborative
accountability reinforces organizational values and increases personal
ownership at all levels. Thereby, the organization gives its citizens
(the employees) the rights such as efficient training, systemic support,
independence and ownership of their roles while expecting duties
such as collaboration, progress reports and team accountability.
The Ritz-Carlton Hotel chain is famous for the quality of its customer
service. Ritz-
Carlton’s management approach achieves service excellence by
decentralizing decision-making to all of its employees. Those
employees each have the discretion to spend up to $2,500 when

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they believe doing so best serves the customer and meets with the Notes
hotel’s mission. A compelling body of evidence about organizations
that excel in providing great service confirms that decentralizing
decision-making and empowering employees can pay off with
increased customer satisfaction and higher profits.
4. High Results-Based Compensation: Developing a compensation
system that rewards employees at all levels when the organization
succeeds, promotes commitment to shared goals and increases
employee awareness of their roles in contributing to profitability.
Compensating employees contingent upon organizational performance
is most effectively adopted as part of a high-performance culture
that incorporates profit sharing throughout an organization. The
logic of contingent compensation is implicitly equitable and fair
and confirms to employees that they will share in the fruits of
their work. Group-based profit sharing or gainsharing not only
reinforces team-based work culture but also creates a social system
of accountability to the organization and to other team members.
Whole Foods, an American supermarket chain that specializes in
natural and organic food products, is a classic case of a business
that has succeeded in creating such a social system as a part of
its commitment to excellence and high quality. The company has
been listed as one of Fortune’s “100 Best Companies to Work For”
every year since that list was created and has received numerous
awards for honoring company values. Paying for performance also
requires companies to develop far more effective measures of what
constitutes excellence, while also communicating to employees how
they create value for customers and for the company.
5. Training by Commitment: Virtually every high performance
work system organization emphasizes training by commitment as
contrasted with training focused on control-oriented management
systems. Training employees in how to resolve problems, to take
responsibility for quality, and to take the initiative in suggesting
changes in organization work methods demonstrates trust in the
quality of employees hired and an acknowledgement of employee
buy-in to a result-based compensation program. In contrast with
many organizations that deem training to be a frill that can be

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes eliminated first when budget cuts are called for in times of strained
economies, high performance work systems carefully determine
the type of training that is most needed to achieve organizational
goals and then invest heavily on helping employees to optimize
their ability to succeed. Research evidence suggests that engaging
employees in work-related team training increases their ownership
and commitment and their ability to contribute to the achievement
of critical organizational goals.
Amazon vowed to invest in its employees, committing over $700
million to retrain 100,000 team members. The target was not only
upscaling the workforce skills but also to diversify them. The
Amazon Technical Academy, for instance, allows employees with
non-technical backgrounds to develop their capabilities and transition
into software engineering careers.
The programs create a win-win, empowering employees to pursue
their professional dreams while allowing the retail giant to close
skill gaps. Along with creating advancement opportunities internally,
participants are also earning certifications that they can carry with
them, increasing their value if they seek out positions elsewhere.
In today’s highly competitive global marketplace, great companies
understand that a “learning culture” helps the company not only
improve individual desirables like retention, engagement, motivation,
and satisfaction but it also helps all members of the company
contribute value and improve service quality.
6. Reduced Status Barriers: A basic assumption of a high performance
work system is that employees and management are intelligent
and self-driven to achieve common goals. Also, good ideas and
organizational improvements can come from employees at all levels
of the organization. Wage inequality and the use of symbols like
language, dress, physical space, and benefits can send a message to
employees that an organization views status hierarchically, rather than
treating every employee as if he or she is both valued and valuable.
Stephen R. Covey repeatedly noted that great organizations seek to
build high trust cultures by nurturing and developing people, rather
than by controlling them. Treating employees like valued partners by
reducing status barriers, by empowering employees, and by treating
employees with dignity and respect builds trust and commitment.
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The two co-founders of Kingston Technology, the largest independent Notes

producer of DRAM memory modules for personal computers in
the world, typify the reduction of status barriers in their highly
successful and extremely profitable company by (1) working in
open cubicles, and (2) not having private secretaries. Although the
artifacts of an organizational culture may send a message about status
barriers and how employees are valued, the most important way that
leaders demonstrate their attitudes about employees is by creating
a culture that values, trusts, and empowers employees. Leaders of
organizations communicate the importance of how employees at all
levels are valued by the policies, practices, and rewards that are
provided throughout the organization.
7. Sharing Key Information: A famous quote attributed to George
MacDonald, a Scottish author, poet and priest , citation says “To
be trusted is a greater compliment than being loved”. The sharing
of financial, strategic, and performance information conveys to
employees that they are trusted partners who can utilize this important
information to assist their organization to achieve its goals. Highly
motivated and well-trained employees not only need information
to be able to contribute to their organization’s success but they
also feel cherished and loved when it is so. Sharing information
and providing the training in how to use it to achieve goals makes
implicit sense, yet many traditional organizations refuse to do either
and pay the price in lost opportunities and reduced trust.
Springfield ReManufacturing Corporation (SRC) is a highly successful
firm that is now owned by its employees after splitting from
International Harvester. It specializes in remanufacturing transportation
products and has pioneered an ‘open book management’ system that
they call ‘great game of business’. Cash (1997) compares SRC’s
role in development of an open book management approach with
Motorola in TQM. He calls SRC the Johnny Appleseed of this
approach. SRC’s approach to open book management, ‘great game
of business’, was aimed at closing the gap between manager and
employee perspectives. The system at its core believes that the
best, most efficient, most profitable way to operate a business is to

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes give everybody in the company a voice in saying how the company
is run and a stake in the outcome. The culture of ownership and
transparent information sharing has become more and more critical
in the current world economy that is increasingly being driven by
knowledge.
The research suggests that an organization should adopt all seven
of these practices in an aligned manner instead of a piecemeal
fashion and that the commitment of the top management team and
leadership at the top are responsible for creating an aligned and
committed corporate culture that is essential to creating an effective
high performance work system organization. Strategic human resource
management is essentially an attempt to create aligned and involved
workspaces. Thus, in line with the above observations, we can
theorize that strategic human resource management is essential to
creating an effective high performance work system organization.
IN-TEXT QUESTIONS
1. High performance work systems can be implemented without
management initiative. (True/False)
2. High performance work systems do not punish low performers
without giving them chances to improve. (True/False)
3. High performance work systems can be implemented within a
very short time. (True/False)
4. High performance work systems require workers to work more
hours and submit more frequent reports to improve productivity.
(True/False)
5. High performance work systems can only be created in very
large organizations. (True/False)
6. High performance work systems and strategic human resource
management are approaches that support each other and improve
both business outcomes and employee experience. (True/False)
7. High performance work systems are __________ term policy
measures to improve performance.
8. High performance work system cultures recognize the importance
of clearly identifying __________.

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9. High performance work system cultures believe that employees Notes

and management are __________ and __________.
10. Group-based profit sharing reinforces __________ work culture.
11. Effective self-managed teams require extensive __________,
accountability in __________ the progress of assignments, and
__________ to optimize their effectiveness.

17.5 Summary
In the earlier chapter of this unit, we had discussed the broad strokes
of how SHRM impacts business performance and acts as a competitive
advantage for it. In this chapter we tried to understand how the concepts
of SHRM and HPWS interact with each other. First, we discussed the
concept behind a high performance work system in detail. High perfor-
mance work systems are systems involving forward looking long-term
work practices that are implemented in such a way as to embed themselves
in the very culture of an organization. They are supported by open and
transparent management, independence at the workplace, high trust and
information sharing practices and robust and dedicated training programs.
These then result in the employees being more independent, accountable
and engaged which then in turn leads to more motivation for higher
target achievement and thus, high business performance. SHRM is also
about making long-term plans that align with overall corporate policy
and implementing them through strategic use of people resources. It also
advocates nurturing of employees and training their potential for long-
term benefits. Thus, SHRM lends itself as the perfect tool to implement
a HPWS-driven organization. And in return, HPWS-based organizations
are the evidence that strategic use of human resources improves perfor-
mance at both individual and organizational levels.

17.6 Answers to In-Text Questions

1. False
2. True
3. False

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes 4. False
5. False
6. True
7. Long
8. Goals and Objectives
9. Intelligent and Self driven
10. Team based
11. Training, Reporting, Ongoing Support

17.7 Self-Assessment Questions

1. Define strategic human resource management.
2. What is a high performance work system?
3. What are the important features of strategic human resource management-
based style of management?
4. Compare traditional HR practices and strategic human resource
management-based HR practices briefly.
5. What are the goals of a high performance work system?
6. Describe the internal and external conditions that help implement a
high performance work system.
7. How does strategic human resource management help maintain a
high performance work system?
8. How does a high performance work system support strategic human
resource management?
9. Keywords: long-term, speed, flexibility, cost minimization, skill-set
creation. sustainability, competitive advantage, human capital, investment.

17.8 References
‹ ‹Alter, S. (2013). Work system theory: overview of core concepts,
extensions, and challenges for the future. Journal of the Association
for Information Systems, 72.

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‹ ‹Becker, B. E., & Huselid, M. A. (2006). Strategic human resources Notes

management: where do we go from here?. Journal of Management,
32(6), 898-925.
‹ ‹Caldwell, C., & Floyd, L. (2014). High Performance Work Systems.
Graziadio Business Review, 17(3).
‹ ‹Cash, J. (1997, March). Opening the Books. Harvard Business
Review. https://hbr.org/1997/03/opening-the-books
‹ ‹Liao, H., Toya, K., Lepak, D. P., & Hong, Y. (2009). Do they see eye
to eye? Management and employee perspectives of high-performance
work systems and influence processes on service quality. Journal
of Applied Psychology, 94(2), 371–391.
‹ ‹Messersmith, J. G., Patel, P. C., Lepak, D. P., & Gould-Williams,
J. S. (2011). Unlocking the black box: Exploring the link between
high-performance work systems and performance. Journal of Applied
Psychology, 96(6), 1105–1118.
‹ ‹Takeuchi, R., Lepak, D. P., Wang, H., & Takeuchi, K. (2007).
An empirical examination of the mechanisms mediating between
high-performance work systems and the performance of Japanese
organizations. Journal of Applied Psychology, 92(4), 1069.
‹ ‹Uysal, G. (2015). Stages, Content, and Theory of Strategic Human
Resource Management (SHRM): An Exploratory Study. Uysal, Gürhan
(2014). Stages, Content and Theory of SHRM: An Exploratory Study.
Journal of Modern Accounting and Auditing, 10(2), 252–256.

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 L E S S O N

18
Human Resource
Management and Firm
Performance: Evaluating
Strategic Human Resource
Management Effectiveness
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
18.1 Learning Objectives
18.2 Introduction
18.3 Key Concepts
18.4 Human Resource Management and Firm Performance
18.5 Evaluating Effectiveness of Strategic Human Resource Management
18.6 Example of Strategic Human Resource Management as Positive Influence on
Firm Performance
18.7 Summary
18.8 Answers to In-Text Questions
18.9 Self-Assessment Questions
18.10 References

18.1 Learning Objectives

‹ ‹Providea thorough understanding of the linkages that exist between human resource
management practices and firm performance.

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‹ ‹Understanding the effectiveness of strategic human resource management Notes

as a practice in positively influencing these linkages.
‹ ‹Understanding the relationship between human resource management
practices and firm performance.
‹ ‹Explore the role of strategic human resource management in
improving firm’s performance.
‹ ‹Understanding the effectiveness of such efforts in a variety of settings.
‹ ‹How strategic human resource management aligns with corporate
goals of optimum performance will be discussed afterwards.
‹ ‹The role that strategic human resource management plays in an
organization’s corporate strategy.
‹ ‹How the strategic human resource management approaches or
frameworks can be evaluated in order to direct corporate policy.
‹ ‹Gain a deep understanding of the relationship and underlying
influences of strategic human resource management and firm
performance on each other.

18.2 Introduction
In the previous chapters, we have gained a deep understanding of the
theory underlying strategic human resource management and the way in
which it translates into sustained competitive advantages for the firm.
The importance of strategic human resource management in broad or-
ganizational structure and its impact on various managerial goals has
also been discussed. In the last lesson, we discussed the concept of high
performance work systems and their relationship with strategic human
resource management.
In the earlier lesson we discussed:
1. Concept and make up of a high performance work system.
2. Importance of strategic orientation of human resource management
in creating and maintaining a high performance work system.
3. How a high performance work system supports and underlines the
strategic outlook towards human resource management.
4. Interrelationship and interdependence between high performance work
system and strategic human resource management.
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Notes Performance of a firm has long been accepted as an indicator of expected

profits and thus can be considered to be the aim of any business. Early
forms of personnel management sought to maximize gains for the firm by
exploiting employees to increase performance. For instance, assembly lines
increased the profit of employers by a wide margin but their existence meant
monotonous and repetitive work for workers with no need for knowledge
or skill enhancement. Later iterations of the concept evolved to consider
the implications of this exploitation over an employee’s lifecycle. With the
emergence of this concept of human resource management, the employees
were considered to be a resource that when kept motivated, engaged and
rewarded would accrue increased gains in terms of performance. The po-
tential of performance in employees was acknowledged along with their
current levels of performance leading to separation of training and de-
velopment as a core function of the modern human resource manager.
In the late 20th century, research based on the technical subsystem per-
spective revolving around task requirement and accomplishment firmly
established the notion that human resource management practices help im-
prove employees’ knowledge, skills and abilities that in turn has a positive
impact on an organization’s performance (Katz & Kahn, 1978; Schuler &
Jackson, 1987). Since then, modern research into human resource practices
and their impact on organizations has revealed many linkages hitherto un-
acknowledged. Bowen and Ostroff (2004) considered organizational climate
to be a significant mediating variable in the relationship between human
resource management and firm performance. Another school of thought
believed that organizational culture influenced the system of human
resource management practices in any organization and that in turn
the human resource management practices as a system reinforced the
organizational culture. This then leads to an impact on the overall
firm performance.
Proponents of the role theory believe that any organization is a system
of roles where the roles are constructs that are independent of the current
employees occupying them. This system of roles need to be strategically
aligned and mutually augment each other in order to optimize firm perfor-
mance. Thus we can see that there are many perspectives of human resource
management that agree that human resource management practices and
overall organizational performance share a positive relationship.

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Also, as discussed in earlier lessons, the resource-based view of human Notes

resource management maintains that strategic human resource man-
agement practices influence firm performance and have been widely
accepted as a possible source of competitive advantage (Becker &
Huselid, 1998). In very simple words, happy employees make for produc-
tive employees and any firm that nurtures its employees can reasonably
expect better individual performance from them. This in turn would be
expected to lead to improved overall performance of the firm translating
into improved gains and sustained competitive advantage.
Human resource management practices have been found to have a
great influence on employee behaviors and impact them during ev-
ery stage of the employee life cycle. An organization’s human resource
management practices begin to impact employee behaviors right from
the beginning when a prospective employee makes a choice to apply for
any particular organization. The prevalent organizational image, climate
and culture are all driven or reinforced by the human resource manage-
ment practices and they also form an important criteria by which the
desirability of an employer is judged. Prospective employees create an
image of the organizational requirements in their minds and model their
behaviors according to their perceptions about the kind of employee the
organization seeks. Human resource management practices then continue
to influence the employment experience by directing the perception of
organizational needs by their very nature. For instance, a set of human
resource management practises that focus on innovation cannot foster an
organizational environment that is conducive for a strategy based on ex-
cellent customer service instead it will foster a culture where innovation
is prized above all else and the employees too are given the signal that
if they focus on innovation then their attempts will be in line with what
the management desires from them in the long term. In other words, we
can say that the human resource management practices are the kind
of signals that an organization can send to its employees to inform
them about its expectations and desires from them.
Summing up, strategic human resource management seeks to understand
and exploit the broader business picture for optimizing the business en-
vironment in order to gain maximum advantage. It is mostly in the form
of performance from its employees but it can also be focussed towards

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes creating a human assets pool with a long-term view. The strategic nature
of this view helps businesses proceed unfailingly towards achieving their
broad overall goals in every aspect be it internal or external. We will
discuss what this entails in the following paragraphs.

18.3 Key Concepts

18.3.1 Firm Performance

Firm performance, as discussed in earlier lessons, refers to the degree
of achievement of overall business outcomes against the goals set by
the management. The nature of goals is different for different firms but
whatever a firm may consider to be its goals are what constitute the pa-
rameters of its performance. This is especially so because different firms,
just like different people, have different preferences and priorities. We
have already seen that firm performance is influenced by factors that can
be either external or internal. The degree of influence that each of them
carry may be easily quantified or difficult to determine but the influence
exists and it is the job of management to manage these to align with
their goals for a positive impact on performance.
In a very simplified manner, we can say that the essence of the above
paragraph is that performance can be said to be that extent to which a
firm can claim to have achieved the goals it had set out for itself at the
beginning of the period over which the performance is being considered.
These goals could be quantified in terms of profit, business turnover,
popularity, customer satisfaction, goodwill or any measure deemed as
worthy by the management.

18.3.2 Effectiveness
The origin of the noun effectiveness is the adjective effective. The Mer-
riam Webster online dictionary essentially defines the word ‘effective’
as “producing a result that is wanted : having an intended effect” or
“producing a decided, decisive, or desired effect”. Then, as a result,
effectiveness can be said to be the ability to be effective or produce the
intended effect. For instance, a new drug or vaccine is said to be effective

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if it can have the desired effect of curing or preventing the associated Notes
disease. In other words, effectiveness of a drug or medicine lies in its
ability to cure or prevent the associated disease.
In the context of workplaces, effectiveness translates into the ability to
get the desired results. It can take on many forms in the context of a
firm. Managerial effectiveness would refer to the ability of a manager to
achieve their goals of managing their subordinates and their team output.
Policy effectiveness would then mean the degree or extent to which the
given policy has intended or desired effect. Operational effectiveness
can be said to be the degree of goal achievement in business operations.
Employee effectiveness would then be the ability of employees to achieve
their goals as expected and defined mutually with their managers and the
organisation. Thus, effectiveness in the context of workplaces would be
derived from the degree of achievement of business goals in one form
or another. In other words, firm performance would influence most of
the workplace effectiveness measures in the long run.

18.3.3 Human Resource Management’s Effectiveness

As discussed above, effectiveness is the ability to be effective. We can
then infer that strategic human resource management effectiveness is the
ability or extent to which the strategic orientation of human resource
management is effective in attaining the desired effects or results.
Richard and Johnson (2001) found that though many viewed human re-
source management as integral to a firm’s strategic processes and believed
it involved viewing human resource management activities as a factor
contributing to firm profitability as opposed to a cost of production, the
further research advocated by Huselid et al. (1997) regarding the effec-
tive use of such policies in contrast to their mere existence has not been
justified satisfactorily in contemporary literature. This means that one
cannot just implement any strategic human resource management initiative
without care for its suitability and effectiveness. Just as we test students
using various methods to test the effectiveness of teaching and the extent
of students’ personal understanding, the same needs to be done for any
strategic human resource management initiative. In other words, for any
strategic human resource management effort to be considered a success,

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Notes it needs to be quantified against a predefined standard of expected im-

provement in desired measurables as well.
Thus, we understand that strategic human resource management effec-
tiveness is the actual extent to which any given strategic human resource
management initiative that is implemented is able to achieve its desired
goals. It is the degree to which the predefined expectations or goals are
achieved at the end of the predefined period. We will also see in the
subsequent sections that there is no fixed formula for implementing a
strategic human resource management framework. We will see that different
organisations choose to adopt different ways to strategically align their
human resource practises with their strategic goals and policies. There
cannot be any one single success factor for an effective strategic human
resource management framework because it needs to fundamentally be
customised to the strategic needs of the organisations. Thus, there must
be as many possible strategic human resource management frameworks
as there are corporate strategies. Since we know that there are numerous
ways to formulate corporate strategy, we must acknowledge that there must
be numerous possible strategic human resource management frameworks.
The question that then arises is how does one identify the most effective
strategic human resource management framework. Although there is no
fixed formula for such initiatives, we can say with reasonable confidence
that a framework that plays to the strengths of any organization while
minimizing its environmental threats will have a reasonable chance of
success.
Next we will try and understand the human resource management–Firm
performance linkages along with their possible intermediaries.

18.4 Human Resource Management and Firm Performance

It is often argued that a firm’s performance is the direct outcome of
its employees’ efforts and the whole field of human resource manage-
ment-based research is directed towards gaining a better understanding
of these relationships to improve business outcomes. Bowen and Ostroff
(2004) in an attempt to understand the model of linkages between human
resource management practices and organizational performance found that
much research needs to be directed towards the ‘How’ and process by
which this relationship works. There are many approaches which can be
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utilized to analyse the relationship between strategically human resource Notes

management practises and organizational performance outcomes.
The dominant approach to human resource management in research has
been to take a systems view of human resource management. In this
approach the focus is on macro factors and variables like the overall or
aggregate set of human resource management practices and firm performance
instead of examining the effects of micro factors like individual human
resource management practises and individual employee performance.
Another perspective is the strategic perspective. Research-based on the
strategic approach to human resource management has explored the ‘fit’
between various human resource management practices and the overall
organizational strategy. This can also be said to be an argument for the
need for horizontal alignment of various human resource management
practices with strategic goals of the organization. In other words, the
need for complementary relationships between both individual human
resource management practices and their overall synergistic relationship
with organizational strategy is considered most important in the strategic
approach.
Richard and Johnson (2001) point out that technical human resource
management effectiveness involves using traditional human resource
practices, such as recruiting and selection, efficiently. Strategic human
resource management effectiveness, in contrast, stems from the firm
building human resource complexities through innovations such as team-
based job designs, flexible workforces and employee empowerment. We
are concerned with the latter viz. strategic human resource management
effectiveness because this form of human resource management effec-
tiveness is a firm-specific capability that yields economic benefits not
readily duplicated through competitive actions.
We now take a look at the research findings from various countries that
attempt to establish effects of strategic human resource management on
firm performance. There has been ample research in the Western developed
countries in order to confidently say that firm performance is positively
linked with strategic human resource management practices (Huselid,
Jackson, & Schuler, 1997; Huselid & Becker, 1998; Richard & Johnson,
2001). We take a look at the research from other regions in order to
better understand the global accuracy of this observation.

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Notes Let us first take a look at the leading eastern economy of the Republic
of Korea that is culturally considered to be the opposite of the individ-
ualistic West (Korea ranked first in a collectivist culture survey surpass-
ing Japan). According to Bae and Lawler (2000), Korean New Human
Resource Management (NHRM) approaches involve greater reliance on
teams, employee empowerment, and performance-based evaluation, pay,
and staffing. They believe that these NHRM approaches are basically
strategic approaches to human resource management developed by Korean
business conglomerates (chaebols) in order to compete internationally in
line with global trends while adapting their collectivist and hierarchical
traditions to international empowerment-driven perspectives. They also
studied the impact of Asian culture on international practices adopted in
Korea. They found that top management’s human resource values and fully
accumulating and utilizing human capital have helped firm performance
and believe that human resources can serve as a source of sustained
competitive advantage through institutionalizing core human resource
competencies. Thus we can say that strategic human resource manage-
ment is positively linked with firm performance in the Korean context.
Korea’s neighbor, China, is an emerging East Asian economy and has
its own set of traditions and cultural practices. Wei and Lau (2008) at-
tempted to analyze the impact of strategic human resource management
on firm performance in the Chinese context. They found that strategic
human resource management mediates the relationship between market
orientation and firm performance. It is also found that the effect of
strategic human resource management on firm performance is stronger
for firms with a higher degree of autonomy in staffing, and weaker for
private firms. Other types of ownership (state or foreign) have no effect
on this relationship.
Now let us take a look at the evidence from middle eastern and southeast
Asian regions as well. Gurbuz and Mert (2011) examined strategic human
resource management (strategic human resource management) and human
resource practices in Turkey to assess the impact of these practices on
financial/market performance, operational performance, job satisfaction,
and turnover. They empirically analyzed a sample of Turkey’s Top 500
firms-2007 and found that strategic human resource management had
direct and positive effects on financial and operational performance but
did not have any significant impact on turnover.
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In the Malaysian context, Osman et al. (2011) analyzed the impact of Notes
strategic human resource management on firm performance. They collected
responses from human resource managers and top executives responsible
for managing human resources from a sample of 217 Malaysian firms and
analyzed them using SPSS. They found that human resource practices do
have a significant impact on the performance of Malaysian organizations.
Loo and Beh (2013) also analyzed firm performance in the context of
the insurance industry in Malaysia. They surveyed non-executives, exec-
utives, managers, and top management from seven major insurance firms
at headquarters in the Klang Valley and found that performance appraisal,
internal communication, strategic human resource management alignment
in the organization, and career planning were the best predictors of firm
performance.
And last but not the least, we take a look at our own unique nation, India.
India not only boasts of the second largest labor force in the world after
China and is a rapidly emerging economy, it is also one of the oldest cra-
dles of civilization and a cultural melting pot of diversity. This diversity
and deep-rooted culture make India vastly different from other economies
and influence employee-employer interactions as well. Even though other
Asian countries also are culturally quite different from the West, they are
mostly homogeneous in terms of domestic population, religion and culture.
India is unique in this sense as it is the world’s largest democracy in
terms of people and has the most diverse religions, languages and cultures
within them. There has been sparse empirical research on the impact of
strategic human resource practises firm performance in the Indian con-
text. Singh (2003) analyzed data on strategic human resource orientation
were obtained from Indian firms belonging to nineteen manufacturing
and service industries. The findings have shown that the firms with an
emphasis on strategic human resource orientation performed significantly
better than the firms with a lower emphasis. Azmi (2011) identified four
types of fit vis-à-vis strategic human resource management based on ex-
tensive literature review. Thereafter, the four types of fit were linked to
effectiveness of human resource management function and organizational
performance using SEM. Mixed support was found for the hypothesized
relationships. Nigam et al. (2011) analyzed data from 25 organizations
and found that there is a positive relationship between strategic human

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Notes resource management and effectiveness, business strategy has an impact

on the relationship between strategic human resource management and
effectiveness and universalistic theory of strategic human resource man-
agement does not work in the Indian service sector. Also, the strategic
human resource management policies need to be dynamic and contingent
on the business strategy to attain maximum impact on effectiveness.
Thus, we have seen that there is empirical evidence from across the
world that strategic human resource practices are positively linked with
firm performance.

18.5 Evaluating Effectiveness of Strategic Human Resource

Management
It is understood that human resource management has evolved over a period
of time and it is today accepted as an integral part of strategic endeav-
ors of any organization. We have discussed the importance of strategic
orientation of human resource management in the previous lessons. The
whole intent of this course has been to make the students aware of the
role of strategic human resource management in an organization and the
wider world. We have seen what strategic human resource management
is, how it is implemented and how it relates to various human resource
management functions among other things. We have seen how it can prove
to be a source of sustained competitive advantage. In this lesson also we
are trying to understand how it relates to firm performance and desired
organizational outcomes. Thus, we understand that strategic human re-
source management is important and desirable. However, the exact nature
and scope of strategic human resource initiatives is not easily defined. It
varies vastly from one firm to another. There are many strategic frame-
works that an organization can choose to adopt in its endeavors along
this path. However, until and unless these efforts bear desired results,
there can be no conclusive argument regarding the usefulness of strategic
human resource management in any firm. Thus, not only is it important
to implement strategic human resource management, it is equally imper-
ative that the strategic human resource management efforts be effective.
For any declaration of effectiveness of these efforts, there needs to be
a framework for measurement of the same. We will now take a look at

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some ways using which we can evaluate the effectiveness of strategic Notes
human resource management.
Since strategic human resource management efforts by their very nature
involve the big picture and long-term intentions, they can only be ana-
lyzed using secondary measures. There is no set quantitative framework
to evaluate the effectiveness of strategic human resource management
directly. That being the case, it is still very important and relevant to
measure and evaluate the impact of any effort intended to be a part of
strategic human resource management.
As we have already discussed, the ‘how’ of SHRM implementation varies
for each organization and is governed by both its external and internal
factors. Also, we understand ‘why’ it is important to do the same. We
are now discussing the method of evaluating the success of the method
implemented by the firm. In other words we seek methods to gauge its
effectiveness. Periodic reviews, in-depth audits, benchmarking, review of
key HR performance indicators and ROI analysis can be used for the same.
Most organizations conduct annual or quarterly strategic reviews as a
mechanism to monitor and evaluate progress toward the achievement
of strategic objectives. This helps assess the degree of adherence to
key objectives and also provides the opportunity to identify and adapt
to significant internal or external changes that affect the strategic plan.
This then can facilitate the modification of the action plan accordingly.
A detailed SHRM audit is an in-depth analysis that evaluates the current
state of SHRM in an organization. The audit identifies areas of strengths
and weaknesses and where improvements are needed. During the audit,
current practices, policies, and procedures are reviewed. This helps the
management understand the level of current vs. expected position of their
efforts. Many audits also include benchmarking against organizations of
similar size or industry. This helps them better focus and streamline their
efforts and prevent deviation from goals. Some organizations may find
that systems or tools such as balanced scorecards, benchmarking and
dashboards are helpful for keeping focus and monitoring results.
Thus, we can say that the key to ensure high effectiveness of SHRM
initiative is to do it right in the beginning itself. It is critical to under-
take in-depth analysis to identify an initiative that aligns with the firm’s
current and desired situations. Also, it is equally important to clearly and

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Notes measurably define the actions, milestones and success measures of each
facet as well as clearly communicating the same to all the involved parties.
Continuous monitoring and action plan streamlining is then needed to
ensure success. This will then yield clear measures to gauge effectiveness
and result in improved business outcomes.

