INTRODUCTION TO SHRM

By:SONAM SACHDEVA

Assistant ProfessorGIBS

Human resources refer to the people who work in an organization.

Human resource management is concerned with a holistic approach towards the management of people working in an organization, who contribute to the achievement of organizational objectives.

Strategy is the determination of the long term goals and objectives of an organization, and the allocation of resources necessary for carrying out these goals.

Like strategy, HR strategy is concerned with two key elements:

1. Determining the strategic objectives (what goals is the strategy supposed to achieve? For example, the goals may be high productivity, reduced accidents, etc.)

2. Developing a plan of action (how will the human resources be organized and allocated to accomplish the objectives of the organization?)

Human resource strategy, therefore, involves the planned and effective use of human resources by an organization to help it gain or maintain an edge over its competitors.

An organization is said to achieve competitive advantage when it is able to gain and maintain edge over its competitors by differentiating its products or services from those of its competitors, thereby increasing its market share.

STRATEGIC HRM: Definition and Components Strategic HRM is concerned with the relationship

between HRM and strategic management in an organization.

Strategic human resource management is an approach which relates to decisions about the nature of employment relationship, recruitment, training, development, performance management, reward and employee relations.

Wright and McMahan defined SHRM as ‘the pattern of planned human resource deployment and activities intended to enable the firm to achieve its goals’.

COMPONENTS It focuses on an organizations’ human

resources (people) as the primary source of competitive advantage of the organization.

The activities highlight the HR programs, policies, and practices as the means through which the people of the organization can be deployed to gain competitive advantage.

The pattern and plan imply that there is a fit between HR strategy and the organization’s business strategy (vertical fit) and between all of the HR activities (horizontal fit).

The people, practices, and planned pattern are all purposeful, that is, directed towards the achievement of the goals of the organization.

An organization uses a combination of several resources- tangible and intangible- in the pursuit of its objectives. These resources can be grouped into three basic types:

1. Physical capital resources- the plant, equipment, and finances.

2. Organizational capital resources- the organization’s structure planning, hr systems history, and organizational culture.

3. Human capital resources-the skills, judgement, and intelligence of the organization’s employees.

An organization may have huge capital and most advanced machinery, but if it does not have capable, motivated, and high performing employees, the organization is not likely to demonstrate sustained levels of high performance. Since all physical and capital resources depend on people for their efficient use, maintenance, and management, the quality of the people of an organization is important in attaining competitive advantage.

Strategic HRM is based on HRM principles

incorporating the concept of strategy. So if HRM is a coherent approach to the management of people, strategic HRM now implies that what is done on a planned way that integrates organizational goals with policies and action sequences.

Objectives of SHRM The major objectives of SHRM are as follows: To ensure the availability of a skilled, committed,

and highly motivated workforce in the organization to achieve sustained competitive advantage.

To provide direction to the organization so that both the business needs of the organization and the individual and collective needs of its workforce are met. This is achieved by developing and implementing HR practices that are strategically aligned.

THE REQUIREMENTS FOR STRATEGIC HRM Strategic HRM is most likely to be practiced in organizations with the following characteristics:

•Strong, visionary and often charismatic leadership from the top.•Well articulated missions and values.•A clear expressed business strategy which had been implemented successfully.•A positive focus on well understood critical success factors•The organization offers a closely related range of products or services to customers.•A cohesive top management team.•A personnel/HR director who plays an active part in discussing corporate/business issues as well as making an effective and corporate/business-oriented contribution on HR matters.

EVOLUTION OF SHRM

The HR function has evolved over time. In India, the Tata Iron and Steel Company

(TISCO) was one of the first organizations to set up a personnel department in the year 1947.

The history of the function pre-dates Taylor’s theory of scientific management and Fayol’s administrative theory. However, it was only during the 1930s and 1940s that the function grew in significance, largely due to war-time imperatives.

Evolution of the HR Function

1. PERSONNEL MANAGEMENT

2. HRM (early 1970s)

3. SHRM (early 1908s)

1. PERSONNEL MANAGEMENT

Part of mechanistic organizationBureaucraticHigh centralizationHigh formalizationLow flexibility

2. HRM (early 1970s)

Part of organic organizationCross-hierarchical and cross-functional

teamsDecentralizedLow formalizationFlexible

3. SHRM (early 1980s)

Convergence between HRM and business strategy

Proactive HRMConcerned with organizational

effectiveness and performance.

