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Let us understand it by dividing the term into its subparts. • Human – people, us • Resource – assets/costs for organizations • Management – co-ordination and control to achieve set goals But humans, unlike other resources in the context of work and management, cause problems. The objective is to seek & maximize commitment of people by organising work and creating attitudes and behaviour, which generate best outcomes. Thus, HRM is basically a search for “best practices” to generate high levels of employee commitment and performance. But organisational practices may cause difficulties – down/right sizing or less secure employment seems to sit uneasily against this rhetoric of HRM. Storey has identified two broadly contrasting pictures of HRM • Emphasis on people as costs and resources to be worked to secure maximum efficiency. It is called the “ Rational or economic view of employment” where the basic approach is Control and compliance • Emphasis on people as resources to be invested in to generate high commitment and involvement. This is the “ Social or psychological view of employment” and it emphasises on commitment of the people working together as an organisation both - Hard and Soft. Bratton and Gold define HRM as: “… a strategic approach to managing employment relations which emphasises that leveraging people’s capabilities is critical to achieving sustained competitive advantage, this being achieved through a distinctive set of integrated employment policies, programmes and practices”. From this definition, we can easily deduce certain key words which can give us an idea of what the features of HRM are. They are: Strategic i.e. planned, deliberate, seeking to achieve set objectives Capabilities i.e. people or resources with potential (knowledge, skills, attitudes) which can be developed to contribute to organisational success. Competitive advantage – by tapping into and developing these capabilities organisations give themselves an edge over their rivals
Integrated – that the range of things under HRM (recruitment, selection of employees, their training and development, how they are rewarded) is looked at together not as separate things. For example, if you recruit and select people you should have a clear idea of how you see them developing and contributing to the performance of the organization. Isn’t it ?? This Employment Relationship has several dimensions to it: 1. Economic – pay in exchange for effort • We sell ourselves to survive and prosper • We enter the “labour market” to be bought • We try to improve our price in various ways. But there is a supply and demand aspect • We bring potential effort which needs control 2. Legal – employment laws, rights and responsibilities on both sides – contractual relationship although formality of the contract can be very freely entered into. But is it that free and equal? Employment rights may help redress the balance between individual and organizations (as does collective association or unions) 3. Social – Work is social because it involves various degrees of integration with others: - Some of this is formally required - Some is just “natural” - Influence of social on individual - In work, social relations are structured 4. Psychological – mutual expectations and obligations - beyond the formal contract What do you expect your employer to provide beyond the wage – effort bargain? What is reasonable in terms of this bargain? To understand what human resource management more clearly, we should first review what managers do. Dessler has defined the concept by relating the HRM field with five basic functions all managers perform: planning, organizing, staffing, leading, and controlling. In total, these functions represent the management process. Some of the specific activities involved in each function include: Planning: Establishing goals and standards; developing rules and procedures; developing plans and forecasting-predicting or projecting some future occurrence.
Organizing: Giving each subordinate a specific task; establishing departments; delegating authority to subordinates; establishing channels of authority and communication; coordinating the work of subordinates. Staffing: Deciding what type of people should be hired; recruiting prospective employees; selecting employees; setting performance standards; compensating employees; evaluating performance; counseling employees; training and developing employees. Leading: Getting others to get the job done; maintaining morale; motivating subordinates. Controlling: Setting standards such as sales quotas, quality standards, or production levels; checking to see how actual performance compares with these standards; taking corrective action as needed. Thus, Human resource management refers to the practices and policies you need to carry out the people or personnel aspects of your management job. Other thinkers like, David. A. Decenzo & Stephen P.Robbins have defined it as “ A process consisting four functions- acquisition, development, motivation, and maintenance of human resources.” Institute of Personnel Management, London, UK: “ Personnel Management is that part of management concerned with the people at work and with their relationship into an effective organisation; the men and women who make up an enterprise and having regard for the well-being of the individual and of working groups, to enable them to make their best contribution to its success.” Edward Flippo refers to it as, “Personnel management is the planning, organising, directing and controlling of the procurement, development, compensation, integration, maintenance and separation of human resources to the objectives are accomplished” The meaning and prevalence of HRM are topics that continue to attract debate and disagreement. As a consequence, practitioners and textbook authors use a diverse and sometimes contradictory range of interpretations. We find that HRM has a variety of definitions but there is general agreement that it has a closer fit with business strategy than previous models, specifically personnel management. Paradoxically, attempts to define HRM too precisely seemed to have resulted in confusion and contradiction rather than clarity. However, and perhaps only for the moment, HRM has the advantage of appearing to be contemporary and innovative.
This is particularly the case in comparison with personnel management. Nevertheless, personnel departments have refused to go away. A casual examination of job advertisements in the press will reveal that applications are still to be sent to 'Personnel Managers', 'Personnel Departments', and even 'Staffing Officers'. At the same time, advertisements for 'human resource' jobs are common - particularly at a senior level - even if applications are to be sent to the Personnel Office! Schools of thought: It is evident, therefore, that defining and accepting HRM comes down to a matter of opinion or vested interest. Indeed, some interpretations have a strong constituency. It can be seen that each of these views has a natural audience able to identify their own interests with a particular interpretation. If you yourself read a few books and will find accounts stressing one of the following: • HRM is really personnel management Human resource management is a modernized form of 'personnel', repackaged to enhance the status of personnel managers. It has a hard edge, entitling HR managers to the same respect as finance professionals. HRM is based on integrated and coherent recruitment, assessment and development programmes. It is sophisticated, requiring rigorous training under the auspices of a professional body or university. • HRM is a strategic model It employs the techniques of strategic management for the utilization of human resources. It focuses on senior managers' concern with achieving objectives and containing costs. HRM aims for a seamless link between business policy and recruitment, performance assessment, reward management, development and dismissal. HRM is a mechanism for control and the exercise of power by top management. It encourages employee attitudes and behaviour which are consistent with business goals. HRM is just one aspect of a senior manager's strategic repertoire. It requires a wide appreciation of the industry and the organization and fits resource-based theories which are familiar from business strategy literature. • HRM is people management It covers all aspects of managing employees in its widest sense and emphasises the role of line managers in overseeing their own staff. From this perspective, HRM is a new generic label for all the techniques and tactics available to manage people. It concentrates on translating organizational objectives into operational achievement by winning
employee commitment and gaining high-quality performance. HRM is practical and pragmatic. However, there is a considerable risk that this approach can result in a loss of focus. In fact, the value and popularity of HRM may derive from its openness to varied interpretations. It is possible to argue that the term is a useful, 'catch-all phrase, reflecting general intentions but devoid of specific meaning' (Guest, 1989b). This allows it to be applied in a variety of circumstances. Individual authors and practitioners interpret HRM according to their own background, interests and intended audiences. Indeed, Keenoy and Anthony (1992: 238) consider that we should not look too closely: '...once we seek to explain HRM, to subject it to any analysis or criticism, it ceases to function as intended. Its purpose is to transform, to inspire, to motivate and, above all, to create a new 'reality' which is freely available to those who choose or are persuaded to believe. To explain it is to destroy it.'
LECTURE 4 – 7 : Evolution of Human Resource Management
We all are aware how the development of Human Resource Management took place, through our subjects in First Semester. The development of HRM has been slow but a steady process. Arguably, HRM has become the dominant approach to people management in most of the countries. However, it is important to stress that human resource management has not 'come out of nowhere'. HRM has absorbed ideas and techniques from a number of areas. In effect, it is a synthesis of themes and concepts drawn from over a century of management theory and social science research. There is a long history of attempts to achieve an understanding of human behaviour in the workplace. Throughout the twentieth century, practitioners and academics have searched for theories and tools to explain and influence human behaviour at work. Managers in different industries encounter similar experiences: businesses expand or fail; they innovate or stagnate; they may be exciting or unhappy organizations in which to work; finance has to be obtained and workers have to be recruited; new equipment is purchased, eliminating old procedures and introducing new methods; staff must be re-organized, retrained or dismissed. Over and over again, managers must deal with events that are clearly similar but also different enough to require fresh thinking. We can imagine that, one day, there will be a science of management in which these problems and their solutions are catalogued, classified, standardized and made predictable. Sociologists, psychologists and management theorists have attempted to build such a science, producing a
constant stream of new and reworked ideas. They offer theoretical insights and practical assistance in areas of people management such as recruitment and selection, performance measurement, team composition and organizational design. Many of their concepts have been integrated into broader approaches which have contributed to management thinking in various periods and ultimately the development of HRM. Let us do a bit of recollection now. The great Industrial Revolution: As you all know brought in an era of Specialization in techniques. The rest is history. Jobs fragmentation, more stress on work specialization earmarked the significance of this era. Development was fast, the rays of management started rising on the horizon of the economy. F.W.Taylor introduced the Scientific Management. More emphasis was laid on the increase in efficiency and right person for the right job. Training, task performance with economic rewards was given much importance. Taylor believed in a combination of detailed task specifications and selection of the 'best man' for the job. It was the function of managers to think - workers were expected to do exactly as they were told. This, he felt, would result in the most efficient method of performing physical work. Additionally, he advocated premium payments as a means of rewarding the most effective (compliant) workers. Taylor's ideas led on to: - Fordism a philosophy of production based on the continuous assembly line techniques devised by Henry Ford. This methodology dominated worldwide manufacturing until the 1980s. - Time and motion - stopwatch methods of measuring work, used to increase efficiency and minimize wasted time and effort. - Continuous improvement - fundamental to Japanese production methods: using employee knowledge and ingenuity to continually refine product manufacture and development. These practices require management control over the precise detail of work in order to maximise efficiency and gain competitive advantage. Inevitably, this is achieved at the expense of employees who sacrifice the freedom to control their own work. 'Scientific management', under any name, creates an inevitable tension between the rights and expectations of workers and management's need to gain ever greater quality and cost-effectiveness. Thus, HRM is identified with attempts to deal constructively with this tension through assertive, but non-
autocratic, people management. It is also linked to the use of performance-related pay and other ways of rewarding appropriate behaviour. Labour : Trends started changing rapidly. Workers started coming together to ask for their rights. Trade unions slowly emerged. Workers started their Union activities for getting good benefits; good pay, perks and improved welfare conditions. One of the major ill effects of Industrial Revolution was the exploitation of labour. This led to unionization of labour movements. Human Factor: Slowly the importance of human aspect began to dawn in the minds of the people. The fact that apart from economic incentives, human beings need satisfaction of social and psychological needs was realized and stressed upon. . In Australia, New Zealand and - particularly - the UK, government-sponsored research by work psychologists during and after the first world war produced significant information on the relationship between boredom, fatigue and working conditions. They established that fatigue arose from psychological as well as physical causes. They demonstrated also that working longer hours did not necessarily increase productivity. Human factors psychologists established a tradition of performance measurement, job analysis and clarification of skill requirements. These underlie key HRM techniques such as competence assessment and selection methods. Human relations. In the 1920s and 30s researchers demonstrated that work performance and motivation did not depend simply on pay and discipline. People worked for many other reasons. They wanted to be involved in determining their own work conditions. They responded to encouragement and the interest shown by management. The Hawthorne experiments paved way for this thought. Workers formed informal groups which established their own norms of behaviour, including acceptable levels of performance. Working groups exercised social pressure on their members to conform to these unconsciously determined rules. The human relations movement had considerable influence within US business schools such as Harvard which later developed a 'soft', humanistic interpretation of HRM. Behavioural science. The human relations and human factors approaches were absorbed into a broad behavioural science movement in the 1950's and 1960's. This period produced some influential theories on the motivation of human performance. For example, Maslow's hierarchy of needs gave an individual focus to the reasons why people work, satisfying an ascending series of needs from survival, through security to eventual 'self-actualisation'.
In the same period, concepts of job design such as job enrichment and job enlargement were investigated. It was felt that people would give more to an organization if they gained satisfaction from their jobs. Jobs should be designed to be interesting and challenging to gain the commitment of workers - a central theme of HRM. Management by Objectives. Based on work by Drucker in the 1950s, and further developed by McGregor, management by objectives (MBO) linked achievement to competence and job performance. MBO primarily focused on the individual, tying rewards and promotion opportunities to specific agreed objectives, measured by feedback from performance assessment. Individual managers were given the opportunity to clarify the purposes of their jobs and set their own targets. MBO developed into modern performance management schemes and performance-related pay. Contingency. Many researchers found difficulty in applying academic theories to real organizations. The socio-technical school developed models of behaviour and performance which took into account the contingent variables, or 'it depends' circumstances, attached to particular work situations (Burns and Stalker, 1961; Woodward, 1980). They argued that employees were part of a system which also included the equipment and other resources utilized by an organization. The system could not function optimally unless all its components - human and non-human - had been considered. The HRM concepts of coherence and integration derive, in part, from this line of thought. Organizational development. Also drawn from the long tradition of organizational theory, organizational development (OD) took a pragmatic approach to change. Theory and practice were mixed in a tentative process called 'action research'. OD familiarized managers with the idea that changes in processes, attitudes and behaviour were possible and that organizations should be thought of as whole entities. Strategic management. Directing people to achieve strategic objectives so that individual goals are tied to the business needs of the whole organization. Strategic management has become a dominant framework for organizational thinking since the second world war. It is based on concepts first used for large-scale military and space programmes in the USA. Frequently, it employs project and team-based methods for planning and implementation. Lately, internal (including human) resources and key competencies have been identified as crucial elements of long-term competitive success. Strategic management has become the major unifying theme of functioning of departments of all organizations
The concern with strategy distinguishes human resource management from personnel management!! Leadership. Many writers have concluded that a visionary leader is essential, particularly in developing and inspiring teams. McGregor's The Human Side of Enterprise (1960) linked leadership and management style to motivation. McGregor expressed the contrast between authoritarian people management ('Theory X') and a modern form based on human relations ideas ('Theory Y'). His ideas parallel 'hard' and 'soft' HRM. Effective managers do not need to give orders and discipline staff; they draw the best from their people through encouragement, support and personal charisma. Corporate culture. Deal and Kennedy (1982) popularized the belief that organizational effectiveness depends on a strong, positive corporate culture. They combined ideas from leadership theory and strategic management thinkers with prevailing beliefs about Japanese business success. The excellence movement inspired by Peters and Waterman (In Search of Excellence, 1982, and others) has been particularly influential with practising managers. Thus, the development in the management field after the human relations movement led to the new term called the human resources approach, which has gained momentum ever since. What does this approach state? It states that human beings are very valuable assets to the organization. Uniqueness amongst individuals was recognized. Peoples involvement, commitment, potential development, good organisational culture were considered as important factors in HRM!! Importance of Human Resource Management HRM is very important to us for the following reasons: 1.Development and Growth of the organization: HRM paves way for development and growth in the organization. By improving the individual capabilities, acquiring necessary cooperation and developing teamwork HRM makes sure that the organization develops and grows well. Goals of the organization are met by HRM by effective motivation and excellent utilization of employees.