18.6 Example of Strategic Human Resource Management

as Positive Influence on Firm Performance
As we know that strategic human resource management is a system
wherein the human resource department proactively supports a compa-
ny’s business outcomes and overall goals. Still too few companies are
truly dedicated to improving their human resource practices for better
business performance. As we’ve touched upon, it requires letting human
resources out of its silo and away from purely administrative operations.
We have amply discussed the theory and underlying reasoning for the
same. Now in this section we take a look at a few organizations that
translated this theoretical framework into practical initiatives and how
this influenced their performance. Here are three companies that not only
are well-known and well-loved brands but they also have systematized
outstanding strategic human resource management practices and reaped
immense rewards from the same.
The first such organization is the IT giant Google without whose products
and services, it is difficult to imagine the internet for many of us. Goo-
gle being Google, it’s a given that their approach to human resource was
out of the box. Google set the trend for modern workplaces with tons of
employee perks and amazing “Googlified” facilities. Google went much
further in breaking tradition in its strategic human resource management
approach. Being a leading technology company they chose to base their
approach in data analytics to make it more empirically sound. In 2006, the
Google co-founders Sergey Brin and Larry Page resolved that feedback and
employee data would be the foundation of this empirical human resource
management approach. Google’s Project Oxygen is a consequence of this.
It is an ongoing study into management practices for identifying and mea-
suring key management-oriented behaviors exhibited by best performers and
helps nurture them. It involves a lot of technical and analytical processing
of data gathered by the human resource department, but in simple terms,

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Google undertook an in-depth statistical analysis into what their employees Notes
consider to be good managers. This analysis resulted in identification of
eight behaviors that were commonly exhibited by the highest-performing
managers. They then consciously trained the rest of their managers in these
eight behaviors.
As a result of this, over a period of time, Google saw a significant im-
provement in human resource and team-oriented measurables like employee
turnover, employee satisfaction, and individual/team performance. Google
proved that collecting data from employees and directing it to improve
the employee experience works. It’s no surprise then that its employees
are rated as some of the most happy as well as productive employees
worldwide.
Now let us take a look at our second organization, networking giant
CISCO. Established in 1984 by husband and wife duo of Len Bosack and
Sandy Lerner, CISCO is the textbook example of the philosophy, ‘neces-
sity is the mother of invention’. Their first product, the multi-protocol
router, was born out of the direct need felt by these two to communicate
while working in different buildings of the Stanford University campus.
Since then CISCO has pioneered many networking and IT solutions. In
line with such history, CISCO decided to develop in-house technology
in order to guide their overall human resource management strategy and
to better serve the needs of their business. The result of this effort was
what is known as the CISCO Talent Cloud.
Talent Cloud at its core is a customer relationship management system
geared towards the internal customers viz. Employees. It aims to provide
managers a transparent insight into the skills and experiences of their
huge number of employees. It goes even further as this system also gives
CISCO employees the tools and insights into their own positions. This is
to help them assess their current levels of skill and experience in order to
determine the steps to overcome the lacking areas to proactively advance
their careers. This strategic approach not only lets the managers enroll
the best team required for any given project, it also provides the employ-
ees with an opportunity to meet their targeted goal by working on their
preferred project. This system also lets senior managers access real-time
data on their team performance, how the teams are producing results,
executing their priorities, and levels of engagement of their reportees.

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Notes Cisco labels this as a ‘one-size-fits-one’ employee experience. And it has

been successful in attracting top talent. CISCO has ranked number one
in Fortune’s ‘Best 100 Companies To Work For’. This system not only
helps them attract the best talent and retain it, but it also helps them
meet their business goals.
For our third example let us get away from the technology sector and
move towards one of the most people-oriented industries, the hospitality
industry. Anyone who’s experienced the hospitality of a Hilton Hotel
will probably have enjoyed it. This is not a coincidence, their standards
are systematized and require managing a large and diverse workforce to
maintain them. Hilton has been frequently lauded as one of the best global
employers. It is not an easy achievement for a service industry company.
Hilton’s secret to retaining both customers and employees owes a lot to
their highly strategic approach to management of organizational culture.
Hilton believes that an organization’s culture is important as it reflects
in the day-to-day work interaction and projects. As a consequence of this
perspective, they chose to implement two-pronged quantitative analysis
to maintain its culture. They chose ‘the balanced scorecard’ and ‘the
team member survey’ as their two methods. The ‘balanced scorecard’
aims to harmonize corporate vision, strategy, and goals with team mem-
ber performance. This method tracks metrics like revenue maximization,
customer loyalty, employee satisfaction, skills training, diversity among
others as key performance indicators constantly. It also allows the teams
and individual employees to see the impact of their role and performance
on the company. Regular sharing of findings and best practices across
the company also nurtures an inclusive culture. The second prong viz.
team member survey, compliments the first one viz. balanced scorecard.
Hilton conducts a global annual team member survey to assess factors
like employee morale, effectiveness of leadership, pride in work, and
personal development. Thus the culture displays inclusive qualities and
supports the organizational objectives. Employees are highly engaged and
feel in sync with the organization. It creates a win-win situation wherein
the employees achieve their personal objectives while contributing their
dues towards the organizational mission.
Thus, we see that industry leaders and highly sought-after brands have
implemented strategic human resource management practices in line with
their strategic goals and they have reaped immense rewards due to the same.
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IN-TEXT QUESTIONS Notes

1. All human resource management practices positively influence

firm performance. (True/False)
2. Aligning a firm’s human resource management practices with its
desired strategic goals helps improve firm performance. (True/
False)
3. Existence of strategic human resource management practices is
sufficient to ensure their effectiveness. (True/False)
4. Cisco believes in ‘one size fits all’ approach to human resource
management. (True/False)
5. Organizational climate is a significant mediating variable in the
relationship between strategic human resource management and
firm performance. (True/False)
6. Strategic human resource management is a system wherein the
human resource management department proactively supports
a company’s business outcomes and overall goals. (True/False)
7. Strategic human resource management seeks to align human
resource management practices with an organization’s __________
goals.
8. Strategic human resource management effectiveness is the __________
to which the predefined expectations or goals are __________
at the end of the predefined period.
9. As a part of its broad strategic human resource management
initiatives, Google statistically identified __________ common
behaviors exhibited by the __________ managers and then
trained the rest in them.
10. Strategic human resource management framework must be __________
to the __________ of an organization in order to be most effective.

18.7 Summary
We have already understood that the function of the human resource de-
partment is no longer just administrative but it has taken on increasingly
strategic undertones in the past few decades. These days it integrates fully

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Notes within the company strategy, policies, and goals for long-term sustainabil-
ity and support of great organizational culture. Strategic human resource
management is not only the hottest buzzword in the industry but it is also
the need of the hour in an ever-changing global business environment for
sustaining firm performance through long-term competitive advantages.
We defined firm performance as the degree of goal achievement and
strategic human resource management effectiveness too as the degree
to which any strategic human resource management initiative was able
to achieve its predefined goals. We understood that there are numerous
ways in which any firm could adopt initiatives geared towards strategic
human resource management and their implementation and environmental
factors both influenced their degree of success. There is no given formula
or checklist for adopting strategic human resource management practices,
instead it is important for each firm to recognise its unique situation and
design and implement initiatives tailored to its strengths and needs in
order to maximize their chances of success. In order to better understand
the range of initiatives that can lead to strategic success, we looked at
a few industry examples. We saw in the example of tech giant, Google
Inc., they played to their strengths and adopted in-depth data analytics
to identify top success indicating behaviors in their best performers and
trained the rest of their managers in them. Whereas, CISCO in their relat-
ed field, created a whole human resource oriented CRM system to cater
to its internal needs. This not only helps them best manage their human
resources but also lets the employees figure out their own personalized
growth paths making CISCO a favorite among prospective employers.
Hospitality leader Hilton employed a two-pronged approach using ‘balanced
scorecard’ and ‘team member survey’ in order to align corporate strategy
and goals with individual member performance. We can see that each
approach varies widely in scope, effect and implementation however they
were each highly successful in their respective organizations and helped
them maintain their leading status and create strategic successes. Thus,
we understood that there is no one-size-fits-all formula for implementing
strategic human resource management. It is as important to understand
the need for strategic human resource management as it is important to
identify the best approach for implementing strategic human resource
management in any given business. When any organization deliberately
formulates a strategic human resource management framework tailored

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 HUMAN RESOURCE MANAGEMENT AND FIRM PERFORMANCE

to its own specifications and then religiously implements it with a long- Notes
term view then it can reasonably expect sustained improvement in its
performance. Thus, in this chapter we learned that not only is strategic
human resource management a significant factor for improving form
performance, it is also equally important to measure and monitor any
strategic human resource management framework as it is to design and
implement it.

18.8 Answers to In-Text Questions

1. False
2. True
3. False
4. False
5. True
6. True
7. Long-term
8. Degree, Achieved
9. Eight, Top-performing
10. Tailored, Specific needs

18.9 Self-Assessment Questions

1. What is human resource management?
2. What is strategic human resource management?
3. What is firm performance?
4. What is meant by effectiveness?
5. What is the relationship between human resource management and
firm performance?
6. Describe the various ways in which human resource management
impacts firm performance.
7. How can we measure the effectiveness of strategic human resource
management framework in improving firm performance?

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Notes As is the case with most real life concepts, there are no right or wrong
answers to the above questions. However, there are many different view-
points that have been expounded upon by scholars and the same have
been discussed in this lesson. It is our expectation that the students un-
derstand these views and form a reasonably sound view and reflect the
same in their answers.
Keywords: effectiveness, performance, goal achievement, long-term goals,
big picture, resource-based view, employee behaviors, business strategy

18.10 References
‹ ‹Azmi, F. T. (2011). Strategic human resource management and its
linkage with HRM effectiveness and organizational performance:
evidence from India. The International Journal of Human Resource
Management, 22(18), 3888–3912
‹ ‹Bae, J., & Lawler, J. J. (2000). Organizational and HRM strategies
in Korea: Impact on firm performance in an emerging economy.
Academy of Management Journal, 43(3), 502–517.
‹ ‹Becker, B. E., & Huselid, M. A. (1998). High performance work
systems and firm performance: A synthesis of research and managerial
implications. In Research in personnel and human resource management.
‹ ‹Bowen, D. E., & Ostroff, C. (2004). Understanding HRM–firm
performance linkages: The role of the “strength” of the HRM system.
Academy of Management Review, 29(2), 203–221.
‹ ‹Gurbuz, S., & Mert, I. S. (2011). Impact of the strategic human
resource management on organizational performance: Evidence from
Turkey. The International Journal of Human Resource Management,
22(8), 1803–1822.
‹ ‹Huselid, M.A., Jackson, S.E. and Schuler, R.S. (1997). Technical
and Strategic Human Resource Effectiveness as Determinants of
Firm Performance, Academy of Management Journal, 40: 171–88.
‹ ‹Katz, D., & Kahn, R. L. (1978). Organizations and the system
concept. Classics of organization theory, 80, 480.
‹ ‹Loo, L. H., & Beh, L. S. (2013). The effectiveness of strategic
human resource management practices on firm performance in the

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 HUMAN RESOURCE MANAGEMENT AND FIRM PERFORMANCE

Malaysian insurance industry. International Journal of Academic Notes

Research in Business and Social Sciences, 3(5), 703.
‹ ‹Merriam-Webster. (n.d.). Effective. In Merriam-Webster.com dictionary.
Retrieved October 21, 2021, from https://www.merriam-webster.com/
dictionary/effective
‹ ‹Nigam, A. K., Nongmaithem, S., Sharma, S., & Tripathi, N.
(2011). The impact of strategic human resource management on
the performance of firms in India: A study of service sector firms.
Journal of Indian business research.
‹ ‹Osman, I., Ho, T. C., & Galang, M. C. (2011). The relationship
between human resource practices and firm performance: an empirical
assessment of firms in Malaysia. Business Strategy Series.
‹ ‹Richard,O. C., & Johnson, N. B. (2001). Strategic human resource
management effectiveness and firm performance. International Journal
of Human Resource Management, 12(2), 299–310.
‹ ‹Schuler, R. S., & Jackson, S. E. (1987). Linking competitive
strategies with human resource management practices. Academy of
Management Perspectives, 1(3), 207–219.
‹ ‹Singh, K. (2003). Strategic HR orientation and firm performance
in India. International journal of human resource management,
14(4), 530–543.
‹ ‹Wei, L. Q., & Lau, C. M. (2008). The impact of market orientation
and strategic HRM on firm performance: The case of Chinese
enterprises. Journal of International Business Studies, 39(6), 980–995.

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 L E S S O N

19
SHRM and Customer
Outcomes; HR Analytics
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
19.1 Learning Objectives
19.2 Introduction
19.3 Key Concepts
19.4 HR Analytics
19.5 Summary
19.6 Answers to In-Text Questions
19.7 Self-Assessment Questions
19.8 References

19.1 Learning Objectives

‹ ‹HRM’s linkages across business strategy.
‹ ‹Employees’ perceptions of their firm’s practices.
‹ ‹Organisational climate that are shaped considerably by these HRM perceptions.
‹ ‹Customer outcomes such as: (a) satisfaction; (b) quality perceptions; (c) loyalty; (d)
Profitability.
‹ ‹HR analytics.

19.2 Introduction
Lack of Customer Orientation in Management Literature
Organizational/management scholars have not given much attention to examine organiza-
tional dynamics and outcomes through the eyes of customers. Danet (1981) observed that
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organization theorists have viewed organizations from the management’s Notes

perspective and employees’ perspective but rarely from the customer’s
perspective. The customer’s absence in the management field is still
largely true today. In the field of HRM also, effectiveness criteria for
HRM practices are determined by internal standards such as employee
attendance or number of products and services produced, but not against
external standards such as customer perceptions.
However, lately there is some increased recognition of the importance
of customer focus in HRM
Factors Responsible for Increased Customer Focus in HRM
The TQM Movement
The first and foremost principle of TQM is customer focus. It emphasis-
es that the central objective of a firm’s management practices, such as
HRM, to improve quality, is to satisfy customers. Indeed, TQM propo-
nents advocated viewing organizations not as closed systems, but as open
systems. This open system view, inclusive of the customer, was reinforced
through the “Balanced Scorecard” approach.
An Emphasis on “customer literacy” in HR Professionals
To be able to “score” well on customer criteria, HRM professionals must
possess “customer literacy”. HR professionals must have their target
customers clearly in mind, and what unique benefits they would value.
The Growth of Services
Many services are still labour intensive in their delivery and often
that delivery occurs in the presence of customers (real time encounters
between employees and customers). It means that quality control cannot
be exercised via supervision that can “stop production” in-progress or
error detection techniques that can remove defects even before they reach
the consumer. Instead, in-services quality control is very much a HRM
activity through flawless hiring and training.
The Rise of an Employee Branding Perspective
Employee branding is the process by which employees internalize the
desired brand image and are motivated to project that image to customers
and other stakeholders. Brand image refers to the conceptualization that
an organization wants its customers to have of it – the set of benefits
that customers would obtain by doing business with the organization.
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Notes
19.3 Key Concepts
HRM’s Linkages across Business Strategy
The linkage between HRM practices and customer outcomes has been
depicted through the model shown in 19.1.

Figure 19.1: A Model linking HRM Practices

and Customer Outcomes in Services
(Source: Bowen & Pugh (2009))

Figure 19.1 has been explained as under:

Strategic Leadership
Model shown in Figure 19.1 begins with strategic leadership which spreads
throughout the organization. Normally management believes employees are
clear about strategy. But it may not always be true. In fact, if it is to be
found out how the strategy is working in reality, not in theory, front-line
employees should be asked and their perceptions of customer outcomes.
Management Practices and Climate Formation: The “strength” of the
HRM system
Employees’ perceptions of management practices, both general and
HRM-focused, are important. Employees form climate perceptions:
‹ ‹From how they see the organization carrying out its day to-day
business, and
‹ ‹The goals the organizations appear to be achievable.
HRM strength is found in system characteristics such as:
‹ ‹“Agreement among principal HRM decision makers” as to the
strategic HRM message to convey;
‹ ‹“Consistent HRM messages,” e.g., practices that all send the same
strategic signal;

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‹ ‹“Validity,” practices that accomplish what they are supposed to; and Notes
‹ ‹“Instrumentality,”employees see favorable consequences, a compelling
value proposition, for behaving consistent with signals.
HRM practices, in the form of a “strong” HRM system, together with
other management practices, influence the creation of two interrelated
organizational climates relevant to customer outcomes.
Climate for Service
In general, organizational climate is typically conceptualized, and man-
aged, around a specific strategic objective which may be, for example,
innovation, safety, service etc. Though it is being treated as a set of
shared employee perceptions of management practices.
In other words, there is a climate for some type of strategic referent, as op-
posed to climate being a generic, global shared set of employee perceptions.
Our focus is on the climate for service (which, itself, can assume different
climate forrefinements, depending upon the customers’ value propositions)
referring to employees’ shared perceptions of the practices, procedures,
and behaviors that are rewarded, supported, and expected by the orga-
nization with regard to customer service and customer service quality
(Schneider et al. 1998). When employees perceive an abundance of cues
from a setting’s management practices that highlight service quality, they
are experiencing a climate for service.
Areas of contribution of General management practices to a climate
for service?
According to Schneider and Bowen (1985), such areas could be:
(a) Logistics, e.g., the availability of equipment, supplies, tools to deliver
service;
(b) Systems support, e.g., marketing, operations, etc.;
(c) Efforts to retain customers; and
(d) General managerial behavior, such as planning, coordinating, and
establishing goals and routines to serve customers.
Later work has focused on similar themes; for example, Schneider et al.
(1998) found that work facilitation and inter-departmental service di-
rectly contributed to overall service climate, and Johnson (1996) found
that information seeking, training, and rewards and recognition were the

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Notes major themes that contributed to service climate and, through climate,
to customer satisfaction.
Climate for Employee Well-being
It is a climate focused on meeting the needs of employees (Schneider
& Bowen 1993). As indicated by the arrow upward from climate for
well-being to climate for service (fig 4.4.1), the climate for employee
well-being is an important foundation on which a climate for service can
be built. Employees need to feel that their own needs have been met be-
fore they can truly focus on meeting the needs of others, e.g., customers.
Similar findings have been shown by Borucki and Burke (1999), who
found that employee climate perceptions could be classified into two
categories: management concern for customers (equivalent to service cli-
mate) and concern for employees (equivalent to climate for well-being).
Both of these climates contributed to sales personnel service performance.
These two climates are interrelated.
Work facilitation, assessed as an HRM dimension in Schneider and Bowen
(1985), is a dimension that also correlated significantly with climate for
service. Although interrelated, it is important to state again that they are
still different – they are only moderately intercorrelated, and emerge as
distinct factors (Borucki & Burke 1999). As such, they involve different
organizational dynamics, and both climates are necessary to fully drive
subsequent linkages toward customer outcomes. HRM professionals must
design practices to support employees both in their general roles as orga-
nizational members as well as in their specific roles as service providers.
HRM practices that link to climate for service and customer outcomes
In this section, we highlight some HRM practices that have demonstrated
some effectiveness in influencing customer satisfaction.
Involvement of Customers in Employee Selection
Heskett and colleagues (1997) stress that the best service companies hire
for attitudes, not skills. More fully, the focus should be on hiring for
positive attitudes toward customer service. Such hiring can be comple-
mented with training.
Recent research suggests that this attitude can be measured effectively
through personality-based measures of customer orientation (Frei & McDaniel
1998; Ones & Viswesraran 2001; Ones et al. 2005). Most importantly,

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they have shown that customer orientation significantly predicts not only Notes
managerial ratings of performance, but also other dimensions of perfor-
mance including counterproductive workplace behavior.
Another aspect of service-oriented selection has become known as
the preferred employer in an industry – which builds a more favorable
selection ratio to find those employees who fit well the needs of the
targeted market segment. As Zeithaml et al. (2006) report, Rosenbluth
International, a corporate travel agency, has acquired such a reputation,
likely owing to President Hal Rosenbluth’s philosophy, “We don’t believe
the customer can come first unless our people come first. If our people
don’t come first, then they’re not free to focus on our clients; they are
worried about other kinds of things. This point of view reinforces another
service management maxim “Treat Your Employees the Way You Would
Like Them to Treat Customers.”
Another approach that builds linkages is found at Southwest Airlines which
often includes frequent flying customers as part of the interviewer panel
screening applicants for flight attendant positions. Strategically, Southwest
strives to differentiate itself in the marketplace by being a fast, fun, and
loving airline. Customers have the best sense of what that competitive
edge looks like in flight attendant behavior, so they are afforded a voice
in hiring. And this certainly also leverages customer loyalty to the airline.
Involvement of Customers in Employee Performance Measurement
“What gets measured gets done,” so it would seem that having customers
provide feedback on employee performance would inform management
whether employees are living the brand and whether the climate for a
particular type of service is strong enough to influence desired employee
behaviours. Customers, then, could be included as raters in a 360-degree
appraisal process (Waldman & Bowen 1998).
Given employee concerns about the validity of surprise customer ap-
praisals, one middle course used with some frequency is to alert both
employees and customers that the service encounter is being monitored,
e.g., “being recorded for quality purposes” (Schneider & White 2004).
Customers could be allowed to view the employee appraisal form to see
if the behaviours and outcomes align with their own expectations (Ulrich
& Brockbank 2005). Also, customer and service quality criteria should

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Notes be included upward through the organization, from supervisors to senior

managers. Sometimes there is a tendency to emphasize customer care
criteria only for front-line employees (Schneider et al. 2005b).
Customer Involvement in Training
Training can deliver value to both employees and customers.
Salanova et al. (2005), for example, found that training impacted service
climate directly, and also had an impact on employee engagement. Liao
and Chuang (2004) found in a sample of 25 restaurants that manager
rankings of the extent to which service-related elements were emphasized
in training (e.g., providing quick service, introducing customers to menu
items and ingredients, being sensitive to customers’ individual needs and
wants) were significantly associated with employee perceptions of service
climate. Again, employees form perceptions of what is important to the
organization based on the signals they receive in training.
General Electric links employee and customer value propositions by in-
viting certain customers to attend training programs.
Employee reports about what they know of customer perceptions, atti-
tudes, preferences, and the like should help frame the content of training
programs.
Linkage surveys can be used to ask employees where they need the devel-
opmentof skills and abilities to better serve customers, and the connections
between these responses and customer outcomes suggest that employees
can accurately identify training needs (Schneider & White 2004).
Finally, this closeness between employees suggests that employees need to
be trained in the skills necessary to perform “emotional labor” – i.e.,
how to deal with the ongoing pressure of customer demands and angry
customers. Many training programs still focus on technical or interper-
sonal skills necessary to be effective with other internal members of the
organization.
Rewards and Recognition to be Tied with Customer Satisfaction
Service climate is defined as perceptions of what is rewarded, supported,
and expected with regard to service delivery, and as such, reward sys-
tems are powerful communications of what is important to management.
If management says that quality service is important, but rewards quan-
tity over quality, employee service climate perceptions will reflect what

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behaviors are actually rewarded, not what behaviors management says Notes
are important. Unfortunately, the “folly of rewarding A, while hoping for
B” (Kerr 1975) appears to be a common malady in service.
Another example is offering customers the opportunity to reward employ-
ees whom they view as deserving. At least one airline provides some of
its best, frequent-flying customers $50 coupons on which they can write
an employee’s name, sign it, and return it to be given to the employee
(Ulrich & Brockbank 2005).
Employee Empowerment
Empowerment is often recommended as an effective management practice
for delivering service quality and satisfying customers. Empowerment has
been defined as sharing with employees: (Bowen & Lawler 1992,1995)
‹ ‹More decision-making power and autonomy;
‹ ‹Information on strategy, business plans, competitor information,
customer data;
‹ ‹Skills and knowledge via training in understanding business information,
effective teamwork skills, customer complaint management; and
‹ ‹Rewards based upon performance.
Empowerment, then, requires more of an HRM investment in employees
than the low-cost, production-line approach to service delivery as found in
fast-food, convenience stores, in which customer expectations are simple
and stable, and technology is routine. The added HRM investment from
empowering employees delivers a return with more complex services in
less predictable environments such as airline travel and consulting.
Seeking Customer Information for the Design of HRM Practices
Many of the HRM practices we have mentioned require seeking out
informationfrom customers and feeding that information back to employees.
Unfortunately, customer data are often overcollected and underutilized
(Schneider & Bowen 1995). Many organizations collect customer in-
formation but unfortunately, the task of collecting and using customer
information is often associated with units or functions in the organization
other than Human Resources, though it should not be. HR should have
a role in the strategic management of this information because of its
powerful signaling function in the design of HRM practices.

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Notes Linking Climate and Customer Outcomes: The Spillover Effect

Of the many possible employee attitudes and behaviors that might spill
over to affect customer outcomes, the most frequently mentioned are
employee satisfaction and service capability-based behaviors (from the
point of view of ‘service-profitchain’).
We will focus on two others that are more recent in receiving attention.
One is a set of organizational citizenship behaviors (OCBs), including
employee displays of altruism, courtesy, sportsmanship, conscientiousness,
and civic virtue that can enhance customer satisfaction and loyalty. The
other is employee engagement.
Organizational Citizenship Behaviors
When employees are treated fairly, they, in turn, are more likely to display
organizational citizenship behaviors (OCBs) toward customers, resulting
in the latter’s satisfaction. Fair treatment of employees can consist of
many aspects such as:
‹ ‹Supervisor communicating respectfully with employees, and
‹ ‹HRM practices which employees perceive as fair. Examples of fair
HRM would include:
‹ ‹Designing and conducting performance appraisals with input from
employees and communicating ratings to employees in a timely
manner;
‹ ‹In rewards, setting salaries internally equitably among employees
in the organization and, if any inequities are necessary, explaining
why to employees.
Employee Engagement
A recent perspective that is generating great enthusiasm in the academic
and applied literature and in-practice is employee engagement (Harter
et al. 2002; Macey & Schneider, 2008; Salanova et al. 2005; Schneider
et al. 2005).
Engagement moves beyond traditional ideas of job satisfaction in that it
has a strong affective tone suggesting passion for the work and organiza-
tion, involvement of the self, absorption in the work, and a high degree
of energy.

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Unique to the idea of engagement is vigor: feelings of physical strength, Notes

cognitive liveliness, and emotional energy that employees tie directly to
the work and workplace (Shirom 2003). Engaged employees also demon-
strate behaviors including organizational citizenship, role expansion, and
initiative, all of which serve organizational goals.
As a newer development, there is debate over engagement as to where
it fits into a linkage model connecting the organization, employees, and
customers (see Macey & Schneider, 2008), but research leaves little doubt
that engagement affects outcomes important to the organization (Harter et
al. 2002; Salanova et al. 2005). Salanova et al. (2005), for example, view
engagement as a motivational state that is directly influenced by organiza-
tional resources. They developed their measure of organizational resources
through a grounded theory method of front-line service employees, and
identified three categories with direct bearing on HRM issues: training, job
autonomy, and technology. In their model, engagement, along with organiza-
tional resources, predict service climate, and service climate directly impacts
employee performance as rated by customers. As such, engagement is cast
by Salanova and colleagues as similar to the foundation issues (Schneider et
al. 1998) that need to be present for a climate for service to develop. What
does seem clear from the research is that engagement attitudes and behav-
iors begin with an organization that provides resources and leadership, and
these behaviors spill over to customers, affecting employee perceptions of
the quality of service provided and customer loyalty (Salanova et al.2005).
Harter and colleagues (2003), for example, report that in a study of more
than 7,000 business units, there was a mean difference of 2.9 percent in
ratings of customer loyalty between those units in the lowest quartile on
employee engagement and the units in the highest quartile. The revenue
impact of that 2.9 percent difference between units with lower and higher
levels of employee engagement will of course depend on factors such as
the type of service, size of business unit, and sales per customer, but the
impact of a 2.9 percent gain in customer loyalty is probably substantial
for many service organizations.
Customer Outcomes . . . and Profitability
It is now very well established in the literature that an organization’s
service climate matters: it is related to various indicators of customer
attitudes including customer satisfaction, perceptions of service quality,

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Notes ratings of service employee performance, and customer loyalty (see Pugh
et al. (2002) for a review). Most service climate research studies end the
story there, using research in marketing and consumer behavior to make
the point that these customer outcomes matter because they, particularly
customer loyalty, ultimately have a positive impact on organizational
profitability. This is a compelling argument because the evidence is indeed
there that customer satisfaction drives customer loyalty and ultimately
organizational profitability (Heskett et al. 1997). But, it is interesting
that the body of research tying service climate to organizational financial
performance is relatively sparse (note, however, that there is a larger
body of linkage research tying more general attitudes such as employee
satisfaction or morale, rather than service climate, to organizational fi-
nancial performance, e.g., Harter et al. 2002).
The linkage between customer satisfaction and financial performance
is complex, to say the least. Although there are a few studies linking
service climate to organizational financial performance (e.g., Borucki &
Burke 1999; Schneider et al. (2005) on unit sales) there are other stud-
ies showing counterintuitive negative relationships between employee
and customer perceptions and financial performance (Wiley 1996). Busy
stores, for example, may often perform financially well but have lower
customer satisfaction. What we are best able to conclude, however, is
that service climate impacts customer satisfaction, and to the extent
customer satisfaction is important to an organization, service climate is
a lever that can be used to influence it with favorable returns on orga-
nizational performance, across various measures and time.