EVOLUTION OF SHRM THOUGHT The success of Japanese firms in the 1980s was

attributed mostly to their Human Resource practices and organizational and national cultures.

This realization attracted attention to the crucial role of the HR function in providing sustainable competitiveness.

There is growing fusion of personnel management, industrial relations, human resource development and knowledge management which combinedly constitutes the field of Strategic Human Resource Management.

Its key characteristics are best summarized by Sission (1989):

1. A stress on the integration of personnel policies both with one another and with corporate planning more generally;

2. The locus of responsibility for personnel managers no longer resides with specialist managers but is now assumed by senior line managers;

3. The focus shifts from management-trade union relations to management- employee relations, from collectivism to individualism; and

4. There is stress on commitment and the exercise of initiative, with managers donning the role of ‘enablers’, coaches and facilitators.

DIFFERENCE BETWEEN TRADITIONAL HRM & SHRM

Basis Traditional HRM

SHRM

Responsibility for HR programmes

Staff personnel in the HR department.

Line mangers; all managers responsible for people are HR managers.

Focus of activities

Employee relations-ensuring employee motivation and productivity, compliance with laws.

Partnerships with internal (employees) and external (customers, stakeholders, public interest groups) groups.

Role of HR Reactive and transactional.

Proactive and transformational, change leader.

Initiative for change

Slow, piecemeal, and fragmented, not integrated with larger issues

Fast, flexible, and systematic, change initiatives implemented in concert with other HR systems.

Time horizon

Short-term Consider various time frames as necessary (short, medium, or long-term).

Control Bureaucratic control through rules, procedures, and policies

Organic control through flexibility, as few restrictions on employee behavior as possible.

Job design Focus on scientific management principles-division of labor, independence, and specialization.

Broad job design, flexibility, teams and groups, and cross-training

Important Investments

Capital, products, technology, and finance

People and their knowledge, skills and abilities.

Accountability Cost centre Investment centre

BENEFITS OF STRATEGIC MANAGEMENT

Allows identification, prioritization and exploitation of opportunities.

Provides an objective view of management problems.

Represents a framework for improved co-ordination and control of activities.

Minimizes the effects of adverse conditions and changes.

Allows major decisions to better support established objectives.

Allows more effective allocation of time and resources to identified opportunities.

Allows fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions.

Creates a framework for internal communication among personnel.

Helps to integrate the behaviors of individuals into a total effort.

Provides a basis for the clarification of individual responsibilities.

Give encouragement to forward thinking.Provides a co-operative, integrated and

enthusiastic approach to tackling problems and opportunities.

Encourages a favorable attitude towards change.

Gives a degree of discipline and formality to the management of a business.

The Changing Role of HR/ HRs New Role OrientationHR is shifting from focusing on the

organization of the business to focusing on the business of the organization.

HR is more important than ever, people are the only sustainable source of competitive advantage.

“Watson Wyatt Study”

“You can take my factories, burn up my buildings, but give me my people, and I’ll bring my business right back again.”

- Henry Ford Employers want HR to address strategic

issues involving the competitiveness and performance of the firm more than the role of protector and administrator.

Environmental changes have put pressure on the HRM function to justify its existence.

Human resource management is placed at the centre of business strategy today.

High uncertainty in the environment has been a major reason for the increasing influence of the HR function on business strategy over the years.

Though the HRM function and personnel continue to be in a transitional phase, dramatic changes have taken place in the past two decades.

Two major changes that have occurred in HR function are the roles associated with HRM and the partnership of HR managers and line managers.

HRM Function

Dual Roles Associated with

HRM

Partnership of HR and Line Managers

ADMINISTRATIVE ROLE

Day to day management of

people within organizations

STRATEGIC ROLEPlanning and attainment of organizational

objectives.

DEVOLUTIONTransfer of

some responsibilities and activities

from the HRM Function

to the line managers

DECENTRALIZATIONStructuring of

HRM department

CHANGES IN HRM FUNCTION

ROLES ASSOCIATED WITH MANAGEMENT OF HR

The HR function today is seen as composed of two roles: an administrative role and a high-level strategic role.