2.Creation of healthy culture in the Organization: HRM creates and maintains excellent culture in the organization and it makes people develop and grow. 3.Maintenance of Human Resources: The development, care of Human Resources is done by the HRM. Human beings are a very crucial and vital factor of production , and thus HRM is gaining more and more importance day by day. It also has important implication in societal development also. IT IS THE HEART AND SOUL OF MODERN MANAGEMENT. Core values of HRM: The core values of HRM states that 1.Human beings are the crucial aspects of every organization. The greater is the commitment of the human resources the more successful is the organization. 2. An individual is a whole person. He brings all aspects of his personality, attitudes, traits and behavior to the work place. 3. All people represents the organization. The building, equipment and other resources productive only because they are being handled by the hyper energic force of humans. 4.People are different from each other. They vary in abilities, nature, personality, religion etc. people are also influenced by social economic and environmental factors. 5. Human resources have to be acquired, developed and motivated to give higher performances and also must be retained. 6. The success of an organization depends upon the satisfaction of organizational needs and employees needs. There are various levels of hierarchical levels in an organisation. The people who manage (i.e., the managers), and people who are at work (subordinates). The effective coordination and commitment between managers and subordinates is essential for organizational success. Apart from that healthy relation ships are to be maintained with consumers, shareholders, entrepreneurs, governments and suppliers. 7. Human relations enable people to work effectively in an organization with other people in organization.
LECTURE 7 – 11 : HR’s NEW ROLE ORIENTATION, COMPETITIVE EDGE
Introduction The human resources function is at a crossroads, as new technologies create opportunities for more strategic leadership in the management of human capital and corporate culture, while commoditizing some of HR’s traditional administrative functions. What’s the strategic vision for HR in today’s large organizations? How can HR proactively help drive business results and business transformation? What are best practices in global talent management, self service HR systems, and outsourcing? Who is the customer for HR? How can HR and IT work together to further the corporation’s business goals?
• The human resources (HR) function is at an inflection point: It must reshape itself to deliver the strategic value that today’s business environment demands and refocus its energies to become a change catalyst and leader. HR is in a position to shape corporate culture, spread best practices, and drive enterprise-wide consistency of important shared values and messages. • HR and IT must jointly leverage technology and their unique cross-enterprise views to enable companies to become increasingly flexible and adaptable, drive enterprise-wide transparency, and provide ‘high-touch’ experiences where and when they are really needed. Information technology is enabling “digitization” of routine transactional processes and event management, at the same time providing all levels of the enterprise more data about its human capital than ever before. • Talent management and development is a high leverage opportunity for HR. HR can play a major role in creating a performance and accountability culture via compensation systems, opt-out programs, recruiting, and continuous learning processes. Technology offers tools to do this more effectively and efficiently. • Both HR and IT can benefit from sharing ‘embedded’ talent with each others’ organizations and with other business functions. Cross-pollination of managerial talent and perspectives can help increase understanding, cooperation and goal alignment. • Self-service HR systems, when well designed, can deliver benefits beyond increased capacity and efficiency. In addition to empowering employees and managers, IT-enabled systems can also deliver new managerial insight by aggregating and leveraging data that were previously inaccessible. Self service HR systems should be event-triggered, workflow-driven and role-based whenever possible. • In making outsourcing and automation decisions, HR must consider both corporate efficiency goals and the strategic benefit of ‘high-touch’ customer and employee experiences. Executives must understand what’s strategic and value-added to the business and what’s not, and let those distinctions drive the design of new processes and programs. The world of work is rapidly changing. As a part of organization, HRM must be prepared to deal with effects of changing world of work. For the HR people it means understanding the implications of globalization, work-force diversity, changing skill requirements, corporate
downsizing, continuous improvement initiatives, reengineering, the contingent work force, decentralized work sites and employee involvement. Let us consider each of them one by one.
1. Globalization and its implications Business today doesn’t have national boundaries - it reaches around the world. The rise of multinational corporations places new requirements on human resource managers. The HR department needs to ensure that the appropriate mix of employees in terms of knowledge, skills and cultural adaptability is available to handle global assignments. In order to meet this goal, the organizations must train individuals to meet the challenges of globalization. The employees must have working knowledge of the language and culture ( in terms of values, morals, customs and laws) of the host country. HRM must also develop mechanisms that will help multicultural individuals work together. As background, language, custom or age differences become more prevalent, there are indications that employee conflict will increase. HRM would be required to train management to be more flexible in its practices. Because tomorrow’s workers will come in different colors, nationalities and so on, managers will be required to change their ways. This will necessitate managers being trained to recognize differences in workers and to appreciate and even celebrate these differences. 2. Work-force Diversity In the past HRM was considerably simpler because our work force was strikingly homogeneous. Today’s work force comprises of people of different gender, age, social class sexual orientation, values, personality characteristics, ethnicity, religion, education, language, physical appearance, martial status, lifestyle, beliefs, ideologies and background characteristics such as geographic origin, tenure with the organization, and economic status and the list could go on. Diversity is critically linked to the organization’s strategic direction. Where diversity flourishes, the potential benefits from better creativity and decision making and greater innovation can be accrued to help increase organization’s competitiveness. One means of achieving that is through the organization’s benefits package. This includes HRM offerings that fall under the heading of the family friendly organization. A family friendly organization is one that has flexible work schedules and provides such employee benefits such as child care. In addition to the diversity brought by gender and nationality, HRM must be aware of the age
differences that exist in today’s work force. HRM must train people of different age groups to effectively mange and to deal with each other and to respect the diversity of views that each offers. In situations like these a participative approach seems to work better. 3. Changing skill requirements Recruiting and developing skilled labour is important for any company concerned about competitiveness, productivity, quality and managing a diverse work force effectively. Skill deficiencies translate into significant losses for the organization in terms of poor-quality work and lower productivity, increase in employee accidents and customer complaints. Since a growing number of jobs will require more education and higher levels of language than current ones , HRM practitioners and specialists will have to communicate this to educators and community leaders etc. Strategic human resource planning will have to carefully weigh the skill deficiencies and shortages. HRM department will have to devise suitable training and short term programmes to bridge the skill gaps & deficiencies. 4. Corporate downsizing Whenever an organization attempts to delayer, it is attempting to create greater efficiency. The premise of downsizing is to reduce the number of workers employed by the organization. HRM department has a very important role to play in downsizing. HRM people must ensure that proper communication must take place during this time. They must minimize the negative effects of rumors and ensure that individuals are kept informed with factual data. HRM must also deal with actual layoff. HRM dept is key to the downsizing discussions that have to take place. 5. Continuous improvement programs Continuous improvement programs focus on the long term well being of the organization. It is a process whereby an organization focuses on quality and builds a better foundation to serve its customers. This often involves a company wide initiative to improve quality and productivity. The company changes its operations to focus on the customer and to involve workers in matters affecting them. Companies strive to improve everything that they do, from hiring quality people, to administrative paper processing, to meeting customer needs. Unfortunately, such initiatives are not something that can be easily implemented, nor dictated down through the many levels in an organization. Rather, they are like an organization wide development process and the process must be accepted and supported by top management and driven by collaborative efforts, throughout each segment in the organization. HRM plays an
important role in the implementation of CIP’s. Whenever an organization embarks on any improvement effort, it is introducing change into the organization. At this point Organization development initiatives dominate. Specifically, HRM must prepare individuals for the change. This requires clear and extensive communications of why the change will occur, what is to be expected and what effect it will have on employees.
6. Reengineering work processes for improved productivity Although continuous improvement initiatives are positive starts in many of our organizations, they typically focus on ongoing incremental change. Such action is intuitively appealing – the constant and permanent search to make things better. Yet many companies function in an environment that is dynamic- facing rapid and constant change. As a result CIP’s may not be in the best interest of the organization. The problem with them is that they may provide a false sense of security. Ongoing incremental change avoids facing up to the possibility that what the organization may really need is radical or quantum change. Such drastic change results in the reengineering of the organization. Reengineering occurs when more than 70% of the work processes in an organization are evaluated and altered. It requires organizational members to rethink what work should be done, how it is to be done and how to best implement these decisions. Reengineering changes how organizations do their business and directly affects the employees. Reengineering may leave certain employees frustrated and angry and unsure of what to expect. Accordingly HRM must have mechanisms in place for employees to get appropriate direction of what to do and what to expect as well as assistance in dealing with the conflict that may permeate the organization. For reengineering to generate its benefits HRM needs to offer skill training to its employees. Whether it’s a new process, a technology enhancement, working in teams, having more decision making authority, or the like , employees would need new skills as a result of the reengineering process. 8. Contingent workforce
A very substantial part of the modern day workforce are the contingent workers. Contingent workers are individuals who are typically hired for shorter periods of time. They perform specific tasks that often require special job skills and are employed when an organization is experiencing significant deviations in its workflow. When an organization makes its strategic decision to employ a sizable portion of its workforce from the contingency ranks, several HRM issues come to the forefront. These include being able to have these virtual employees available when needed, providing scheduling options that meet their needs and making decisions about whether or not benefits will be offered to the contingent work force. No organization can make the transition to a contingent workforce without sufficient planning. As such, when these strategic decisions are being made, HRM must be an active partner in these discussions. After all its HRM department’s responsibility to locate and bring into the organization these temporary workers. As temporary workers are brought in, HRM will also have the responsibility of quickly adapting them to the organization. HRM will also have to give some thought to how it will attract quality temporaries. 9. Decentralized work sites Work sites are getting more and more decentralized. Telecommuting capabilities that exist today have made it possible for the employees to be located anywhere on the globe. With this potential, the employers no longer have to consider locating a business near its work force. Telecommuting also offers an opportunity for a business tin a high cost area to have its work done in an area where lower wages prevail. Decentralized work sites also offer opportunities that may meet the needs of the diversified workforce. Those who have family responsibilities like child care, or those who have disabilities may prefer to work in their homes rather than travel to the organization’s facility. For HRM, decentralized work sites present a challenge. Much of that challenge revolves around training managers in how to establish and ensure appropriate work quality and on-time completion. Work at home may also require HRM to rethink its compensation policy. Will it pay by the hour, on a salary basis, or by the job performed. Also, because employees in decentralized work sites are full time employees of the organization as opposed to contingent workers, it will be organization’s responsibility to ensure health and safety of the decentralized work force.
10. Employee involvement By and large for today’s organization’s to be successful, there are a number of employee involvement concepts that appear to be accepted. These are delegation, participative management, work teams, goal setting, employee training and empowering of employees. HRM has a significant role to play in employee involvement. What is needed is demonstrated leadership as well as supportive management. Employees need to be trained and that’s where human resource management has a significant role to play. Employees expected to delegate, to have decisions participatively handled, to work in teams, or to set goals cannot do so unless they know and understand what it is that they are to do. Empowering employees requires extensive training in all aspects of the job. Workers may need to understand how new job design processes. They may need training in interpersonal skills to make participative and work teams function properly. LECTURE 12 – 15 : INVESTMENT PERSPECTIVE OF HR : WHY SHOULD ORGANIZATIONS INVEST IN HR ? The answer lies in the contribution of high performance work practices. Many studies have shown the substantial economic benefits of adopting high-commitment or high-performance work practices in contrast to conventional ‘scientific’ management typical of ‘modernist’ organizations. Often described as ‘Japanese” management practices, the case for implementing such approaches is strong. The “assembly plants which had adopted flexible or lean manufacturing methods and associated employment-relation practices far outperformed others using mass production methods. These high commitment work practices are characterized by • Suggestion schemes, Quality Circles, Problem-solving groups or other forms of employee participation in idea generation • Employee participation in decision making • Freedom of expression • Extensive teamwork including self-managing teams • Reformulation of work to make best use of upgraded skills.
Participation and involvement means that power shifts from middle managers to further down the organizational hierarchy – those closest to the customer or the production process. Companies operating such approaches include Levi Strauss, Motorola and Honeywell. What is common about high performing companies in their agenda to create relationships with employees which support their business objectives. Employee relations are therefore a priority and ‘to push the execution of employee relations policies down to the lowest level possible, compatible with t he organization’s overall values.’ Corporate values are most clearly visible in reward policies which are sometimes used to instill specific values. Profit-related pay and share ownership are obvious manifestations of value statements about the worth of the people to the organization. Similarly, formal communication transmit values, through usually more is understood by behavior of the people conveying the message then by the words used. Despite the evidence from the organizations which practice Total Quality that these practices work, diffusion seems to be slow. The main barrier appears to be that traditionally the focus of management has been on the financial and strategic aspects of the business, rather than on employee relations. Since high-commitment work practices require major up-front investments, such as in training and higher rates of pay, a willingness to take risk that these measures will pay off is required; and many management teams are risk averse. Political and power barriers can get in the way of implementing high-commitment work practices. How can HR help to implement high performance work practices? I By creating a culture which is supportive of high performance High performances does not occur in vacuum. The organization’s culture must be conductive to productivity and the quality improvement. II By influencing attitudes HR professionals can be effective in bringing about change through their cross-organizational influence, ability to design structures and processes which support the business strategy and helping to create the culture changes through values and communication which supports new
ways of working. HR can help set up benchmarking visits to organizations which are achieving outstanding results through people. Skillful use of data can stimulate the need for change among III By designing and implementing HR processes which support the business strategy At a practical level to create the conditions for high performance, HR processes such as reward systems need to be aligned to the new ways of working. The following HR processes are typical of ‘vanguard’ companies described by O’toole: Highly selective recruitment Extensive training and skill development Contingent or performance-related pay , at high rates Employee share ownership Benefits tailored to individual needs Providing some degree of employment security Sharing information about a firm’ goals and results.