19.3.1 Management of the Relationship between HRM

Practices and Customer Outcomes
We close with four overarching perspectives on how to manage the re-
lationship between HRM practices and customer outcomes. Connecting
to customer outcomes is leveraged in the following four areas:
Strategically
Sharpen Strategic Focus
One message that sometimes comes out of the strategic HRM literature
is simply that organizations should “do HRM better” (Schneider & White

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2004). That is, the advice is rather generic: good organizations do a good Notes
job at strategically selecting, training, and rewarding. But with HRM
being strategic, it suggests that some HRM practices should be better
suited to particular organizational purposes than others. In order for the
climate for service to set in motion the strongest linkages to employee
behavior and customer outcomes, the strategic focus should be sharp-
ened from just generic service to a more market-segmented climate for
certain types of service. For example, a low-cost business strategy geared
to customer expectations of low frill, standardized service offerings at
a Red Roof Inn obviously requires a different mix of HRM practices to
create a climate for that type of service versus that of a Four Seasons.
An obvious point, perhaps, but one that should not obscure the less ob-
vious notion of strategically designing internal HRM practices to focus
on your customers’ value proposition.
Compete on Intangibles
HRM professionals and HRM practices can help build organizational
climates and shape employee behaviors that customers view as valuable
and rare, and competitors view as difficult to copy. This is the sustain-
able competitive advantage of the pantheon of service role models such
as Southwest Airlines, Toyota and Lexus dealerships, and Four Seasons
hotels around the world. HRM can build relationships within the firm,
and between the firm and its customers, built on emotional ties, trust,
and fairness linking to customer loyalty and even profits (Bowen et al.
1999; Ulrich & Brockbank 2005).
Create High-performing Customers as a Competitive Advantage
Involve customers as partners in designing and co-producing the services
they consume; stay involved with them in the ongoing co-creation of
value. Customers help co-produce many services from simple examples
of ATM or online banking to business-to-business examples of business
customers helping to co-design, operate, and maintain information sys-
tems with firms such as EDS. To accomplish this is difficult, and thus
difficult for competitors to copy. To do so, firms must work with their
customers as important human resources of the firm (Bettencourt
et al. 2002; Bowen 1986; Tax et al. 2006). Creating high-performance
customers requires selecting customers to work with who possess the
necessary competencies, training them in how to perform as expected,
and rewarding them for doing so.
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Notes Contingently
Determine the Conditions under which Climate Linkages are the Strongest
Before HRM professionals dedicate resources to building service climates,
they should assess where and when service climates will be strongly
linked to customer outcomes. Here are some research-based insights on
relevant conditions.
Customer Contact
The core argument in the service climate literature is that service cli-
mate is important because of the physical and psychological closeness
of employees and customers (Parkington & Schneider 1979). But what
of organizations where there is less physical and psychological contact?
Increasingly, some organizations are moving to take the human element
out of service delivery (e.g., ATMs, kiosks at airports). Where there is less
contact, does service climate become less relevant for shaping customer
attitudes? A study by Dietz et al. (2004) suggests that the answer is yes.
In their study, they found typical positive relationships between service
climate and customer satisfaction, but they found that these associations
were significantly weaker in bank branches characterized by lower levels
of customer contact. This implies that the employees who have the greatest
degree of customer contact should be the ones with the best information
about customers and the organizational practices that affect them. These
employees should be the primary focus of survey efforts.
Frequent Shoppers
In one study it was found that in a video rental chain, frequent customers
valued high-quality service interactions (Kendall & Barker 1999). For
these customers, employee perceptions of service climate affected customer
satisfaction (these were the customers who expected high quantity and
quality interactions with employees). Low-volume customers (occasional
renters), on the other hand, were primarily interested in price, not em-
ployee expertise. Their satisfaction was not related to employee attitudes.
Store Pace
Several studies have shown that when stores are busy, customers expect
employees to focus on the core aspects of service delivery, and their ex-

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pectations for pleasant emotional displays by employees are less (Rafaeli Notes
1989; Rafaeli & Sutton 1990).
Other Boundary Conditions? Directions for Future Research
What are the dynamics and strengths of the linkages among HRM prac-
tices, climate, and customer outcomes in firm–customer relationships
other than B2C services? For example, certainly, there is psychological
closeness in B2B settings between firm reps and firm agents/buyers – how
do the linkages operate in such settings? This question has not received
serious research attention.
Scientifically
Invest in HRM Practices based on Data – Not on Intuition or Trend
Chasing
Linkage research should be used by practitioners to discover the important
drivers of customer satisfaction, in their own unique strategic and orga-
nizational context (e.g., Macey & Schneider 2006; Wiley & Campbell
2006). These drivers provide valuable information for how to predict
and improve customer satisfaction. By validating HRM practices against
external customer criteria, it becomes possible to make informed choices
about which HRM practices to emphasize the most in pursuit of customer
satisfaction. Data-driven linkage research searches not just
for correlations between HRM practices and customer outcomes, but for
the most important correlations. For example, which HRM investments,
e.g., upgrades to selection or training, will yield the highest return on
a variety of customer outcomes of interest? And statistically significant
linkage data support reliance upon employees as valid reporters of how
customers perceive the “internal” organizational climate and customer
perceptions of service quality.
Consider “new” Performance Data to Utilize
Many business performance measures are capital-based and, consequently,
inadequate for assessing the unique economics of people-businesses (Barber
& Strack 2005). These authors emphasize the need to focus on factors
such as how employees create value directly for customers. Therefore,
economic profit is more appropriately calculated using a people rather
than a capital denominator as is used in economic value added (EVA) or
cash value added (CVA).

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Notes Cross-functionally
Avoid the “HR Trap”
Senior management must not mistakenly think that if they take care of
employees, and have the right HRM mix, customer satisfaction will fol-
low – and if it does not, employees are to blame.
Customer satisfaction requires marketing, making attractive customer
value propositions, management setting reasonable prices, operations cre-
ating service delivery systems that allow both employees and customers
to accomplish what they are trying to do. Effective service requires a
seamless, integrated approach across different organizational functions
with which the customer interacts. As a final word, HRM links most fully
and positively to customer outcomes when HRM professionals partner
with their colleagues in other functions to implement business strategies
that create value for stakeholders, both internal and external.

19.4 HR Analytics
HR analytics is the process of collecting and analyzing Human Resource
(HR) data in order to improve an organization’s workforce performance.
The process can also be referred to as talent analytics, people analytics,
or even workforce analytics.
This method of data analysis takes data that is routinely collected by HR
and correlates it to HR and organizational objectives. Doing so provides
measured evidence of how HR initiatives are contributing to the organi-
zation’s goals and strategies.
As in the example above, knowing the cause of the firm’s high turnover
can provide valuable insight into how it might be reduced. By reducing
the turnover, the company can increase its revenue and productivity.
Why HR Analytics
Most organizations already have data that is routinely collected, so why
the need for a specialized form of analytics? HR analytics helps the data
organise and help answer questions like:
‹ ‹What patterns can be revealed in employee turnover?
‹ ‹How long does it take to hire employees?

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‹ ‹What amount of investment is needed to get employees up to a Notes

fully productive speed?
‹ ‹Which of our employees are most likely to leave within the year?
‹ ‹Are learning and development initiatives having an impact on
employee performance
‹ ‹Having data-backed evidence means that organizations can focus on
making the necessary improvements and plan for future initiatives.
For example, if a software engineering firm has high employee turn-
over, the company is not operating at a fully productive level. It takes
time and investment to bring employees up to a fully productive level.
HR analytics provides data-backed insight on what is working well and
what is not so that organizations can make improvements and plan more
effectively for the future.
Process of HR Analytics
HR Analytics is made up of several components that feed into each other.
‹ ‹To gain the problem-solving insights that HR Analytics promises,
data must first be collected.
‹ ‹The data then needs to be monitored and measured against other
data, such as historical information, norms or averages.
‹ ‹This helps identify trends or patterns. It is at this point that the
results can be analyzed at the analytical stage.
‹ ‹The final step is to apply insight to organizational decisions.
Pros and Cons of HR Analytics
HR analytics is fast becoming a desired addition to HR practices.
Data that is routinely collected across the organization offers no value
without aggregation and analysis, making HR analytics a valuable tool
for measured insight that previously did not exist.
But while HR analytics offers to move HR practice from the operational
level to the strategic level, it is not without its challenges.
Here are the pros and cons of implementing HR analytics:
Pros:
‹ ‹More accurate decision-making can be had thanks to a data-driven
approach, which reduces the need for organizations to rely on
intuition or guess-work in decision-making.
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Notes ‹ ‹Strategies to improve retention can be developed thanks to a

deeper understanding of the reasons employees leave or stay with
an organization.
‹ ‹Employee engagement can be improved by analyzing data about employee
behavior, such as how they work with co-workers and customers, and
determining how processes and environment can be fine-tuned.
‹ ‹Recruitment and hiring can be better tailored to the organization’s
actual skillset needs by analyzing and comparing the data of current
employees and potential candidates.
‹ ‹Trends and patterns in HR data can lend itself to forecasting via
predictive analytics, enabling organizations to be proactive in
maintaining a productive workforce.
Cons:
‹ ‹Many HR departments lack the statistical and analytical skillset to
work with large datasets.
‹ ‹Different management and reporting systems within the organization
can make it difficult to aggregate and compare data.
‹ ‹Access to quality data can be an issue for some organizations that
do not have up-to-date systems.
‹ ‹Organizations need access to good quality analytical and reporting
software that can utilize the data collected.
‹ ‹Monitoring and collecting a greater amount of data with new
technologies (e.g. cloud-based systems, wearable devices), as well
as basing predictions on data, can create ethical issues.
IN-TEXT QUESTIONS
1. How has HRM become one of the highly focused jobs?
(a) It focuses on obtaining as well as maintaining a satisfied
workforce
(b) It results in maximum output with the increased customer
satisfaction
(c) It promotes group satisfaction with individual development
(d) Optimum utilization of manpower by motivation and
improving efficiency

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2. What are those aspects on which the HR professionals apply Notes

the risk management techniques?
(a) HR Competencies
(b) HR Strategies
(c) Both (a) and (b)
(d) None of the above
3. Relationship between HRM practices and Customer Outcomes
can be leveraged through:
(a) Sharpened strategic focus
(b) Competing on intangibles
(c) Co-Creation of Values
(d) All of the above
4. Customer satisfaction requires:
(a) Making attractive customer value propositions
(b) Setting reasonable prices
(c) Creating efficient service delivery systems
(d) All of the above
5. The process of collecting and analysing HR data in order to
improve workforce performance.
6. Give another name for HR analytics.
7. Customer focus is the main principle of TQM. (True/False)
8. TQM views organisations as closed systems. (True/False)
9. Customer literacy is not necessary for HR professionals. (True/
False)
10. Brand Image refers to the conceptualisation that an organisation
wants its customers to have of it. (True/False)
11. Service companies should prefer __________ while hiring, not
__________.
12. Employees form __________ of what is important to the organisations
through signals received in training.

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Notes
19.5 Summary
We conclude by noting that there has been some discussion in the academic
literature on the differences between the constructs of climate and culture
(e.g., Dennison 1996). Climate is generally regarded as the perceptions of
organizational imperatives, as captured by what is rewarded, supported,
and expected in the organization, whereas culture refers to the “deeper”
beliefs and values that underlie these practices.
For our purposes, we are focusing mainly on climate – and the HRM prac-
tices that shape employees’ perceptions of them – but both ideas capture
the notion of what is important, valued, and rewarded in the organization.

19.6 Answers to In-Text Questions

1. (d) Optimum utilization of manpower by motivation and improving
efficiency
2. (c) Both (a) and (b)
3. (d) All of the above
4. (d) All of the above
5. HR Analytics
6. Talent Analytics, People Analytics, Workforce Analytics
7. True
8. False
9. False
10. True
11. Attitudes and Skills
12. Perceptions

19.7 Self-Assessment Questions

1. Do you think there is increased focus on Customer satisfaction in
HRM? If yes, discuss the factors responsible for it in brief.
2. Discuss two interrelated organizational climates relevant to customer
outcomes.

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3. Describe HRM practices that link to climate for service and customer Notes
outcomes.
4. Do you think HR practices influence customer satisfaction? If yes,
discuss how?
5. How do HR functions increase customer satisfaction?

19.8 References
‹ ‹Ashkenas, R., Ulrich, D., Jick, T. & Kerr, S. (1995). The Boundaryless
Organization: Breaking the Chains of Organizational Structure. San
Francisco, CA: Jossey-Bass.
‹ ‹Barber, F. & Strack, R. (2005). The surprising economics of a
‘people business’. Harvard Business Review, June, 81–90.
‹ ‹Borucki, C.C. & Burke, M.J. (1999). An examination of service-related
antecedents to retail store performance. Journal of Organizational
Behavior, 20, 943–62.
‹ ‹Bowen, D.E. & Lawler, E.E.(1995). Empowering service employees.
Sloane Management Review, 36, 73–84.
‹ ‹Bowen David E. and Pugh S. Douglas. Linking Human Resource
Management and Customer Outcomes in Storey John, Wright Patrick
and Ulrich Dave (eds). (2009). The Routledge Companion to Strategic
Human Resource Management, Routledge, Oxon, USA, Canada.
‹ ‹Danet, B. (1981). Client-organization relationships. In P.C. Nystrom
& W.H. Starbuck (Eds), Handbook of Organizational Design (pp.
382–428). New York: Oxford University Press.
‹ ‹Dietz, J., Pugh, S. D. & Wiley, J. W. (2004). Service climate effects
on customer attitudes: An examination of boundary conditions.
Academy of Management Journal, 47, 81-92.
‹ ‹Frei, R. L. & McDaniel, M. A. (1998). Validity of customer service
measures in personnel selection: A review of criterion and construct
evidence. Human Performance, 11, 1–27.
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the workplace and its relationship to business outcomes: A review
of the Gallup studies. In C.L. Keyes & J. Haidt (Eds), Flourishing:

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Notes The Positive Person and the Good Life (pp. 205–24).Washington,
D.C.: American Psychological Association.
‹ ‹Heskett, J. L., Sasser, W. E., Jr. & Schlesinger, L. A. (1997). The
Service Profit Chain. New York: The Free Press.
‹ ‹https://www.valamis.com/hub/hr-analytics

‹ ‹Johnson, J. W. (1996). Linking employee perceptions of service

climate to customer satisfaction. Personnel Psychology, 49, 831–51.
‹ ‹Kendall, S. D. & Barker, L. (1999). When does service matter?
Linking employee service emphasis to customer satisfaction within
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of a symposium at the 14th Annual Conference of the Society of
Industrial and Organizational Psychology, Atlanta, GA.
‹ ‹Kerr, S. (1975). On the folly of rewarding A, while hoping for B.
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influencing employee service performance and customer outcomes.
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‹ ‹Macey, W. H. & Schneider, B. (2006). Employee experiences and
customer satisfaction: Toward a framework for survey design with
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Organizational Surveys (pp. 53–75). San Francisco, CA: Jossey-Bass.
‹ ‹Macey, W. H. & Schneider, B. (2008). The meaning of Employee
Engagement. Industrial and Organizational Psychology: Perspectives
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22, 270–81.

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‹ ‹Pugh, S. D., Dietz, J., Wiley, J. W. & Brooks, S. M. (2002). Driving Notes
service effectiveness through employee–customer linkages. Academy
of Management Executive, 16, 73-84.
‹ ‹Rafaeli, A. (1989). When cashiers meet customers: An analysis of
the role of supermarket cashiers. Academy of Management Journal,
32, 245-73.
‹ ‹Rafaeli, A. & Sutton, R. I. (1990). Busy stores and demanding
customers: How do they affect the display of positive emotion?
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resources and work engagement to employee performance and
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Applied Psychology, 90, 1217-27.
‹ ‹Schneider, B. & Bowen, D. E. (1985). Employee and customer
perceptions of service in banks. Journal of Applied Psychology,
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‹ ‹Schneider, B. & Bowen, D. E. (1993). The service organization:
Human resources management is crucial. Organizational Dynamics,
21, 39-52.
‹ ‹Schneider,B. & Bowen, D. E. (1995). Winning the Service Game.
Boston, MA: Harvard Business School Press.
‹ ‹Schneider, B. & White, S. S. (2004). Service Quality: Research
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P.L. Perrewe (Eds), Research in Organizational Stress and Well-
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Notes ‹ ‹Waldman, D. A. & Bowen, D. E. (1998). The acceptability of 360

degree appraisals: A customer–supplier relationship perspective.
Human Resource Management, 37, 117–31.
‹ ‹Wiley, J.W. (1996). Linking survey data to the bottom line. In A.I.
Kraut (Ed.), Organizational Surveys: Tools for Assessment and
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‹ ‹Wiley, J. W. & Campbell, B. C. (2006). Using linkage research to
drive high performance: A case study in organizational development.
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 L E S S O N

20
HC Bridge Model and
Decision Science Model
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
20.1 Learning Objectives
20.2 Introduction
20.3 Four Decision-Making Styles (With Examples)
20.4 Common Types of Decision-Making Models
20.5 HR Bridge Decision Framework and Talent Management
20.6 Summary
20.7 Self-Assessment Questions
20.8 Answers to In-Text Questions

20.1 Learning Objectives

‹ ‹Meaning of decision science and its importance.
‹ ‹Styles of decision making.
‹ ‹Common types of decision making models.
‹ ‹HR Bridge Decision framework.
‹ ‹Talent Management.

20.2 Introduction
What is Decision Science?
Decision Science is the collection of quantitative techniques used to help in decision-mak-
ing at the individual and population levels. It includes decision analysis, risk analysis,

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Notes cost-benefit and cost-effectiveness analysis, constrained optimization,

simulation modeling, and behavioral decision theory, as well as parts of
operations research, microeconomics, statistical inference, management
control, cognitive and social psychology, and computer science.1
By focusing on decisions as the unit of analysis, decision science provides
a unique framework for understanding public health problems, and for
improving policies to address those problems.
How is Decision Science Different from Other Research Approaches?
While most fields of research focus on producing new knowledge, deci-
sion science is uniquely concerned with making optimal choices based on
available information. Decision science seeks to make plain the scientific
issues and value judgments underlying these decisions, and to identify
tradeoffs that might accompany any particular action or inaction.
What Kinds of Tools and Methods do Decision Scientists use?
Decision science utilizes a variety of tools which include models for deci-
sion-making under conditions of uncertainty, experimental and descriptive
studies of decision-making behavior, economic analysis of competitive
and strategic decisions, approaches for facilitating decision-making by
groups, and mathematical modeling techniques.
Decision science has been used in business and management, law and
education, environmental regulation, military science, public health and
public policy.
Importance of HR Decision Science2
Traditionally HR contributors are measured in terms of supporting organ-
isational goals through aligning HR services, practices and programmes.
This measurement is in line with the traditional definition of organisational
success. It results in decreasing cost per hire, time taken for training, HR
staff per employee and increasing client satisfaction with HR practices.
HR contribution can best be measured through Return on Investment of
HR programmes. For example, increase in sales due to increase in sales
knowledge after deduction for training costs.
Another measure for HR effectiveness is in terms of how HR commits
to sustainability. For example, the ILO urges:
1. https://chds.hsph.harvard.edu/approaches/what-is-decision-science/as on 6.11.2021.
2. https://ukdiss.com/examples/the-h-bridge-frame-work.php

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(a) Elimination of child labour and employment discrimination, and Notes

(b) Promotion of collective bargaining.
According to UN Global Compact,3 companies should protect interna-
tionally proclaimed human rights abuses (…..2005)
HR programmes such as performance management, selection, and training
can be framed in such a way that they reflect upon respect for collective
association rights. Such rewards can also reward community involvement
also in addition to economic performance.
Sustainability related knowledge, behaviours, motivation, employee health
and safety can be measured by HR.
Such measures are often used in reporting to investors about “corporate
social responsibility”. Though it is important, the HR pattern is still
applying sustainability restraints to the policies, practices and activities
within the HR function ….2005.
Comparability between Accounting and HR
Finance and marketing are supposed to be very mature strategic functions.
The financing decisions are different from accounting but accounting still
remains an important professional function. Present-day HR is similar to
accounting. It is and will continue to grow as an important professional
practice yet a well-developed decision science for talent still lacks.
Therefore, it is increasingly important to enhance talent decisions which
will include structures, behaviours, capabilities, learning, collaboration
and shared culture.
Some organisations label it as a talent ship because it focuses on decisions
that improve the stewardship of the hidden and apparent talents of employees.
Comparability between Financing and Talent Science
Any decision science involves the element of logic which connects de-
cisions about the resources to organisation’s success. When we calculate
return on investment for taking financial decisions, factors relevant to
financial decisions are kept in mind and the calculations produce a num-
ber. In the same way, the science for talent decisions requires considering
factors that are relevant to making talent decisions.

3. https://www.unglobalcompact.org/about/governance 2005

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes
20.3 Four Decision-Making Styles (With Examples)4
Each decision-making style is characterized by either a task or social
focus and a high or low tolerance for ambiguity. Styles with a high tol-
erance for ambiguity can work with unknown variables as they come to
a conclusion. Those with a low tolerance for ambiguity want as much
clarity as possible in all the circumstances and information that lead to
their decisions.
Decision-making styles also vary in a social or task-driven focus. Social-driven
decisions consider the behavior of others involved in the outcome. Those
who are task-driven make decisions based on how to best achieve a goal.
Here are the four decision-making styles with examples of how they
might be used in the workplace:
Directive
The directive decision-making style uses quick, decisive thinking to come
to a solution. A directive decision-maker has a low tolerance for unclear
or ambiguous ideas. They are focused on the task and will use their own
knowledge and judgment to come to a conclusion with selective input
from other individuals.
Directive decision-makers excel at verbal communication. They are ratio-
nal and logical in their decision making. When the team or organization
needs a fast decision, a directive-style decision-maker can effectively
make a choice. Their style is valuable for making short-term decisions.
Example: Company stockholders have voted to expand their 401(k) option
to all current employees and new employees after they complete a 90-day
trial period. The CEO must now decide if the company will provide
matching funds for employees who give to their 401(k) fund. She thinks
about how this might help to attract top talent for their team.
The CEO looks at the budget projections she has just prepared and thinks
about how funds that are allocated for another project could be used to
match employee contributions. She decides that employees who contribute
to their funds will be matched 4% by the company.

4. https://www.indeed.com/career-advice/career-development/decision-making-style

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Analytical Notes
Analytical decision-makers carefully analyze data to come up with a
solution. They are careful and adaptable thinkers. They will invest time
to glean information to form a conclusion. These decision-makers are
task-oriented, but have a high tolerance for ambiguity.
Analytical decision-makers take time to compile data and evidence be-
fore they come to a conclusion. When they do make a decision, they
have looked at all the details and formed what they believe is the best
possible solution.
Example: The marketing team of a sports broadcasting company is tasked
to identify how they can reach a wider audience with their current ad
campaign. The marketing manager asks each team leader to submit a
report from their portion of the campaign including the numbers of each
audience demographic. They read each report then meet with the team
leads. After the meeting, the marketing manager decides to purchase more
add space on social media websites for the next 30 days.
Conceptual
Those who make decisions with a conceptual style are big picture think-
ers who are willing to take risks. They evaluate different options and
possibilities with a high tolerance to ambiguity. They are social-oriented
and take time to consider big ideas and creative solutions.
Conceptual decision-makers look forward to what could happen if the decision
is made. Their conclusions come from visualizing different opportunities
and outcomes for the future. They are strong in making long-term decisions.
Example: Joe’s startup retail company is performing well during their
first year. He thinks about how the company can open stores nationwide
in the next five years. When a new shopping development begins con-
struction in a nearby big city, he decides to open a new store branch at
the site. Although it is a risk to open this new store, Joe is confident his
team will be successful, and this will help launch their brand nationally.
Behavioral
A behavioral style of decision-making focuses on relationships more than
the task. It evaluates the feelings of others as part of their decision-making
process. Behavior decision-makers have a low tolerance for ambiguity
and a social focus as they evaluate solutions.

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Notes These decision-makers rely on information from others to guide what

they choose. They are persuasive communicators who value decisions
based on a team consensus. Their decisions are often based on how the
choice will impact relationships.
Example: As HR manager, Kate has been asked to decide which week
employees should get as a bonus paid vacation days before the end of
the year. She sends out an email survey to see how employees feel about
three possible dates. After she reads the survey responses, she asks her
coworkers for input over a lunch break. Later in the afternoon, she walks
through the office chatting with several more employees.
When she decides which week the majority of coworkers want, she talks to
several employees who will not get the choice they hoped for, making sure
they’re feeling alright about the decision. At the end of the day, she noti-
fies the management and the employees which week will be a bonus paid
vacation time.
Why are decision-making models important?5
Decision-making models can help teams simplify their decision-making
processes and collaborate more effectively. Models provide useful steps
for teams to follow to create solutions and describe their processes clearly
to other team members. When everyone on a team understands the de-
cision-making model being used, they can more easily contribute to the
thinking process for a balanced, successful solution.

20.4 Common Types of Decision-Making Models

To help you understand when to use some common decision-making
models, examine the definitions and steps below:
Rational decision model
The rational decision-making model focuses on using logical steps to
come to the best solution possible. This often involves analyzing multiple
solutions at once to choose the one that offers the best quality outcome.
Teams typically use the rational decision model when they have time for
meetings and research, which allows them to create a list of potential
solutions and discuss the pros and cons of each. Here are the steps you
may follow when using a rational decision-making model:
5. https://www.indeed.com/career-advice/career-development/decision-maker-model

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1. Define Your Goal or Obstacle: First, you must define the goal or Notes
obstacle you wish to achieve or overcome. Defining this helps you
understand exactly what outcome your solution should produce.
2. Determine the Relevant Information: For this step, consider
delegating research tasks to your team or brainstorming during
a team meeting. Determine what information about your goal or
obstacle is relevant to finding a solution.
3. Create a List of Options: Using the relevant information, your team
can create a list of potential options for solutions. Try to support
your options with evidence for why they would solve achieve your
goal or overcome your obstacle.
4. Arrange Options by Their Value: After creating a list of options,
arrange them by their likelihood of success. Options that have a
higher chance of success also have a higher value, while options
with little evidence may have a lower value.
5. Choose the Best Option: Consider the value of each option and
how it can help your company succeed. With your team, come to a
consensus about the best option for a solution using the information
you’ve gathered.
6. Finalize Your Decision and Take Action: Once your team decides
on the best solution, clearly state your commitment to the solution
and ask if any team members have concerns. After this, you can
implement your solution in your company.
Intuitive Decision Model
Rather than logical reasoning, the intuitive decision model uses feelings
and instinct to make decisions. Often, team leaders or managers use this
model to make quick decisions when they don’t have a lot of time for
research or planning. The process of an intuitive decision is less struc-
tured and may use previous knowledge of similar goals or obstacles to
determine a useful solution. Consider the following steps to help you use
the intuitive decision-making model:
1. Define Your Goal or Obstacle: Even with little time, it’s important
to define your goal or obstacle clearly, especially if you’re making a
decision without your team. This can help you explain the decision
and its effects later.

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Notes 2. Identify Similar Goals or Obstacles: Brainstorm similar goals or

obstacles you’ve encountered before and how you solved them. Use
this information as a basis for creating your own solution.
3. Recognize Possible Biases: Recognizing your biases is especially
important when you don’t have input from your team. Consider how
your decision may affect yourself, your team and your company as
you think of potential solutions.
4. Determine a Usable Solution: Determine the best solution using
your prior experience and the values of your company. An ideal
solution helps your company achieve its goals or overcome an
obstacle while also benefiting your team and other employees.
5. Finalize Your Decision and Take Action: After choosing a usable
solution, you can alert your company and team of your decision.
If you have to make the decision quickly, you may have to put it
into action without discussing with your team.
Recognition-primed Decision Model
The recognition-primed decision model, created by Gary A. Klein in his
book Sources of Power, uses quick-thinking and prior experience to make
decisions, often in fast-paced environments. Team leaders may use this
model to assess the basics of a situation and create a potential solution
and then think through the solution to determine if it’s usable. This may
require you to have a lot of experience with the goal or obstacle for
you to create a suitable solution. The following steps can help you use
a recognition-primed decision model:
1. Define Your Goal or Obstacle: Clearly define the goal or obstacle
your team wants to achieve or overcome to make it easier for you
to create a solution quickly. While the idea can be broad, try to
identify the most important thing you need to decide.
2. Consider Relevant Information and Similar Situations: Using
your prior experience, quickly assess the situation and determine
what information or prior situations can help you make a usable
solution. If you have time, do more research on how to solve your
goal or obstacle.
3. Create a Potential Solution: Create at least one potential solution
using your prior experience or additional knowledge about the

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situation. To quicken your decision process, try to create a generic Notes

solution so you can change or add details as you think through it.
4. Consider if the Solution Works: Think through your solution to
determine if it can really solve your challenge. Start by considering
the most obvious issues and then consider the smaller details of
the solution.
5. If Needed, Change the Solution: Your first solution may not produce
the best outcomes, so change details about it if you need to. This
may involve adding new actions to your solution, making it more
specific or changing it altogether.
6. Finalize Your Decision and Take Action: Once you’re confident in
your solution, finalize the decision with your team and take action.
In a fast-paced situation, you may have to change your solution
again if you learn new information while taking action.
Creative Decision Model
The creative decision model uses original ideas to create innovative solu-
tions that achieve goals or overcome obstacles. This involves thinking
through a situation and inventing a solution without referencing similar
situations. Often, you can use this model for situations you haven’t expe-
rienced before, like new projects or production issues. Using the creative
decision model typically requires flexible thinking to create successful,
unique solutions. You may follow these steps when using the creative
decision-making model:
1. Define Your Goal or Obstacle: You may not have experience
with your goal or obstacle, so it’s useful to define it as clearly as
possible to help you understand what you need to do. This may
involve meetings with your team or other colleagues, like business
partners or managers.
2. Consider Relevant Information: Do research on the challenge you
need to solve to learn everything you can about it. This includes
trying to find any similar projects, reports or companies that may
inspire your ideas.
3. Consider the Information Over Time: You can choose how long to
consider the information, but it’s helpful to take at least a day to

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Notes think about your challenge passively. To do this, you may brainstorm
ideas, talk with colleagues or make a word-association list.
4. Create a Usable Solution: With the creative decision model, your
idea may come naturally after a period of thinking about your goal
or obstacle and the information relevant to it. Think through your
solution logically to make sure it’s usable for your situation.
5. Finalize Your Decision and Take Action: After considering the
details of your solution, you may finalize your decision with your
team and take action to solve your challenge. It’s helpful to have a
draft or presentation of your creative solution to explain it to your
team more easily.

20.5 HR Bridge Decision Framework6 and Talent Management

Bordeau J W and Ramstad P M suggest a decision framework which
logically supports talents. It is based on three anchor points—efficiency,
effectiveness and Impact.
Efficiency: This anchor point asks
What resources are used to produce HR Policies and practices. Efficiency
is typically indicated by:-
‹ ‹Cost per hire
‹ ‹Time to fill vacancies
When applied to sustainability, efficiency would focus on the resources
that are used:
Either to bring HR practices into compliance or
‹ ‹To provide incentives that reflect community, environmental or
social goal.
Effectiveness: Effectiveness is concerned with how do HR policies and
practices affect the talent pool to which they are directed. It refers to the
effects of HR policies and practices on human capacity (a combination
of motivation, capability and opportunity).