In its administrative role, the HR function performs the traditional administrative tasks associated with the day-today management of people within organizations.

The strategic role of the HR function has increased in importance since the 1990s. The strategic focus of HRM is concerned with the planning and attainment of organizational objectives.

PARTNERSHIP OF HR AND LINE MANAGERS

Human resource activities are no longer seen to be the sole responsibility of HR Managers. In the knowledge economy, line managers play an important role in the formation as well as implementation of HR practices.

As HRM work expands, responsibility for HR is increasingly shared among HR managers and line managers.

For example, without the participation of line managers, an employee involvement programme cannot succeed in a firm.

Similarly, though firms spend huge amounts on employee training and development, the best developments take place on-the job through coaching by a senior and more experienced manager.

There is both Devolution and Decentralization of the HR functions.

Devolution involves transferring some of the responsibilities and activities from the HR personnel function to the line managers.

Decentralization refers to how the HR department is structured. When the firm is organized around strategic business units, each business unit has its own HR staff. These HR personnel report to the head of the business unit rather than to the head of the central HR department at corporate headquarters. Line managers must play a strategic role in formulating HR strategies.

Line managers and HR managers must jointly own all aspects of the business. Therefore, there are many HR skills that line managers must have.

Multiple Roles Of the HR Managers

Administrative expertOperational roleEmployee championPartner in Business StrategyChange AgentCustomer Orientation

Emerging trends and issues

In the post-industrial society dominated by multinationals and information technology, globalization, and services, the field of people management has changed from reactive personnel management to proactive human resource management and to value creating function, which is strategic in nature. The trends in SHRM and the issues to which it is trying to provide answers as follows:

Each organization has its own situational realities, characteristics and challenges. Business strategy and the role, strategy and process of HR therefore has to be customized. It is generally felt that the competitive pressures will increasingly demand speed, flexibility, process integration, team building and concern for quality and customer care. There would be more focus on results and social responsibility of business. All the stakeholders have to be taken care of. HR interventions in the area of selection, performance management, compensation and employee relations have to be strategically managed to meet specific organizational situations.

HR roles are changing with decentralization, de-layering and downsizing. Corporate and HR roles are changing to advisory and line managers are assuming direct responsibility of people under their charge. HR is a service to be provided to them. They are internal customers of HR.

HR capability has to come out from narrow functional knowledge to encompass business capability. HR has to understand the concerns and language of other functions and become their trusted partner.

More and more reliance on IT is making HR self-administrating in its routine aspects. HR has, therefore, to be more direct, visibly contributing to achievement of organizational goals.

Upgrading employees, preparing them to change, modernization of mind, leading to collaboration and innovation is another important role emerging for SHRM.

Management of redundancy due to up gradation of technology is another area. In this context transparency, communication, redeployment, retaining and rightsizing are being emphasized.

Internationalization and training of people in cross-cultural operations is gaining added importance and HR has to prepare organizations for expatriate management.

Employee burnout, work-life balance and management of stress have become prime responsibilities of HR because people are the most vital resource.

Building unions as strategic partners of business and to make business a joint partnership between unions and management is a challenge. How organizations listen to the ‘voice’ of employees and act on it is the responsibility of SHRM as unions are losing their hold in MNCs.

Finally, the role of HR in business restructuring, acquisitions, mergers and joint ventures has become the most important strategic responsibility of HR function.

HUMAN RESOURCE PLANNING: An Overview

Manpower Planning which is also called as Human Resource Planning consists of putting right number of people, right kind of people at the right place, right time, doing the right things for which they are suited for the achievement of goals of the organization. Human Resource Planning has got an important place in the arena of industrialization. Human Resource Planning has to be a systems approach and is carried out in a set procedure. The procedure is as follows:

Analyzing the current manpower inventory Making future manpower forecasts Developing employment programmes Design training programmes

HRP helps in determining the HR requirements of firms and develop strategies for meeting those requirements so that the organization achieves its objectives. It seeks answers to questions such as:

What are the implications of proposed strategic plans with respect to human resources?

What are the implications of proposed strategic plans for staffing, training and development, and management succession?

How will a projected shortfall in the supply of skilled employees impact various HR practices of the firm?

What are the implications for attracting, retaining, motivating and rewarding workers with skills that are in short supply?

The HRP process cannot be carried out in isolation. The HRP process examines the implications of business strategies and goals on human requirements.