Performance management Managing performances is perhaps the key responsibility of the line managers and an area where a partnership between line and HR can be most beneficial. Hr can help managers to understand how to define roles in the light of business drivers and how to identify the capabilities required to do the job. The key performance indicators for each role should derive from business drivers and are then built into role processes. This makes each job role responsive to the changing business environment. The four key elements of performance management are: A common understanding of the organizations goals Shared expectations of how individuals can contribute Employee with the skill and ability to meet expectations
Individuals who are fully committed to the aims of the organization In managing performances mangers should ensure that the employees are appropriately focused into roles, developed and managed. Job fit and job design – what role can HR play? HR can develop assessment processes to ensure that the ‘right’ people are selected for roles. HR can work with the line to develop self-assessment process. The pace of change is so fast that job description, which create boundaries, are inappropriate. Important responsibilities fall between the gaps and the most job descriptions are not current for more than few months. What is needed is a broad role description, with some ‘fuzzy’ boundaries to allow for growth. Dealing with poor performance In some organizations, poor performance is handled by simply passing on the underperformer to another department. HR needs to be able to support managers in understanding how they can achieve high standards with slim resources. HR can provide valuable training and other resources to ensure that managers have the skills to coach and develop other people, as well as appraise performance. Designing effective appraisal and development processes Appraisal requires excellent interview and counseling skills if the process is to be motivating for those involved. It relies on managers and employees having a relationship in which discussing performance is not seen as a burden or a threat. Usually appraisal are taken only as an administrative tool, thus there is no link between personal development and business strategy. HR can help by designing processes which are user friendly and effective like, 360° feedback. Helping line managers to set appropriate measures
Success criteria should be such that makes a positive difference to the organization. While measure undoubtedly send strong symbolic messages about what is valued, the question of what is being measured and therefore considered important is increasingly be called into question. Targets need to be set for the deliverables which are required but not at the expense of how the deliverables are to be achieved. If measures are set around ‘soft’ targets such as behavior, care must be taken that they are taken seriously and also understood well. Reward Strategies Since 1990’s the dynamic link between performance and reward has been a topic of debate. The need of flexibility and cost effectiveness has lead to organizational restructuring of various kinds; including flatter structures with their focus on teamwork, broader roles and nontraditional work arrangements. Implementing a flatter structure is meaningless unless there is a degree of consistency between what is expected of employees in terms of working practices and systems, processes and the resources needed to do the job. All human resource systems especially pay; need to reinforce the forms of skilled performance required of individuals. However most of the companies believe in following the preferred model of paying market rates alongside schemes that recognize individual short-term performance but not long term development. This is among the most challenging responsibility of human resource specialist, as there are many factors to be taken into account before revising a compensation system to make it reflect the diverse aspects of behavior, skills and experience which lead to the sort of performance organization requires. Many organizations are experimenting with more flexible packages which include elements of variable pay, linked to job performance, competence skill development and desired team and leadership behavior. The symbolic power of reward systems Reward schemes are required to meet both the organizational need of managing its salary bill, along side ensuring that it is getting good performance from its employees as well as the employee is been appropriately recompensed for their efforts. Reward schemes carry enormous
symbolic significance for employees, as they are the powerful means of teaching employees what is actually valued in the organization, as well as what is not. As such they have a greater impact on employee attitudes and behavior than rhetoric or values statements which encourage, team work. In theory, reward schemes are designed to be motivating, offering appropriate incentives for, and recognition of, desired performance. Whether schemes which focus exclusively on the financial aspects of reward achieves this aim is open to debate. The need to revise reward strategies In an attempt to move towards the performance culture, many organizations have introduced pay schemes which have intended to reflected performance in the job more than the job grade itself. In these changing times, reward schemes quickly becomes sources of discontent. In flatter structures in particular, there is often considerable pressure for reward system to be revised. However, in traditional hierarchical structure, being promoted was the only way of gaining status as well as earning more money or breaking through the ceiling for a grade. In some organizations, eligibility for promotion was based on age and experience rather than performance. In flatter structure where promotion is most unlikely, thus pay is obviously performance based. There’s no perfect pay system, thus a good system should be customized and tailored as per the need and the objective, rather than adopting any off-the shelf solution. Performance-related pay Incentive schemes and performance-related pay continues to provoke debate. However some researches propagate the ineffectiveness of performance-based reward, recognition and incentive systems on the following grounds: There is no data to show long term benefits They setup internal competition Reward systems undermine teamwork and cooperation They often reward those who are lucky and pass by those who are unlucky
They create cynic and losers While devising such schemes care should be taken about their responsiveness to the business drivers, the changing technology, the new skills needed and the fact in a new environment, people need to perform on different parameters. In response to these business drivers some basic questions need to be answered: • What, for instance, are t he critical roles, task, skills, which should be rewarded? • What are the new working practices that t he organization wishes to encourage? • Will team working be more critical to achieving business goals than individual performances? • Is having one system the only way of thinking about the revised system? Many organizations want people to be keen and willing to take on broader responsibilities, learn new skills and develop wider competencies. In addition, technology is bringing about a more fundamental change, switching the nature of the way work is carried out from directive tasks to process-driven activities. In some organizations only outputs are assessed for bonus purposes while in others inputs are also taken into account. Typically, the new areas of providing incentives include ‘soft’ areas such as making creative suggestions, receiving positive feedback from customers, team working and demonstrating leadership. To support this approach there is usually an emphasis on competencies and various feedback mechanisms are used. Other trends…… I Competence-based pay (CBP) Many organizations are experimenting with the competence-based pay (CBP), also known as knowledge- or skill0based pay which takes the notion of performance-related pay in a particular direction. CBP- works on the basis of rewarding the skills an individual possesses and actually uses. The downside of such schemes of such schemes
That they tend to be very complex. The emphasis on individual competence can lead to a failure to reflect sought after organizational business goals such as team working and quality.
II Team-based pay It provides financial rewards to individual employees working within a formally established team. Payments are linked to team performances or the achievement of agreed team objectives. One of the drawback is that every scheme is unique, it’s not possible to adopt some broad recommendations from other organizations, nor are such schemes easy to design or manage. For effective success of such a scheme it necessary that team stands alone with the agreed targets and standards, have autonomy, are composed of people whose work is interdependent, are stable, are well established and make good use of complimentary skills. The three basic elements of a team-based reward package (assuming that the basic pay is right) are: 1. The individual element, the basic salary but varied in relation to performance or skills/competence. 2. A team element related to the achievement of team targets. 3. An organization element related to the business performance measured as a profit, or added value. According to Danny Chestennan, corporate development advisor at Kent County Council, ‘individuals should be rewarded for their contribution to teams, and the teams for the way they develop individuals’.
III Flexible benefits Given the way the work environment is changing, continuing to offer benefits that are based on the ‘job-for-life’ assumption is unrealistic. The important thing is to find out how people perceive their benefits and whether these are valued appropriate to both the company and the employee needs. Items in this scheme include pensions, healthcare, childcare vouchers, annual
leave, life cover and dental insurance for employees and their partners. Further emphasize should be there to ensure proper communication of these schemes by HR team.
How do people want to be rewarded? The latest rewards techniques followed are as follows: Profit (gain) sharing Flexible benefit Bonuses payable Bonuses payable in terms of extra leaves rather than pay Bonuses payable towards prestigious qualification Long term incentives Deferred incentives Extending private health schemes to all employees and their families Longer holidays Sponsored holidays ‘Free” family holiday in company owned cottages Enhanced early retirement
Research suggests that intrinsic motivators such as the chance to do something worthwhile, to have a development stretch, to increase job satisfaction are all as important as the financial package and represent ‘psychological’ rewards. IV Recognition In many organizations the scope for modifying the reward system may appear limited. Recognition schemes take on a special significance since they are a symbolic way of reinforcing the ‘new’ behaviors and the performance needed in the organization.
LECTURE 16 –18 : INVESTMENT IN TRAINING AND DEVELOPMENT Strategies for Training & Developing People
The workplace is being radically reshaped in a number of ways. People are now expected to have a wide range of skills in areas such as customer relations, business awareness and leadership. The impact of technology on people’s jobs is becoming ever more apparent, leading to a growing importance attached to the soft skills as well as the ‘hard’. Peter Cochrane, head of Research for BT and a well-known futurologist, suggests that ‘the future belongs to highly skilled professionals working long hours on short contracts who won’t have time for the daily life, which will create opportunities for others.’ In this period of rapid change, the need for employees to continuously update their skills, and develop new ones, has never been greater. Paradoxically, the pace of change and the demanding workloads of most employees act as a deterrent to conscious development. Development strategies need to take into account the reality of most people’s working lives and the fact that conventional training is only one way in which people can develop. Development solutions can take many forms and strategies should ideally be as innovative as employees are now required to be. In creating a Development strategies, it is important as ever to start with where the business is going and what that suggests in terms of the skills which will be needed. The Development strategies should be guided by a vision and set of values. What is the philosophy which will underpin development – do want people to be self sufficient or do u see development as a partnership between the individual and th4e organization. Abroad philosophy can be communicated to employees as it provides the rationale for the choice of elements in the strategy The question which Development strategies need to answer is how do we ensure that people are developed to their full potential and maximum effectiveness?
Development needs to be focused on areas which are relevant to the individual and the organization. One employee for instance might need a rapid injection of job related skills due to a change in technology. Another may have reached the stage in his or her career when a Development stretch, such as major new responsibility or an MBA programme might provide, is required. While a Development strategy should be sufficiently flexible that it can adapt to individual needs, organizational priorities may take precedence. This is where having a guiding framework and criteria for decision making can be helpful. In any Development strategy there are likely to be three areas of focus: • • • Organizational level – where corporate requirements such as induction, quality improvements, leadership, customer care and culture change programmes are addressed Departmental business unit level – where job related training and development is likely to take place Individual level – where people are usually motivated to close the gap between there current and desired capabilities It follows then that to ensure an optimum return on the time and other resources in development that those activities are well targeted. Making a difference can be measured at a number of levels. Donald Kirkpatrick’s evaluations framework suggests four levels – 1. Reactions - what do participants think about the activity at the time? 2. Learning how have skills, knowledge or attitudes improved as a result of the activity? 3. Behavior – how does participants changed behaviors affect their constituents example their work group? 4. Results – how do these improved behaviors, skills and knowledge translate into bottom line impact?
One way of finding out what is needed to carryout some form of development needs analysis based on the existing work force there are many ways of doing this. Which includes surveys, using existing data such as appraisal information, sampling of specific groups, bench marking
with “world class” organization to identify obvious gaps. The analysis should provide answers to the questions: • • • • • • What is needed and why? Where is this needed? By whom? How will this best be provided? How m much will this cost? What will the expected return look like?
Increasingly hard measures of the impact of development activities are required. Kirkpatrick suggests the following guidelines to implementation when trying to assess the impact of the training on business results: • • • • • • Use a control group Allow enough time for results to be achieved Measure both before and after training Repeat the ,measurement at appropriate time Consider the cost of evaluation versus the potential benefit Be satisfied with the evidence if absolute proof isn’t possible to attain
Marilyn Mc Dougall and Angela Mulvie carried out a study of how companies measure the impact of HRM to bottom line. They found that many organizations make access to management knowledge and skills available on a general basis to employees as a part of a philosophy of continuous learning participants are therefore not expected to produce improved bottom line results
PRIORITISING DEVELOPMENT NEEDS USING COMPETENCIES
The need to ensure that training and other forms of development are tailored to the business requirements as well as to those of individuals evident in the wide spread use of competency based development process. These should ensure that Development opportunities are targeted
to meet specific objectives for the relevant individuals. Some organizations are offering managers 360 degree feedback based on a range of competencies. Competencies can be used to develop self assessment questionnaires and other feedback processes to ensure that individual needs are understood. Ensuring that development opportunities are appropriately targeted may prove more difficult. It is useful to identify short list of priority areas of management Development for the short, medium and long term. In the medium term there may be significant merits in standardizing role description using competencies to define the skilled component of each role. In the short term, management Development effort may perhaps produce best effect when applied to specific business objectives and particular groups or individuals according to relevant criteria such as: Business needs • The current short to medium term business strategy. If the current main business priority is maintaining quality standard it may seem inappropriate to put effort into change management and leadership. • The biggest obstacle in terms of management skills or behavior to achieving the overall business goals, i.e. does the lack of certain competencies prevent the organization from maximizing opportunities or actually cause operating problems? • • • The specific priorities of different business groups What managers would like to develop Cultural priorities
Building to strengths Focusing Development on areas which people consider strengths may seem contradictory. However there is reasonable amount of research evidence to suggest that people are motivated to even higher levels of performance when they are working on areas in which they feel they are effective.
Prioritizing resource allocation according to different development needs
How do the strengths and development needs of managers, high fliers and directors differ? Roffey Park has carried out research into the effects of the changing workplace or employees for a number of years. Two surveys carried out in 1998 highlight the needs employees perceive with regard to the skills required to do their jobs. One survey, the
Management Agenda was completed by a cross-sector population of managers mainly based in UK. The sample was a good mix of juniors, middle and senior managers as well as people who were running their own companies. The other survey was a focused look at the needs of high flyers in 400 organizations. The survey asked both groups about their current skills and strengths. In both surveys, the information supplied was a self assessment and may be viewed differently by people reporting to the individuals surveyed. The top skills of the ‘Agenda’ group reflected the broadly ‘people management’ aspects of their role and were as follows: • • • • • • • • • Interpersonal Communication Flexibility People management Organization/planning Analytical Motivational Leadership Coaching
The high flyers had a similar range of skills and strengths but there were some different priorities in terms of job focus. For nearly half of this group, developing strategy is their key priority with other responsibilities for managing a team, building and maintaining relationships with clients and managing the financial side of the business. These priorities reflect the business focus and direction setting so often associated with high flyers. Similarly, the emphasis given to managing a team and managing relationships with clients suggests that people related activities are important. However, the high flyer group as a whole placed little priority on issues relating to customer satisfaction and quality management or training and development. Not surprisingly, the current skills and strengths of the high flyers reflected their priorities to a large extent as follows: • • • Communication Managing people Strategic thinking
• • • • •
Interpersonal Business Financial Political Influencing
The survey asked both groups what they believed were the skills they needed to develop to equip them for their current role (i.e. short term). The agenda group’s needs were as follows: • • • • • • • • Political/influencing skills Strategic thinking skills IT skills Financial Entrepreneurial Leadership Business Change management
This group appears to be mainly in implementation roles, with an emphasis on raising or maintaining quality. Ideally, these managers should have opportunities to improve processes across their organization. Without making this overly complex, senior managers can improve the efficiency of services while developing themselves at the same time. They may need help in project management skills, including dealing with third parties s work is increasingly put out to tender. The art of managing a flexible workforce is somewhat more challenging than managing a directly managed staff.
Development needs of high flyers
The skills people felt would equip them for future success were diverse. The main areas were as follows: • • • • • Business Political/influencing Managing people Communication Leadership
Interestingly rather at odds with current management trends, this group does not see the ability to coach and develop others as crucial to future success. This may reflect the pragmatic reality that in many organizations promotion to senior positions has not depended on a manager being an effective ‘people person’. However as many organizations are attempting to integrate culture change objectives with succession planning, this may change. A number of the organizations are now screening candidates for senior roles on the basis of how they demonstrate leadership behaviors. Supporting manager’s development 1. Creating a self-development culture Development should be seen as primarily the individual’s responsibility but encouraged and supported by the organization. A newsletter which regularly focuses on development achievements will convey the message that development is taken seriously, especially when directors contribute. Similarly, where people set themselves development targets they should be encouraged to identify the organizational benefits (including bottom line) of what they are planning to do. That way, people’s development can be more clearly understood and celebrated in terms of its contribution to organizational effectiveness. In the medium term, reward systems should be enhanced and reflect people development. Managers should be rewarded on the achievement of people development targets and individuals should ideally be offered a small bonus or a slightly higher salary if their improved skills enhance their contribution. The appraisal scheme can be supplemented, if this has not yet happened, with a development planning process. This again calls upon line managers to be willing and able to hold development discussions with individuals. 2. Enabling development through competencies People should be encouraged to move jobs around the organization, acquiring different forms of experience. Competencies can be helpful in facilitating this process in that job requirements can be defined in ways which enable people to undertake a realistic self-assessment. Job profiles can be updated and specific technical competencies defined. This way, a data bank of people requiring specific forms of development can be matched against available options. There may also be opportunities for job swaps and secondments if resourcing is a problem. The increased mobility of staff can also be supported by greater awareness of the roles of different
business groups. This can be encouraged by briefings hosted by different business groups at their workplace.
Methods of learning on the job
1. On the job It seems that most senior managers learn best by experience. On the job learning is therefore likely to be the primary source of development. Given the importance of this form of learning, it is essential that managers are able to support people with their development as well as their current performance. 2. Training Training can be helpful for both awareness raising and skills development. There are clear benefits, for instance, in raising senior managers’ awareness of the strategic issues for their organization through briefings and networks. The majority of managers, however, consider that most of their development took place on the job, or outside work. 3. Mentoring and coaching In many organizations, tools are now provided to encourage self development, including the use of development centers and resource learning centers. Many organizations such as British-American tobacco, have trained managers in coaching skills and the trend towards the ‘line manager as developer’ is well established. In some companies, managers’ ability to help others to develop is now taken into account when bonuses are being allocated. Learning groups are increasingly being used in a number of organizations such as ICL and the former Glaxo-Wellcome. These can enable individual needs to be met in work context. Some organizations are introducing peer mentoring to address both organizational needs for teamwork and greater collaboration and individual needs for support. Peer mentoring involves two, three or more individuals agreeing to have development relationship with one another. This is primarily a development relationship with the clear purpose of supporting individuals to achieve their job objectives. HR can help such relationships to be established through creating a mechanism whereby peers can identify likely peer ‘resources’. Often this is through the use of a database on which information is stored about people who have specific expertise and are willing to act as peer mentors. These can be matched against people who express specific needs.