6. All Answers Ltd. (November 2018). The HC Bridge Frame Work. Retrieved from https://
ukdiss.com/examples/the-h-bridge-frame-work.php?vref=1

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As per the traditional HR standards, effectiveness would include: Notes

‹ ‹Increase in knowledge of trainees
‹ ‹Increase in performance ratings of those receiving incentives
Effectiveness applied to sustainability draws attention to human capac-
ity and aligned actions that go beyond traditional job and performance
requirements.
Capacity is reflected through
‹ ‹Capability: Which might include knowledge about the organisation’s
social responsibility and ethics code;
‹ ‹Opportunity: Which might include time off from work to do
volunteer tasks in the local community; and
‹ ‹Motivation: Which might include employee perceptions that activities
related to sustainability are noticed and rewarded.

Impact
It reflects the hardest question of all the three (efficiency, effectiveness,
and impact). It most clearly explains the fundamental differences which
focus on talent decisions reveal as compared to simply HR service de-
livery concerns.
The concern of the impact is to assess, “How do differences in the quality
or availability of different talent pools affect strategic success?”. This
question relates to talent segmentation.
Traditional definition of success of enterprise in terms of financial re-
sults can be increased to a substantial extent if we take into account
HR investments as its talent pool can improve product development to
a large extent.

This concern then leads to exploring the aspect of Talent Management.

Talent Management
Let us begin by defining what is talent. An employee is said to be tal-
ented if he displays a sharp strategic mind, leadership ability, emotional
maturity, communication skills, the ability to attract and inspire other

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Notes talented people, entrepreneurial instincts, functional skills and the ability
to deliver results.
There is not a single consistent or concise definition of talent manage-
ment. All such definitions can be categorised in three streams:
1. Studies which substitute the label “Talent management” for “Human
Resource Management”. They limit their focus to a few specific
HR practices, namely recruitment, selection, and replacement. As
it is merely a rebranding of human resource management, the
contribution of this approach is very limited to talent management.
Though, it may be useful for literature on Strategic Human Resource
management.
2. The second approach is little improvement over the first approach as
it builds the literature on succession planning. Thus it differentiates,
though narrowly, between Human Resource Management and Talent
management.
3. The third category of literature argues that all positions in the
organisation should be filled with A performers, also called “top
graders” and suggests that category “C performers or consistently
poor performers” should be managed or even laid off. Though
this approach has its plus points, still filling all the positions with
A performers is neither possible (as talent is available in limited
numbers) nor feasible (due to cost considerations as they have to
be paid higher compensation).
Besides the above three streams, management thinkers also identify a
fourth stream. It emphasises on the identification of key positions which
have the capability of impacting the competitive advantage of the firm.
It differs from the third approach as it begins with identification of key
positions rather than high performing individuals.
To sum up, an organisational talent management can be viewed as:
‹ ‹Activities and processes that involve the systematic identification of
those key positions which differentially contribute to the organisation’s
sustainable competitive advantage,
‹ ‹The development of a talent pool of incumbents who are high both
in terms of potential and performance to fill key positions identified
in the above step, and

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‹ ‹The development of a differentiated human resource system to Notes

facilitate filling these positions with competent incumbents and to
ensure their continued commitment to the organisation”.
Overall, it can be said that Talent Management is getting the right people
in the right jobs at the right time.
Required Mindset for Talent Management
Due to the critical importance of Talent management, it cannot be left
alone on HR managers, top management’s support is required and talent
should be made a core element of work.
Table 20.1 depicts the comparison between the old mindset that has been
followed so far and the new mindset required to manage it.

Table 20.17
Old HR Mindset New Talent Mindset
The leadership used to be vague. A belief close to the heart that tal-
There was an oratory slogan ‘people ented people improve organisational
are our most important asset’. performance.
The presumption was ‘The respon- All managers are responsible to
sibility for people management lies strengthen the talent pool.
with HR’.
Programmes for succession planning Talent management is seen as a
and training managers in acquiring central component of the manage-
and nurturing people used to be ment and part of the ongoing role
Small-scale and infrequent. of senior leaders.
Employees are in the organisation Managers constantly should take
for lifelong. So, managers have to active and bold steps to attract and
work with the people they inherit. develop their talent pool. They should
actively manage low performers,
and can even ask them to leave the
organisation.
Following a new mindset should not be considered as enough. Organisations
should also implement the three main elements of a talent management
approach as shown in Table 20.2.

7. https://ukdiss.com/examples/the-h-bridge-frame-work.php as retrieved on 6.2.2022

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Notes ‹ ‹Disciplined talent management, by developing managers and matching

them with the right jobs also rigorous and continuous assessment
of employees.
‹ ‹Creative recruitment and retention of employees through refined
and meaningful employee value propositions.
‹ ‹Executive development, using coaching and mentoring.

Table 20.2: Three Elements of a Talent Management Approach

Danger Signs Signs of Progress Signs of Achievement

1. Disciplined Talent Management
Focus only on obvious Superficial discussion of Clear identification of
successors in succession incumbents performance A, B and C performers
planning exercises in each talent pool
Lists high potential List is consulted when Written action plans for
people, but little action vacancies occur each high potential’s
development and re-
tention
Works under the belief Admit that there are Act decisively on poor
that the organisation likely to be some, but performance by improv-
has no poor performers still not much action ing or replacing them
HR is solely held ac- Evaluate managers on Hold leaders directly
countable for talent how well they manage accountable for devel-
management. their staff oping their talent pool
2. Creative Recruitment and Retention
Empty eloquence about Management Thinks Strengths and weakness
being a good employer about EVP’s for each of the EVP for each type
to work for type of talent of talent and should be
identified and plan to be
developed to strengthen
them
Hire only at entry levels Occasionally bring in Recruit a steady flow
and grow only from senior or specialist peo- of talent at all levels
internal hires ple from outside

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Danger Signs Signs of Progress Signs of Achievement Notes

Go to the same sources Experiment with new Creatively tap new
for recruiting talent sources, but look for pools of talent, looking
similar backgrounds for essential capabilities

attrition rates among Analyse attrition data Know the attrition rates
managers are high and by department and type of A, B and C perform-
consistent ers and understand why
they are leaving, per-
forming or underper-
forming.
3. Thoughtful Executive Development
Leave the job assign- Suggest some candi- Involve leadership
ments of managers to dates from the high po- teams on every assign-
the manager who hires tential list or job posting ment decision, seeking
them systems to optimise these across
the company
Recruit most qualified Stretch people, but not Thoughtfully consider
candidate with no dis- in the context of any de- the development needs
cussion of development velopment plan of each assignment and
the development needs
of each candidate
Assume that the best Provide formal feed- Embed candidate feed-
way to develop people back through appraisal back and coaching into
is by throwing them in once a year the routines of the or-
at the deep end ganisation and the jobs
of leaders
Invest in training driv- Offer regular but basic Offer integrated man-
en by top-down assess- programmes for man- agement/leadership
ments of candidates and agement development learning programmes
then only in response and leadership, usually for each transition point
to immediate needs, off-the-job of managerial careers
threats or crisis.

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Notes IN-TEXT QUESTIONS

1. Decision science approach is ___________.
(a) Intra-disciplinary
(b) Multi-disciplinary
(c) Uni-disciplinary
(d) Complex
2. For analyzing a problem decision-makers should generally study
___________ aspects.
(a) Quantitative
(b) Qualitative
(c) Paranormal
(d) Both (a) and (b)
3. Decision variables are ___________.
(a) Independent
(b) Uncontrollable
(c) Controllable
(d) Qualitative
4. Decision science is also called ___________.
(a) Management science
(b) Operation research
(c) Quantitative analysis
(d) All of the above
5. Decision science is an approach to decision making which utilizes
extensively ___________.
(a) Qualitative analysis
(b) Digital analysis
(c) Quantitative analysis
(d) Informative analysis

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6. Decision science is a ___________ for solving management Notes

problems in order to help managers to make better decisions.
(a) Pseudo-scientific approach
(b) Artistic approach
(c) Scientific approach
(d) Astrological approach
7. Decision science encompasses a number of mathematically
oriented technique such as ___________
(a) Natural sciences
(b) Mathematics and statistics
(c) Engineering
(d) All of the above
8. ___________ are those statistical and operations research for
programming techniques which help in the decision making
process
(a) Qualitative techniques
(b) Quantitative techniques
(c) Assumptive techniques
(d) None of the (a) (b) and (c)
9. ___________ is the characteristic of quantitative technique.
(a) Objective oriented approach
(b) Interdisciplinary approach
(c) Scientific approach
(d) All of the above
10. ___________ are used to allocate resources to activities in such
a way that some measure of effectiveness is optimized.
(a) Queuing models
(b) Sequencing models
(c) Allocation models
(d) Simulation models

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Notes
20.6 Summary
Decision Science is a collection of quantitative techniques. While most
fields of research focus on producing new knowledge, decision science
is uniquely concerned with making optimal choices based on available
information. Four decision making styles are used at workplaces—directive,
analytical, conceptual and behavioural. Some common decision making
models are rational decision model, intuitive decision model, recognition
primed decision model and creative model. Traditionally HR contributors
are measured in terms of supporting organisational goals through aligning
HR services, practices and programmes. But now one of the measures
for HR effectiveness is in terms of how HR commits to sustainability.
Present-day HR is similar to accounting. It is and will continue to grow
as an important professional practice yet a well-developed decision science
for talent still lacks. Any decision science involves the element of logic
which connects decisions about the resources to organisation’s success.
Bordeau J W and Ramstad P M suggest a decision framework which
logically supports talents. It is based on three anchor points—efficiency,
effectiveness and Impact. This concern then leads to exploring the aspect
of Talent Management.

20.7 Self-Assessment Questions

1. How can a decision support system be built relating to selling
on the Internet, online store, e-commerce?
Such a system can be a Business Intelligence analytical platform
connected to the Big Data database system, where information from
the Internet is collected, collected, processed and analyzed, including
comments from Internet users entered into social media portals.
On the basis of this data, analytics reports are created in the Business
Intelligence system describing changes in interest, consumer
preferences for specific products and services, as well as changes
in the company’s brand assessment that offers a specific product
or service offer to the market.
These reports can be very tangible in the business management
process, including they can support decision-making in the field

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 HC Bridge Model and Decision Science Model

of production planning as well as the distribution process, sales Notes

organization in the form via the Internet, in the form of e-commerce.
2. Define decision science and state its uses.
3. Explain the meaning of disciplined talent management and how it
can be achieved.
4. What do you mean by thoughtful executive development and how
can it be implemented?
5. How can creative recruitment and retention be done using talent
management framework.
6. Elaborate different decision making styles.
7. Discuss HR Bridge Decision Framework.
8. Define Talent management and explain the required mindset for
managing talent.
9. Describe the three elements of talent management.
10. Discuss the importance of HR decision science.

20.8 Answers to In-Text Questions8

1. (b) Multi-disciplinary
2. (d) Both (a) and (b)
3. (c) Controllable
4. (d) All of the above
5. (c) Quantitative analysis
6. (c) Scientific approach
7. (d) All of the above
8. (b) Quantitative techniques
9. (d) All of the above
10. (c) Allocation models

8. https://www.indiaclass.com/decision-science-mcq/ as on 6.2.2022

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 UNIT - V
ISSUES in Mergers
and Acquisition

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 L E S S O N

21
Issues in Mergers and
Acquisitions
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
21.1 Learning Objectives
21.2 Meaning - Mergers and Acquisitions
21.3 Three-Stage Model of Mergers and Acquisitions
21.4 Role of the HR Departments/Professionals
21.5 Recommendations for Improvements
21.6 Summary
21.7 Answers to In-Text Questions
21.8 Self-Assessment Questions
21.9 Suggested Readings

21.1 Learning Objectives

‹ ‹Designing a systematic, people-oriented approach for effective mergers and acquisitions,
from beginning to integration and post-integration.
‹ ‹Listing the types of mergers and acquisitions.
‹ ‹Studying the reasons for their successes and failures.
‹ ‹Three-stage model for effective mergers and acquisitions.
‹ ‹Recommendations for companies, employees, unions and society.

21.2 Meaning - Mergers and Acquisitions

Mergers and acquisitions represent the end of the continuum of options that companies
have in combining with each other. The least intense and complex form of combination is
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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes licensing. Next come alliances and partnerships, and then joint ventures.
Mergers and then acquisitions conclude the combination options. It is the
mergers and acquisitions that are the combinations that have the greatest
implications for size of investment, control, integration requirements,
pains of separation, and people management issues. With the focus of this
chapter on mergers and acquisitions, it is important to distinguish them.
In a merger, two companies come together and create a new entity. In an
acquisition, one company buys another one and manages it consistent with
the acquirer’s needs.
Reasons of M&A
There are numerous reasons for companies to merge or acquire. Some
of the most frequent ones include:
‹ ‹Mergers for market dominance; economies of scale.
‹ ‹Mergers for channel control.
‹ ‹Mergers for risk spreading, cost cutting, synergies, defensive drivers.
‹ ‹Growth for world class leadership and global reach.
‹ ‹Survival; critical mass; sales maximization.
‹ ‹Acquisition of cash, deferred taxes, and excess debt capacity.
‹ ‹Move quickly and inexpensively.
‹ ‹Flexibility; leverage.
‹ ‹Bigger asset base to leverage borrowing.
‹ ‹Adopt potentially disruptive technologies.
‹ ‹Financial gain and personal power.
‹ ‹Gaining a core competence to do more combinations.
‹ ‹Acquiring talent, knowledge, and technology.
In addition, companies that are successful and inventive in M&As not
only create value, but also develop a core competence in combination
management itself. This in turn, can give the company an edge over oth-
ers who haven’t been successful and/or have not learned from their past
efforts. Such combinations in turn can lead to job growth over time. In
the short run, however, jobs can be lost and the impact on employees and
society can be significant. Failed M&As, however, are likely to result in
even more negative social consequences.

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 Issues in Mergers and Acquisitions

Assumptions Notes
Regardless of the reasons companies have for merging or combining,
there are several basic assumptions on mergers and acquisitions being
made, either explicitly or implicitly. These include:
‹ ‹M&As are the fastest and easiest ways to grow.
‹ ‹M&As are likely to fall short of their initial goals.
‹ ‹M&As are difficult to do.
‹ ‹Creating synergies is a major challenge.
‹ ‹Molding cultures is a major challenge.
‹ ‹Soft and hard due diligence are necessary but not sufficient conditions.
‹ ‹Pre-planning can help increase chances for success.
It appears that companies that have gained from the experience of pre-
vious combination efforts recognize and address these assumptions more
effectively than those that haven’t. And the more firms have experiences,
the more they appear to learn from each additional merger or acquisition,
thus solidifying their core competency and competitive advantage.
Track Record
With the importance of and need for mergers and acquisitions growing,
and the base of experience expanding, it may seem reasonable to also
assume that success is more likely to occur than failure in these types of
company combinations. Indeed, worse than this, mergers and acquisitions
are more likely to fail than succeed. Statistics show that more than a
staggering 75 per cent fail. Only 15 percent of mergers and acquisitions
in the US achieve their financial objectives, as measured by share value,
return on investment, and post combination profitability. In the European
arena, a 1995 study of large combinations – deals valued at $500 million
or more – showed one half destroyed shareholder value, 30 per cent
had minimal impact, and only 17 per cent created shareholder returns
(Charman, 1998).
Reasons for Failure
Mergers and acquisitions fail for a variety of reasons, such as:
‹ ‹Expectations are unrealistic.
‹ ‹Hastily constructed strategy, poor planning, unskilled execution.

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Notes ‹ ‹Failure/inability to unify behind a single macro message.

‹ ‹Talent is lost or mismanaged.
‹ ‹Power and politics are the driving forces, rather than productive
objectives.
‹ ‹Requires an impossible degree of synergy.
‹ ‹Culture clashes between the two entities go unchecked.
‹ ‹Transition management fails.
‹ ‹The underestimation of transition costs.
‹ ‹Financial drain.
‹ ‹Defensive motivation.
‹ ‹Focus of executives is distracted from the core business.
Perhaps of these, culture clashes, gaps, or incompatibility and losses of
key talent are cited the most frequently, although even these become
intertwined with other reasons. Therefore, it can be said that people
problems are a major cause of failed mergers, and it must be ensured
that most if not all of the people, the integrating parties, need are still
in place at the end of the integration period.
Reasons for Success
Some of the major reasons for success in mergers and acquisitions include:
‹ ‹Worthwhile leadership
‹ ‹Astute goals and objectives
‹ ‹Due thoroughness on hard and soft issues
‹ ‹Well-managed M&A team
‹ ‹Successful learning from previous experience
‹ ‹Through early Planning for combination and solidification steps
‹ ‹Retention of Key talent
‹ ‹Detailed and timely communications to all the stakeholders.
Thus, one can see from the above-listed reasons that while there are many
reasons for success and failure in mergers and acquisitions, all over the
world, people issues are at the core of many of them.

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 Issues in Mergers and Acquisitions

Guidelines for Successful M&A Notes

‹ ‹Develop a more realistic time scale, including allowance for the
time required to prepare for effective due diligence;
‹ ‹Start the planning of integration processes sooner and get HR
involved earlier.
‹ ‹Work to align expectations in the acquirer and acquired businesses.
‹ ‹Confront difficult decisions, including employee and human resource
issues, earlier in the process.
The Human Side of M&A Activity
Above discussion proves that proper management of the changes in the
human side of enterprises due to M&A is the real key to maximizing
the value of a deal and thus to reduce failure rate. However, while a
lot of attention is paid to the operational, legal, and financial aspects of
mergers and acquisitions, the management of the human side of M&A
activity seems to be a somewhat neglected focus of the top management’s
attention. But those executives who have gone through the merger pro-
cess earlier, now recognize its importance in today’s economy due to the
experience gained so people issues in such cases are fewer.
A number of mergers and acquisitions do not create the shareholder value
expected of them. The combination of cultural differences and an ill-con-
ceived human resource integration strategy is one of the most common
reasons for that failure. When there is a well-accepted war for talent,
damage done by paying little attention to the matter of human capital
during mergers and acquisitions gets more extensive.
Possible Reasons of Neglect of Human Issues:
Above discussion reveals that people issues have a sizeable impact on
the effectiveness of integration, so the question arises is why are they
neglected? Some of the possible reasons are listed here under:
‹ ‹The belief that they are too soft, and, therefore, hard to manage.
‹ ‹Lack of concern by top management for the impact on employees,
unions and communities.
‹ ‹Lack of awareness or consensus that people issues are critical.
‹ ‹No spokesperson to articulate these issues.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes ‹ ‹No model or framework that can serve as a tool to systematically

understand and manage the people issues; and therefore
‹ ‹The focus of attention in M&A activity is on other activities such
as finance, accounting and manufacturing.
Stages/ Phases of Occurrence of People Issues
Integration Phase
During integration phase of mergers and acquisitions, people issues include:
‹ ‹Retention of key talent;
‹ ‹Communications;

‹ ‹Retention of key managers; and

‹ ‹Integration of corporate cultures.
The above issues result in numerous, more detailed people issues, e.g.,
‹ ‹Evaluation and selection of duplicate managerial talent to determine
who remains and who departs after the merger or acquisition;
‹ ‹In the process of integrating corporate cultures, entire sets of human
resource policies and practices from both companies may be subject
to evaluation, revision, or replacement.
While these human resource issues are important in M&A activity
throughout the world, their importance tends to vary by the type of
M&A combination. For example, if it is an acquisition that will allow
for separate continuation of the acquired company, there may be fewer
evaluation, selection, and replacement decisions than in acquisitions that
result in complete integration of the two organizations. Lesser integration
leads to lesser need for reduction in the size of workforces of both the
organizations, hence lesser people related issues.
Before and After Integration
In addition to these people issues in the integration phase of M&A activity,
there are several other people issues that are evident in the phases before
and after integration. Those become more evident and more manageable
by detailing a model of M&A activity as shown below:

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 Issues in Mergers and Acquisitions

Notes
21.3 Three-Stage Model of Mergers and Acquisitions
The experiences of companies in merger and acquisition activity suggest
a model of M&A activity that has three stages: (1) pre-combination;
(2) combination - integration of the partners; and (3) solidification and
advancement - the new entity.
While these three stages are applicable to and encompass the larger set
of business functions such as business strategy, finance, marketing, distri-
bution, IT, and manufacturing, the issues highlighted here are those that
reflect issues most closely associated with human resource management.
Then to provide further focus and detail for these human resources (HR)
issues in M&A activity, HR implications and actions for the several issues
in each stage are identified.
Stage 1 - Pre-Combination
There are several human resource issues in this first stage of the M&A
activity. While discussed together, the differences that may accompany a
merger rather than an acquisition are noted. Because of the wide variation
of mergers and acquisitions that are possible, however, details of all such
possible differences are not fully articulated here. In this Pre-Combination
stage, the most significant HR issues and their more specific implications
and actions for M&A activity are illustrated in Table 21.1. The HR issues are
described first, followed by a discussion of the HR implications and actions.
HR Issues.
As highlighted in Table 21.1, an important HR issue in the Pre-Combi-
nation stage of any M&A activity is identifying the reasons to initiate
such an action. As described earlier, of the many possible reasons for an
M&A, a substantial number are human resource related, e.g., acquisition
of key talent.

Table 21.1 Stage 1 – Pre-Combination

HR Issues HR Implications and Actions
Reasons for M&A to be identified Knowledge and understanding need
to be disseminated
Searching for potential partners Leadership needs to be placed

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes HR Issues HR Implications and Actions

Selecting a partner Composition of team impacts success
Planning for managing the process Systematic and extensive pre-se-
of the M and/or A lection and selection are essential.
Planning to learn from the process Conducting thorough due diligence
of all areas is vital
Cultural assessment
Planning for combination minimizes
problems later
Creating practices for learning and
knowledge transfer

Jackson Susan E. and Schuler Randall S. (2001)

HR Implications and Actions
An immediate HR implication of Stage 1 is that firms that have a bet-
ter understanding and knowledge base of the M&A process are likely
to be more successful in their M&A activities. This understanding and
this knowledge base, however, have to be shared and disseminated to
employees to have maximum impact, because M&A activity is likely to
affect everyone in the company, particularly if the combination results in
extensive integration of the two companies. Consequently, cultural assess-
ments, as an element of soft due diligence, are also becoming common.
Stage 2 - Combination - Integrating the Companies
In general, two or more organizations integrate as a result of the an-
nouncement of merger or acquisition, and completion of pre-combination
activities. The first stage prepares the base for the second stage. This
crucial second stage incorporates a wide variety of HR issues and activ-
ities as shown in Table 21.2.
Table 21.2: HR Issues and HR Implications and Actions At Stage 2

HR Issues HR Implications and Actions

Selecting the integration manager Selecting the appropriate candidate
Designing/implementing teams Creating team design and selection
are critical for transition and com-
bination success
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 Issues in Mergers and Acquisitions

HR Issues HR Implications and Actions Notes

Creating the new structure/strategies/ Communicating is essential
leadership
Retaining key employees Deciding on who stays and goes

Motivating the employees Establishing a new culture, struc-

ture, and HR policies and practices
is essential
Managing the change process
Communicating to and invoicing
stakeholders
Deciding on the HR policies and
practices

Jackson Susan E. and Schuler Randall S. (2001)

Results of Poor Integration
‹ ‹Sharp reduction in productivity;
‹ ‹Sharp increase in leadership attrition;
‹ ‹Significant reduction in employee satisfaction;
‹ ‹Expected increases do not result from high-tech mergers;
‹ ‹Lowering of morale of employees as they begin to feel management
cares more about financials than product quality or people.
Requisites of Successful Integration
‹ ‹Some degree of integration is required in all acquisitions, in the areas
of day-to-day systems, processes and in achieving key synergies.
‹ ‹Integration effort has to be tailor made keeping in mind specific
strengths and weaknesses of the acquired company.
‹ ‹Acquiring organization’s characteristics will affect the Integration
efforts.
‹ ‹There are a number of aspects to be taken care of for effective
integration. However, the critical part is that the ability to focus
on the few key value drivers is maintained.

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Notes HR Implications and Actions

Out of all, the most critical HR issue for the success of integration
at this stage is, perhaps, selection of the integration manager with the
ability to focus exclusively on the particular acquisition or merger. This
person should not be one of the people running the business. Rather he
should be acquired from outside for a fee. Such an integration manager
can adopt any of the following Combinations, like:
‹ ‹Retain a higher percentage of the acquired organization’s’ leaders.
‹ ‹Retain a higher percentage of the total employees.
‹ ‹Keep in mind earlier achieved business goals.
The integration manager helps to provide continuity between the deal
team and management of the new company. Such people “understand the
company,” “feel ownership,” and “are passionate about making it work”.
The integration manager may be part of a “steering committee” along
with other top executives. This is the group responsible for setting the
role, process and objectives of the integration and overseeing the progress
of integration teams across various M&A projects.
Another critical HR issue is the selection of a leader who will actually
manage the new business combination. Successful leaders of the new
business should have the following traits:
‹ ‹Understanding of cultural differences;
‹ ‹Unbiased;

‹ ‹Flexible;

‹ ‹Ability to understand the relative strengths and weaknesses of both

the organizations;
‹ ‹Commitment to retain the key employees;
‹ ‹Good listeners;
‹ ‹Intuitive;

‹ ‹Ability to eliminate distractions and thus focus on integrating key

business drivers such as R&D and customer interfaces.
To ensure the acquired firm’s close integration with the acquirer, it is
critical that the leader of the acquiring company has solid knowledge

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about the acquired company. Some of the essential tasks this new busi- Notes
ness leader can perform include:
‹ ‹Providing structure and strategy.
‹ ‹Managing the change process.
‹ ‹Retaining and motivating key employees.
‹ ‹Communicating with all stakeholders.
It appears to be crucial that restructuring should be done early, fast, and
once. This minimizes the uncertainty of “waiting for the other shoe to
drop”. A historical problem has been a tendency to restructure slowly
and to rely heavily on people rather than structures and processes. A
lesson learned by the folks at GE Capital that greatly aids successful in-
tegration is: “Decisions about management structure, key roles, reporting
relationships, layoffs, restructuring, and other career-affecting aspects of
the integration should be made, announced, and implemented as soon
as possible after the deal is signed - within days, if possible. Creeping
changes, uncertainty, and anxiety that last for months are debilitating
and immediately start to drain value from an acquisition” Ashkenas and
Francis (2000)
Stage 3 - Solidification and Assessment of the New Entity
When there is a clear and specific new entity created due to acquisition
with high levels of inclusion, several HR issues need to be addressed to
ensure its viability and success. These HR issues and their implications
are outlined in Table 21.3.

Table 21.3: Stage 3 - Final Integration and Assessment

of the New Entity
HR Issues HR Implications and Actions
Solidifying leadership and staffing Leadership and staffing of the new
entity are essential
Assessment of the new strategies and Creation and evaluation of a new
structures structure
Assessment of the new culture Melding two cultures needs assess-
ment revision
Assessing the new HR Policies and The concerns of all stakeholders need
Practices to be addressed and satisfied
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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes HR Issues HR Implications and Actions

Assessment of the concerns of stake- The new entity must learn
holders
Revising as and when needed
Learning from the process
Jackson Susan E. and Schuler Randall S. (2001)
HR Issues and HR Implications and Actions
As the new combination takes shape, it faces issues of readjusting, so-
lidifying and fine tuning. These issues take on varying degrees of inten-
sity, although not importance, depending upon the nature of the merger
or acquisition. Of course, change is a constant in almost any company
today, as the macro factors in the global environment continue to change
and present new conditions for all companies.

21.4 Role of the HR Departments/Professionals

As illustrated in the Three-Stage Model of M&As, there are many people
issues on which the relative success or failure depends, particularly at
the combination or implementation stage.
At the same time, there are many activities that are consistent with and appro-
priate for the HR professional’s skills and competencies. These include:
1. Developing key strategies for a company’s M&A activities. Providing
arguments for and against merger and acquisition activity. Outlining
the social costs, for successful and unsuccessful combinations.
Eighty-five per cent of HR executives say they should be involved
in these activities.
2. Managing the soft due diligence activity. This can mean:
‹ ‹Gainingknowledge of the make-up and motivation of the two
work forces;
‹ ‹Understanding the potential impact on the companies’ multiple
stakeholders, including the employees, the communities, and the
unions;

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‹ ‹Accessing management team of the other company; Notes

‹ ‹Conducting analysis of its organizational structure;
‹ ‹Comparing benefits, compensation policies, and labor contracts
of both organizations
‹ ‹Assessing the cultural match between the two firms.
3. Providing input into managing the process of change: HR is a change
champion providing the change management skills to align the right
people with the appropriate knowledge and skills base to meet the
shared goals of the enterprise.
4. Advising top management on the merged company’s new organizational
structure. Almost 75 percent of HR executives think this, and only
9 per cent think that HR should have full responsibility.
5. Creating transition teams, especially those that will:
‹ ‹Develop infrastructure for new organization;
‹ ‹Process and design systems;
‹ ‹Address cultural issues;
‹ ‹Provide training
‹ ‹Managing the activities associated with staffing, in particular,
developing and overseeing:
‹ ‹Selection processes
‹ ‹Retention strategies
‹ ‹Separation strategies.
6. Overseeing the communications. Develop a communication plan
aimed at realizing a vision of the new organization through:
‹ ‹Assessing issues regarding audience, timing, method and message.
‹ ‹Information delivery.
‹ ‹Information gathering.
‹ ‹Helping employees and communities cope with change.
7. Managing the learning processes, e.g.,
‹ ‹Building learning into the partnership agreement.
‹ ‹Staffing to learn.

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Notes ‹ ‹Setting up learning-driven career plans.