HRP is a proactive process. It anticipates the changes in industry, marketplace, economy, society and technology to ensure that the organization is well prepared to meet these changes when they occur.

BUSINESS STRATEGY AND HRP

Business strategy directly affects HR strategies and activities.

(refer Tanuja Agarwala Pg 183-185)

Behavioural issues in strategy implementation

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 behavioural of the employees affect the success of the organization. Strategic implementation requires support, discipline, motivation and hard work from all manager and employees

Influence Tactics: The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behaviour 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

Power: it is the potential ability to influence the behavior of others. Leaders often use their power their power to influence others and implement strategy. Formal authority that comes through leaders position in 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)

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.

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

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 the advantage of being able to benchmark the culture against those 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.

Values and Culture: Value is something that has worth and importance to an individual. People should have shared values. This value keeps the every one from the top management down to factory persons on the factory floor pulling in the same direction.

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 function successfully the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations.

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?

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.

Linking Performance and Pay to Strategies: In order to implement the strategies effectively the organization has to align salary increases, promotions, merit pay, bonuses etc., more closely to support the long term objectives of the organization

SHRM for Competitive Advantage

TRENDS IN BUSINESS ENVIRONMENTGlobalization of BusinessMergers and AcquisitionsDownsizing

CHANGING NATURE OF WORKIndustry and Occupational ShiftsTechnological AdvancementsOutsourcingFlexible work arrangements

DEMOGRAPHIC, SOCIETAL, AND WORKFORCE TRENDS

Workforce Diversity Workforce availability Shortage of Skilled Talent Ageing population and Ageing workforce An educated knowledge workforce Women in workforce Changing family structures Global Workforce Contingent Workforce and Workforce flexibility CHANGING NATURE OF EMPLOYMENT

RELATIONSHIP

Strategic fit: A Conceptual Framework

Organizations are often confronted with a dilemma-should they adopt business strategies that fit the available competencies and capabilities in the firm, or should they first decide their business strategy, and then stretch and modify their competencies and capabilities to fit the business strategy?

The strategic fit proposes that if an organization seeks to maximize its competitive advantage, it must match its internal resources and skills (organizational competencies) with the opportunities available in the external environment.

When an organization attempts to implement new strategies with outmoded or inappropriate HR strategies, it can face problems. SHRM is largely about integration.

Guest emphasized that it is important to ensure that HRM is fully integrated into strategic planning. In 1997, Guest identified the following five types of fit:

1. Fit as strategic interaction (best fit approach)-HR practices linkage with the external context.

2. Fit as contingency-HR approaches to ensure that internal practices of the organization respond to external factors such as the nature of the market, skill availability, etc.

3. Fit is an ideal set of practices (best practice approach)-there are ‘best practices’ which all firms can adopt.

4. Fit is gestalt-emphasizes the importance of finding an appropriate combination of practices.

5. Fit as ‘bundles’ (the configuration approach)-suggests a search for distinct configuration or bundles of HR practices that complement each other, in order to determine which ‘bundle’ is likely to be most effective.

MATCHING CULTURE WITH STRATEGY

Organization culture is a set of characteristics that describe an organization and

1. That distinguish one organization from another,

2. That are relatively enduring over a period of time, and

3. That influence the behavior of people in an organization.

Organizational structure is likely to reflect the power structure and, again, delineate important relationships and emphasize what is important in the organization.

In most companies, there are strong informal networks of individuals and groups, which coalesce around specific issues to promote or resist a particular view.

Strategy and the external environment are big influences on corporate culture.

Corporate culture should embody what the organization needs to be effective within its environment.

For example, if the organization requires flexibility and responsiveness, the culture should encourage adaptability. The correct relationship between cultural values and beliefs, organizational strategy and the business environment can enhance business performance.

Prof. Dan Denison conducted a study of culture and effectiveness and proposed that the fit among the strategy, environment and culture is associated with four types These categories are based on two factors:

1. The extent to which the competitive environment requires change or stability, and

2. The extent to which the strategic focus and strength is internal or external.

The four categories associated with these differences are-

1. Adaptability

2. Mission

3. Involvement, and

4. Consistency

REFER HANDOUTS – ORGANIZATION AND NATIONAL CULTURE

(Pg 144-148)