4. Learning opportunities using computers Many pundits predict a huge growth in on-line learning in next few years. This is driven by shortage of time to attend training and the increasingly global spread of organizations which make training solutions costly. Research by the Chartered Institute of Personnel and Development (1999) found that only one quarter of organizations used the internet or
intranet for training and development, but forecast that there would be a 70 percent increase in the early years of the millennium. Similarly, CD-ROM usage is expected to grow by 60% as per the respondents in the CIPD survey.
Development is a process of enhancing an individual’s present and future effectiveness. In the present case, we are viewing effectiveness in the context of the employee’s career. And by career we mean, the individually perceived sequence of attitudes and behaviors associated with work-related experiences over the space of person’s life. Thus development in the career entails changing both perceptions and behavior (or skills). More specifically, the targets of development are the four outcomes that measure career effectiveness: performance, attitudes, identity and adaptability. These outcomes can be broken down by time-frame and locus of concern, as shown in the following figure: Performance and attitudes focus on the short term: attainment of present work goals and present feelings about the career, such as involvement commitment and conflict. Adaptability is the extent to which the person is preparing to meet future career demands. Identity is a measure of the congruence of integration of the person’s self-perceptions overtime (i.e., a measure of how the person sees the parts of the career fitting together or “making sense”). Any activity that enhances one or more of these four career outcomes constitutes development. Training, coaching, increased effort and self-improvement to increase job performance are development. Socialization, job experiences, counseling, peer interactions and other activities that alter or clarify career attitudes are development. Job assignments, education and other learning that broadens the person’s skills and abilities enhances adaptability and thus also development. And finally self-examination, selfassessment, feedback, counseling and other activities that clarify and focus self-identity are also development. Too often, however, organizations define development as working only on the top left-hand corner on short-term, task-related skills. Too seldom are attitudes, adaptability and identity the focus of plans for development.
In addition to considering the four career outcomes as goals of developmental activities, we can also examine various strategies for attaining these goals. In their review of organizational training and development processes, Wexley and Latham propose certain basic developmental strategies that organizations use. The first strategy is cognitive and is conceived with altering thoughts and ideas. The second is behavioral, entailing the attempt to change behavior directly. And the third is environmental and consists of interventions aimed at immediate work environment of the individual. If we combine the career goals and these three basic strategies, we obtain a matrix of possible combinations of development strategies aimed at particular career outcomes, as shown in the table. (Since the performance category is so important, it has been subdivided into technical, interpersonal and conceptual skills.) The specific activities listed are not meant to be exhaustive and some cells may represent somewhat incompatible combinations (e.g. cognitive approaches to developing interpersonal skills). Furthermore, several activities are found in more than one cell, as a given activity can produce multiple outcomes.
The need for employee at all levels to be involved in ongoing development – of new skills, exposure to new experiences and learning to learn - is apparent. HR can work towards creating a culture in which learning is valued and supported, and where the enhanced skills of the individual are put to good use. In such a development culture the pressure to measure a return on every development activity maybe less strong than in a culture which believes that any offline activity is a cost. Individuals can take responsibility for managing their development. After all, it is in their interest to do so, but the organization can help ‘kickstart’ the process by providing people with the opportunity to understand what to develop and how. Ironically, pressure of work in some cases is so strong on the company ethos so ‘macho’ that people are always prepared to learn, especially through training. Various innovative approaches such as ‘just-in-time’ training, using on-line resources, can help, but sometimes the best form of development is when individual take themselves to a residential training programme and make time to reflect. Senior managers in particular are important role models in both leaning and valuing learning. They set the tone and need to be willing to exercise some old fashioned command and control with regard to development.
Encouraging people to prioritize development, whose returns to the business may not be immediate, over short-term business demands, at least occasionally, may well produce larger returns in the long run.
LECTURE 19 – 22 : NON TRADITIONAL INVESTMENT APPROACHES : INVESTMENT IN DISABLED EMPLOYEES Before we move on to the core of the issue, we must define what disability or being disabled means “Someone who is disabled has an illness, injury or condition that tends to restrict the way they live their life, especially by making it difficult for them to move about.” Thus, the employee, who is working for the organization, will be termed disabled if he/she is suffering from an injury or illness which affects or restricts them from performing their job effectively. There can be two types of disabled employees I. Disabled - while employed : i.e. the person was fit and sound during the start of employment relationship, however, during the tenure of his/her service he turned disable, which can be either: a) On-the-job: This is during the work hours while working at premises. b) Off-the-job: This is not at work premises, but surely after the start of employment relationship. II. Disabled - prior to employment: Here the employer is well aware of the disability yet employ the person for the job.
Disabled – while employed: There can be short- and long-term disability (STD and
LTD).While dealing with such a case the employer must follow the following procedure.
The Interactive Process, whereby through an informal open discussion with the disabled employee, the precise job related limitation imposed by the employee's disability are being realized and how those limitations could be overcome with a reasonable accommodation. Even if the department's ability to accommodate the employee's disability seems doubtful, the department must still conduct a good-faith interactive process. There are four levels of possible accommodation: 1. Job Accommodation: Modification of job duties, job environment and/or work schedule. 2. Modified Work: Lateral transfer into an existing position for which employee is qualified. 3. Transferable Skills: Transfer to "demoted" position or position of lesser terms/conditions ("last resort accommodation."). 4. Alternate Work: However, consideration should be given to his present salary and the distance of the new work place from his residence. Consider the preference of the individual to be accommodated and select and implement the accommodation that is most appropriate for both the employee and the employer. The employer should not accommodate the employee in case: 1. The disabled employee cannot perform the essential functions of the job; and that no reasonable accommodation exists. 2. The person would create an imminent and substantial danger to him/her self or to others by performing the job; and there is no way to remove or reduce the danger. In such a scenario employer may use medical separation and also appoint a rehabilitation counselor for the disabled employee. II Disabled prior to employment: There could be any form of disability namely i) ii) iii) Mental health Physical Disability Learning Disability
which the employer is aware of prior to employment. But still considers their employment as a part of social responsibility, alongside trusting their capability to perform the task fit for them. The trend of employing disabled as well as keeping provisions for employees disabled after employment is gaining momentum which can be due to: i) ii) iii) Realization of social responsibility by employers. Government intervention Trade benefit schemes, tax benefits etc.
Reasons for this change Disability Confident employers will have access to a wider talent pool. Technological developments and increasing use of flexible working mean that organisations are able to create enabling environments where more disabled people can contribute to business success. Engaging with potential employees (disabled)
Attracting talented disabled candidates can be problematic. Experience of leading employers suggests that multiple (project based) recruitment tends to attract more disabled candidates than single-post advertising.
• • •
Employer needs to build a brand which symbolize welcome and fair treatment. Consider offering work experience and internship opportunities to disabled people. Sector based initiatives can help to change people's views of working in a particular industry.
Take for example, in ITES sector companies like Hero Ites, a part of Munjal group, openly mentions the special invitation to disabled in it’s employment advertisement. Similarly there’s a lot of potential to hire these people in the sunrise sectors like banking, software,etc though companies like Satyam, Infosys… have taken initiative yet lot has to be done. Considering high staff turnover and an acute shortage of skilled workforce, qualified technical people who are disabled can be good alternative. Unfortunately when it comes to recruitment, employers tend to look the other way if the job candidate is a person with disability. Top of the charts in the IT job market include vacancies for software developers,
programmers, web designers, database and system administrators, graphic artists and system analysts. But still the percentage of disabled employees is very low. Most employers are reluctant to employ the disabled because of concerns regarding safety regulations, the need to modify premises such as installing ramps, disabled-friendly toilets and extra medical costs. Even if they are employed, the system that is being followed in the organization does not work in their favour. There is, however, concern that some management practices, even those imposed without prejudice on all employees, might have a disparate effect on the health and performance of some disabled employees. With the advancement in technology, the potential of these employees can be enhanced to a higher level. For example, speech device can be used as a tool to support the person who is verbally impaired. Similarly, visually disabled can convey through special computers. Thus we need such things along with training for the disabled employees as well as the normal employees to help them adjust to the changes, and their differently-abled employees. Though, this may seem as an investment but the benefits are far reached and rewarding. Return on investment is far greater considering people with disabilities tend to be appreciative and loyal employees, because they have difficulties finding jobs. Their commitment to work has to do with their self-esteem. This notion of work, as a prideful activity, is something they definitely feel. Cost to keep disabled employee (employed) Employers experience multiple direct and indirect benefits such as retaining qualified employees, considering i) ii) iii) iv) the cost of training the new employee productivity of retained employee is higher cost of accommodation is lower than inducting new employee Employers want to retain valued and qualified employees.
There are lot many industries which have a scope of employing disabled employee. its just the initiative which is required, considering Titan, Tata group which is one of the world's largest timepiece manufacturers started introducing disabled employees to it’s facility since 80’s . "Titan was clear that these people are an intrinsic part of our society and need understanding, support and opportunities, not charity or misplaced compassion," says Mamatha Bhat. Thus, the capable candidates of 18 -24 yrs were adopted and proper measures were taken to get them into main stream, like i) ii) iii) ergonomically designed workspaces training to enhance technical competence non-discriminating policies, effective grievance handling, counseling etc.
With time, Titan has realized that the disabled members of its family are more loyal and far more focused on the job. Despite the physical shortcomings of these employees, productivity and are quality no had longer never been an issue. as Titan's disabled, children merely of a lesser god classified 'differently-abled'.
Thus, such an investment is worth not only for it’s return in terms of loyalty earned. But, employers should consider their responsibility towards the society and help in making these people self dependent and getting them into the main stream. EMPLOYEE ASSISTANCE PROGRAMMES (EAPs) EAPS are used to make professional help available to the employees. Typical EAPS offer assistance to employees in such areas as alcoholism, drug abuse, emotional stress, family problems and financial indebtedness. Although research findings tend to vary, it is believed that EAPs are valuable contributors to both employees and employers. First of all, giving employee assistance is simply the right thing to do from the standpoint of humanity, and there are some cost-benefit arguments in favor of EAPS. Certainly, the resolution of personal problems tends to make the employee a more effective contributor to
employer objectives. That is, money spent on abating alcoholism among the workforce is perceived to be cheaper than money spent on ineffective performance, lost time, illness and death on the part of employees suffering from the disease of alcoholism.
Characteristics of an effective EAP The EAP should be staffed with competent professionals who respond to employee problems with empathy and who know what services are available in the local community. The EAP should be accessible to all employees 24-hours a day, seven days a week. The EAP should be advertised to all employees so that all are aware of the program. The EAP should be available to all employees and their dependents. The EAP must guarantee complete confidentiality. The EAP staff members should be willing to meet at any location where the employee or dependent feels comfortable.
LECTURE 23 – 24 STRATEGY
: IMPORTANCE OF HUMAN RESOURCES TO
The field of Human Resource Management (HRM) has recently seen the human resources that it selects, trains, and retains move from a supportive to a strategic role in organizations. This occurred because in Strategic Management sources of competitive advantage were no longer sought in the external, but in the internal environment of a firm, namely in its resources, particularly its human ones. Accordingly the field of HRM reconsidered its own role, resulting in the emergence of a new distinct discipline termed Strategic Human Resource Management (SHRM). It intended to link HRM with the strategic management process of the organization
A shift in thinking in Strategic Management about the location of sources of competitive advantage has put the spot light on human resources as the strategic resource in a firm. Initially, sources of competitive advantage were sought outside of the firm, i.e. in a superior positioning of a firm in attractive markets and keeping contenders out. In this view, the role of the human resources was one of implementation and support. More recently a new school of thought, called the resource-based view of the firm argued instead that the source of competitive advantage lies within the firm, in unique resources that cannot be imitated by competitors. Because these resources, capabilities, and competencies are dependent on people and in the case of capabilities and competencies located in the minds of people human resources are deemed valuable if not the "the key strategic resource". This shift in Strategic Management has elevated the role of human resources from a supportive to a strategic one In light of this elevated status for human resources in the Strategic Management field, many have reasoned that the HRM function had acquired a new strategic role as well. Bartlett and Ghoshal (2002) explain that rather than being supportive - by focusing on recruiting, training, and taking care of benefits - HRM's role became strategic: building and using human capital to ensure competitive advantage. The notion of the HRM function being strategic is embodied in the distinct field (Dyer, 1985; Dyer and Holder, 1988; Fisher, 1989; Schuler and Jackson, 1987) of Strategic Human Resource Management (SHRM). Rather than being supportive it consists of (1) "linking [HRM] with the strategic management process of the organization," and (2) "emphasizes the coordination or congruence among the various human resource management practices (Wright and McMahan, 298)." In other words, rather than executing strategy formulated by others, it attempts to be involved in the formulation of the strategy. These attempts consist amongst others of (1) use of the label 'strategic,' (2) linking role behaviors to strategy types, (3) linking competency profiles to core competencies, (4) using HR measures to justify performance contribution, (5) adapting strategy tools to encompass the HRM function. Human capital has long been held to be a critical resource in most firms. Human resource management (HRM) is one of the principal mechanisms by which managers integrate the actions of individuals to keep their behavior congruent with the interests of the firm. Business leaders now recognize that the human resource (HR) function has a direct impact on bottom
line results and must be aligned with corporate goals. Both academics and practitioners agree that as the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive advantage. Therefore, effective management of human capital may be the ultimate determinant of organizational performance. Rather than focusing on particular HR practices that are used in isolation, strategic human resource management (SHRM) researchers look more broadly at bundles of HR practices that are implemented in combination. SHRM researchers have established a broader perspective that is oriented toward managing the workforce as a whole since the era of SHRM was ushered decades ago. Since that time, behavioral perspective has emerged as the predominate paradigm for the research (Fisher, 1989; Schuler, 1989; Snell, 1992). According to behavioral perspective, different strategies require different behaviors and different HRM practices to elicit and reinforce those behaviors. This view of the link between strategy and HRM provides a clear explanation for why such management should be linked to strategy. To date, a growing body of empirical evidence supports this perspective. HRM has evolved over the years from a disjointed collection of employment practices. If we are to develop a more parsimonious depiction of the field as a whole, an overarching construct is needed to describe how particular patterns of practice fit together. Control is an important - if sometimes neglected - facet of organizational design. In the past, the construct of control has been used as a lens for combining HRM practices. A control perspective is consistent with the behavioral perspective in many ways; for instance, control systems mold the emergent behavior. Accordingly, this study used the concept of control to integrate HRM practices and place them in the strategic context of firms. Strategies are only a means toward an end. According to contingency theory, a close link exists between business strategy and HRM methods. This theory holds that HRM methods are determined by the type of business strategy a firm follows. It moreover assumes that the companies that closely coordinate their business strategy and HRM practices achieve better performance than the companies that do not. To date, there is an extensive research exploring the links between competitive strategy and HRM strategy. However, one of the areas that is conspicuous by its absence is, based on control perspective, the links between HRM control
and business strategy, and their effects on performance. Further effort is needed to direct toward closing the gap. The focus in this study is on the performance effects of HRM control and interaction of business strategy with HRM control. As such, this research contributes to knowledge about the effects of HRM control on firm performance and, importantly, illuminates how HRM control moderates the relationship between business strategy and firm performance.