‹ ‹Using training to stimulate the learning process.
‹ ‹Specifying the responsibilities for learning.
‹ ‹Rewarding learning activities.
8. Re-casting the HR department itself:
‹ ‹Develop new policies and practices consistent with the vision
of the new organization.
‹ ‹Develop HR structure and staffing.
‹ ‹Determine service delivery model.
9. Identifying and embracing new roles and competencies for the HR
leader, namely:
‹ ‹Innovator

‹ ‹Partnership

‹ ‹Strategy Formulator
‹ ‹Strategy Implementer
‹ ‹Change Facilitator
‹ ‹Collaborator.

21.5 Recommendations for Improvements

There are numerous recommendations and conclusions that can be made
about M&A activity, especially at the company level and at the HR level.
At the Company Level
‹ ‹Business and integration strategies must be clear.
‹ ‹The social costs must be articulated and understood.
‹ ‹When the deal is concluded, there must be a clear vision of what
the new combination will look like:
‹ ‹How will it be structured and run?
‹ ‹Will it be stand-alone or connected?
‹ ‹Such decisions must be made as early as possible and avoid ambiguity
in decision-making guidance.

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‹ ‹It is critical to have a clear plan on whether to merge acquired Notes

companies or leave them alone.
‹ ‹Performance expectations must be reasonable and take into account
market conditions, capital investment requirements, etc.
‹ ‹The seller’s picture is too often the starting point for ongoing
operations (e.g., artificially inflated sales, lagging capital investment)
- but is not realistic as a performance goal.
‹ ‹Inflated performance expectations can lead executives to adopt
short-term focus and delay making investments in the business.
‹ ‹Financial expectations must be made clear, along with expectations
with respect to other things.
‹ ‹Discovery is a broader concept than legal “due diligence”, covering
internal and external analysis of all key functions and culture (soft
and hard due diligence); concerns of all stakeholders should be
considered.
‹ ‹Thinking through the membership of due diligence teams and the
responsibilities of key participants is critical.
‹ ‹It is important to make sure that areas such as HR, IT, Operations
and R&D are represented on the teams.
‹ ‹Thishas implications for capital expenditures, new product development,
management, retention etc.
‹ ‹For acquisitions or mergers in new markets, it is essential to
understand market dynamics and customers.
At the HR Level
‹ ‹Companies should put their best people in charge of implementing
M&A deals, and seek union and community involvement.
‹ ‹HR leaders should make sure that other company leaders know the
true social costs involved in the M or A activity.
‹ ‹More emphasis needs to be placed on early planning of the integration
process.
‹ ‹Difficult decisions should be dealt with quickly; provisions for the
impact on employees and the communities must be considered and
provided for.

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Notes ‹ ‹The time taken to complete the integration of a deal should not be
underestimated.
‹ ‹Employee communications, retention of key employees and cultural
integration are the most important activities in the HR area for
successful M&A integration.
‹ ‹Acquired company employees often identify cultural elements (e.g.,
flexibility in decision making) as integral to the company’s success.
‹ ‹It is important to be sensitive to cultural differences.
‹ ‹Acquired companies often view their culture as faster moving than
that of their new, larger parent.
‹ ‹It is possible that each side will perceive its culture as “better” and
does not want to give it up.
‹ ‹Unmanaged cultural differences will lead to miscommunications
and misunderstandings.
‹ ‹It is also important to remember that each separate integration
activity changes the acquired company in some way. It is important
to recognize and preserve the important elements of the acquired
company’s culture.
‹ ‹HR professionals still need to prove their worth in order to get a
more central role in the M&A process.
‹ ‹Companies with M&A as part of their future strategy should review
how they have managed M&A deals in the past, and learn from
these experiences when embarking on future deals. This review
should focus on:
‹ ‹How to deal with inadequate information during due diligence
Employee communication
‹ ‹Identifying and dealing with integration bottlenecks.
‹ ‹M&A management can become a core competency for an HR
department.

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 Issues in Mergers and Acquisitions

IN-TEXT QUESTIONS Notes

1. In a merger, one company buys another one and manages it

consistent with the acquirer’s needs. (True/False)
2. In an acquisition, two companies come together and create a
new entity. (True/False)
3. Integration is the process by which two companies combine after
a merger or an acquisition is announced, and pre-combination
activities are completed. (True/False)
4. The integration manager helps to provide continuity between
the deal team and management of the new company. (True/
False)
5. The social costs involved in integration are not important. (True/
False)
6. The time taken to complete the integration of a deal should
not be __________.
7. HR leaders should make sure that other company leaders know
the true __________ costs involved in the M or A activity.
8. HR is a __________ champion in an acquisition process.
9. Poor Integration results in __________ in productivity.
10. Integration efforts will __________ depending on the company’s
characteristics.

21.6 Summary
Overall, with the likelihood of continued merger and acquisition activity
around the world for the next several years, the future seems bright for
a significant positive contribution to be made by the HR department and
its professionals, in partnership with line managers and the employees
and their representatives. This impact occurs through:
1. Ensuring that company executives consider whether M&A activity
is really essential; and
2. If companies go ahead, that success is more likely than has been the
track record of combinations.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes This contribution will be beneficial to the employees, shareowners,

communities, suppliers and customers of the companies involved in the
merger or acquisition company.

21.7 Answers to In-Text Questions

1. False
2. False
3. True
4. True
5. False
6. Underestimated
7. Social
8. Change
9. Decrease
10. Differ

21.8 Self-Assessment Questions

1. Define merger and acquisition. Differentiate between the two.
2. List various Reasons of M&A.
3. Write down some basic assumptions made during mergers and
acquisitions.
4. Write down the role of the HR departments/professionals for
successful M&A.
5. Discuss various reasons for the failure of M&A. What guidelines
should be followed for increasing the effectiveness of M&A?
6. Discuss the three stage model for Successful Integration.
7. Write a note on the human side of M&A activity. Discuss various
possible reasons for neglect of human issues.
8. Discuss various recommendations for improvements in integration
efforts at the organization level.

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 Issues in Mergers and Acquisitions

9. Discuss various recommendations for improvements in integration Notes

efforts at the HR level.
10. Discuss the track record of successful/unsuccessful M&A. Explain
the possible reasons for their success and failures.

21.9 Suggested Readings

‹ ‹Ashkenas, R. N. and Francis, S. C. (2000). “Integration Managers:
Special Leaders for Special Times,” Harvard Business Review
(November-December: 108-114); Delta Consulting Group Study.
‹ ‹Atul Arun Pathak. (2016).”Seller side HR perspectives during M&A
deals”, Strategic Direction, Vol. 32 (6) pp. 19-22.
‹ ‹Bansal Anjali. (2015).”Understanding the integration mechanisms
practiced during organizational change: evidence from five M&A
transactions”, Journal of Organizational Change Management, Vol.
28 (6) pp. 1-31.
‹ ‹Bansal Anjali. (2016). “Employee trust dynamics during organizational
change: a context of mergers and acquisitions”. Asia- Pacific Journal
of Business Administration, Vol. 8 Iss 1 pp. 1-20.
‹ ‹Bou-Wen Lin and Shih-Chang Hung. (2006). “Mergers and
acquisitions as a human resource strategy - Evidence from US
banking firms”. International Journal of Manpower Vol. 27 No. 2,
2006 pp. 126-142, Emerald Group Publishing Limited 0143-7720,
DOI 10.1108/01437720610666173.
‹ ‹Charman; A. T. Kearney study conducted in 1998 and reported in
Haebeck, M.H., Kroger, F. and Trum, M.R. (2000). After the Mergers:
Seven Rules for Successful Post-Merger Integration (Prentice Hall/
FT: New York/London).
‹ ‹Croucher Richard, Glaister Keith W., Rizov Marian, Rofcanin Yasin
and Geoffrey Wood. (2019). “Challenges and Resilience: Managers’
Perceptions of Firm Performance Following M&As”. Applied
Psychology: An International Review, 1-36.
‹ ‹José-Luis Rodríguez-Sánchez, Eva-María Mora-Valentín and Marta
Ortiz-de-Urbina-Criado. Human resource management in merger and

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes acquisition planning Journal of Organizational Change Management

Vol. 33 No. 1, 2020 pp. 16-28 Emerald Publishing Limited.
‹ ‹Muhammad Waseem Bari. (2019). “Soft Issues During Cross-Border
Mergers and Acquisitions and Industry Performance, China–Pakistan
Economic Corridor Based View”, April-June, pp. 1-16, Sage open
access.
‹ ‹Nargunde Amarja Satish. (2013). “Mergers and Acquisitions: The
HR Issues” 4(2), March-April, pp. 57-62). International Journal of
Management (IJM).
‹ ‹Schuler, Randall and Susan Jackson. (2001). “HR Issues and Activities
in Mergers and Acquisitions” 19(3), European Management Journal,
pp. 239-253, Elsevier.
‹ ‹Uday Bhaskar. (2012).”HR as business partner during mergers and
acquisitions”, Human Resource Management International Digest,
Vol. 20 iss 2 pp. 22-23.
‹ ‹Viewpoint. “Prevention is the best cure: human resource planning in
Mergers and Acquisitions” Human Resource Management International
Digest, DOI 10.1108/HRMID-05-2020-0134, Emerald.
‹ ‹Viewpoint. (2020). “HR integration: a review of M&A HR integration
literature” 28(5) pp. 19-21, Emerald Publishing Limited, DOI
10.1108/HRMID-04-2020-0075, Human Resource Management
International Digest.
‹ ‹Weber Yaakov, Rishon Lezion, Israel, and Shlomo Yedidia Tarba.
(2012). “Mergers and acquisitions process: the use of corporate
culture analysis”, Cross Cultural Management, Vol. 19 (3), pp.
288-303, Emerald Group Publishing Limited.
‹ ‹Yousef Al Hosani, Fauzia Jabeen, Justin Paul, and Agata Stachowicz-
Stanusch.(2020). “Antecedents of employee alienation and its impact
on individual work performance during post-merger integration
(PMI)” Journal of Organizational Change Management, pp. 1-20
Emerald Publishing Limited.

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 L E S S O N

22
Outsourcing and Its HR
Implications
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
22.1 Learning Objectives
22.2 HR Outsourcing – Meaning
22.3 Advantages and Disadvantages of Outsourcing
22.4 Broad Types of HR Outsourcing
22.5 Choice of Services for HR Outsourcing
22.6 HR—Outsourcing: Future Development
22.7 Answers to In-Text Questions
22.8 Self-Assessment Questions
22.9 References

22.1 Learning Objectives

‹ ‹Meaning of HR Outsourcing.
‹ ‹Advantages And Disadvantages.
‹ ‹Types of HR Outsourcing.
‹ ‹Choices of Services to Be Outsourced.
‹ ‹Future Development of HR Outsourcing.

22.2 HR Outsourcing – Meaning

The capital structure, physical resources, and human resources are the three factors that deter-
mine the productive capacity of all businesses. (Peter F Drucker). This statement holds a lot

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Notes of significance because of the fact that of all the three resources, only the
human resources possess the productive capacity for which the upper limits
are not defined. People are the most important asset of an organization.
Leading organizations around the world are taking more strategic approach
to managing their human resources. Outsourcing is one such approach.
Outsourcing is simply obtaining work previously done by employees
inside an organization company from outside sources. If someone has
specialized in an activity which is not strategically critical to our busi-
ness – and is able to do that cost effectively, it is better to get it from
outside. Human Resource Outsourcing can also be defined as a process
in which a company utilizes the services of the third party to take care
of its HR functions. A company may outsource a few or all of its HR
related activities to a single or combination of service providers.
Outsourcing is work done for a company by another company or people
other than the original company’s employees. Outsourcing entails purchas-
ing a product or process from an outside supplier rather than producing
this product or process in-house. The business that is outsourcing will
train outsourcing provider to form a supply chain partnership.
Activities to be Outsourced
Organizations are outsourcing day to day human resource functions so as
to focus on strategic HR issues that impact corporate performance and
shareholder value. Recruitment and selection, payroll and compensation
management, staff training, employee benefits and service, job evalua-
tion, maintenance of employee records keeping up to date with State and
Central tax laws are some examples of such functions.
These are basically people and effort intensive activities but are routine
in nature. Such repetitive work can easily be turned over to a third party
specialist-who would be able to deliver excellent results, leading to sig-
nificant savings in cost and effort. Through standardization of processes
the specialist is able to deliver service at unbelievable speed also.
At the same time, the organization should continue to perform trans-
formational HR roles – such as attracting and retaining talent, bringing
about strategic change in partnership with line managers, championing
employee concerns etc. Across boardrooms and business schools HR is
primarily viewed as a powerful tool to attract and retain talent, build
workforce capabilities, handle grievances and bring out the best in people.
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With high attrition rates still haunting most people intensive industries, Notes
an active and vibrant HR can be a key differentiator between mediocre
and high-performance organization. Seen against this backdrop, it is not
surprising to find that routine activities such as pensions/benefits, stock
options, health benefits and payroll are among the most popular HR
programs being outsourced partially or completely. HR outsourcing is
growing as HR programmes and services become more complex.

22.3 Advantages and Disadvantages of Outsourcing

HR outsourcing has a major impact on an organization’s functioning and
is, therefore, a trend in the majority of organizations. Making a profit and
staying competitive are the main objectives of any business. To that end,
some organizations opt to outsource their HR or other functions in order to
aid in their success. While this practice has positive implications, it does
not come without its disadvantages. Companies considering outsourcing
anything should carefully weigh these implications before making a decision.
Reasons/Advantages of HR Outsourcing
(a) It helps HR personnel focus on core activities which adds value
at the strategic level. As HR focus changes from operational,
transactional and administrative, to strategic, it becomes aligned
with organizational goals and strategy.
(b) It is cost-effective as organizations avoid large investments in
technology, save on operational costs as outsourced partners offer
cost-effective solutions.
(c) Operational efficiencies result from HRO providers because HR
activities are their core competencies.
(d) Provides flexibility in dealing with the challenges of a changing
environment.
(e) Improved Service Delivery and Greater Employee Satisfaction: HRO
providers have clearly defined SLAs and TATs which ensures more
efficient service and enhanced employee query response/resolution.
(f) Gain Expertise which may not be Available In-House: HRO
providers can provide skill sets for certain activities which may
not be available within the company, thereby helping organizations
make up for the lack of in-house expertise.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes (g) Improves Compliance and Avoid Legal Risk: Compliances related
to tax, retirals, labour laws etc. are complex, and outsourcing to
a specialized Service Provider ensures compliance and therefore
minimizes exposure to legal risks which can lead to financial and
reputational issues.
Disadvantages
Job Loss
HR outsourcing is not a perfect practice. Job loss is a classic occurrence
and a serious concern for employees. It makes staff feel undervalued,
leaving them in a state of fear that they may be laid off in favor of the
company’s bottom line. In turn, employee loyalty suffers, resulting in
increased turnover. This is especially problematic during a recession,
where workers know that finding other employment will be more difficult.
Product Quality
HR Outsourcing is Not an Effective
way to ensure quality. Whether it is human resources functions, custom-
er service or manufacturing, third party companies employ less skilled
workers at a lower wage. This can result in a substandard product that
ultimately results in client dissatisfaction. In short, a company’s desire
to save money can be offset by lost revenue due to a poor end product.
One of the reasons that outsourced products are cheaper is that service
provider often prioritize quantity over quality. Workers may have to pro-
duce shocking numbers of products in an hour or day. This can cause
quality to suffer immensely.
Costs
Outsourcing saves money on direct labor expenses, but that might not
mean as much to your bottom line as you may expect. Management ex-
penses might increase, thanks to more hours spent dealing with overseas
operations and additional travel involved. A longer supply chain can add
costs and delays, and quality control issues can lead to significant hidden
cost. Don’t forget to include the cost of oversight in your projections, as
those will increase even as money you are paying each worker goes down.
Time
If your business needs to bring in product quickly by chasing current
trends, outsourcing might not be effective. The lead time from design to
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 Outsourcing and Its HR Implications

receipt of product is substantial, typically ranging from six to nine months. Notes
Although outsourcing saves money on production, it also can result in
getting the goods too late to take advantage of having customers eager
to purchase them at full price.
Control
Outsourcing associates your brand with the work of others, which can
have negative effects if the company you choose mistreats its workers
or otherwise gets mired in scandal. While an outsourcing company may
have many other clients and your business may have nothing to do with
a particular bit of bad news, few consumers will make that distinction if
that company is accused of maintaining sweatshop conditions and you’re
listed as one of its clients. You also have less control over factors such
as quality. You can provide specifications and demand testing, but the
distance involved and the difficulty of oversight may mean you don’t
find out about problems until it is too late.
Language Barriers
When companies outsource to another country, language barriers can
prove problematic, particularly when companies outsource customer ser-
vice. Customers may have difficulty communicating their needs to cus-
tomer service representatives who are not native speakers, and customer
service representatives may not be able to competently explain issues to
customers. This can result in lower customer satisfaction, poor customer
service and a loss of business.
Cultural Barriers
When companies outsource to countries that have different cultural values,
quality may suffer. Customer service representatives in foreign countries,
for example, may not communicate to customers in culturally appropriate
ways or may not understand figures of speech. Other countries may not
use the safety standards used in the United States, resulting in products
that break or contain dangerous chemicals. According to the New York
Times, 60 percent of recalled products were made in China.
Increased Bureaucratic Difficulties
When you outsource to a foreign country, you may face time zone dif-
ficulties and travel costs that can greatly increase your costs. Moreover,

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes trying to navigate decision-making in a different country can compromise

product quality. When outsourcing to a U.S.-based company, you may
face an avalanche of paperwork, difficulty communicating with the other
company and an increased need for oversight. Not only do these issues
increase costs; they can also reduce quality and increase stress.
Poorly Qualified Employees
As one of the main reasons of outsourcing is providing cheaper products/
services to the outsourcer. So, they try to cut cost on every aspect. Con-
sidering labour, this means that employees may not stick around, and that
highly qualified employees are more likely to seek work at businesses
that provide higher wages. The result is that the least qualified employees
tend to work at the cheapest outsourcing locations. This increases the
likelihood of producing poor-quality products or giving customers bad
customer service. Even when the work is outsourced to the best company
in that area, the outsourcer may encounter poorly qualified employees be-
cause the employees of that organization were not interviewed by him/her.
Conclusion: Since, there are both benefits as well as shortcomings of
outsourcing HR related activities, the key to the positive impact of out-
sourcing an organization’s functioning will depend on the proper iden-
tification of key HR initiatives and functions that can be outsourced,
supported by the right outsourcing partner who shares the same vision
as the organization. This is one of the biggest challenges, because it may
adversely affect company’s performance if selected wrongly.
HR Outsourcing is rapidly emerging as one of the world’s most exciting
business trends. It reflects the need, recognized by increasing numbers
of organizations, to focus on their core areas of business – and to out-
source processes that add little or no value in terms of achieving their
business objectives.

22.4 Broad Types of HR Outsourcing

HR – outsourcing can be broadly divided into three types:
1. Application Service Provider (ASP): A host of companies specialise
in providing hardware and software applications to support large
organisations, including application vendors like PeopleSoft, Oracle,
etc. which have developed application packages (PeopleSoft HRMS,

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Oracle HRMS), for supporting human resource activities in an Notes

organisation.
They install, customise and provide support for running these
applications. The major disadvantage with ASP is the costs associated
with application software. Secondly, the successful implementation
of the application software is doubtful.
2. Business Process Outsourcing (BPO): The major difference between
BPO and ASP is that in BPO, the client is in direct contact with the
employees through call centres or support centres. MNCs generally
opt for BPO as they operate in many countries and employ a large
number of people. While certain firms wish to retain the power to
control human resources, others hand over the power to the service
providers.
3. Total HR Outsourcing: In this type of outsourcing, the entire HR
function is run by the service provider. There is no specific HR
department in the organisation. The client organisation only has
senior HR professionals who are also HR- strategists. A host of
non-strategic functions and employee contact is done by the service
provider.

22.5 Choice of Services for HR Outsourcing

The following processes can be adopted for outsourcing a few of the HR
services from outside:
1. Hiring Services: Recruitment and selection are the human resource
services through which knowledgeable people from outside are
brought into a company. External market gets its supply of human
resources mainly from three sources, viz., the households, academic
institutes, and industries. All those people who look for jobs are
available in different types of markets. Prospective employees search
for jobs using varieties of means and media.
As such there are varieties of markets where an employer can find
its employees. These potential employee markets differ not only
in terms of number and qualities of employees available but also
in terms of willingness of a new hire to continue the employment
relations with the company for a good many years.

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Notes With varieties of people joining the labour markets at different

stages of their career, organizations find the task of reaching out to
the right market for hiring a few good quality employees who will
stick with the company for some number of years, a very costly and
risky affair. It requires good amount of investment to keep track
of changing employee profiles of different markets. Furthermore,
an employer may use such market specific knowledge assets only
occasionally.
Further, with the growing entry of varieties of employment practices,
these characteristics of the employee market are also changing very
fast. Much of the activities required to get a few potential employees
who show interest for the company positions are highly repetitive
and are amenable to computerization.
Thus, specialized agencies have developed database of potential
employees of various kinds which a company can use to fill up
its position at a much shorter time. This is one of the reasons why
employee search service is one of the first human resource services
that has been outsourced to external vendors.
However, a company that hires its potential employees through
outside vendors must take adequate protection against losing its
competitive edge through such suppliers. There are various ways
by which organizational knowledge asset and source of competitive
advantage can diffuse to competitors. Firstly, the vendor may be
sending the same list of employees to you and the competitors or
may be sending better list of candidates to your competitors.
This means the average characteristics of the potential employees
received by both the companies can be very similar. Under such
conditions, human resource-based competitive edge can be protected
only by keeping the selection part of the employee hiring service
in the hand of the internal line function. Within a common average
there is room for wide variations among the potential candidates.
Only a human learning system that is non-mechanical and tacit
knowledge driven can spot the presence of such variability in a pool
of candidates. Since organizational capability is generated from the
joint efforts of a group of employees, by keeping this final choice
in its hand, it ensures that a selected employee has the required

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learning capability and social relational skills compatible with other Notes
employees.
In other words, though explicit knowledge about market is bought
from outside but its conversion into tacit knowledge useful for the
company is still kept in the hands of the internal management.
Similarly, for a company where employee diversity is one of the
essential requirements for implementation of its business policy,
the employee selection must incorporate assessment of additional
characteristics of the potential employees. This can be done only
if the final selection is still kept in the hands of the management.
2. Developmental Services: In the area of outsourcing of external
developmental resources, companies buy explicit market developed
knowledge. Since there are many other organizations who are
experimenting with newer innovations in the area of management
processes, an organization can enhance the capability of its employees
by giving them exposure to those practices of other companies.
Further, there are economy of scale in acquisition and compilation
of such information.
And, some organizations, e.g., academic institutes, professional
manpower training institutes specialize in such information acquisition,
structuring, and presentations to prospective learners.
However, if an organization straightaway uses the same external
knowledge for its internal employee development, then it will not
get any competitive advantage over the competitors. In order to gain
competitive advantage out of an externally designed and delivered
explicit knowledge, an organization again should use a human learning
system to convert such explicit knowledge into internally useful tacit
knowledge.
This conversion of externally purchased knowledge into internally
useful tacit knowledge can be effective if the choice of learner is not
left to the external vendor but is managed by the internal managers
who are well acquainted with the employees. Such a choice must
take into account not just the company requirements of trained
employee but also the ability and aspirations of the learners.
Not all employees are willing to acquire new knowledge nor do they
have the same ability to internalize them and work as a source
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Notes of learning to others. Both requirements of development for a

particular area and the person who should be developed must be
left in the hands of the line function manager who is familiar with
the long-term strategic goals of the company and the expectations
and abilities of the potential trainees.
Before sending a group of employees to any externally provided
developmental programme, an organization should carry out a
thorough internal learner identification.
Further, by placing a group of selected employees that has gone
through a common learning programme together, it cannot only
increase the scope for conversion of such externally acquired explicit
knowledge into internally useful tacit knowledge but also ensure
that such externally procured organizational knowledge capital will
not diffuse easily.
3. Performance Management: Organizational performance evaluation
involves measurement at three levels, viz., at total organizational
level, at group or at departmental level, and at individual employee
level. Performance information or data at total organization and at
group or department level are mostly explicit knowledge intensive
and their measurements are less controversial though there can be
a few areas which are tacit and personalized knowledge intensive.
As such a company can outsource evaluation of those parts of
its organizational and departmental performance that are explicit
knowledge intensive keeping the subjective and qualitative part of
the assessments in-house.
In the area of individual employee assessment, the scope of outsourcing
is extremely limited because much of these assessments are subjective
and tacit relational knowledge intensive. However, individual
performance assessment uses tools and techniques which are being
continuously improved upon and are explicit knowledge-intensive.
These markets or industry-specific knowledge, e.g., the format of
performance appraisal system or the weights given to different types
of measurements, viz., economic results, observable behaviour or
personal traits, can be outsourced. An organization can learn from
the practices of other companies doing business in the same industry.

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The benefit of such external sourcing of measurement format is Notes

that a company can acquire the design of a successful company in
the same industry without spending much in its actual design.
However, the actual outcome from the administration of a formal
performance evaluation system depends not only on the format
used for such measurement but also on the way it is applied for
assessing the performance of an individual employee, i.e., the way
performance data is generated. This execution part of performance
evaluation is mostly tacit knowledge-intensive and must be handled
by someone responsible for supervision and observation of the
employees.
It is through the action of the internal line function, the explicit
knowledge-driven performance evaluation form gets converted
into useable knowledge in the company. Since such measurement
involves extensive use of prior experience of the line function
manager and mostly driven by the internal culture of the company,
such knowledge cannot diffuse easily to competitors even though
the format for measurement has been bought from a third party.
4. Compensation and Benefit Management: Compensation is an
important part of the human resource services which ensures supply
of adequately skilled manpower to the company and to its various
positions. Unless the compensation for various positions are adequate
to remunerate the qualification and experience that is required for
the job, it may fail to attract the right people for those positions
and it will be harder to retain such employees for long.
Since the main utility of a well-designed compensation is to attract
and retain employees in the organization, it is important that the
compensation system and method are as per the practices of its
competitors. This means an external designer of a compensation system
can perform a better job than an internal expert. Since such external
vendors provide similar services in many other organizations, their
design and practices reflect the prevailing market practices well.
Further, for ensuring consistency across many other employees and
fairness in compensation of any employee, compensation growth
is generally linked with a few indicators including educational

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes qualification, work experience, and performance results. Though

performance assessment process is tacit knowledge intensive but
the outcome of such a process is an explicit knowledge or data.
Naturally, once a compensation formula has been decided, an algorithm
can be used to write a software program that is administered
repeatedly for calculating the compensation of all the employees.
And, the system administrator doing the job of calculating employee
compensation need not be working in the company. In other words,
it can be contracted out to a third party with sufficient technical
skill and modern IT infrastructure.
5. Reward and Incentive Management: Rewards and incentives are
used to encourage employees to go beyond their call of duty. A
good reward system not only attracts the right kind of employees
into the organization but also encourages them to work in such a
way that organizational capabilities are maintained. A reward that is
well linked with the achievement of objective outcome is a powerful
motivating force for employees to work hard and show the desired
behaviour.
However, for most managerial positions such objective outcome
is available mostly at the unit and group level. There are only
a few positions for which an employee’s actual contribution to
organizational goals can be related directly with the incumbent
skill, competency, and motivation. This means an organization is
able to outsource reward management at group and unit levels but
not at the individual level.
The advantage of such outsourced reward management is that a
supplier can bring in lot of expert knowledge from the market and
provide a reward system that is being used in the industry.
However, even if the reward at group level is driven by explicit
knowledge there is still the tacit knowledge-driven reward when
such group-level rewards are distributed among the members of
a team. Trust among members and faith and confidence on the
leaders ensure that such internal distribution of rewards based on
the leader’s personalized knowledge about individual employee

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 Outsourcing and Its HR Implications

competence and contribution will not encourage development of Notes

destructive inter-member competition or jealousy.
Thus, the key to maintenance of competitive advantage is the trust
and faith on the internal culture of the organization and the team.
This is possible when a leader knows the members well and is in
turn well accepted by them.
6. Specialized Consultancy Services: Consultancy is a fast-growing
service business in many countries including India. There are
a number of reasons why this business has been growing so
fast. Firstly, many big multi-functional, multi-product companies
occasionally find a glaring mismatch between manpower required
and the manpower available both in terms of number and quality in
different departments. This happens because organizational processes
have inertia and are often hostages to their past successes.
Very few organizations can change their internal policies and fewer
can change their departmental manpower allocations in the same
pace as that of the external environment. The presence of different
interests groups with their distinct powers and pulls gives shape to
any change in an organization’s policies.
Faced with the growing burden of operating cost and declining share
of a company’s products in the market, a management team often
looks for an objective and neutral assessment of internal functional
departments. High inter-departmental rivalry often makes it difficult
for an internal expert to arrive at any valid assessment of these
internal functions.
Secondly, survival and growth in a competitive environment require
fast learning and adoption of good practices of others. Innovation
is a risky and costly exercise. But a company can reduce its risk
and cost of adoption by learning from the experiences of others.
This has been making the benchmarking of organizational practices
with competitors quite a popular move.
There are specialized consultancy organizations which collect, process,
and sell such organizational process-oriented information. With growing
importance of process innovation and risk in such innovations, the
market for consultancy services is certain to expand very fast.

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Notes 7. Management of Employment Relations for Low-Level Jobs: Apart

from outsourcing of selective parts of human resource management
services, another type of HR outsourcing is emerging as a new
development where Company A allows another Company B to
manage its entire department or division. Company B will bring its
own employees in Company A premise and supervise them while
they are working there. The contract of Company A is only with
the owner of Company B.
In any big manufacturing or service company, there are lots of jobs that are
required for its business but are not directly related to its main business.
Let us take a ship building company employing over 5000 employees.
For providing tea, coffee, and food, it needs a big canteen facility. This
canteen has to engage as many as 50-60 employees to prepare and serve
food and drinks to its various departments.
For running the company, these services are essential but their relations
with its main business are not direct and the effects of service failure
from these departments on the company market performance are not
immediate. In the past, many of these services were managed through
internal departments and controlled through hierarchy.
But the problem of having such a remotely related activity as a part of
a ship building activity is that if a manager overseeing such activities
may not gain any knowledge that can be utilized in other departments
of a ship builder that are directly related to ship making. As a result, a
manager who has worked for say ten years very efficiently in overseeing
a catering service in a ship building company will not find a befitting
position in the hierarchy. He/she will reach a career ceiling very quickly.
The net effect is that no good manager will be interested in working as
a Canteen Manager if he/she finds that there is no further growth in that
line. As a result, these types of unrelated service areas are fast going for
contract employment.
Unlike a consultancy service which is a temporary job, a contract employ-
ment is good for those areas of business where the jobs are of permanent
nature but the services are in non-core areas of the company. A vendor
or contractor generates the services in the client premise using all the
facilities required for service generation. A contractor will provide only
the employees.

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Such externally served services are good arrangement both from the point Notes
of view of the client organization and from the point of view of the
employee who is engaged by an external vendor. The external contractor
can engage a large number of employees and managerial staff to provide
similar services to many other companies and use a separate specialized
managerial hierarchy to supervise workers.
And, from the client’s point of view, it can redeploy its employees more
on those services that generate knowledge and competency in line with
its core business. Thus, most manufacturing and service companies have
started engaging external vendors mostly in their own premise to get a
lot of their low end services, e.g., maintenance services, IT management,
security services, catering services, through contract.
Apart from this core versus non-core analysis that prompts companies to
go for external servicing of certain functional areas, contractual employ-
ment of worker has been found to be quite popular in certain industries.
Seasonal industries, e.g., woollen garments industry cannot afford to have
too many employees on its permanent roll as its main business varies
widely over different times of the year.
Industries that operate on a project mode, e.g., building construction in-
dustry will engage a lot of workers on contract basis because its demand
for workers varies according to the project cycle time. BPO industries go
for contractual employment because many of them are heavily dependent
on a few clients. If at the end of its present contract, a big client does
not renew its contract, then they cannot keep the employees engaged.
On the other hand, if they are engaged by a contractor then they can be
redeployed in another BPO firm by the contractor. In India Team-Lease
Service is a big contractor who provides lot of employees to BPO companies.
Industries that are highly export-oriented are very susceptible to frequent
slump of demand for their goods and services caused by international
business cycles. During a recession, the net worth of any such organiza-
tion whose business is heavily dependent on international markets could
get wiped out in a short time if it has to carry the full burden of its
employees that it hired during the boom time.
There are varieties of regulation-mandated payments for regular employ-
ees, e.g., benefits and welfare which are fixed irrespective of whether a

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes company has any business or not. In order to protect it from the burden
of statutory payment for employees without any job, these industries hire
a large number of employees under contract category whose payment
burdens could be avoided by not renewing their contracts at the end of
the current period.

22.6 HR—Outsourcing: Future Development

Organisations are focussing more on their core competencies. This, cou-
pled with techno-structural changes has made the role of the HR-manager
vital for the organisation. There are various future development that have
to be dealt with before and after making the outsourcing decision. Some
of them are:
1. Outsourcing and Technology: Technology is one factor that has
changed the HRM domain. Emerging technologies like HRIS (Human
Resource Information System), application software (Oracle HRMS)
and self-service human resource packages have changed the way
HR-services were being administered. Organisations that were unable
to keep up with technological changes decided to outsource their
HR activities.
2. Managing the Outsourcing Relationship Restructuring and
Outsourcing: There is a need for specialists who are good at
managing the outsourcing relationship. The specialist should strengthen
and nurture the relationship over a period of time and this requires
considerable experience and foresight on part of both the parties.
The relationship should encourage a culture of knowledge sharing
and mutual learning.
3. Monitoring and Evaluating Vendor Performance: Before the HR
activity is outsourced, the performance standards for the activity
have to be conveyed to the vendor. External consultants can be
consulted to develop performance standards. There is a need for
frequent communication between the outsourcer and the vendor.
In order to enhance performance, the organisation can also resort
to schemes where it shares the amount saved due to reduction in
compensation claims with the vendor.

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4. Role of HR Manager: HR managers today need to have multiple Notes

skills. They should be adept at solving business problems apart from
managing human resources. They should play an active role in the
formulation and implementation of business strategy. HR managers
who are generalists and can fit into any role are in short supply.
Because of the lack of availability of HR generalists, organisations
may resort to HR outsourcing.
IN-TEXT QUESTIONS
1. Productive capacity of human resources is limited. (True/False)
2. Outsourcing implies doing someone’s else work within the
organization. (True/False)
3. Outsourcing transformational roles of HR is a good strategy.
(True/False)
4. Outsourcing helps the organization in concentrating on non-core
activities. (True/False)
5. Outsourcing ensures product quality. (True/False)
6. Outsourcing saves money on __________ labour expenses.
7. Outsourcer has __________ control over factors such as quality.
8. Time zone difficulties crop up in case of __________ outsourcing
agreements.
9. Outsourcing results in __________ qualified employees.
10. Three broad types of outsourcing are: Application Service
Provider (ASP), Total HR Outsourcing and __________.

22.7 Answers to In-Text Questions

1. False
2. False
3. False
4. False
5. False
6. Direct

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Notes
7. Less
8. International
9. Poorly
10. Business process outsourcing

22.8 Self-Assessment Questions

1. Define outsourcing of HR business processes.
2. Explain what types of HR business processes are outsourced.
3. Discuss the advantages of HR business process outsourcing.
4. Discuss the disadvantages of HR business process outsourcing.
5. Explain the three broad types of HR process outsourcing.
6. Explain in detail which HR processes can be outsourced and how.
7. Discuss some of the future developments in the area of HR process
outsourcing.

22.9 References
‹ ‹Cathy Sheehan Brian K. Cooper. (2011). “HRM outsourcing: the
impact of organisational size and HRM strategic involvement”,
Personnel Review, Vol. 40 Iss 6, pp. 742–760.
‹ ‹Klaas Szierbowski-Seibel, Ruediger Kabst. “The impact of HR
outsourcing and strategic HR integration on the HR-to-employee
ratio: An empirical evaluation of the HR function over the last
decade”, International Journal of Manpower, https:// doi.org/10.1108/
IJM-06-2016-0129; Downloaded by University of Pennsylvania
Libraries At 01:06 18 March 2018 (PT); pp. 2–33.
‹ ‹Kodwani Amitabh. “Human Resource Outsourcing: Issues and
Challenges”, Journal of Nepalese Business Studies · January 2007;
IV (1)DOI: 10.3126/jnbs.v4i1.1028, pp. 38–46.
‹ ‹Pattanee Susomrith, Alan Brown. “The core processes adopted for
outsourcing HRM in Australia and its outcomes”, Management

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 Outsourcing and Its HR Implications

Decision, https://doi.org/10.1108/MD-05-2016-0333 Downloaded by Notes

Cornell University Library At 21:37 13 July 2017 (PT); pp. 1–21.
‹ ‹https://www.peoplematters.in/article/outsourcing/impact-of-hr-
outsourcing-on-an-organizations-functioning-19107
‹ ‹https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/
pages/outsourcingthehrfunction.aspx
‹ ‹https://www.yourarticlelibrary.com/human-resource-management-2/
hr-outsourcing/99683
‹ ‹https://yourbusiness.azcentral.com/hr-outsourcing-implications-4850.
html

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 L E S S O N

23
HR Strategy in
International Context:
HRM in Developing
Countries
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
23.1 Learning Objectives
23.2 Strategic International Human Resource Management - Meaning
23.3 Steps in Designing a Global Human Resource Strategy
23.4 HRM in Developing Countries
23.5 Management Characteristics in Developing’ Countries also Known as Post-
Colonial Management Systems
23.6 Strategic Global Human Resource Management: Case Study of an Emerging
Indian Multinational (Thite 2012)
23.7 Answers to In-Text Questions
23.8 Self-Assessment Questions
23.9 References

23.1 Learning Objectives

‹ ‹Meaning and Importance of International HRM.
‹ ‹Steps In Designing a Global Human Resource Strategy.
‹ ‹HRM in Developing Countries - Meaning.
‹ ‹Characteristics of HRM in Developing Countries.
‹ ‹HR Practices of a successful Indian MNC - A case study.
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Notes
23.2 Strategic International Human Resource Management -
Meaning
Strategic International Human Resource Management can be defined as
a unified and comprehensive plan designed by HR to manage its global
human capital in such a way that the same aligns with organisation’s
philosophy and purpose. Such HR strategies, if done rightly, can play a
pivotal role in the growth and strength of an organization.
Importance
There is growing evidence that HR practices influence organizational
performance and competitive advantage and those organizations, which
deploy good people management practices, reap the benefits. Successful
organizations follow certain common high performance/high involvement
work practices (Thite, 2012):
‹ ‹HR function in these organizations establishes business partnership
with line managers who have direct interest and involvement in
delivering HR. The HR functionaries become an integral part of
the strategic business units (SBUs) and customize HR solutions
to provide fast and efficient service. It is their attitude to internal
and external customer service that distinguishes their work from
traditional HR delivery.
‹ ‹They identify, operationalize and implement the competencies and
characters that they believe are at the core of their organizational
culture.
‹ ‹They leverage intellectual capital in and around the organization
by institutionalizing a life-long learning culture.
‹ ‹They aim to recruit the best talent available in the market by
carefully cultivating the image of a preferred employer.
‹ ‹Their remuneration system is timely, performance-based and profit
sharing. It rewards and reinforces the competencies and characters
valued by organizational members.
‹ ‹Their commitment to employees is demonstrated in several ways,
such as continuous training and opportunity to work on challenging
tasks.

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Notes ‹ ‹They develop organizational structures that revolve around autonomy,

self-leadership and team-based learning and problem solving.

23.3 Steps in Designing a Global Human Resource Strategy

Internationalization is the key for the survival of organizations in the
contemporary business environment. Internationalization of human re-
source management (IHRM) is one of the most relevant functional areas
of an organization though all functional areas like finance, marketing,
production, require internationalization. HR managers, while working
in an international context, should make decisions about what human
resource practices are best suited to the firm’s international operations.
It requires an awareness on their part regarding the differences between
domestic and international human resource management. Such awareness
will help managers to establish operational mechanisms to deal with
country differences in terms of industrial labor, culture, and organization’s
practices. Therefore, this chapter enlightens readers as well as managers
as to how to deal with aspects like adaptation or standardization of HR
practices, international staffing, and relevant issues around expatriation
and repatriation.
Management studies always had, for many years, International Human
Resource Management (IHRM) as an important area, and one which is
critical for the competitiveness of organizations. Organizations must innovate
and develop a greater capacity for reaction than that of their competitors
to maintain competitiveness. Appropriate people management can endow
firms with the indispensable capacities needed to achieve survival and
differentiate themselves from their competitors. While going global or
international, HR managers will have to ask themselves questions such as:
What type of employees do they need to hire? Employees from the home
country (expatriates), or local employees? How will we choose whether
to send expatriates or use local employees?
‹ ‹How can we know about HR practices conducted in other countries?
Is the recruitment and selection process the same in the country or
countries the company wants to operate in?
‹ ‹How knowledge across geographical and cultural distances will be
managed? etc.

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International HRM requires more ‘functions and activities, broader Notes

perspectives, and more involvement in employee’s personal life’ as the
workforce consists of mix of Parent Company Nationals (PCNs) and Host
Country National (HCNs). Such workforce will vary in terms of various
cultural, regional characteristics like ability to bear risk and motivational
forces etc. Therefore, a single approach for managing human resources
at international level cannot be perfect and foolproof.
The steps to be followed are:
1. Setting Goals and Choosing Activities that Best Align with the
Organization’s Goals: The goals set for an organization must
reflect its unique philosophy which is shaped by mission and vision
of the organisation. Goals decide where the organization wants to
go. Strategies and activities direct how it is going to get there.
Therefore, goal setting is the first and important step in strategizing
a global human resource plan. The goals must contemplate:
‹ ‹Why does our organization exist?
‹ ‹Who does it serve?
‹ ‹Why does it do what it does?
Set a long-term target towards which your global organization will
work. The next step is to identify activities that best achieve the
goals that lead to a successful business. These objectives must be
achievable, short-term ones that move towards the targets set.
2. Design Organizational Structure in Accordance with the Goals:
The organizational structure outlines how the planned activities
would be performed to fulfill the defined goals. The basic four
types include:
‹ ‹Functional (Small to Medium Organizations): The organization is
divided based on the departments (finance, marketing, production,
research and development etc.). Each department functions
separately with a hierarchical structure, with a manager at the top.
‹ ‹Multidivisional (Big Organizations): With several product line-
ups, the company is split based on the product and the type.
Each unit functions as a separate entity.

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Notes ‹ ‹Flatarchy (Start-ups): There are very few or no hierarchical

levels followed among the employees. It gives the employees
more autonomy.
‹ ‹Matrix: Employees work across departments and divisions.
They report to more than one supervisor. For example, the same
employee works as in presales as well as customer service.
An HR must choose a structure and hierarchy that works best for
the goals set under the first step.
3. HR Planning: Three usual approaches followed by multinationals
regarding HR planning are:
(a) Ethnocentric Policy: All key management positions are filled
by parent company nationals and foreign subsidiaries are being
locally staffed or what is termed as HCNs (Home Country
Nationals). It is followed when:
‹ ‹There is lack of managerial talent in the host country,
‹ ‹The parent organization desires to maintain a unified
corporate culture and tighter control and
‹ ‹Desireto disseminate the parent firm’s core competencies
across foreign subsidiaries.
Though this policy is usually followed at an early stage of
internationalisation, some major problems with this approach
are:
‹ ‹Limited promotional opportunities to HCNs which may
lead to reduced productivity; and
‹ ‹PCNs unfamiliarity with local conditions could be a negative
factor.
(b) Polycentric Approach: Foreign subsidiaries are managed by
host country nationals and home-office headquarters by parent-
country nationals. This approach may reduce the local cultural
misunderstandings that expatriate managers may exhibit. The
advantage of this approach is that adjustment and language
learning problems are eliminated. American Express and Nestle
follow this approach for staffing their foreign subsidiaries.

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(c) Geocentric Approach has Preference for Ability Rather than Notes
on Nationality: This approach seeks the best people for key
jobs throughout the organization regardless of nationality.
This approach seems to identify with the spirit of the times
and enable a firm to develop an international executive cadre
and reduce the tendency of national identification of managers
with units.
The drawbacks of this approach, if any, are it faces conflict with
policies of local governments who desire foreign subsidiaries
to employ their citizens, cumbersome paperwork, and increased
relocation and training costs.
4. Recruitment and Selection: Recruitment and selection functions
of HRM are performed to ensure right man on right job at right
time and right place. However, this is not so easy, more especially
in case of MNCs. Foreign placements make demand on expatriate
employee that are different from what the employee would face
if posted in his or her home country. For example, the expatriate
employee will have to cope with new workforce, with colleagues
with drastically different cultural inclinations, coupled with, if the
spouse and children also accompany, the problems of adjustments
with new place and people, making new friends, shopping in strange
surroundings, learning language, and attending new schools.
Thus, selecting employees for foreign assignments means screening
them for those traits that predict success in adapting to what may be
dramatically new environments. Five factors perceived by international
employees to contribute to success in a foreign assignment are job
knowledge and motivation, relational skills, flexibility/ adaptability,
extra cultural openness, and family situation. It is said that in a
multicultural workforce, human resource practices have to be reactive
rather than proactive.
5. Training: Training is essentially imparted to improve job skills of the
employees. It should also coincide with staffing needs. Accordingly,
employees in an MNC need induction, orientation and training to
be imparted in the social, cultural, business and technical aspects
to make them, fit for business requirements of today and tomorrow.

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Notes An expert suggests that overseas employees need four-level training

to be imparted. These are:
Level I: Training focuses on the impact of cultural differences, and on
raising trainees’ awareness of such differences and their impact on busi-
ness outcomes.
Level II: Focuses on attitudes and aims at getting participants to un-
derstand how attitudes (both positive and negative) are formed and how
they influence behavior.
Level III: Training provides factual knowledge about the target country.
Level IV: This final level training provides skill building in areas like
language, adjustment and adaptation skills.
Beyond these special training practices, the need for traditional training
is also felt for development of overseas employees. Such training can
be imparted by rotating employees’ assignments so that employees grow
professionally. Some MNCs establish their Management Development
Centres (MDCs) around the world where executives can come to hone
their skills. The success of the Japanese MNCs is attributed, to a large
extent, to their strong training practices. Japanese companies impart dif-
ferent kinds of training to their employees. Some send them for graduate
programmes, some send them abroad to train in business law and engi-
neering and familiarize themselves with foreign principles of management.
There is also the Institute of International Studies and Training in Japan,
established as a joint venture among business, government and academic
circles, to promote training activity in the country.
6. Compensation: The issue of compensation/remuneration in case of
international employees is a tricky one for two reasons. First, paying
all the employees of one rank the same compensation satisfies the
norm of equitable remuneration. However, it raises more problems
than it solves. The fact remains that as a second reason, the cost
of living can be significantly varying among the countries.
For example, it can be enormously more expensive to live in
America than in India. It these cost-or-living differences are not
duly considered while determining compensation for overseas
employees, it may be almost impossible to get employees to take
these high-cost assignments. Therefore, paying compensation that

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not just satisfies employees but also seems fair and equitable is no Notes
simple matter.
The most common approach for formulating multinational employees’
compensation is to equalize purchasing power across countries, a
technique known as the Balance Sheet Approach”. The basic idea
behind this approach is that each foreign employee should enjoy
the same standard of living he/she would have enjoyed at home.
For this, multinational pay equal base pay to employees plus some
allowances in the form of mobility allowance, housing allowance,
children’s education allowance, etc., to regain lost purchasing power
due to relocation.
In India with the process of liberalization and globalization, the
government has allowed companies to pay their managers salary
packages which are more in keeping with those of their counterparts
abroad. Unless salary and benefits are more or less equitably
distributed through the different units of a multinational, it can
cause problems of demotivation and lackluster performance. This
would cause more damage to the bottom line than the increase in
benefits paid to individual employees.
7. Performance Appraisal: Like compensation, several things complicate
the task of appraising a foreign employee’s performance. Two are
the most crucial ones. One, who will appraise? Two, what will be
the criterion of appraising? Local managers having some inputs can
appraise the expatriate employee. But, such appraisal is likely to
be distorted by cultural differences.
For example, a US expatriate employee in India may be appraised
somewhat negatively by his host-country bosses who find his use
of participative decision making inappropriate in their culture If
the expatriate is appraised by objective criteria such as profits and
market share, it may also not be quite appropriate because local
events such as political instability, for example, will have their
bearing on the expatriate performance.
In order to resolve the above appraisal issues, experts have suggested
a five-point procedure for improving the expatriate employee’s
appraisal. They are:

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Notes 1. Stipulate the difficulty involved in assignments at the workplace of

expatriate. For example, working as expatriate in China is generally
considered more difficult than working in India.
2. Give more weight in evaluation towards the on-site manager’s appraisal
than towards the home-site manager’s appraisal which will be mainly
based on distant perceptions of the employees’ performance.
3. In case the home-site manager appraises the expatriate employee,
the manager should take at least background advice from a former
expatriate from the same overseas location.
4. Modify if required, the performance criteria used for a particular job to
fit the overseas position and characteristics of that particular locale.
For example, maintaining and improving labour relations might be
more important in India which is characterized by labour instability,
than it would be in another country like the United States.
5. Use both quantitative and qualitative criteria to evaluate the performance
of overseas employee. So, to say, don’t appraise the expatriate, in
terms of quantifiable criteria like profits or market share only, but
also give due credit for his or her very relevant insights into the
functioning of overseas operation.

23.4 HRM in Developing Countries

Countries that have been termed ‘developing’, which comprise some
80 per cent of the globe, have suffered from a negative image and un-
der-exposure in the main stream management literature. These include
all countries in the continent of Africa, in Latin America, South Asia,
many parts of South East Asia and Polynesia, and Central Asia including
many of the former Soviet republics. One could also stretch the point
to include some of the transitional economies of the former Soviet bloc
in East and Central Europe, the Newly Industrialized Counties of East
Asia, and much of the Middle East. China also is often included in this
category. The developing-developed world paradigm, which is mostly
employed in the few texts currently available in this field projects a view
that ‘developing’ countries should become more like the ‘developed’
countries: the United States and Western Europe in particular. The aim
of development then becomes to make the developing countries more like

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the developed countries. This includes introducing ‘modern’ management Notes

methods, in order to manage staff more efficiently.

23.5 Management Characteristics in Developing’ Countries

also Known as Post-Colonial Management Systems
(a) Top-down management with authoritarian and paternalistic decision
styles with centralized control and decision-making
(b) Associated with this is Bureaucracy with an emphasis on control
mechanisms, rules and procedures rather than performance, with a
high level of conservatism and risk aversion, and a lack of a clear
mission statement or sense of direction in organizations. A reluctance
to judge performance makes appraisal systems problematic.
(c) This may be associated with an emphasis on inputs through
increasing expenditure on health, education and housing after
independence in, for example, African states, to the exclusion of
outputs such as quantity, quality, service and client satisfaction.
Best use is not being made of inputs or the supply to organizations
(generated through improvement in education and training) through
capacity utilization within organizations.
(d) Inefficiencies, including lack of clear objectives, over-staffing, lack of
job descriptions and job evaluation, lack of incentives, and political
interference, as well as poor infrastructure and lack of systems.
(e) Internal policies may be discriminatory as a result of preferences
given to in-group or family members (this is well documented in
the collectivism-individualism literature. This may lead to decisions
(such as promotion and appointments) based on relationships rather
than the application of universal rules.
(f) Employee Alienation: Understaffing, poor motivation, risk aversion
and unwillingness to take independent action; close supervision of
subordinates with little delegation; operations often inefficient and
high cost with low productivity, over-staffing, under-utilizations, poor
pay and poor morale indicated by high turnover and absenteeism.
Through the general underdevelopment of the economy and the
tenuous status of many jobs, unions are likely to be weak and often
subjugated to wider political interests.

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Notes (g) Lack of Management Skills: Although top managers are typically
learned, articulate and well-travelled, at middle management levels
there are weak systems and controls, inadequate managerial skills
and a lack of industrial knowledge. This is reflected in the general
low levels of managerial expertise.
(h) Management Motivated by Control Rather than Results: While
little research has been undertaken on management motivation,
those few studies undertaken in Africa do seem to support this
supposition. Management commitment may ignore means in favour
of ends, although not reflecting an achievement orientation. This
may reflect an ethical disregard for wider stakeholders, and a pursuit
of corporate objectives as they dovetail with own objectives.
(i) Management principles reflect an external locus of control where
events are considered not within the individual’s control, where
creative potential is regarded as being limited, and people are generally
fixed in their ways and not changeable. This may well reflect also a
mistrust of human nature, and a belief in the undisciplined attitudes
of workers to industrial life. Decisions are focused in the past and
present rather than the future and therefore may be deontological in
nature rather than teleological. Action is focused on the short term,
and success orientation may be moralistic rather than pragmatic as
a result. This may reflect a passive-reactive orientation.
(j) Authoritarian Management practices with reliance on the hierarchy, use
of rank, low egalitarianism, and a lack of openness in communication
and information giving.

23.6 Strategic Global Human Resource Management: Case

Study of an Emerging Indian Multinational (Thite 2012)
This case describes the key elements of the corporate human resource (HR)
philosophy, policies and practices of the case study organization in order
to explore whether and how they mirror the best practices in the strategic
global HRM literature. The case of Alpha Computers (name changed to
maintain confidentiality) explains why and how Alpha has been able to
become a world class IT firm by keeping its intellectual capital at the core
of its business philosophy and strategy (Thite, 2012). Alpha was established

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as a private limited company in India in 1987 but today is a publicly listed Notes
company both in India and New York Stock Exchange (NYSE).
HR Philosophy
Every employee in the organization is known as an ‘associate’ in line
with Alpha’s policy of decentralization, distributed leadership, employee
empowerment and non-hierarchical work environment. Alpha encourages
employees to ‘think like CEOs’ and accordingly they are expected to run
their ‘business’ as any CEO would do to achieve a reasonable return on
investment in time, efforts and money. As a consequence, the same per-
formance metrics apply to every employee and position, as explained later.
Collectively, it is known as the ‘Alphaway’ of doing business which is
embedded in the corporate DNA of the organization and is the common
currency that circulates across the length and breadth of the organization
in its day-to-day life. It is based on the recognition that the greatest
motivation for people comes from a sense of achievement and not from
monetary rewards.
The Alpha School of Leadership brings this vision to practice through
continuous learning programmes at its sprawling corporate training cen-
tres throughout the world as well as in India at its units. Its mission is
to develop 80% of the leadership requirements from within. It uses star
performers to act as role models and spread best practices so that their
collective wisdom is distilled, institutionalized, automated and then spread
across the corporate DNA.
Metrics – the lifeblood of Alpha
The most potent symbol of Alphaway is the incorporation of performance
metrics. The metrics are built around five outcome measures (5 R’s) and
six built measures (6 P’s) which are:
The outcome measures ask the 5 R’s questions. Is your business:
‹ ‹Doing Better (aiming for zero defects),
‹ ‹Larger (that results in repeat business),
‹ ‹Faster (reduced turn-around-time),
‹ ‹Cheaper (reduced resource cost) and
‹ ‹Steadier (adherence service standards)?

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Notes In order to produce these outcomes, the built measures ask the 6 P’s
questions about:
‹ ‹People (do you have the right technical skills?),
‹ ‹Process (how process-oriented is your job in demystifying knowledge?),
‹ ‹Product (how much of your work processes are automated?),
‹ ‹Proliferation (are you aware of and benchmarking against best
practices, inside and outside the organization?),
‹ ‹Patent (how innovative are you in cost management?) and
‹ ‹Promotion (do you motivate people by appreciating and celebrating
team achievements?)
These measures apply to every employee irrespective of their position, task
and location. The targets are stretched to the extent where they are chal-
lenging enough against global benchmarks for comparable jobs. Those who
fall behind targets are placed under a performance improvement plan (PIP).
The measures take into account both hard and soft aspects of the job.
For example, when it comes to resolving employee grievances, both the
response time and resolution time are taken into account as it is not
enough just responding quickly but it is equally important to resolve it
satisfactorily which may take time and involve other people.
As with many organizations that use team-based organizational structures,
most teams at Alpha are cross-functional which can be challenging for
performance measurement. Alpha uses a ‘collaboration index’ to account
for the degree of collaboration between members and teams. The idea
is to promote the culture of ‘competing to collaborate’. This forces em-
ployees to shed their silo mentality and look beyond the boundaries of
their tasks and departments in the interests of the overall organization.
Flexibility is built into the metrics system to ensure that it is not rigid-
ly implemented irrespective of the situation. Employees have a say in
what measures apply to their position, why and how. The collaboration
meetings take place across different levels, and functions to achieve
consensus before performance targets are agreed upon both in terms of
soft and hard deliverables.
Alpha is taking its metrics-driven business approach beyond organizational
boundaries by involving customers and suppliers as part of its eco-system.

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The customers are given access to the live performance monitoring da- Notes
tabase for all of their projects. Similarly, suppliers are trained in how
the same metrics can be applied by them to improve their performance.
HR as a Strategic Business Partner
One of the most distinguishing features that demonstrate how HR is
strongly embedded at the strategic level in Alpha is the fact that today,
most of the critical HR functions at the corporate level are staffed by
managers who have come from business background. Even at lower levels,
technical personnel are being inducted into HR roles and responsibilities.
It is the result of a conscious decision by the top management because
as in any technology company, people are the most important assets and
can make or break its future.
Another equally notable feature that illustrates the strategic nature of HR
function at Alpha is the incorporation of the ‘full life cycle leadership’
(FLCL) and ‘full life cycle business’ (FLCB) into HR policy making and
practice. For example, the recruitment function is regarded as a ‘business’
in its own right. Within that
business, campus recruitment and lateral recruitment (of experienced
people) are separate business lines. Within campus recruitment, business
colleges and technical colleges are again treated as sub-businesses. The
managers in charge of all these business lines are the full life-cycle
leaders subject to the same 11 performance metrics as discussed above.
The leader in charge of campus recruitment is assessed every month on
relevant critical measures, such as how many top educational institutes
have been signed up for recruitment, how many offers have been released
and how many joined and so on.
Similarly, any manager in charge of people management will be assessed
on ‘associate delight index’, that is, how fast and how effectively employee
concerns have been addressed in a given period and whether there is a
gradual improvement over time. This exercise of feeling the employee pulse
is qualitatively different than the annual ritual of conducting employee
survey because it is done more frequently and monitored more closely.
According to the Head of Global Delivery and Leadership Development,
‘Alpha is a listening organization’.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes Global Staffing

Alpha believes that with over 45,000 employees spread over 40 countries,
it is poised to reach the next level in becoming a truly global company
with firm local roots. The statement from Alpha’s Head of HR in China
that ‘Alpha wants to be a Chinese company in China but provide the same
global experience to clients, no matter where the operations are carried
out’ reflects this ambition. At lower levels, Alpha is committed to localize
the workforce in its overseas offices to the extent possible but this effort
is somewhat hampered by many reasons, such as the need for cost effec-
tiveness in an offshored business model necessitating the bulk of project
execution in India, the diminishing attractiveness of IT as a career in the
developed world with fewer people opting to study IT courses and in some
countries, the poor perception of Indian companies as employers of choice.
As a policy, Alpha strives to staff locally at least 20% of all positions
in all of its overseas operations, 50% of entry level positions and 90%
in its non-English speaking geographies, such as China, where possible.
With regards to lateral recruitment (of experienced people), Alpha prefers
local managers for their knowledge of the local market and environment.
Global HR Policies and Practices
One of the critical challenges for any multinational enterprise (MNE) relates
to the control and coordination between the headquarters and subsidiar-
ies. The MNE is faced with the constant need to balance between ‘push
for control from headquarters and pull for autonomy from subsidiaries’.
The headquarters may assert its control over its subsidiaries by a variety
of means, such as sending expatriates from corporate office to staff key
positions in subsidiaries, formulating and implementing organization wide
management policies and controlling finances and other output measures.
With regard to the standardization of HR policies and practices, where
local laws and conditions permit, uniform policies are rolled out across
all the units of the organization. For instance, in terms of remuneration
and reward management, 80% of compensation-related policies at Alpha
are common across the world. Similarly, every Alphaite is offered a fixed
and variable pay, the latter being tied to performance at individual, team,
unit and organizational levels. The proportion of variable pay increases at
higher levels. So performance pay is a common practice throughout the
organization whereas the fixed pay is subject to local laws and conditions.