LECTURE 25 – 27 : BUSINESS STRATEGY : THEORETICAL OVERVIEW Business strategy determines the direction in which the enterprise is going within its environment in order to achieve sustainable competitive advantage. Strategy is a declaration of intent, which is concerned, with the long-term allocation of significant company resources. It is a means of addressing critical issues or success factors at level of the business as a whole or an aspect of it. Thus, strategic decisions aim to make a major and long-term impact on the behavior of the organization. Business objectives, plans, financial projections, target for shareholder value or key result areas (KRAs) are the outcomes or expressions of strategy. LEVELS OF BUSINESS STRATEGY ♦ Corporate level Strategy is likely to be concerned in general with the composition and performance of the portfolio of businesses that make up a company. In particular, corporate strategy is concerned with: The company’s mission
The cohesiveness of that portfolio Mergers, acquisitions and divestment The ethos of how to manage and control the business. ♦ Business unit strategy Strategy is concerned mainly with answering the question ‘where and how are we going to compete in order to earn sustained high returns?’ This means making decisions on the business can develop superior effectiveness, a superior cost position and superior quality, coupled with the ability to meet customer’s real needs. It puts corporate strategy into effect at the competitive level and refers to definition of the business, growth and profitability objectives, product/market scope, marketing approach and competitive position.
DEVELOPMENT OF BUSINESS STRATEGY It is generally assumed that strategy formulation is an analytical, systematic and rigorous process. But this is not necessarily so. According to Mintzberg, strategy formulation is not necessarily a rational and continuous process. He believes that, rather than being consciously and systematically developed, strategy reorientation happen in brief quantum leaps. Strategies are not always deliberate. In theory, strategy is a systematic process. ‘First we think, then we act. We formulate then we implement’ In practice, ‘a realized strategy can emerge in response to an evolving situation. Analysis of the concept of business strategy as a basis for HR strategy has to take into account not only the different levels and styles of strategy but also of the diversity of ways in which strategy is formed.
ARTICULATING BUSINESS STRATEGIES Business strategies are not necessarily expressed in writing, although there are advantages in doing so from the point of view of having a defined point of view of having a defined point of reference for planning and control purposes. Strategic management and control companies are more likely to prepare formal, long- term strategic plans. Financial control companies will rely on one-year budgets with interim reforecast as required. A business unit may have a formal strategy but it is more likely (especially in the case of a financial control company) to have an unwritten strategic orientation which is based on an assessment of future market opportunities.
STRATEGIC MANAGEMENT It involves following considerations: Mission and strategy Formal structure Human resource system (HRS) Organizations exist to accomplish some mission or set of objectives. Change in the mission or objectives are more of incremental in nature as the organization adapts to changing customer tastes or competitive threats. To accomplish its mission or objectives, the firm must decide what optimal structure is needed to carry out its objectives. Once the nature of the structure is decided upon, it must attract and retain sufficient number of people to carry out the tasks needed to see that its objectives or strategies are effectively implemented.
DEVELOPING HR STRATEGY, STRATEGY DRIVEN ROLE BEHAVIOURS AND PRACTICES HR strategy can be used as an integrating force, linking various strands together into an overall strategic thrust which complements and is consistent with the overall business strategy. In some circumstances this may be highly desirable; for example, when Book club Associates, a leading mail order book club, embarked on a programme of sustained growth and diversification, it developed an integrated HR strategy aimed at achieving significant cultural change in four main areas: communications, involvement, performance management, and reward management. The links between each aspect of this strategy were emphasized and new communication channels were developed and used to ensure that everyone knew and could discuss the implications of the business strategy. The key requirements of HR strategy are that it should be: Justified from the business strategy, i.e. in alignment with the business strategy Imaginative and innovative Clear and actionable Selective, focusing on priorities Flexible
Strategic HR thinking may indeed concentrate on one area such as resourcing or performance management, although it would be important to ensure that the implications of change in one direction are considered for other aspects of human resource management. For example, the development of a performance management system raises questions about career development, training and performance related pay. KEY ISSUES Of all the requirements of HR strategy referred to above, perhaps the most critical is that HR strategy should be justified by business strategy. Without this, top management and line
managers as of little relevance to the real priorities of the business will see HR strategies, and the credibility of the HR function will be in doubt. It is therefore; instructive to consider the views of senior executives on how they rank HR issues among the key business issues that their organizations face. Organizing and managing HR strategy development Effective integration of HR strategy is best achieved if the personnel director is closely involved at top management level with the formulation of business strategy. One would expect the head of the personnel function to be a member of an executive and management committee, or at least to have access to the CEO, in order to obtain information about the direction business strategy is taking and make contributions at an early stage on any HR Implications. HR strategies should be based on information concerning:
The business strategy and plan The external environment, with particular reference to the supply of people (demographics) and the availability of skills The internal environment, including the implications of product development and new technology, the requirement for increased flexibility and the need for new skills and multiskilling HR issues related to productivity, motivation, communications, commitment, involvement, employee relations etc.
HR strategy areas There are specific aspects of HR strategy, which, collectively, will form the building blocks of overall HR strategy development. No two organizations will face quite the same issues, and each will address in its own way those issues that it does face First however, a human resource management strategy should provide answers to three fundamental questions, which relate to all the specific aspects discussed below:
1. How are we going to acquire and retain the number and quality of people required to meet the forecast needs of the organization? 2. How are we going to ensure that we have a well-motivated and fully committed workforce? 3. What actions will be needed to train, develop, and fit people for greater responsibility and responsiveness to change and the resulting demands for different skills and abilities? ACQUISITION AND RETENTION STRATEGIES A starting point in the development of a human resource strategy is often the identification of the long-term human resource requirements of the organization. These provide the basis for more detailed human resource planning processes. The aim of these strategies should be to ensure, On the one hand, that the achievement of corporate objectives will not be inhibited by human resource shortages or inefficiencies and, or other, that impending surpluses can be dealt with in good time with the minimum individual hardship and disruption to employee relations. At this stage broad questions need to be answered concerning: Human resource requirements: - How many employees are needed? – Over what period? – What kind of abilities and skills will be required? Availability: What is available now inside the company? What would be made available from inside and outside the company?
Retention What is the company’s experience in retaining staff? What are the problems and how can they be overcome?
Human resource utilization:
How well are human resources used in the company? What is the scope for increasing productivity?
MOTIVATION STRATEGY Motivation strategy should aim to increase the effective contribution of members of the organization in achieving its objectives. Motivation strategy will refer to the performance management and reward systems, and in particular to the type and scale of financial incentives which are to be provided. But it will also be considered with other processes which should yield favorable attitudes, including job design, participation, joint objective setting, career development, and nay other processes relating to the individual’s need to achieve and maintain a sense of personal worth and importance. Motivation is also affected by the quality of leadership in an organization: therefore the selection, training, and development of effective leaders should be part of the strategy. HUMAN RESOURCE DEVELOPMENT AND TRAINING STRATEGIES A human resource development strategy is concerned with the longer-term programmes needed by an organization to improve operational performance at all levels, in accordance with the additional demands which the business strategy will place on people in future. The strategy will provide continuous development processes linked closely with the programmes designed for the organization as a whole to implement its product, technology and market development strategies. The associated training strategy will be concerned particularly with the development of new or existing competencies and with multi-skilling. For example, it will take account of the introduction of new technology and of increased demands for `knowledge workers’ and for `systems technicians` on production lines. The training strategy may be linked to the reward strategy by the development of skills or competency- based payment systems. ORGANIZATION DEVELOPMENT STRATEGY
The aim of on organization should be to ensure that an effective organization is maintained which will respond appropriately to changes in its internal and external environment and make the best use of the individual and collective capacities of its members. The main strategic areas in which organization development takes place are: • The implications of change and the actions required to ensure that the organization will continue to function effectively when subjected to pressures resulting from change • • • • • Changes in organization structure as well as values and culture development programmes, and changes in organization climate and management style The proper integration of increasingly diversified activities which are likely to result from change Team development The management of conflict Work on planning and objective-setting processes for individuals and teams
How can HR strategies be fully aligned? In setting business strategies, line managers need to be fully in tune with what their customers say they want from the organization. The same is true of HR strategies, except that such strategies may have to be attuned to the needs of each organizational unit. HR and line managers need to think through the kind of culture needed in each unit if the people in that unit are able to deliver the business strategy. What makes a difference to the delivery of business strategy is people’s behaviors. So, for instance, all the ‘customer focus’ training in the world is of no use if clients perceive that the company’s representative is rude to them over the phone. HR needs to think through the behavioral character desired of employees. This: includes both behaviors, which the company wants to encourage, and dysfunctional behaviors, which the company wishes to stop. HR also needs to think through the HR processes, which are aligned to that behavior. This will include issues such as recruitment, training, resources, location, working environment etc.
Working through these issues with line managers in a systematic way helps line managers to se the link between managing the cultural aspects of the organization and achieving business goals. Major action plans can establish what the HR team needs to do next to make the change happen. These plans need to be developed with the management team and can be both short and long term. Changing the structure, for instance, can be a short-term measure while changing the culture can take several years and may need to be phased. LECTURE 28 – 29 : ALIGNING HR AND BUSINESS STRATEGIES THROUGH HR PLANNING Strategic planning is a key tool for HR. Tony Grundy defines HR strategy as ‘the plans, programmes and intentions to develop the human capability of an organization to meet the future needs of its external and internal environment’. HR strategy may be planned, emergent or some combination of these. Research by Tyson and Witcher as well as Grundy suggests that emergent HR strategy may be damaging by organizational effectiveness. Other research projects also suggest that the more planned and timely the implementation of HR strategies, the more value is perceived to be added to the business. There are many reasons why many HR teams do not take a planned approach. Some HR teams may prefer working in an emergent way and would rather wait until there is a clear business strategy on which to model the HR strategy. This may be a long wait and opportunities for adding value may be missed. Some teams fear criticism of being seen to create their own policy in the absence of business strategy, on the one hand, or being seen to drive business strategy, on the other. The sheer complexity of the links which need to be managed between HR strategy and organizational effectiveness amy mean that the overall focus of the delivery is diffuse and therefore not appreciated. Similarly, periods of ongoing change and active organizational politics can cause the links to be undermined. This may be a question of ownership of the HR’s strategy and where it sits in the organization structure. However, Lam and Schaubroeck’s research suggests that leaders in firms with relatively highly formalized HR planning are more likely to perceive its usefulness compared with those firms
where the Hr strategic objectives are less clear. In strategic HRM, planning needs to go beyond being focused on operations and control.whether a formal or informal approach is used, the important thing is to keep the plan simple. As Hr teams move towards a strategic HRM approach, the need for integration among the different HR practices increases. These clear objectives are than likely to be useful in strategic planning activities, helping the organization, to enhance organizational performance, rather than simply being a means of making the case for more resources. HR planning is critical to the effective development of strategy since it should identify gaps and surpluses in capabilities as well as issues of utilization of talent. Indeed so central is this identification of organizational capability considered by some researchers that they argue for an enhanced role for HR planning in overall strategic palnning. Various researchers have suggested that the most effective links are made when HR strategy as such disappears and is more fully integrated into other resource strategies supporting the operational management process. This would mean that the role of Hr would be to facilitate the development of an organizational strategy, which is owned and developed by line managers. This would probably be issue based and directly linked to the business strategy. Indeed, Grundy argues that the key role of a strategic HRM function is to facilitate Organization and people strategy, together through joint coordination with line management of strategic programmes such as management development and succession planning. The effectiveness of HR planning very much depends on the organizational context. HR planning objectives are likely to be contingent upon different competitive strategies and different organizations will therefore be unlikely to use identical approaches to similar issues. However, unless the objectives are clear, building commitment to the strategy among line managers and employees is difficult. Lam and Schaubroek suggest three different kinds of Hr objectives: Operational: which seek to identify current capabilities and with short term requirements in mind.
Traditional: which attempt to incorporate forecasts about the numbers of employees and their skill types to meet longer-term demands. This type of planning needs to take account of career development, succession planning, external recruitment and appraisal data. It can establish whether it is possible for the organization to achieve its strategic objectives. Strategic: which is where HR planning provides valuable data and is carried out as an integral part of the overall strategic planning process. This involves line managers in developing and evaluating HR practices since this approach recognizes that those who are most knowledgeable about the workforce should be involved in building commitment of the strategy across the organization. Often the main thrust of strategic HR planning is finding ways to establish and maintain core competencies. Typical objectives associated with different areas of HR responsibility includes: Maximum strategic impact Align HR practices with business objectives Conduct development programmes to support strategic changes Carry out job analysis for long-term objectives Improve HR adaptability on changing environment Enhance workforce capability and innovation Coordinate Improve coordination between various HR functions Improve team effectiveness Improve HR project management Develop compensation and benefit programmes Coordinate any potential HR problems
Integrate diverse HR functions and operations Communicate Communicate HR policies inside the organization Improve management acceptance of current HR policies, improve employee involvement and understanding of HR Conduct job analysis for long-term objectives Communicate HR policies outside the company Control Clarify budget and resources availability Manage personnel-related costs Improve HR budget control Improve HR resource procedures and control Review Hr operations procedures Alignment through organization development Corporate strategy usually involves reviewing the business the organization is in, or wants to be in and its relative competitive positioning in the market place. This allows a strategic intent to be developed. A review is then carried out of the human capabilities through which competitive advantage can be achieved, enabling the organization to compete in a distinctive and sustainable way. The decentralized structure has led to a wide range of management practices in different business units and little sharing of good practice across the organization. An organization development team at the center of the organization has the challenge of helping to bring about change as well as creating greater coherence across the organization while not diminishing the autonomy of the business units. This delicate balancing act is achieved by ensuring that the
heads of the different business units are fully involved in developing the OD strategy and can perceive the potential value added by the unit to their own operations. The OD team is aiming to focus its delivery on a few key areas. These include strategy and planning, orgainsation and management culture and values, people and performance. Learning and change will be at the heart of al OD activities and provide inner coherence to the OD strategy. The team consists of experienced OD practitioners who have both internal consultancy and business experience. The OD strategy is as follows:
Our focus is on: Change in organizations and culture Organizations and team effectiveness Leadership and management processes Organization learning and corporate knowledge
Our outputs will be: Involvement in major change initiatives Supporting business management and major functions- developing change skills in the company; Evaluating organization effectiveness
Our methods include: Consultancy and facilitation Project management Education and training Backed up with New management tools and processes Diagnostic audits and surveys Seminars, case studies and information networks Best practice action research
Clear lines of communication exist between the OD team and those responsible for providing training, management and leadership development and succession planning. While at any point in time, the specific focus of the team’s activity within this general remit will be tailored to the needs of a particular business unit, the core thrusts remain the same and have a corporate perspective. The team can then pursue major corporate projects while working within different business units to help them achieve their local OD objectives, such as managing a specific change process. The clarity of outputs means that the team will be able to measure their achievement and gain client feedback which can feed further into the ongoing development of strategy. It could be argued that a coordinated organizational strategy such as this could be the joint staring pint for developing corporate strategy. Aligning the structure of HR with the organizational strategy In recent years, many central HR teams in large organizations have decreased in size. There has been a noticeable shift to consultancy-type roles with many HR responsibilities devolved to the line. Operational HAR roles have been the most endangered with parts of the operation, such as pay and even recruitment outsourced. Many; organizations have experienced problems with quality and the current trend appears to be too take back into the centre the areas of operations which leave HR most exposed if they go wrong. This includes areas such as executive compensation and bonus arrangements. To some extent, these consultancy-type relationships have left HR with less direct power, but where the influence of HR is strong, the function is seen as central. The converse is also true. The most common HR structures appear to concentrate the strategic roles in the corporate centre, leaving operational support to the line being provided through divisional support units. Where such developed support units exist, they sometimes report back to the head of HR, and are therefore clearly marinating a strong professional link, while other units report to the divisional director, maintaining only a dottedline relationship with the head of HR. In some cases, call centers and help desks have been established to ensure that operational HR support of some kind is available to line managers who may not have a regular HR contact. Unisys has established an international on-line service centre which provides solutions to HR issues in a way which meets ‘local’ as well as corporate requirements.