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The two basic principles that determine compensation policies at Alpha Notes
are comparability in the local market and affordability as an employer.
While Alpha strives to maintain a cohesive organizational culture through-
out its global network, some of the managers at its overseas subsidiaries
believe that there is too much centralization of power in the corporate
office and decisions are more often India centric than global.
Discussion
As can be seen from above, Alpha is well on its way to become a tru-
ly globalized MNC with best-in-class organizational capabilities in its
corporate strategy, leadership vision, organizational structure and HR
policies and practices.
IN-TEXT QUESTIONS
1. A cohesive, holistic plan designed by HR to manage its human
capital is termed a global Human Resource strategy. (True/False)
2. Successful organizations can follow any work practices. (True/
False)
3. Successful Organisations develop organizational structures that
revolve around autonomy, self-leadership and team-based learning
and problem solving. (True/False)
4. A company’s internationalization means internalisation of human
resources while localisation of all other resources. (True/False)
5. Participative management approach is one of the features of
management in developing countries. (True/False)
6. A firm must __________ and develop a greater capacity for
reaction than that of their competitors to maintain competitiveness.
7. 5 R’s to measure outcome of an organisation are Better, Larger,
Faster, Cheaper, and __________.
8. In order to produce desired outcomes, 6 P’s are People, Process,
Product, Patent, Proliferation and __________.
9. The __________ structure outlines how the planned activities
are directed within, to fulfil the defined goals.
10. HR __________ for global organizations become a pivotal player
in the growth and strength of an organization.

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Notes
23.7 Answers to In-Text Questions
1. False
2. False
3. True
4. False
5. False
6. Innovate
7. Steadier
8. Promotion
9. Organizational
10. Strategies

23.8 Self-Assessment Questions

1. Explain the meaning of Strategic International Human Resource
Management.
2. Discuss the importance of Strategic International Human Resource
Management.
3. Explain the management characteristics in developing countries.
4. Name the countries which come under the category “ developing”.
5. Discuss how ‘performance appraisal’ must be performed in an
international organisation.
6. Discuss the steps in designing a global HR strategy.
7. Discuss the case of Alpha company in your words.

23.9 References
‹ ‹Budhwar, P., & Debrah, Y. (2004). Introduction: HRM in developing
countries. HRM in developing countries, 115.
‹ ‹Faisal Qadeer and Saad Hussain L. (2019). “Antecedents of Transition
towards Strategic HRM in Developing Countries” Asian Management
Research Journal 1(1), pp. 4–21.

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 HR Strategy in International Context: HRM in Developing Countries

‹ ‹Faten Z. Baddar Al-Husan and Ross Brennan. (2009). “Transferring Notes

Western HRM practices to developing countries The case of a
privatized utility in Jordan”. Personnel Review Vol. 38 No. 2, pp.
104–123 Emerald Group Publishing L.
‹ ‹Festing, M. (2007). ‘Globalisation of SMEs and implications for
international human resource management research and practice’,
Int. J. Globalisation and Small Business, Vol. 2, No. 1, pp. 5–18.
‹ ‹Frédéric Martin. (2011).”Lafarge develops employee talent through
e-learning”, Industrial and Commercial Training, Vol. 43 Iss 5 pp.
291–296.
‹ ‹Graeme Martin & Martin Reddington. (2010). Theorizing the links
between e-HR and strategic HRM: a model, case illustration and
reflections, The International Journal of Human Resource Management,
21:10, 1553-1574. DOI: 10.1080/09585192.2010.500483
‹ ‹https://www.yourarticlelibrary.com/hrm/4-major-dimensions-involved-
in-hr-practices-in-international-context/35529
‹ ‹https://www.researchgate.net/publication/269275512_HRM_in_
Developing_Countries [accessed Aug 01 2022].
‹ ‹https://ecommons.cornell.edu/bitstream/handle/1813/75863/Kuruvilla11_
MNCs_as_Diffusers_of_Best_Practices_in_HRM.pdf?sequence=1 as
on 31.7.2022
‹ ‹https://www.usemultiplier.com/blog/global-human-resource-strategy

‹ ‹Ilhaamie Abdul Ghani Azmi, and Junaidah Hashim. (2021). “Do HRM
practices facilitate innovation? A qualitative study in a developing
country” Innovation & Management Review. pp. 2-14.
‹ ‹Joseph L.C Cheng, Danielle L Cooper. “A strategic context approach
to International human resource management research” In Leadership
in International Business Education and Research. Published online:
09 Mar 2015; 235-250..
‹ ‹Sangeetha Lakshman, C Lakshman, Christophe Estay. (2017). “The
relationship between MNCs’ strategies and executive staffing”,
International Journal of Organizational Analysis, Vol. 25 Issue: 2.
doi: 10.1108/IJOA-10-2015-0913
‹ ‹Sarosh Kuruvilla, Stephen David Peetz. “MNCs as Diffusers of Best
Practices in HRM/LR in Developing Countries” available at Stephen
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Notes M. Nyambegera, Paul Sparrow & Kevin Daniels. (2000). “The

impact of cultural value orientations on individual HRM preferences
in developing countries: lessons from Kenyan organizations”. The
International Journal of Human Resource Management, 11:4, 639-
663. DOI: 10.1080/09585190050075042 T
‹ ‹Sateesh. V. Shet. (2019). Strategic talent management – contemporary
issues in international context. Human Resource Development
International. DOI:10.1080/13678868.2019.1650324; pp. 1-6
‹ ‹Sylvester Egwuche O., Bamidele Adewole D. and Oluyemi Olatunji
S. (October 2015). “Implementing E-HRM System in Developing
Countries: Challenges and Prospects”. International Journal of
Applied Information Systems (IJAIS), 9(8), pp. 38-41.
‹ ‹Thite Mohan. (April 2012). “Strategic global human resource
management: case study of an emerging Indian multinational”.
Human Resource Development International, pp. 1-9.

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 L E S S O N

24
Technology Ethics and
Values and HRM
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
24.1 Learning Objectives
24.2 Introduction
24.3 Meaning, Types and Role of HR Technology
24.4 Benefits and Challenges of E-HRM
24.5 Meaning of Ethics and Values in SHRM
24.6 Ethical and Non-ethical Leaders
24.7 Summary
24.8 Answers to In-Text Questions
24.9 Self-Assessment Questions
24.10 References

24.1 Learning Objectives

‹ ‹Meaning, Types and Role of HR Technology.
‹ ‹Benefits and Challenges of E-HRM.
‹ ‹Meaning of Ethics and values in SHRM.
‹ ‹Ethical and Unethical Leaders.
‹ ‹Importance of Ethics in Organisations.

24.2 Introduction
The proliferation of international business activities drives organizations to expand their
operations into new areas and propels human resource management (HRM) to ensure
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Notes hiring and retaining competent personnel. Consequently, firms have been
struggling to place qualified people in relevant roles, provide adequate
training and retaining them.
In the era of privatization and globalization, digital technologies, also
called artificial intelligence, are the supportive pillar for the growth and
development of a dynamic business environment. But at the same time,
ethics and values (emotional Intelligence) are important to be used in
order to satisfy the human needs. The present chapter aims at discussing
both with reference to HRM.

24.3 Meaning, Types and Role of HR Technology

Meaning
HR technology can be defined as any technology that is used to source and
manage employees in an organized working environment. This technology
can be used in different types of human resource information systems
(HRIS) and by various stakeholders, such as managers, employees, and HR
professionals. This technology can be accessed in different ways. There is
no doubt that technology has made it easier and faster to gather, collate,
and deliver information and communicate with employees. It is pertinent
to note that this innovation has the potential to reduce the administrative
burden experience by HR department. Research has shown that companies
who effectively use technology to manage their HR functions will have
a significant advantage over those that do not. The concept of E-HRM is
an advance business solution which provides a rich online support in the
management of all processes, activities, data and information required,
to manage human resources in any organization.
Types of AI
There are actually many kinds of artificial intelligence that can range
from calculating auto-immune system performance to physical systems,
but the three major areas that concern HR are voice recognition, robot
automation and algorithms.
Voice Recognition
The main function of voice recognition is to trigger actions based on
voice commands, such as opening a file, website or program, adjusting

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environmental controls, controlling household and office devices and other Notes
simple command functions. It is also used to convert text into words and
vice versa, search Internet sites, videos, podcasts and broadcasts for key
phrases and subjects and deliver the information automatically to other
analytic programs and on-demand in the preferred format of speech or text.
An HR manager’s AI personal assistants usually employ this technology.
Bots
The major search engines employ bots/robots to search the Internet for
keyword phrases. The usefulness of bots extends to learning, chatting,
asking questions, giving directions, recalculating routes and other useful
functions. Current AI systems can learn, but they have a long way to go
before they can solve complex logic problems. Even the simplest decision
involves thousands of variables. AI can accelerate finishing repetitive
searching tasks exponentially.
AI Algorithms
AI algorithms are step-by-step instructions that guide AI functions. So-
phisticated algorithms can be set to automate many HR functions such
as gathering business intelligence, disseminating information to the right
stakeholders, monitoring key performance benchmarks and tracking outside
interests and social media activity of employees and recruitment prospects.
Conflict between Organization’s Objectives and Employees’ Needs
The management of HR is complex and problematic because the indi-
viduals as workers rarely adapt or voluntarily embrace the objectives of
the organization. As individuals, the employees have needs, aspirations,
motivations, desires and interests which influence their behavior at work
but unfortunately these objectives are sometimes in conflict with the
corporate objectives of the enterprise. In reconciling these conflicting
interests, Human Resources Management and Planning are useful tools
that can harmonize the needs of the employees with the goals and ob-
jectives of the organization on a continuous basis.
Role of Information Technology in Bridging the Gap
Information technology has the potentials of bridging the gap between
theory and practice in human resource management studies. Businesses
invest in information systems as a way to cope with and manage their
peculiar production functions and to cope with the demands of key actors

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Notes in their environments. Information flow is therefore a determining factor

in the success of any business ventures.
Technology and HRM have a broad range of influences upon each other,
and Human Resource (HR) professionals should be able to adopt tech-
nologies that allow the reengineering of the HR function, be prepared to
support organizational and work-design changes caused by technology. HR
technology is increasingly used by small, medium, and large employers to
meet the needs of its stakeholders. What sets high-performing organizations
apart from others is how they utilize cutting edge technology to deliver
HR services. E-HRM provides the possibility to store and repeatedly use
the information as electronic database, which could be accessible by any-
one, anytime and anywhere within the organization. Maximum benefits
can be derived from the use of IT by changing work processes, which
can be more challenging than the purchase and integration installation
of the technology itself.
Few areas of implementing Artificial Intelligence (Technology) in Hu-
man Resource Management
HR is one discipline with extremely complex needs of data analytics and
management. AI can assist in gathering large quantities of data and make
predictive analysis in a matter of seconds, a task that would probably
take months to do manually. This speed is crucial for global businesses
as they compete in a highly fluid environment. The areas where AI can
be useful in Human Resources are identified as discussed below -
Recruitment: The application of AI became helpful in the recruitment
process due to which the conventional way of searching the pool of
candidates became smooth in the present era of privatization. With the
process of animated techniques, HR specialists easily examine the large
pool of applications for finding worthy candidates for the job and auto-
matically scan, evaluate and reject the application. In addition, the chatbot
application provides suggestions to the rejected candidates to improve
themselves for increasing their chances of selection in future.
Selection: With the invention of AI (technologies), organizations can
select the suitable candidate in a very short span of time according to
the required skill of the job position.
Training and Development: AI has played an important role in provid-
ing training to the personnel of an organization. With the intervention
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of robots, providing training sessions become smoother in any course of Notes

time. If the application of AI is adopted in the Indian corporate sector,
then it will become convenient for the organizations to provide training
since each employee would be able to get training from an artificial
intelligence trainer.
Performance appraisal: For assessing the persistent growth and progress
of employees, the process of performance appraisal becomes a road-map-
ping path for the business organization. Traditionally, the performance
appraisal was affected by a lot of discrimination and biased behavior.
However, with the advancement of technological era, AI accurately re-
cords all the data regarding the business operation of employee working
and progress which makes the process of performance appraisal more
objective rather than subjective one. According to research studies, very
few organizations utilize AI for assessing the performance of employees
since it is more difficult for the employees to tackle the complex nature
of techniques.
Compensation Management AI in compensation management automatizes
the cumbersome task that requires manual acts to deliver compensation
in an organization. Robotic-based technologies of AI assist companies
to use compensation analytics for identifying their challenges and pre-
dicting the needs of employees. Inclusion of AI in HRM optimizes the
compensation and incentive resulting in higher frequency of employee
retention and engagement. The application of AI allows HR specialists to
check the background of employees and provide compensation packages.
AI in Managing Stress: In the complexities of digital technology, man-
aging stress is the crucial function of the effective working environment
of an organization. Through AI, HR specialists identify the stress and
burnout among employees and provide therapeutic services that reduce
the stress which enhances the organizational productivity.
Safety and Health Management: AI/Machine learning provides varied
opportunities to improve the health and safety of personnel. AI detects
and identifies the hazards and takes instant real time action in order to
prevent and improve safety.

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Notes
24.4 Benefits and Challenges of E-HRM
Benefits
(a) Information Technology is a tool to facilitate the collection, analysis,
dissemination and use of information.
(b) It includes hardware and software for the support of organizational
information.
(c) IT offers many ways to improve the quality of service, help staff
to make better use of their time and expertise and promote greater
efficiency.
(d) The biggest benefit of using IT in HRM to organizations is the
freeing of HR staff from intermediary roles which enable them to
concentrate on strategic planning in human resource organization
and development.
(e) In the present context of increasing globalization, employing organizations
and their environments have become increasingly complex. Managers
of cross- cultural organizations are facing growing difficulties in
coping with workforces that may be spread across a variety of
countries, cultures and political systems. Given such trends, IT has
considerable potential as a tool that managers can utilize to increase
the capabilities of the organization.
(f) The reasons behind an organization’s introduction of an HRIS may
vary considerably from the need to facilitate efficient processes or
cut costs, to improve communication and customer service, or the
desire to create a shift in the role of the HR function from one that
is mainly administrative to one that is more strategic.
(g) Using HRIS technology can help HR automate and simplify tasks,
reduce administration and record keeping, and provide management
with HR-related information when required.
Challenges
Information/evidence-based decision making is not yet a culture adopted
in many organization of developing countries.
‹ ‹There is shortage of personnel, equipment and financial resources
that are essential for information collection, analysis, dissemination
and use.
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‹ ‹Not all companies have the latest and greatest technology, nor do Notes
all companies need the most advanced technology, but all companies
do have HR-related information needs.
‹ ‹One challenge in E-HR is the alignment of processes in the HR
function according to the future of e-business challenge. Several
such challenges are lack of funding to acquire, update, and maintain
critical HRIS, lack of expertise(s) in IT to operate the HRIS because
of the reluctance of the organizations to train, educate and develop
the employee.
Challenges Specific to Developing Countries
Government institutions are increasingly growing in developing countries
but it is observed that the existing government structures are weak in
performing their statutory responsibilities. Human societies have advanced
to a stage that one government cannot infinitely govern the people there-
fore; change in government has come to stay. But, developing countries
suffer lack of continuity in the ideas and policies of past administrations.
Hence, policy somersault in terms of IT penetration for effective HR ad-
ministration affects the steady growth of organizations in such societies.
Hindrances to some of these ideas and policies include:
‹ ‹Insufficient financial support.
‹ ‹Problems with time management of the HRIS implementation process
and the need to work with other departments.
‹ ‹Fear of changing the way staff do things.
‹ ‹The HRIS not being perceived as an advantage.
‹ ‹Lack of commitment and involvement by all employees and lot
of paper work that is difficult to computerize undermined the
achievement of the full potential of HRIS.
Deriving benefit from IT generally means changing work processes,
which can be more challenging than the purchase and installation of the
technology itself. There are many communities around the developing
societies today who are cut off from Internet connection. In every part
of any nations, youths with requisite employable skills exist but situa-
tions become more difficult for citizens of that category if the mode of
recruiting workers to their workforce is carried out on electronic platform.
More so, existing telecommunication industries in developing countries

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Notes offer poor quality of service which is necessitated by digital divide, poor
maintenance culture, lack of technical know-how, and mismanagement
of public funds by the government of the day. Imagine how the best can
be derived from an HRIS system that is meant to run for 24 hours in a
society that experience epileptic power supply.
One crucial fact that is not far from any developing society is insecurity
which slows down the pace of development in most of these countries.
Long-term investors plan to go far in the business world and no inves-
tor will pool his resources together and invest in any society where the
safety of his facilities is bleak. Therefore, insecurity of lives and property
impedes the penetration of IT in any country.

24.5 Meaning of Ethics and Values in SHRM

Definition of Ethics
By the term ‘ethics’ we mean a branch of moral philosophy – a sense
of rightness or wrongness of actions, motives and the results of these
actions. In short, it is a discipline that identifies good or evil, just or un-
just, fair or unfair practices, about moral duty. It is well-based standards
that a person should do, concerning rights, obligations, fairness, benefits
to society and so on. The standard puts a reasonable obligation to stop
crime like stealing, assault, rape, murder, fraud and so on.
The system addresses the questions of the human morality, such as: What
should be a standard way for people to live? Or What are the appropriate
actions in the given situations? What should be an ideal human conduct?
etc. Under Ethics there are four important subject areas of study:
‹ ‹Meta-ethics: Ethical philosophy that analyses the meaning and
scope of moral values.
‹ ‹Descriptive Ethics: The branch of ethics that deals with psychology,
sociology, anthropology, etc.
‹ ‹Normative Ethics: The study of the moral course of action through
practical means.
‹ ‹Applied Ethics: This branch tells us how we can achieve moral
outcomes, in a particular circumstance.

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Definition of Values Notes

Values refer to the important and enduring beliefs or principles, based
on which an individual makes judgements in life. It is at the centre of
our lives which act as a standard of behaviour. They severely affect the
emotional state of mind of an individual. They can be personal values,
cultural values or corporate values.
Values are forces that cause an individual to behave in a particular
manner. It sets our priorities in life, i.e. what we consider in the first
place. It is a reason behind the choices we make. It reflects what is more
important for us. So, if we are true to our values and make our choices
accordingly, then the way we live to express our core values. Moreover,
if you understand an individual’s values, you can easily identify what is
important for them.
Ethics and Values together lay the foundation for sustainability. While
they are sometimes used synonymously, they are different.
Key Differences between Ethics and Values
The fundamental differences between ethics and value are described in
the given below points:
1. Ethics refers to the guidelines for conduct, that address question
about morality. Value is defined as the principles and ideals, which
help them in making the judgement of what is more important.
2. Ethics is a system of moral principles. In contrast to values, which
is the stimuli of our thinking.
3. Values strongly influence the emotional state of mind. Therefore it
acts as a motivator. On the other hand, ethics compels to follow a
particular course of action.
4. Ethics are consistent, whereas values are different for different
persons, i.e. what is important for one person, may not be important
for another person.
5. Values tell us what we want to do or achieve in our life, whereas
ethics helps us in deciding what is morally correct or incorrect, in
the given situation.
6. Ethics determines, to what extent our options are right or wrong. As
opposed to values, which defines our priorities for life.

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Notes Business Ethics in Human Resource Management

It deals with the positive moral obligations of the employer towards
employees to maintain parity and equity. Areas under this aspect include
the following issues at the workplace:
‹ ‹Safety;

‹ ‹Respect;

‹ ‹Fairness;

‹ ‹Privacy;

‹ ‹Basic civil rights;

‹ ‹Justifiable treatment of employees; and
‹ ‹Honest-based processes in the workplace;
‹ ‹If Human Resources managers navigate the above ethical challenges
of their job, they will be able to effectively attract, motivate and
retain employees.
Ethics in Human Resource Management is based on ‘The Common
Good Approach’ which assumes a society that includes people whose
own good is inextricably linked to the good of the community. Commu-
nity members are required to seek common values and goals. Common
Good can be described as “some general conditions that are tantamount
to benefit everyone.
Ethics Relevant Human Resource Professionals
Issues of discrimination among employees, sexual harassment, and unfair
employment policies can result in a number of troubles for organizations
with consumers, potential strategic partners, and potential future employ-
ees. There are some fundamental questions of HRM which should be
answered in the code of ethics prepared by the human resource managers.
The questions are:
‹ ‹What treatment should be meted out to employees;
‹ ‹Deciding the volume and form of their compensation;
‹ ‹Deciding who are to be trained and the mode of training;
‹ ‹Deciding the working conditions;
‹ ‹Deciding work expectations from them;

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‹ ‹Deciding the mode of disciplining them; and Notes

‹ ‹Deciding their termination.
Sometimes, HR leaders have to make tough decisions in order to be
ethical in their approach.

24.6 Ethical and Non-ethical Leaders

Ethical Leader and Related Characteristics
‹ ‹An ethical leader tries to be always fair and just.
‹ ‹An ethical leader is compassionate and respects all the members
of the team. He listens to them attentively, even the opposing
viewpoints, and values their contributions.
‹ ‹He tries to convey facts transparently even if they are unpopular.
‹ ‹He always tries to act in a beneficial manner to the team.
‹ ‹He tries to develop team spirit within the organization.
‹ ‹He considers overall organizational values while implementing
decisions.
‹ ‹He rewards employees for coming up with innovative ideas.
‹ ‹He does what he talks.
‹ ‹He regularly discusses the importance of high values being followed
by everybody in the organisation.
‹ ‹He expects employees to do the right thing always.
Unethical Leader
Unethical leadership is usually defined as those behaviours of leaders
under which:
‹ ‹They make illegal decisions;
‹ ‹They make decisions that violate moral standards, and
‹ ‹They make decisions that promote unethical conduct by followers.
Related Characteristics
(a) Unethical leader’s motivation is greed and he does not mind even
harming others to earn more.
(b) He is unmindful of the impact of his decisions on other stakeholders.

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Notes (c) He can encourage corrupt and unethical acts within their organizations
even without engaging in the behaviour themselves.
(d) It can be done by way of condoning and rewarding non-conformers,
and ignoring their unethical acts.
To sum up, it can be said that an unethical leader acts badly, allows bad
acts to happen, and is self-centred, self-protective and self-serving.
Importance of Ethics in Organizations
Ethics in leadership are important as leaders are usually in a position to
control a number of outcomes that affect employees. Some such outcomes
are: goal-setting and strategies, appraisals, promotions, etc. Globalisation
now has increased the importance of ethics in human resource manage-
ment in the following ways:
‹ ‹Now the organisational policies have to be geared to work in the
world economy.
‹ ‹The growing competition forces every organization to find a
competitive advantage;
‹ ‹With the increasing scope of organisations to do business at the
international level, there is increasing need to address the ethical
issues dealing with human resources.
‹ ‹An organisation now has to consider human resources as of strategic
importance; and
‹ ‹It has become imperative to ensure only appropriate information is
used in decisions affecting the employment relationship.
An organization which is able to managing human resources ethically as
a group as well as incorporating ethical values in individuals, enables
it to maintain and increase trust. When management of an organization
shows respect for ethics and values, it is said to be following ethical
leadership. Ethical leadership emphasise fairness, honesty, integrity, and
trust. Ethical leadership can constantly inspire employees to live up to
the organization’s values which ultimately increases value of business.
Adverse Effects of Ethical Violations
Though ethical violations in any department affect the entire organiza-
tion adversely, but the impact of such violations in the human resource
department could be enormous as

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‹ ‹They can have adverse impact on individuals, business as a whole, Notes

stockholders, and society at large;
‹ ‹They may have an adverse influence on the organization’s profitability.
‹ ‹Reduced profitability can also negatively affect the organization’s
competitive position.
Therefore, ethics-conscious entrepreneurs, managers and owners prepare
and implement exhaustive ethics plans to display a firm commitment to
ethics in every area of business, including human resources.
Role of Ethics in Human Resource Management
(a) Ethical policies, codes and procedures are shaped only by an ethical
human resource management.
(b) Ethics-related activities at the workplace are conducted centrally by
the ethical human resource management.
(c) Ethical violations are to be resolved by HR professionals while
raising organizational efficiency simultaneously.
(d) HR professionals have to ensure that the code of business conduct
should be abided by all officers, employees, contractual workers,
and agents as well ethically.
(e) Ethical behaviours are the concern of both personal and professional
levels, but HRM’s influence is more at the professional level.
(f) Human resources professionals can contribute to the ethical integrity
of the organization they work in.
(g) They must comply with every law as it will help them to make ethical
decisions for the betterment of the business and the company.
(h) It is essential for them to commit good standard of professional
responsibility. For example, the HR department of any company
must know all the legal requirements to run the company in a
professional way.
(i) HR department must ensure feelings of Fairness and Justice among
employees and thus create a healthy atmosphere and supports the
business entities.
(j) They must play a significant role in eliminating bias and providing
same opportunities to every staff member.

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Notes (k) Following is the explanation of the two HRM’s contemporary ethical
issues: Downsizing and Sexual harassment at work place. The
solutions for the mentioned issues and justification are to provide
honest and open communication, reassure the survivors, and setting
appropriate guidelines of ethical behaviour at the workplace.
(l) Employees look upon their leaders for guidance in resolving questions
or problems.
(m) Ethically positive leaders influence productive employees’ work
behaviour positively and counterproductive work behaviour negatively.
(n) Ethical leadership results in more satisfied employees and higher
profits.
(o) According to reciprocity principles of social exchange theory,
employees feel indebted to ethical leaders more as compared to
unethical leaders so they reciprocate with beneficial work behaviour.
Levels of Ethical Leader-Employee Relationship
Such relationships can occur at there are three levels: Individual, team
and organisation. Encouraging ethical relationships results in following
outcomes:
1. The Well-Being of the Individual: An ethical leader is responsible
for maintaining a positive working atmosphere. He can help maintain
a positive work environment for each individual at the individual
level. He may influence others to do the same as employees get
inspired to follow their ethical leaders. People are affected by
the interactions that occur around them according to the principle
of demonstration effect and also by the principle of ‘leading by
example’. Positivity of atmosphere affect job productivity and
attitude positively. Positive communication among co-workers as a
result of ethical leadership can in turn influence productivity and
improve each individual’s attitude in the workplace.
2. The Energy of the Team: Ethical leadership can also improve
group dynamics and overall morale within an organization. Besides,
other works, effective leadership also requires good inter-personnel
relations at the work place which involves the management of conduct
and collaboration within a team. Typically, when people are getting
along with one another well, morale at the workplace shows a boost.

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Strong team spirits can help in building cordial relationships at the Notes
workplace and help in improving the overall performance of any
group. Generally, strong leaders lead by example. Ethical leaders
help team members to communicate and get along with one another,
which in turn affects the team’s performance. Strong ethical leaders
set an example for their team.
3. The Health of the Organization: An ethical organization can
occur only when groups of people work together in an ethical
environment of mutual respect, where they can grow personally,
build friendships and contribute to the overall goal. An ethical leader
can help in maintaining a positive outlook at the workplace which
contributes significantly towards improving the overall health of
the organization. In such a positive environment, employees show
respect for one another. They value others’ opinions which helps
in creating a productive working environment. The overall health
and well-being of an organization can be deeply affected by ethical
leadership. The leaders should foster an environment of collaboration
and mutual respect throughout the organization.
IN-TEXT QUESTIONS
1. Decisions with unintended consequences can be just as harmful
as intentionally unethical decisions. (True/False)
2. Common Good can be described as “some general conditions
that are tantamount to benefit a few. (True/False)
3. An ethical leader should be fair and just most of the time.
(True/False)
4. According to principles of reciprocity in social exchange theory,
employees do not feel indebted to ethical leaders. (True/False)
5. Unethical leadership behaviour promotes unethical conduct by
followers.” (True/False)
6. HR technology can be defined as any technology that is used
to source and manage employees in an __________ working
environment.
7. The three major areas that concern HR are voice recognition,
robot automation and __________.

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Notes 8. The three Levels of Ethical Leader-Employees Relationship are

individual, team, and __________.
9. Business ethics in human resource management deals with the
__________ moral obligations of the employer towards employees.
10. Ethical leaders place importance in being kind and act in a
manner that is always __________ to the team.

24.7 Summary
Drivers of investment in information technology include the promise of
quality and efficiency gains. Barriers include the cost and complexity of
IT implementation, which often necessitates significant work process and
cultural changes. Some of the strategies put forward to counteract the
challenges were ensuring that the sources of funds to cover the costs of
setting up and maintaining a HRIS, mobilization of financial resources,
support from top management, training of staff on how to operate E-HRM,
staff attitude change towards information technology, sourcing for the
required expertise(s) and timeliness during the implementation stage.
Strategies must continually be redefined to deliver improved return on
investment in human capital. As HR professionals work within their own
organizations, they must also cope with good and bad economies and,
new technology. Because of the numerous potentials of E-HRM in devel-
oping societies, policy makers need to better understand how information
technology is diffusing across providers, whether action to spur further
adoption is needed, and if so, what steps might be taken. Any policy to
stimulate further investment must be carefully considered because of the
possibility of unintended consequences—such as implementation failures
due to organizations’ inability to make the necessary cultural changes.
The research about strategic human resource management (SHRM) has
suggested that human resource professionals (HRPs) have the opportu-
nity to play a greater role in contributing to organizational success if
they are effective in developing systems and policies aligned with the
organization’s values, goals, and mission. We suggest that HRPs need to
raise the standard of their performance and that the competitive demands
of the modern economic environment create implicit ethical duties that
HRPs owe to their organizations. Ethical stewardship as a model of gov-

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ernance that honors obligations due to the many stakeholders and that Notes
maximizes long-term organizational wealth creation. If HRPs adopt an
ethical stewardship framework and the qualities of transformative leaders,
they will be more aware of their ethical duties to their organizations and
more effective in helping their organizations to create increased wealth,
achieve desired organizational outcomes, and establish work environments
that are more satisfying to employees.