As units devolve, there can be tension which the HR function attempts to resolve in different ways. The centre can come to be seen as increasingly peripheral as most strategic decision making takes place in the business units. This can be particularly challenging when HR attempts to take a corporate perspective on the development of high potential talent, for instance, since business heads can be reluctant to share information with the centre which might cause them to lose a ‘star’ employee to another region.
Empowerment Empowerment has become a cliché and a discredited one at that in some quarters. The main reason according to Barbara Ettore is the myths surrounding it. If empowerment is supposed to be defined as an employee’s ability to solve problems, take decisions based on those decisions, management has encouraged the tint two but has failed to allow the third. Often the real dilemma for executives is whether to trust employees. The management assumption is that workers cannot fully understand the impact of their actions on the organization’s bottom line. This assumption is based on the relative lack of information received by workers which would give them a clear insight into how their actions affect the whole operation, stretching from the business strategy and work processes to customers, shareholders, suppliers, etc. This is where empowerment without alignment with strategy and information is likely to backfire. Yet the benefits of empowerment can outweigh the risks. Empowered orgainsation are more likely than others to respond quickly to ideas and suggestions, enable managers to make their own decisions without having to rely on headquarters and put customers’ needs first. Empowerment needs to be aligned to the strategic aims of the organization so that employees can direct their solutions to real business issues. Typically, employees need to be clear about what the customer wants, the part their own role plays and what shareholders are looking for. Characteristically, in empowered organizations, good ideas are rewarded effectively and authority is appropriately delegated as far down the organization as possible. Systems are a supportive framework rather than a set of constraints and employees work to broad principles rather than rules. Companies like Levi-Strauss, Hewlett-Packard and
Nordstorm are among high-performing orgainsation which practice aligned and informed empowerment. But, as Ettore points out, ‘as with all initiatives, if management is not committed and if HR is not a strategic function, it will fail’. Aligning training and development to business strategy Benchmarking is often used to identify organizations considered to be best in class on particular aspects of their strategy or implementation. Training and development benchmarks often focus in the amount of money invested in T & D activity. These figures vary widely among employees but US surveys during the last decade suggest that a disproportionate expenditure, i.e. those who spend more than 1.5% of their payroll on T & D, is made by just 0.5% of all US employers. These few organizations recognize that having a workforce with high skill levels is a primary source of competitive advantage. In these exemplary organizations, T & D is strongly aligned to the strategic leadership and planning processed of the business. The primary focus of such training is on creating readiness and flexibility through training supervisors, managers and executives since it is these individuals who set the tone for the rest of the orgainsation. Typical of the ‘best practice’ benchmark organization is that they: Create a systematic link between business strategy and the T & D system. T & D targets, are reviewed at least annually to ensure that they are still on track with changing business requirements. T & D executives take a full part in the strategic planning process, ensuring that strategic goals take into account the availability of the talent needed to carry out the goals. Information support systems are also integrated into the strategic planning process.
Links between training and development activity and the business strategy depend very much on whither training is integral part of the HR strategy and whether this is itself fully aligned to business needs. Depending on the type of competitive strategy in use, different analytical links can exist. Strategies geared to the life cycle of the organization need employees and especially management styles to be adopted to changing conditions. Those which focus on competitive
positioning through differentiation are likely to place a greater emphasis on process innovation and specialization of distinctive skills. Similarly, strategies focusing on realizing strategic intent are likely to competency definitions which help ht orgainsation to compete effectively. Research carried out in the UK (Poole and Jenkins, 1996) suggest that core elements in the development of competitive advantage in respondents’ organizations were: • • • • Management development Career development The development of high-potential employees Support for continuous training and retraining
Clearly, human resource development as well as management is an essential plan for building sustainable competitive advantage. Training can help in the creation of a more productive, skilled and adaptable workforce. Strategic alignment through competencies Ensuring alignment relies on excellent performance management so that people are clear what their roles are, what is expected of them and how that might change. A competency framework is a useful way of aligning HR processes to the business strategy. In this section we look at some processes for defining and using competencies. Competencies area often defined as ‘a particular attribute that people have that collectively helps to develop the capability of the individual and the organization’. If you adjust competencies so that they are continually aligned to the business strategy, the likelihood of people’s behavior being in line with what the business needs at any point in time is high. If these are reflected in the performance standards the organization is seeking to achieve, the link between skilled behavior and outputs is evident. They are a means of describing the kinds of behaviors and approaches which should enable the organization to achieve its business objectives and should draw employees’ attention to things
which need to be commonly applied. So, for instance, as organizations require people to work across boundaries, there is a need to clarity on what effectively cross-boundary team working looks like. Defining the competency can b\help those involved become aware of the applications for the way they work. By definition, competencies are temporary and need a review process built in to check that they are still linked with current business strategies. General competencies are a means of ensuring consistency across the orgainsation through the creation of a common language to describe performance. In addition, professional functionally specific technical competencies to make up the typical competence framework. Performance management of the 1990s has focused on activity management. Competencies should be a means of defining where the 20% of effort needs to be put in order to achieve an 80% return. However, if competencies are used mechanistically, or are not ‘owned’ by the people for whom they have been defined, it is unlikely that they will produce the benefits of clarity since they will not be used. There is an increasing awareness that people’s needs must be taken into account if they are to be motivated to carry out activities to a high standard. A competency framework needs to be a means of addressing both organizational requirements for performance and individual needs for development, achievement and recognition. The skills for future success Dave Ulrich suggests that organizational skills springs from capabilities such as speed, responsiveness, agility, learning capacity and employee competence. The kinds of skills which individuals are likely to find useful in changing times seem fairly common to organizations of all sectors. Research has found a remarkable similarity among respondents in recent surveys who recognize the need to develop high-level political influencing skills. This is the ability to make things happen by understanding the informal system, and bringing about change without formal authority. Strategic thinking is needed at all levels, so that people can understand the implications of change and work in partnership with the organization to deliver strategic solutions. IT skills, financial and broader business awareness should enable staff to understand the mechanics of what the organization needs to do as well as take shrewd risks based on informed judgment. Leadership and change management should be core skills for any manager, especially those in senior positions.
Entrepreneurial skills and creative thinking should enable people to find innovative solutions and make things happen. Training may be a part of the answer, but in many cases need to be developed on the job through effective use of mentors, peer coaching, challenging assignments and learning review processes. Competency-based approaches to development may make it possible for people to have learning opportunities in different parts of the organization from areas to which they had access in the past. Helping people to develop skills and employability calls for a strategic approach, with a longer term perspective but firmly rooted in the here and now. Trials of different approaches, well evaluated to assess what works, can deliver results in the short term and avoid the danger of paralysis while officials wit for the way ahead to become clear. Delivering best value and through employees So if change under Best Value is to be managed skillfully, a partnership approach between management and HR is called for. The business strategy for delivering Best Value needs to be clear and the HR strategies which support this must be directly linked to the business intention. Key targets for strategic activity with regard to employees include: • • • • • • Improve communications Clarity career tracks Develop people Provide feedback and recognition Ensure balance Involve people
Most importantly, developing an open, problem-solving climate can not only equip people for learning what is appropriate in the short term but can also provide the basis for ongoing change in the longer term. This involves understanding your current culture, breaking established patterns which are counterproductive, setting new standards and giving people the chance to exercise new skills. In addition, some sacred cows may need to be challenged. New ways of working which are positive and moving in the ‘right’ direction should be stabilized and achievements celebrated. People’s roles should be linked to the business imperative so that
everyone knows where they fit in, and what role they have to play in ensuring successful service delivery which really represents best value. As Davin Ulrich says: The successful organization will be those that are able to quickly turn strategy into action: to manage processes intelligently and efficiently: to maximize employee contribution and commitment; and to create the conditions for seamless change.
LECTURE 30 – 32 : INTEGRATING BUSINESS AND HR STRATEGY Strategic Integration Strategic integration is the process of linking human resource management policies and activities to explicit business strategies. This integrating process will aim to match available human resources to the ever changing requirements if the organization. It will also establish the competencies required at all levels in the organization to ensure that business strategies are implemented and will then take the human resource development initiatives required to provide those competencies. Finally, it will provide the levers required to manage strategic change. A coherent approach The history of personnel management, in fact management generally, over the last two decades is littered with techniques and nostrums such as management by objectives, job enrichment, OD (organization development), systematic training, career planning, job evaluation, merit rating, assessment centres, psychometric tests, performance related pay, performance management, quality circles and competency analysis. These have usually been introduced piecemeal and have too often failed to make any real impact on performance. Each of these techniques can play a part in improving organizational effectiveness but not if used in isolation and without the full backing of top management as something they recognize as being important in helping them to get things done. A coherent approach means linking and, as necessary, coordinating the various techniques available to ensure that added value is obtained from their combined impact. For example, a
performance management system will generate data on development needs, indicate where competency-related training is required, provide the basis for performance related pay, help managers to lead their teams more effectively, clarify the results expected of individuals and teams and assist with career and management succession planning. A coherent approach to human resource management, is however, only possible where the whole top team works together in developing and managing the process. In this situation, the human resource professional acts as an enabler and facilitator, providing ideas, drawing the threads together, and helping his or her colleagues to put the ideas into practice. Change management Human resource strategies should help the organization to move forward in the direction set by business strategies. They do this first, by providing various levers for change through the introduction of integrated resourcing, human resource development, performance and reward management systems and secondly by seeing that change is managed properly. Change management programmes should be managed by the top but their implementation requires the support and involvement of people at every level in the organization. They are sometimes related to abstractions such as participation or culture and are based on the belief that the place to begin is with the knowledge and attitude of individuals. In fact, at Beer, Eisenstat and Spector point out : ‘Individual behaviour is powerfully shaped by the organizational roles that people play. The most effective way to change behaviour, therefore, is to put people into a new organizational context which imposes new roles, responsibilities and relationships on them’. They suggest a six step approach to effective change: 1. Develop commitment to change through joint analysis of business problems. 2. Develop a shared vision of how to organize and manage for competitiveness. 3. Foster consensus for the new vision, competence to enact it, and cohesion to move it along. 4. Spread revitalization all departments without pushing it from the fop, i.e. don’t force the issue, allow departments to find their own way to the new organization. 5. Institutionalize revitalization through formal policies, systems and structures.
6. Monitor and adjust strategies in response to problems in the revitalization process. Flexibility In each area of human resource management it is necessary to develop flexible structures, climates, systems and organizations which enable the organization to respond readily to change. Organizations need to embrace the motto ‘constancy towards ends but flexibility about means’. Greater operational flexibility must, of course, be achieved within a strategic framework which maintains a strong sense of direction, but there is usually plenty of scope within that framework to develop organization structures which are adaptive and receptive to innovation. The thrust towards functional flexibility which can be achieved by one and more of the following approaches: • • Work-based-job related flexibilities concerned with multi-skilling and the removal of demarcation boundaries Contract-based-employee contracts which specify flexibility as a key aspect of terms and conditions and job descriptions which specify outputs but do not attempt to hamper employees by over-rigid descriptions of how they are expected to achieve results • • • Values Peters and Waterman wrote that if they were asked for one all-purpose bit of advice for management, one truth they could distil from all their research on what makes company excellent, it would be: ’Figure out your value system. Decide what the company stands for’. And Selznick emphasized the key role of values in an organization when he wrote: ‘The formation of an institute is marked by the making of value commitments, that is, choices which fix the assumptions of policy makers as to the nature of the enterprise, its distinctive aims, methods and roles. Team-based-the use of project teams, task forces and autonomous work groups Organization-based-the use of contract workers and part-timers Time-based-the use of flexible hours : daily, weekly and annual.
Successful companies are value driven, whether those values direct the beliefs and actions of the chief executive officer or whether, preferably, they permeate the whole organization. Each aspect of human resource management discussed in this book can be enhanced if it is underpinned by a set of values which may refer to such areas as care and consideration for people, care for customers, competitiveness, enterprise, excellence, financial flexibility, growth, innovation, market/customer orientation, performance orientation, productivity, quality, social responsibility and team work. Commitment The effectiveness of any aspect of human resource management depends largely upon the extent to which it will increase commitment, motivation and, ultimately, performance. A strategy for commitment is therefore necessary to support each aspect of the overall human resource strategy. The aims of a commitment strategy will be: • • Identification – Increasing the identification of every member of the organization with the mission, goals and core values of that organization. Mutuality – developing unity of purpose and a shared belief that what is good for the individual is good for the organization and vice versa. Mutuality therefore involves integrating the needs of these who work in the organization with the needs of the organization. • Individual creativity and energy – Unleashing the latent creativity and energy of individuals throughout the organization. Note the emphasis on individuals. While good teamwork is vital, and a commitment strategy will aim to enhance it, what must not be inferred from the development and application of such a strategy is that the organization wants to create a colony of clones who will slavishly conform to norms and standards imposed on them by the company. As John Harvey-Jones 4 says, it is ‘the individual’s unique and personal contribution that matters’. • Ownership of change – Managing change by getting people to ‘own’ it. This means trying to ensure that those affected by change feel the project is their and not one
imposed upon them by outsiders which will conflict with their values or be detrimental in any way. The reality is that organizations are faced with an increasingly unpredictable world. Change is not susceptible to a one-off programme that will lead to calmer times. Yet to survive and thrive, businesses cannot afford simply to be buffeted by uncontrollable forces, in the hope that luck will be on their side. Success will not happen by change but through continuous strategic processes that will ride these choppy waters. (It has been said that the Japanese in top management see themselves as White water rafters) Some characteristics of these processes include: • • • • A recognition that short term decisions have long term consequences The processes are value driven. Strategic decisions have a sense of direction, related to a vision of what could be This ‘what could be’ has to be based on the distinctive capabilities of the firm It is not just a ‘wish list Strategic decisions have implications for resources – not least the human resource. Levels of Managerial Activity Let us now look at the human resource system as they affect the strategic activities of the organization. To define our focus it is necessary to add one more degree of complexity to the frameworks already presented. To do this we use Robert Anthony’s definition of the three levels of managerial work: 1. Strategic level – deals with policy formulation and overall goal setting, its objective is to position the organization the best possible way to deal effectively with the environment. 2. Managerial level – focuses on the processes by which the organization obtains and allocates the resources needed to carry out its strategy and objectives.
Operational level – the day-to-day management of the organization is carried out at this level.
Professional execution of the operational and managerial level activities is a necessary condition, but, not sufficient basis for an effective human resource organization. The strategic level activities, however, begin to separate the truly well managed companies from competition. Strategic selection The selection process includes all activities related to the internal movement of the people across positions as well as to hiring. The process matches available human resources to jobs in the organization. Three strategic concerns are particularly important. 1. design of a selection system that supports the organization strategy eg if a company plans to diversify in the next vie years, a careful analysis should be made of the types of people who will be needed to staff the new business 2. 3. monitoring the internal flow of personnel to match emerging business strategies matching key executives to business strategies
Strategic appraisal The performance appraisal process is the key to an effective human resource system. Companies must develop a performance appraisal system that is supportive of their business strategy because there is a link between such a system and total performance for the firm. Excellent managers and companies simply recognize that an integral part of management is the process of evaluating performance. Strategic rewards Among the rewards that are deemed to be important are the following:
Pay in its many forms such as salary, bonuses, stock options, benefits and perquisites Promotion Career opportunities, a long term chance for growth and development Positive feedback from clients Responsibility
Strategic Development Activities designed to ensure that individuals are properly equipped with skills and knowledge to carry out their jobs fall into the management-development category. Development that occurs in organizations takes the form of on-the-job training, job rotation mentoring, formal training etc. Strategic integration is necessary in order to provide congruence between business and human resource strategy so that the latter supports the accomplishment of the former and, indeed, helps to define it. The aim to provide strategic fit and consistency between the policy goals of human resource management and the business. Problems of integration However, integrating the two is easier said than done for the following reasons: 1. Diversity of strategic processes, levels and styles – as described above, the different levels at which strategy is formulated and the different styles adopted by organizations may make it difficult to develop a coherent view of what sort of HR strategies will fit the overall business strategies and what type of HR contributions are required during the process of business strategy formulation. In other words, it may be difficult to focus HR strategies.
The evolutionary nature of business strategy – which may make it difficult to pin down the relevant HR strategies.
The absence of written business strategies – which adds to the problems of clarifying the strategic business issues which human resource strategies should address.
The qualitative nature of HR issues – business strategies tend, or at least aim to be expressed in the common currency of figures and hard data on portfolio structure, growth, competitive positioning, market share, profitability etc.
HR strategies may deal with quantifiable issues such as resourcing and skills acquisition but are equally likely to refer to qualitative factors such as commitment, motivation, good employee relations and high employment standards. And as John Purcell has written: If it were possible to demonstrate that ‘enlightened’ or progressive approaches to the management of people were invariably associated with higher productivity, lower until costs and improved profit, life would be easier for the human resource planner. As it is, little can be proved because for the complexity of the variable and the impossibility of monitoring and measuring all the relevant dynamics and relationships. Approaches to dealing with these problems These are serious problems and it may be difficult for the HR strategist to overcome them completely. But the attempt should be made and the following approaches are available. 1. Understand how business strategy is forms The HR strategist should take pains to understand the levels at which business strategy is formed and the style adopted by the company in creating strategy and monitoring its implementation. It will then be easier to focus on those corporate or business unit issues which are likely to have HR implications.
Understand the key business issues The key business issues which may impact on HR strategies include: • • • • Intentions concerning growth or retrenchment, acquisitions, mergers,
investments, divestments, diversification, product/market development Proposals on increasing competitive advantage through productivity, improved quality/customer service, cost reduction The perceived need to develop a more positive, performance-oriented culture Other culture management imperatives associated with changes in the philosophies of all organization in such areas as moving from ‘control’ to commitment’, mutuality, communications, involvement empowerment, devolution and team working. Business strategies in these areas should not be over-influenced by HR factors; HR strategies are, after all, primarily about making business strategies work. But the business strategy must take into account key HR opportunities and constraints. Business strategy, therefore, sets the agenda for HR strategy in the following areas: • • • • • • • • Resourcing Skills acquisition and development Culture, values and attitudes Commitment Productivity Performance management Rewards Employee relations
While these may all arise at business unit level, there are a number of strategic issues which exist at the corporate level and are likely to have a decisive influence on HR strategy. These are:
• • • •
Corporate mission Corporate values, culture and style Organizational philosophy and approach to the management of people Top management as a corporate resource
Some organizations such as IBM, Hewlett-Packard and Marks & Spencer will have clearly articulated strategies in these areas. Others will not, until events force a re-evaluation of the mission, values, philosophies and structure of the organization, as has happened in such companies as British Airways, BP, Thom EMI and ICL. These changes have often taken place following the appointment of a CEO with a new vision of where the organization should be going and how it is going to get there. 3. Establish methods of linking business and HR strategy Business and HR issues influence each other, and in turn influence corporate and business unit strategy,. It must be remembered, however, that in establishing those links account must be taken of the fact that strategies for change have also to be integrated with the changes in the external and internal environments. centre for Corporate Strategy and Change, Warwick University This model shows in general the relationship between HR and business strategy and the environment, but how can specific links be achieved? To achieve a link in rigorous terms would require a means of quantifying the resources allocated to human resource development, both overall and at the level of each element of HR strategy, and then measuring and comparing the marginal return (in terms of higher profit) on investing in each element. But, to echo Purcell’s point, such an approach is unlikely to be practicable. The link must therefore be judgmental, but it can still be rigorous. Conceptually, the approach would be develop a matrix, for each of the key elements of business strategy, identifies the associated key elements of HR strategy. This is illustrated in a model developed by Professor Andrew Pettigrew and his team at the
While it may seldom, if ever, be possible to devise a complete expression of these relationship in matrix form, at least this approach will ensure that the implications and interrelationship of business and HR strategy are analyzed systematically. The following is a disguised example of a real life statement of business strategy which has been distilled into an HR strategy statement, which in turn has been expanded into an expression of its key elements. Implementing Strategic Human Resource Management One a manager has used these frameworks to identify the scope of the human resource function in a particular organization the task becomes one of implementation. The following steps should prove helpful as guidelines for task. 1. The task that the organization needs to support its strategic objectives should be identified at the strategic, managerial, and operational level. 2. Gaps in the delivery of service to clients at the present time should be identified. Just as it is not possible to reward managers solely for how well they meet long-term goals, so a human resource system must have its operational house in order before it can afford the luxury of concentrating on the formulation and implementation of a human resource strategy. 3. If the organization has no process by which it emerges in strategic planning at the corporate or business level, it will not be possible for the human resource function to develop a strategic thrust since the human resource strategy flows from the corporate or business strategy. 4. In terms of staffing the function, the organization will need to provide for people trained as business generalists so they can better respond to line management concerns. 5. The reward and control systems should be altered to support the strategic human resource function. Just as managers need to be rewarded for both performance of operational and managerial short-term objective as well as for progress against strategic goals, there should be a similar system to drive the human resources function. 6. Systematic links should be designed between the human resource function and the line organization. Although the debate rages on over where strategies for managing change are playing an increasingly important parts in human resource management.
The Internal Environment Competitive pressures have accentuated the need for managements to concentrate on innovation, quality enhancement, customer service and cost reduction. This has influenced the way which organizations have been structured and managed. The need to be more responsive to external events has resulted in a greater emphasis on operational flexibility, and the need to make managers more accountable for results has resulted in more decentralization and devolution of authority. The impact of new technology, especially information technology, has enabled organizations to eliminate layers of management and supervision in the interests of a quicker and more flexible response to new demands, increased accountability and, of course, cost reduction. Cellular manufacturing systems, for example, have encouraged the creation of autonomous work groups, which reduces the need for supervisory and quality control staff as well as enhancing team accountability and, importantly, cohesiveness. The new ‘flexible fir is one in which teamwork is more important but it also means the setting of core groups of employees consisting of managers, technicians, knowledge workers and multi-skilled craft workers. These groups are supported as and when required be contracted staff and part-timers. The creation, development and control of teams of core workers operating in a state of constant change places even greater demands on all managers and it is these demands which have accentuated the need to adopt a human resource management approach. What makes strategic HRM ‘more strategic’ that HRM? Strategic HRM has become topical in recent years but definitions as to what is meant by the term very widely. Shaun Tyson defines FR strategy as the intentions of the corporation, both explicit and convert, toward the management of its employees, expressed through philosophies, policies and practices’/ Typically, strategic HRM bridges business strategy and HRM and focuses on the integration of HR with the business and its environment. Researchers
distinguish between ‘hard’, traditional HRM and ‘soft’. ‘Hard’ HRM reflects a contingency approach based on the assessment of the best way to manage people in order to achieve business goats in the light of contextual factors. ‘Soft’ HRM focuses on a high-commitmenthigh-performance approach to the management of people. One of the key elements of soft’ HRM is the internal approach to the management of people. One of the key elements of ‘soft’ HRM is the internal integration of HR policy goals with each other. In the UK, David Guest incorporated the HR policy goats of strategic integration, commitment, quality and flexibility into a model. He suggests that these HRM policy goals are a package which Purcell considers to have six common elements: Careful recruitment and selection. Extensive use of systems of communication. Team working with flexible job design. Emphasis on training and learning. Involvement in decision making. Performance appraisal with tight links to contingent pay. The main rationale for strategic HRM thinking is that by integrating HRM with the business strategy, rather than HR strategies being a separate set of priorities, employees will be managed more effectively, organizational performance will improve and therefore business success will follow. This is itself may not be enough. Tony Grundy suggest: Human Resources Strategy in itself may not be effective. Integrating Corporate Strategy and HR matters into an ‘Organization and People Strategy’ may prove more successful. Some researchers have argued that technical HRM focuses on building company’s performance, while strategic HRM creates competitive advantage by building HR systems which cannot be imitated. Strategic HRM therefore has a clear focus on implementing strategic change and growing the skill base of the organization to ensure that the organization can compete effectively in the future. Indeed, strategic HR departments are future-oriented and operate in a manner consistent with the overall business plan in their organizations. Such departments assess the knowledge, skills and abilities needed for the future and institute staffing, appraisal and evaluation, incentives and compensation, training and development to meet those needs. This also suggests
that facilitating organizational learning, both for implementing change and in helping to develop strategy, is a key element to strategic HR. According to this approach, people are a key resources and a critical element in a firm’s performances since they build organizational effectiveness. Tony Grundy defines organizational effectiveness as : ‘The capacity of the organization to adapt rapidly to its external environment and to meet market and other external demands and with good resulting business performance.’ What remains unclear is how organizations can achieve consistently superior performance via HR strategy necessarily so. As Johnson comments: ‘Strategic decisions are characterized by the political hurly-burly of organizational life with a high incidence of bargaining and a trading off of costs and benefits of one group against another; all within a notable lack of clarity in terms of environmental interests and objectives. Goold and Campbell also emphasise the variety and ambiguity of influences which shape strategy: Informal understandings work alongside more formal processes and analyses. The headquarters agenda becomes entwined with the business unit agenda, and both are interpreted in the light of personal interests. The sequence of events from decision to action reversed, so that ‘decisions’ get made retrospectively to justify actions that have already taken place. Strategy formulation is not necessarily rational and continuous process, as was pointed out by Mintzberg. He believes that, rather than being consciously and systematically developed strategy reorientations happen in brief quantum leaps. Strategies, according to Mintzberg, are not always deliberate. In theory, he says, strategy is a systematic process. “First we think, then we act. WE formulate, then we implement’ in practice, ‘ a realized strategy can emerge in response to an evolving situation’ and the strategist is often ‘a pattern organizer, a learner if you like, who manages a process in which strategies, and visions, can emerge as well as be deliberately conceived. Articulating business strategies Business strategies are not necessarily expressed in writing, although there are advantages in doing so from the point of view of having a defined of references for planning and control
purposes. Strategic management and strategic control companies are more likely to prepare formal, long-term strategic plans, but financial control companies will rely on one year budgets with interim reforecasts as required. A business unit or independent company may have a formal strategy but it is more likely, especially in the case of financial control company, to have an unwritten strategic orientation which is based on an assessment of future market opportunities. In Mintzberg’s phrase, these organizations ‘craft’ their strategies, being responsive situations as they emerge while still taking a view on the general direction in which they are going.
LECTURE 33 – 35 : STRATEGIC PERFORMANCE MANAGEMENT AND COMPENSATION SYSTEMS Traditionally, performance appraisal has been used as the guide for employee performance. Performance appraisal also known as ‘performance evaluation’, ‘merit rating’, and ‘performance assessment’ is a process of recording assessment of employees’ performance, potential and development needs. According to Wayne F Cascio (1995) performance appraisal is defined as “the systematic description of job related strengths and weaknesses of an individual or a group”. Performance appraisal is a system of review and evaluation of an individual’s (or team’s) performance. Lately it has been supplanted in more and more companies with performance management (PM), a more comprehensive human resource management process. Within the recent past there has been a shift from traditional annual performance appraisal to continuous performance management . The obvious reasons behind this have been the inadequacy of Performance appraisal in serving as a performance enhancement tool. Performance appraisal is known to be a contentious and unpopular activity of Human Resource Management. It is contentious because employees do not readily accept their manager’s assessment about their performance, and managers feel uncomfortable when they have to defend their judgment. It is unpopular because managers do not want to play the role of a judge; besides they have feelings of guilt if their evaluation is critical of their employees’ performance. There could be other reasons for performance appraisal being unpopular: • • • • Many a times appraisal is based on hunches, opinions and reflects what appraiser can readily recall since real performance measurement takes time and follow up. Employees are often less certain about where they stand after the appraisal than before it. Employees don’t know what constitutes performance or what precisely is expected out of them. Many a times employees don’t take appraisals seriously because they feel it is an annual or six monthly ritual undertaken by the organization.
With these problems with the conventional performance appraisal, there was a transition in the approach, organizations started moving towards developmental performance appraisal. This led to additions in the definition of performance appraisal also. Fletcher has defined performance appraisal more broadly as activities through which organizations seek to assess employees and develop their competence, enhance performance and distribute rewards. Fletcher holds that as a set of practices (and as a part of performance management), performance appraisal has now become part of a more strategic approach to integrating HR activities and business policies. Later on, a new field of study has emerged in the form of performance management, which is a holistic approach towards management of employee and organizational performance. Performance management is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. It is a process for establishing shared understanding about what is to be achieved and an approach to managing and developing people in a way that increases the probability that it will be achieved in the short and longer term (Armstrong, 1998). Performance Management becomes essential because most of the contemporary organizations possess some or the other of the following features: • • • • A diversity of locations, units, programs, projects and specialized disciplines. Complex cultural interactions and varied tasks and problems. Interdependence and dynamism – what one segment of the organization does, affects the total organization. Decentralization and empowerment. Some of the benefits of an effective Performance Management system are as follows: • • • • • It creates a culture of excellence in the organization that inspires every employee; aligns organizational objectives to individual aspirations; equips people with the skills and the infrastructure necessary to perform their duties and imbibes teamwork; clears growth paths for specially talented individuals; provides new challenges to rejuvenate plateauing careers;
Performance management systems are widely recognized as a key business strategy for driving strong business results. Through goal setting, performance appraisal and feedback, continuous training and development efforts, and performance related pay, Performance Management can help companies incorporate strategy into individual employee efforts and turn their potential into desired results. Performance Management can assist in motivating employees for good performance and can strengthen their commitment to the organization. Furthermore, it can assist in organizational processes that are important to organization’s long term success such as organizational learning, knowledge management, change management and succession management. Performance management is necessary to develop a ‘performance consciousness’ and it can be used as a powerful employee development tool. Effective performance management makes people aware of where they stand and also helps in retention of star performers. The thrust of an effective Performance Management System (PMS) has been identified as the ability to understand and reinforce the desired work behavior by all employees. The performance management process links individual job performance to the attainment of organization’s vision, mission and goals. Performance management is a continuous process that involves supervisors and employees in the identification and evaluation of key job performance objectives and competencies that contribute to the achievement of organizational goals. Employees who understand what they are trying to accomplish and how their work fits into the work of the organization as a whole are more likely to perform at a higher level. With this in mind, the performance management process is designed to: • Provide supervisors and employees with a method to identify individual job performance objectives and discuss their alignment with organization objectives; • Provide supervisors and employees with a forum for ongoing communication and feedback on the attainment of individual objectives and performance in core competency areas; • Facilitate the identification of areas for improvement needed by employees to perform more effectively on the job; • Provide employees with the opportunity to collaborate with their supervisor to develop a personal job performance development plan.