24.8 Answers to In-Text Questions

1. True
2. False
3. False
4. False
5. True
6. Organized
7. Algorithms
8. Organisation
9. Affirmative
10. Beneficial

24.9 Self-Assessment Questions

1. Explain the meaning of HR technology.
2. Discuss the types of Artificial Intelligence.
3. Describe the role of Information Technology in integration of employees
and employer needs.
4. Discuss the meaning of E HRM.
5. Discuss the challenges of E-HRM
6. Describe areas of implementing Artificial Intelligence (Technology)
in Human Resource Management.
7. Describe ethical and unethical leadership behaviour.

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Notes
24.10 References
‹ ‹Caldwell, C., Truong, D. X., Linh, P. T. et al. Strategic Human
Resource Management as Ethical Stewardship. J Bus Ethics, 98,
171–182 (2011). https://doi.org/10.1007/s10551-010-0541-y
‹ ‹Khan Sania (6.5.22). “An efficient human resource management
system model using web based hybrid technique”. Problems and
Perspectives in Management, Volume 20, Issue 2, 2022, pp. 2–17.
‹ ‹https://keydifferences.com/difference-between-ethics-and-values.html
as on 9.8.22
‹ ‹Mohammad Al-Alwan, Dojanah Bader, Manar Al-Qatawneh, Suleiman
Alneimat and Sulieman Al-Hawary. “E-HRM and employee flexibility
in Islamic banks in Jordan”. International Journal of Data and
Network Science 6 (2022). 703–710.
‹ ‹Richard Amoako, Yuanchun Jiang, Michelle Frempomaa Frempong,
Stephen Tetteh, and Stephen Sarfo Adu-Yeboah. “Examining the
Effect of Organizational Leadership, Organizational Structure, and
Employee Technological Capability on the Success of Electronic
Human Resource Management”. Sage Open, April-June 2022: 1–14.

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 L E S S O N

25
Future of SHRM
Dr. Savita Rastogi
Associate Professor
Jesus & Mary College
University of Delhi

STRUCTURE
25.1 Learning Objectives
25.2 Changes in Future of Work
25.3 HR’s Role in Creating a Framework for the Future Work
25.4 Areas for Improvement in HR Skills
25.5 Opportunities for Future Research
25.6 Main Aspects of the 2025 HR Operations Model
25.7 Conclusion
25.8 Answers to In-Text Questions
25.9 Self-Assessment Questions
25.10 References

25.1 Learning Objectives

‹ ‹Changes in Future of Work.
‹ ‹HR’s Role in Creating a Framework for The Future Work.
‹ ‹Areas Where HR Skills Need to Be Improved.
‹ ‹Opportunities for Future Research.
‹ ‹Key Aspects of the 2025 HR Operations Model.

25.2 Changes in Future of Work

A number of dramatic changes have taken place in the economies of different countries world
over. Workforce too has changed in a number of ways. In keeping with these changes, the role
of the HR professional, too, has incorporated many changes. This evolution is still continuing

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Notes as machines and technology are ever increasingly replacing tasks once per-
formed by humans. However, it does not mean reduced importance of HR,
individual or teams, who work with them. HR leaders, in coming times, will
need to be bigger and broader thinkers. They will have to be tech-savvy and
deft enough to deal with an increasingly energetic and restless workforce.
Twenty-first century organisations are competing over the efficiency and
utilisation of their workforce. Moreover, in a competitive environment, a
company must understand all its negative and positive forces, including
relevant skill sets among its workforce to stay in the market. Hence,
having the right composition in the team, with the right skill sets is good
enough to get a sustainable competitive advantage.
Employees provide the primary source of competitive advantage, with the
quality of HRM being a critical influence on the performance of firms and
managing people. Along those lines, it is also argued that HRM practices
can contribute to a firm’s sustainable competitive advantage not only by
enhancing employee’s ability, and offering motivation and opportunities,
but also by shaping supply-side and demand-side mobility constraints.
People, by the very nature of human behaviour, want fewer layers of
approvals and greater autonomy over their work, including its location-at
home, in a central meeting place, or a mix of the two. They believe
working in liberated work environment will help to realize their potential.
The pandemic has accelerated the fulfilment of dream that every one of
us has had: to escape the tyranny of bureaucracy. These changes are here
to stay. There is no going back.
Current technological and other trends in businesses show that employees’ ways
of working in all respects (what, why, when, where, and with whom) have
changed, still changing and will continue to change in future also in such a
way that they would be lot different from what they are today. Organizations
responses to future directions of the workplace are discussed here under.9
(i) Middle Management will have Different Responsibilities: Present
day managers must face new realities. Turbulence in social and political
environment, disappearing for work-life fine line of demarcation, and
facilitation of hybrid work have made their more complex. Many

9. https://www.gartner.com/smarterwithgartner/6-ways-the-workplace-will-change-in-the-
next-10-years as on 22.8.22

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employees are working in a hybrid mode with more choices about Notes
where, when and how much to work. Further, the responsibilities of
managers per employee and the number of employees who report to
them have increased manifolds. These added features to their roles have
made it more difficult for managers to provide hands-on assistance.
Traditional managers were supposed to be successful if they were
able to manage and evaluate employees’ performance. But now
such parameters have increased in numbers and difficulty levels.
So, it is the role of HR executives to hire managers with necessary
skills and further train managers in such a way that get ready to
be great trainers, and give them the feeling of being on the same
wavelength, operate with empathy.
(ii) Tenure and Experience will be outweighed by Upskilling and Digital
Dexterity: Importance of cognitive skills at the work place will rise,
specifically, for the most high-valued works. Application of creativity,
critical thinking and digital skills to solve complex problems have
already become inevitable. The economy, which has become digitised,
demands new ideas, information and business models. These trends will
continually expand, combine and shift into new ventures. Therefore,
employees are expected to consistently upgrade their digital knowledge.
It would be the duty of HR to continuously establish and promote a
continuous learning environment. It indicates knowledge acquisition
will become necessary for everyone even on daily basis.
(iii) Data Collection about Employees will Expand: Hybrid work has led
to increased necessity both of monitoring workplace productivity as
well as of employee wellness. Many contemporary research works
show that employers are ever increasingly using technologies to check
their employees’ work performance. Tools used for such surveillance
are methods such as virtual clocking in and out, keeping track of
usage of work computer, and even observing employees’ emails or
internal communications. Though, some organizations limit tracking for
productivity purposes only, others also focus on employee engagement,
health and happiness so as to integrate them better.
Technological tools, such as biorhythms, nutritional requirements and
exercise needs, are available to assess employees’ need for break.
Therefore, leaders, to be effective, will have to use technology.

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Notes (iv) Smart Machines will be Our Colleagues: Machines are being
prepared to complete tasks previously reserved for humans. Every
second day, smart machines are getting smarter and more pervasive
with the help of software and apps. Organizations will have to start
their increased use. Further, technology will enable employees to
carry their personal workplaces with them using open applications,
cloud communities, and personal virtual assistants.
Eventually, employees will be required to possess extreme digital
dexterity due to ever increasing demands for a more automated
workplace. Therefore, proactive leaders must continuously encourage
employees to create and share AI tools or personalized portfolios
of apps, tools and smart technology to increase digital dexterity as
much as possible so as to improve overall competitive advantage.
(v) Employees will Work Not Just for Money but for Purpose and
Passion also: Employees want to make a meaningful impact of
their activities on society and that too as early as possible in their
lives. They actively seek opportunities to attach the impact and
value of their work to their passions, missions and purposes. Their
motivation increases while viewing others’ posts on social media.
Adaptive organizations will make themselves more attractive as
compared to competitors by paying higher monetary compensation
as well as by satisfying their need of making a meaningful impact. A
message will be built by organisations to drive employee engagement
in social causes.
(vi) Challenges of Remote Work-life Balance will Get Revealed: Employees
working independently or in remote locations will face a dilemma of
choosing between the two ends. On the one hand, they would like
upskilling and manage better projects. For this, they will take more
assignments probably to a point where they will start feeling they are
working round the clock. Since, employees will start emphasizing life
over work, achieving work-life balance will no longer be enough. In
future, aspects of work-life balance will be dismal as technological
advancement has ended the geographical divide.
Remote distribution of work will reduce social relationships in the
workplace which will lead to issues of disengagement and loneliness.
Therefore, HR leaders must advise CEOs and work with them to

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ensure work-life balance in every employee’s entire work life. Doing Notes
this easily, will require ability on the part of HR leaders to peer
into the future.

25.3 HR’s Role in Creating a Framework for the Future

Work
In contemporary business environment, the top HR professionals of the
world have helped prove that the continuous sustainability and growth of
a business is related to the success of its people. Therefore, HR leaders
must play an active role to create a structure for the future of work that
provides a greater role to the workers in shaping it. They can help their
organizations adapt to these changes by decreasing/eliminating the bu-
reaucracy that has trapped productivity and innovation since long. They
must lead the businesses to new ways of organizing work so that they
come out of traditional thinking.
Though the steps to be followed for liberation of work from the hackles
of bureaucracy will vary from organization to organization, the following
four-point process can be followed as a standardized one10:
(i) Find Tasks that will Ensure Continuity of the Business: Identify
and prioritize the tasks that produce positive financial results so
that continuity of the business can be ensured. For example:
‹ ‹Creation of new products.
‹ ‹Identifying employees who all need to work together to accomplish
those tasks that push businesses to growth and who do not?
‹ ‹Deciding whether such employees need to meet physically and
how often?
‹ ‹HR should also take employees viewpoints besides using its own
expertise to find the answers. Liberating employees in this way
can cut bureaucracy and will act as a stimulant for productivity
of the mind.
(ii) Using Technology: Software is available to help HR in assembling
teams of the right people led by right managers. Though the

10. https://www.shrm.org/resourcesandtools/hr-topics/organizational-and-employee-
development/pages/ the-future-of-work.aspx as on 22.8.22

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Notes specific technology needed will vary depending on many situational

factors, beginning can be made with a database of people, skills and
functions that can be matched to business needs. This will generate
ability to move easily with swiftness. Records can be maintained
and productivity can be measured easily with the help of Artificial
intelligence. The need for bosses’ intervention gets reduced if AI
is also used to capture workers’ preferences and feedback and, by
showing progress on tasks immediately.
(iii) Middle Managers are to be Transformed into Coaches: Increasing
trends towards teams working together with agility on projects and
availability of software have eliminated the need for managers
for supervision. Thus a layer of bureaucracy has got eliminated.
Managers’ role nowadays is not command-and-control, but to remove
obstacles, facilitate imagination and inspire motivation. Since a
percentage of people are working remotely, managers must accept
the shift in their role from authority to coaching.
(iv) Communicate: The new framework’s emphasis is on ‘Communication’
as it requires managers increased communication with team members,
creating a vision, explaining processes and policies, and so on and
so forth. Personalized communication delivered through channels
most used by employees will bear more results.
The application of this framework will help HR solve many of the
present-day biggest workplace challenges. Organizations using this
framework:
‹ ‹Will be able to attract new talent.
‹ ‹Will have committed engaged employees inspired to deliver results.
‹ ‹Will
provide customized services to employees, demonstrating the
benefits of digitalization and paving the way for new applications.
Now, there is hardly any time to wait and see how the future work
changes and then react to challenges as they arise. Now it is the time
for HR to lead boldly into the future taking guidance by the framework
that can be moulded to fit any circumstance.

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Notes
25.4 Areas for Improvement in HR Skills
There is need for HR to adopt technology so as to adjust to a changing
workforce that has become accustomed to doing things online to get wide
variety of services. There is an increased duty of HR departments now
to make more information and services available to workers around the
clock. This move will also enable HR to focus more on business strategy
and employee career development. A beginning can be made by enhancing
their HR skills in seven critical areas. These areas are said to be the key
to future success in the profession by HR analyst. A brief discussion of
the same is given here under:
(i) Adopt Technology and HR Analytics: Savvy HR departments are
already using analytics in almost every area of HR ranging from
recruitment to retention to wellness programmes. For example:
‹ ‹Use of a chatbot by a worker to find out how many days leaves’
he has availed till a particular time.
‹ ‹What procedures does the organization follow to reimburse
medical expenditure.
‹ ‹Use of a computer-generated personalized assistant (who has a
name, a face and a pleasant outward behaviour) by a job candidate
to answer questions, complete assessments, and track the status
of his or her application.
‹ ‹The workforce now mainly consists of tech savvy Millennials
who are used to getting instant information through computer/
smartphone. Therefore, a broad range of employee services should
be made available online, and HR should be managing that effort.
HR professionals will have more time for strategic planning as
technology is helping them doing such mundane tasks as preparing
payroll, answering employees’ queries, conducting interviews etc.
Human resource manager’s role can be upgraded from being a
supervisor of employment to being a supervisor of work so as to
become trusted advisor.
(ii) Understanding Organization’s Success: It is not enough for HR
professionals to know the field of HR only. They also need to
know vision and mission of the organization and contribute to the

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Notes financial success of the business. Otherwise, their advises will not
be taken seriously by the top management. Besides, they will not
be able to execute HR operative functions effectively. Further, in
addition to financial success, strategic direction of the business
and the environment in which the organization operates must also
be understood by HR leaders. They should anticipate the changes
and incorporate them in work and workforce. This will result in
effective management of human capital and aligning HR initiatives
with the objectives of the organization. Predictions of experts about
HR Jobs of the Future are as under:
‹ ‹HR as Data Scientist/Chief Technology Officer: Increasingly
data and analytics will be the driving force behind HR’s job.
‹ ‹Specialistof Employee Experience: HR professional will be
required to concentrate on facilitating employee’s relationship
with the organization throughout his work life.
‹ ‹Head of Talent-acquisition Technology Selection: As new
platforms for talent acquisition are emerging, HR professional
looking after this function will evaluate all such platforms to
find the most appropriate one for the organization.
‹ ‹Head of Candidate Experience: HR professional should ensure
that job candidates are provided experiences of speed, convenience
and efficiency.
‹ ‹Performance Coach: The HR will contribute towards maximizing
the individual contribution of all employees, whether managerial
or non-managerial.
‹ ‹Organizational Psychologist: Though organizational or industrial
psychologists are not technically HR persons, still they develop
a more holistic approach to HR, marketing and sales.
(iii) Stay Focused on People: Despite increasing role of technology,
humans will also continue to play a major role. In fact, with the
aid of technology, HR managers in future will have more time to
focus on individuals and related HR functions. To emphasise on
the importance of humans, HR officer will start being called chief
people officer and their job will transform from mitigating risk
and ensuring compliance to formulation and execution of business

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strategies. Technology is increasing HR’s level of intelligence in a Notes

way that enables it to perform captivating consultancy role. Further,
top HR professionals of tomorrow could also play the role of coaches
and brokers for talent to give career guidance to everyone in the
organization. With competition being fierce for talent, successful
HR managers need to attract top talent a reason to come to work
for them. Even if an organisation is not in a global business, it
will face competition from global businesses for the best employees
sooner or later.
(iv) Be Ready for the New Workforce: The future workforce will include
transient workers (open to new job opportunities) as well as gig
workers (who pop in and out of jobs on a daily basis). Further, HR
will be required to help in assessing which tasks throughout the
organization can be mechanised and then reskill those employees
whose jobs are affected by such automation. Majority of employers
feel “breakthrough approaches in HR’s role” are required to deal
with automation and digitalization of works and globalisation of
workforce. Examples of these roles and the employee filling them
include:
‹ ‹Combined responsibility for the HR and IT functions so that
the benefits of machine learning techniques, automated works
can be passed on to employees. Thus consumer experience for
employees can be created.
‹ ‹HR’s use of data with the objective of retaining employees by
enhancing internal career mobility with learning opportunities and
personalized job availability information based on their skills.
‹ ‹Suggesting deserving employees. For recognition in the form
of promotion or merit increases
(v) Market a Modern Benefits Package: To attract and retain talented
contemporary worker requires offering and administering an appealing
package of benefits. Modern benefits package should include benefits
that support critical life events. Like leave for caregiver, expanded
fertility benefits, gender reassignment and transformation assistance,
and financial wellness programs. The steps to make recruitment
attractive are taken even now, but its importance will increase in
future.

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes (vi) Compliance with Laws will Become All the More Important:
Besides, compliance with tax regulations and other laws at the core
of HR function HR will need to be swift enough to comply with
laws related to the gig and remote workers. There is also likely to
be continued attention on equality of pay which will force HR to
determine compensation strategy in such a manner that allows the
organization to attract best talent while not violating the law.
(vii) Be Certified (or Update Skill Set): As certain HR functions are
either becoming automated or been outsourced (payroll, benefits and
recruiting, for example), HR specialists are needed to increase their
knowledge of traditional tasks as well as overall business strategy.
The field of HR is changing rapidly and becoming subject to many
new labour regulations. HR professionals need to pursue education
opportunities in different fields so that they are taken more seriously
by top management. Increased certification will also lead to higher
pay and more promotions.

25.5 Opportunities for Future Research

As the field of HR is facing many challenges, research in this field is
also providing many opportunities. Some of them are as under (Wright
and Michael, 2017):
(i) Increasing Rigor: SHRM research will continue to see an increase
in the level of rigor used in empirical research. This does not
suggest that past research was not sufficiently rigorous for drawing
any valid conclusions. Rather, it recognizes that as any field of
inquiry evolves over time, it necessarily grows in rigor. Because
no study eliminates all threats to validity, later researchers are able
to identify common threats that may preclude drawing definitive
conclusions. By then designing studies that minimize those threats
(while having threats that may not have existed in the previous
studies), researchers can provide more rigorous and robust tests of
the focal relationships.
(ii) Increasing Multilevel: Previously, the field of SHRM research was
concentrated on organizational, unit, and individual actors. Now it
has evolved to increasingly recognize that the research in this area

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will increasingly trend toward multilevel. At a theoretical level, few Notes

attempts have been made to develop multilevel theories of SHRM.
(iii) Increasing Global: Researchers have identified two approaches to the
research of international business: theories of context and theories
in context. Theories in context take existing theories (historically
derived by Western academics) and place them in new settings. This
research approach attempts to test one idea in different settings.
This theory borrowing is the typical way international research is
conducted. Traditional SHRM models, derived using largely American
organizations and samples, are extrapolated by testing the same
hypotheses using non-US samples. This approach can develop new
theoretical insight by finding contexts in which existing empirical
and theoretical research fails.
(iv) Increasing Human Capital: As previously discussed, early explorations
in the area of SHRM had human resources (people) as a central
variable. Writers discussed the implications for different strategies on
the different kinds of people needed, the different skills necessary,
and the different behaviors required. However, after researchers
demonstrated the link between HRM practices and performance,
many researchers diverted their focus from the actual people to the
practices that allegedly impact those people.
(v) Increasing Integration with Strategy Researchers: Several researchers
have called for integrating strategy and HR literatures, particularly
as a means of pursuing multilevel research. The emphasis on human
capital has enabled traditional SHRM researchers to better connect
with strategy researchers. Strategy researchers have increasingly
attended to human capital as a critical strategic resource, yet focused
very little on the practices that acquire, motivate, develop, and
retain that human capital. HRM researchers, however, had focused
more on the HRM practices–performance relationship and less on
the actual human capital. In addition, strategy researchers have a
deeper understanding of organizational-level strategy processes,
whereas HRM researchers tend to have greater knowledge of
individual- and team-level processes. Consequently, bringing these
two complementary perspectives and knowledge bases together

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Notes can result in significantly greater progress than these two fields
progressing independently of one another.
(vi) Increasing Integration with Practice: Early work in SHRM had a
pointedly practice-oriented tone. However, probably in efforts to
make the field relevant in more academically oriented journals, the
field drifted into more theoretically deep and empirically rigorous
emphases. Again, this created a situation where two streams of
SHRM writing developed relatively independent of one another.
Consequently, academic writings became less linked to what is going
on in practice and practice-oriented writers became less concerned
about rigor.
(vii) Employer Branding: Employer branding is becoming an increasingly
important topic for research and practice in multinational enterprises
(MNEs) because it plays directly into their corporate reputation, talent
management and employee engagement agendas. The potential effects
of employer branding have yet to be fully understood because current
theory and practice have failed to connect this internal application
of marketing and branding to the key reputational and innovation
agendas of MNEs, both of which are at the heart of another strategic
agenda – effective corporate governance. However, these agendas
are characterised by ‘wicked problems’ in MNEs, which have their
origins in competing logic in strategic human resource management
(SHRM). These problems need to be articulated and understood
before they can be addressed. It requires three-pronged approach:
(a) Setting out a definition and model of employer branding and
how it potentially articulates with corporate governance,
innovation and organisational reputations,
(b) Discussing and analysing the ‘wicked problems’ resulting from
the sometimes-contradictory logics underpinning innovation
and corporate reputations and SHRM in MNEs and
(c) Evaluating the potential of employer branding as a contribution
to SHRM approaches a way of resolving three particular
wicked problems in MNEs.

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Notes
25.6 Main Aspects of the 2025 HR Operations Model
Good understanding of the main aspects of HR model of 2025 11 is required
to plan a future-proof HR strategy. Such main aspects are as under:
HR will Become Partners in Business
Senior HR professionals having experience in formulation and implemen-
tation of HR strategies will act as business partners to achieve a number
of business results, some of them are as under:
‹ ‹Framing recruitment policies to improve the overall experience of
candidates.
‹ ‹Developing easy joining programmes for selected candidates.
‹ ‹Overhauling of the practices of performance management.
‹ ‹Modernizing practices of talent management.
‹ ‹Formulating strategies to increase employees’ retention.
Since HR will become business partners, they would be aligned with all
other departments within an organization. Further, every department will
also have an HR partner of its own whose role will be to work with the
department head to guide and improve HR policies and practices for that
specific department.
Centres of Excellence (CoEs)
CoEs means virtual knowledge centres consisting of teams of HR experts
to provide the best practices around HR processes. They will also help
the managerial team in identification and filling of gaps in HR strategy.
While HR partners are aligned with departments, CoEs are aligned with
HR functions, such as recruitment, selection etc. They focus on specific
functions to identify existing gaps and suggest best practices to improve
efficiency.
Preparing an Organisation’s HR Operations for 2025
Though many changes are required to be implemented in the HR depart-
ment, it is not possible to introduce all the desired changes overnight. It
is a process that requires thorough planning and careful implementation.
Three steps to revamp HR department systematically are as under:

11. https://www.getapp.com/resources/future-of-human-resource-management/as on 28.8.22

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Notes 1. A Team of Problem-solvers to be Created: It requires thorough

assessments of individuals with requisite skills. Assessment is done
on the bases of their earlier work experience, the challenges faced
by them, and how they overcame those challenges. Some additional
aspects of measurement include presenting simulated scenarios to
measure their analytical skills, level-headedness, innovative acumen,
team skills, adaptability, and flexibility.
This team will play an important role in future transformation of
organizations assisting HR partners and CoE members in formulating
and executing strategies for HR improvement.
Skills required to be member of such a team are:
‹ ‹Candidates should have a track record in process innovations.
‹ ‹They should have skills for Project management. They should
also be good at emotional intelligence (EQ) besides having top
quality IQ. Critical thinking, and ability to experiment are some
other skills required.
Composition of the Team: The team can be selected either from
totally internal HR professionals or by hiring totally external HR
experts or through a mix of the two. Usually this team consists of
10-20% of the total HR workforce.
Problem-solvers’ Role in the Future of HR: As discussed above,
HR changes are expected to create challenges both for process-
related aspects and people-related aspects. This team of problem
solvers will help the management in formulating innovative feasible
strategies to overcome challenges and facilitating hassle-free HR
transformation.
2. Set up Dedicated CoEs: Traditionally large enterprises used to set up
exclusive CoEs which formed a major part of the HR department.
However, in future, this trend is likely to change. Small and midsize
businesses are expected to start them within their HR departments
while large businesses would decrease the size of their CoEs.
The CoE team will work for defining and developing HR standards
and best practices. In future, HR manager would be expected to

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search for candidates with expertise in specific HR functions like Notes

recruiting, payroll, or learning management. Knowledgeable internal
employees would be expected to devote time to their duties as
member of CoE as well as their roles they are performing at present.
Otherwise, full-time staff from external sources, with industry
expertise in the HR functions, required by the organization could
be hired.
The CoE team will work across all functions of HR and provide
suitable recommendations on the aspects of technology, practices,
techniques, and many more to help HR practitioners better prepare
for the future. HR practitioners would be able to pinpoint specific
focus areas for transformation and make better-informed decisions
using their functional expertise.
Skills Required:
‹ ‹Minimum five years of experience in any specific HR function.
‹ ‹Knowledge of industry practices established since long,
‹ ‹Information about the latest industry trends and
‹ ‹An innovative mind to test traditional knowledge against newly
developing knowledge.
Team Composition: 2-3 professionals per HR function would be
required for efficient functioning, however, actual number would
depend on organization size, number of people employed and top
management philosophy.
Role of CoEs in the Future of HR:
‹ ‹CoEs will facilitate expertise in different functional areas for
smooth transformation process.
‹ ‹CoEs will help business managers prioritize focus areas to ensure
that efforts bear fruits due to their knowledge of the latest HR
trends and practices.
3. Expand the HR Business Partner Role to Include Strategy
Relating to Management of Talent: Traditionally, HR business
partners were supposed to interact with department heads to assess
the requirements relating to talent management only i.e., attraction,

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes motivation and retention of talent. However, in future, they will be

required to play expanded strategizing role to include talent strategy
responsibilities.
In this newly evolved role, HR business partners will work with the
managerial team on existing policies and requirements to recommend
best practices for talent management strategy. Their role in the overall
decision-making process will also increase.
Skills Required: To perform increased responsibilities, HR business
partners will require strong communication and negotiation skills.
Team Composition: One HR partner would be required per business
division. He can be either from internal HR professionals or external HR
experts especially hired for this team.
HR Business Partners’ Role in the Future of HR: HR partners will be
a link between HR professionals and business leadership. His role would
be to suggest changes in existing processes and negotiating to facilitate
both the parties reach common ground on HR policies. Thus, they will
contribute towards simplifying decision-making process. Thus, they ensure
laying a strong foundation for future HR processes.
Ensuring Close Coordination between the above Three Teams
To achieve the common goal of HR transformation, it should be ensured
that the problem-solvers, members of CoEs, and HR business partners
work in close coordination with one another. It can be done through the
following steps:
‹ ‹Regular meetings to be conducted involving members from all the
three teams.
‹ ‹It should be ensured that some employees are members of two or
more teams to create transparency. This will increase awareness on
the part of all the three teams as to the suggestions of the other
teams.
‹ ‹Group tasks should be created in such a way that involves the
participation of members from all the three teams.

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IN-TEXT QUESTIONS Notes

1. Upskilling and digital dexterity will not outweigh tenure and

experience in future. (True/False)
2. There will be no role for HR business partners in the future of
HR. (True/False)
3. HR partner role will likely expand to include talent strategy
responsibilities. in organizations of the future. (True/False)
4. Creating a team of HR professionals with strong problem-solving
skills will be one of the requirements in future. (True/False)
5. Employer branding will fade away in future. (True/False)
6. The two key aspects of the 2025 HR Operations Model are
___________ and ___________.
7. SHRM research will continue to see an increase in the level of
___________ used in empirical research.
8. Complying with tax regulations, and other laws will continue to
be at the ___________ of HR compliance.
9. Artificial intelligence can be applied to keep records and measure
___________.
10. As Artificial Intelligence will play a greater role in future of
work, workers will have ___________ role in shaping it.

25.7 Conclusion
The approach outlined in this chapter will prepare a business for incor-
porating future expected changes in the working at present itself so as
to continue doing business uninterrupted.

25.8 Answers to In-Text Questions

1. False
2. False
3. True
4. True

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 STRATEGIC HUMAN RESOURCE MANAGEMENT

Notes
5. False
6. HR partners and Centres of Excellence
7. Rigor
8. Core
9. Productivity
10. Greater

25.9 Self-Assessment Questions

1. Write a note on future directions of the workplace and how
organizations can prepare for it.
2. Write a note on HR’s role in creating a framework for the future
work.
3. Discuss the two key aspects of the 2025 HR Operations Model.
4. Explain the main steps to prepare any organisation’s HR operations
for 2025.
5. Explain in detail Opportunities that exist in the area of SHRM for
future research.
6. Discuss in detail areas where HR skills need to be improved in
future.

25.10 References
‹ ‹Wright Patrick M. and Ulrich Michael D. (2017). A Road Well
Travelled: The Past, Present, and Future Journey of Strategic Human
Resource Management. The Annual Review of Organizational
Psychology and Organizational Behavior.
‹ ‹Jeske Van Beurden, Karina Van De Voorde & Marc Van Veldhoven.
(2020). The employee perspective on HR practices: A systematic
literature review, integration and outlook. The International Journal
of Human Resource Management
‹ ‹Elaine Farndale, Jaap Paauwe. (2018). “SHRM and context: why
firms want to be as different as legitimately possible”, Journal of
Organizational Effectiveness: People and Performance. https://doi.
org/10.1108/JOEPP-04-2018-0021
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 Future of SHRM

‹ ‹Harrison, Joshua D. Bazzy. (2017). “Aligning organizational culture Notes

and strategic human resource management”. Journal of Management
Development, Vol. 36 Issue: 10, pp. 1260–1269.
‹ ‹Graeme Martin, Paul J. Gollan & Kerry Grigg. (2011). Is there
a bigger and better future for employer branding? Facing up to
innovation, corporate reputations and wicked problems in SHRM.
The International Journal of Human Resource Management, 22:17,
3618-3637.
‹ ‹https://www.gartner.com/smarterwithgartner/6-ways-the-workplace-
will-change-in-the-next-10-years as on 22.8.22.
‹ ‹https://www.shrm.org/resourcesandtools/hr-topics/organizational-and-
employee-development/pages/ the-future-of-work.aspx as on 22.8.22.
‹ ‹https://www.getapp.com/resources/future-of-human-resource-
management/as on 28.8.22.

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Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi

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