The goal of performance management is to help employees improve their performance and their effectiveness. Performance is the results accomplished by an employee in meeting specific objectives or the development of competencies necessary for effectively doing a job. Performance management is a continuous process of supervisors and employees working together to: • Set performance expectations linked to organizational objectives; • Establish criteria against which individual and unit performance can be measured; • Identify areas for competency improvement; • Provide performance feedback; • Continually enhance performance. STRATEGY ORIENTED COMPENSATION SYSTEMS Workforce alignment, the concept of aligning the contributions of individual employees with corporate goals, is one of today’s hottest business topics, on the mind of every business manager from the CEO to the HR director. Yet for all of the urgency associated with workforce alignment, many organizations are stymied in their attempts to achieve it. Pay for performance plays an essential role in achieving workforce alignment. Many leading companies practice this compensation management discipline with varying degrees of success. Typically they rate their managers on a bell curve annually, assigning an overall performance rating from “Exceeds objectives” to “Does not meet objectives.” At many companies, the “Does not meet objectives” generally have to go, while others are awarded bonuses, raises and stock-option grants commensurate with their rating. Unfortunately, although most organizations profess to subscribe to pay-for-performance philosophies, many simply cannot execute. There is a broken link between senior executives’ desire to differentiate pay based on performance and line managers’ ability to do so. Relating compensation to individual performance for tens or hundreds of thousands of employees across large global companies is nearly an impossible task today. Complexity in compensation processes creates apathy among managers who do not see themselves as compensation experts and instead take the path of least resistance.
Hence, the companies use the “peanut butter” approach to compensation distribution, spreading merit increases, bonuses and stock options equally across the employee population. Top performers are not given rewards commensurate with their contributions, and under-performers are over-compensated. Shockingly, the peanut-butter approach is used in company after company, where employeerelated compensation spending consumes up to 80 percent of each operating expense dollar, according to industry research. This reality practically screams for a pay-for-performance solution that keeps compensation expenditures in line with the allocated budget — a system that makes managers compensation experts and, above all, makes them believe in the pay-forperformance process and take ownership of it. Challenges Today’s business environment provides a stark backdrop for the ongoing disconnect between corporate performance and individual compensation. Unfortunately, in all too many companies, workforce misalignment is the norm. Despite strong commitment from senior executives to differentiate pay based on performance, managers throughout the organization have a difficult time doing so. Meanwhile, economic pressures conspire to force organizations to do more with less. As compensation funds shrink, how are limited resources best used? Every day newspapers are filled with the latest news on lower-than-expected earnings, mergers, acquisitions and corporate restructurings, all of which beg the question: Which employees will be chosen to stay, which will go, and how shall the remaining ones be motivated? Without a connection to compensation, performance management lacks the element of execution. How can companies ensure that employees will actually be financially rewarded for meeting performance objectives? Adding compensation to the equation brings the required element of execution to performance management, ensuring that it is a true pay-forperformance strategy that can deliver tangible business results. Clearly, there are no companywide common denominators for compensation practices, let alone guidelines or systems for implementing them. Faced with this constant state of flux,
many managers quickly give up on attempts to become compensation experts, and instead muddle their way through the compensation planning process as quickly as possible to “get it over with.” What’s Needed “Getting it over with” does not constitute the proper respect due to employee-related compensation. What’s needed is a system for implementing pay-for-performance that balances compensation expenditures with available financial resources. Compensation management technology applications play a critical role in supporting pay-forperformance initiatives that ultimately lead to workforce alignment. These systems provide the structure, processes and knowledge required to make pay-for-performance initiatives successful at all levels of the organization. Among the benefits of on-demand compensation management applications include: Employee differentiation, which puts an end to the peanut-butter style of compensation disbursement. True manager self-reliance, in which managers can leverage drill-down analytics and situation-specific advice and guidance to help them become self-sufficient and confident in administering their group’s compensation. In turn, this boosts their ownership of the pay-forperformance corporate mandate. Situation-specific advice and guidance: Far more sophisticated and personalized than previous-generation knowledge management technologies, today’s most advanced systems provide the infrastructure to harness and share knowledge within the enterprise, delivering it on an individualized basis. Strong, direct return on investment: Because compensation consumes such a large portion of corporate budgets, administering it can significantly improve process efficiency. This, in turn, can result in increased profitability and productivity, saving dramatic amounts of time and effort. The goals and objectives for automated compensation analyses and delivery systems are the same as those for any other mission-critical application: to bring the needed information to those who must make pay decisions and do so quickly, accurately and in the form in which
they can best use the information. Web-based compensation management applications do all of this better than any other previous system. Allen P. Jackson, principle at Towers Perrin, describes the following capabilities and features of Web-based compensation management applications used to implement and administer payfor-performance programs. These include: Determine the manager’s population: Before a manager can administer the
compensation plan, the population must be determined. Because it is role-based, the Webbased application must know who is a manager and to whom the manager directly reports. Rating employees: The manager now accesses the rating that was generated during the performance management process or, if that process was not Web-enabled or the data are not in machine-readable form, enters the appropriate performance rating into the application for each employee. The system then automatically generates graphics that depict the distribution of the ratings, both the actual distribution for the manager’s employee population and the desired distribution. Compensation planning: Performance versus position-in-range matrix: This useful tool contains a list of performance categories and increase percentages, and highlights one employee. The guidelines in the range quartiles show the suggested percentage increases that could be given by a manager to an employee depending on the employee’s position in the range. A wide variety of variables, including market rates, traditional evaluation methods, and newer competency-based approaches, as well as minimum and maximum guidelines, ensure that managers are properly prepared to plan actual compensation changes. Planning new base salaries: When the performance rating versus position-in-range matrix is finalized, the manager can proceed with compensation planning, entering either the percentage increase provided by the matrix or the actual dollar amount. Planning new variable compensation: In a fashion identical to that used for base salaries, each employee who is eligible for variable compensation is now reviewed and a suggested amount of compensation is calculated. Planning stock compensation awards: The manager can then decide on the award of any stock (typically stock options) that is part of the total compensation package. When this step is completed, managers can generate statistics for their own work group and, under certain
conditions, determine where they stand in relation to other groups. In addition, reports are available showing roll-ups and grouped departmental or line-of-business statistics. Approving compensation plans: After a manager submits a compensation plan, it is accessible to the approving manager for review and approval. The manager can then roll up for an aggregate view of pay-for-performance and drill down to examine any one individual’s pay plan. Group-level analytics provide visibility at each level in the management hierarchy before compensation actions are taken. In delivering these capabilities, the compensation management application must support corporate requirements for a predictable total cost of ownership and for likely high levels of ROI. Changes in objectives must therefore be easily incorporated into the pay-for-performance system to keep up with frequent modifications to corporate objectives and compensation plans. The application must provide flexibility for constant tuning and substantial change, or it will need to be essentially re-deployed on a frequent basis—at a significant cost of both time and money. System deployment needs to be reviewed carefully to monitor and measure expected ROI. To support a broad user base, the compensation management system also must have an outstanding capability to deliver situation-specific advice and guidance to line and senior managers. The advice and guidance management system should offer tailored support, instructions and learning for each company based on corporate-defined compensation objectives, employee compensation records and compensation market survey data. Just-intime, situation-specific advice and guidance should be delivered to each line manager when they need it and must be relevant to the situation under review by the manager, helping to shape manager behavior and affect more appropriate and consistent pay decisions. Finally, an online compensation management application that supports managers with a situation-specific, knowledge-based administration approach helps them become experts in the art of compensation and fosters manager ownership of the resulting decisions. Although these managers are focused on their particular fields of expertise — whether it is sales, engineering, manufacturing, distribution or finance — they are looked to as compensation experts during the annual corporate compensation planning process. As a result, it is critically important that the company striving to realize a pay-for-performance culture provide a best-in-class
compensation management application that supports managers each step of the way. The system must provide information for both decision-making and employee explanations, thereby giving managers competence, confidence and ownership in their abilities and knowledge to administer effective compensation plans. Compensation management plays a critical role in forging a link between corporate goals and individual performance. These solutions help organizations achieve workforce alignment by supporting pay-for-performance initiatives with the structure, processes and knowledge required to make them a success at all levels of the organization. As companies implement pay-for-performance, which often starts with incremental efforts, compensation management applications can be the catalyst for their deployment, acceptance and ultimate success. LECTURE 36 – 39 : ROLE OF STRATEGIC HR LEADERS, FUTURE ROLES AND LEADERSHIP COMPETENCIES Businesses can recapture the innovative spirit that initially launched their success. It has been done in companies old and new, big and small, and in just about every industry you can imagine. Each case is different, but there are three common threads. First, corporate leaders recognized the intellectual capital and potential that resided within their own employees. Second, they turned to the Human Resources Department to find the key to unlocking that potential and putting that capital to work. Third, the company reaped tremendous rewards in terms of productivity and profitability as a result. What is common to each strand of this process is the importance of HR departments to the process of strategic innovation. Ideas are the lifeblood of business success. Most of today's corporate giants began with little more than a great idea and an entrepreneurial gleam in their eye. They leveraged their intellectual capital to build financial strength. Yet, along the way, many corporations lose the ability to innovate and take risks. Entrepreneurship gives way to entropy, and new ideas are relegated to the suggestion box in the employee cafeteria. It does not have to be that way.
Businesses can recapture the innovative spirit that initially launched their success. It has been done in companies old and new, big and small, and in just about every industry you can imagine. Each case is different, but there are three common threads. * First, corporate leaders recognized the intellectual capital and potential that resided within their own employees. * Second, they turned to the Human Resources Department to find the key to unlocking that potential and putting that capital to work. * Third, the company reaped tremendous rewards in terms of productivity and profitability as a result. What is common to each strand of this process is the importance of HR departments to the process of strategic innovation. Rarely are the terms "strategic innovation" and "human resources" uttered in the same breath. HR departments in many corporations have come to be little more than service providersoffering basic training and rewarding performance based on formulas created out of a cookiecutter process. Ask yourself: How often does an HR department see its role as building corporate-wide capabilities, as opposed to increasing the general competence of the workforce? Look at where the innovation movements usually take their lead: In most companies, the push to make quality a priority starts with manufacturing. Customer service efforts got their start in marketing. How much has HR contributed? The real question should be: How much more can HR contribute? Look closely, and it becomes clear that the HR function has a distinctive ability to create wealth. After all, HR departments have at their disposal the means and the tools to have a more strategic impact. Their product is people, and it is people who are indispensable to the innovation process. Moreover, it is people who can carry the innovation message and the innovation approach to all corners of an organization. When HR professionals put their focus on developing employee innovation and pushing it deep within the organization, they can drive change and growth company-wide. HR AS INNOVATION INCUBATOR
There are many ways an HR Department can drive the innovation function. It can do it as the incubator of new ideas, as the crossfertilizer of concepts and teams, or even just by focusing on the teaching/learning dimensions of its traditional training mandate. First, look at an example of HR "going for the gold," as an incubator of ideas by harnessing the passion of a workforce. An example of this dynamic in action can be found at Whirlpool, the appliance-making giant. Looking for ways to enhance customer loyalty and get beyond the seas of "white boxes" that confront consumers when they begin shopping for a new range or refrigerator, Whirlpool turned to its employees for new ideas. They tapped their creativity through a new process that gave every employee accessible tools and an environment that propelled innovation. Among the tools they established were a Knowledge Management intranet site and an innovation database to help employees share insights and spark ideas. The intranet site paired those who had good ideas-but perhaps lacked the business skills to put them in action-with "innovation coaches," in-house experts skilled at working with employees to bring their ideas to fruition. Their efforts have paid off: Whirlpool employees have helped develop and introduce pathbreaking new products, including Polara, the first refrigerated range; the Gladiator line of garage appliances, and the first in-sink dishwasher. Today, innovation is so deeply embedded in the corporate culture that every employee is encouraged to participate. One senior manager summed up the results this way: "We don't have teams to make people feel good; we have teams to run the business here, and we feel that engages people in the business." The results speak for themselves: Whirlpool's stock is up significantly since its employee innovation program began, and 40 percent above that of one of its closest competitors, Maytag. (No wonder their repair people are so lonely!) Whirlpool's model engaged many employees in the innovation process-nearly 10,000 of them in one manner or another. This example illustrates the important role employee-driven innovation can play in a company's success. However, innovation for innovation's sake does not work. A few top people sitting around an "Innovation Department" trying to think of new ideas amounts to an ineffective echo chamber, yet having a thousand bright employees going off in different directions, all pursuing their personal ideas about how to build a better mousetrap, is a recipe for a different sort of disaster. What is needed is a corporate function
designed to drive innovation in support of a company's overall goals and objectives. That is a role HR departments are well suited to fill. When they do it right, the results benefit employees, shareholders, and consumers alike. HR AS CONCEPT CROSS-FERTILIZER Part of the HR supportive role, as mentioned earlier, can be as a cross-fertilizer of concepts and teams. A good example of that occurred "down under" at the National Australia Bank. It started with an idea in the head of the Executive General Manager responsible for People and Culture, NAB's rather elegant moniker for its HR department. She began with a values-based concept: People like to save. Considering the age of baby boomers, there is increasing worry about retirement, but people also like to shop, which can undercut the urge to save. What the NAB executive saw were two values in contradiction. The goal was to combine them and allow them to work together rather than at cross-purposes. The idea that emerged from this values-based analysis was the notion of a credit card which automatically sent a percentage of the cost of any purchase made on the card to the customer's savings account. What NAB did was reconcile two apparently conflicting values and come up with a unique notion: Spend to save! What one sees here is an inherent strength of HR being integrated into the bank's marketing/product strategy: HR's fundamental understanding of people. In the great save versus shop conflict, the pull of an immediate object of desire meets the intangible distance of a faraway goal such as retirement, and the immediate object usually wins. Recognizing this conflict, NAB's "spend to save" program connected the two, so that savings were also buttressed when the customer shopped. Perhaps even more unique than the idea itself was the way it was developed and shepherded through the corporate development process. The Executive GM for People and Culture pushed this program through as part of a people project within the broad purview of HR. In fact, it started as part of a corporate values project which involved a broad cross-section of employees to define values that motivated them such as "humanizing values." NAB pushed the underlying long/short-term values inherent in the "shop to save" concept from the drawing board into the marketplace by pulling together a core, cross-functional team that originated with and was coordinated by the HR department. The exercise demonstrated the intimate link between
classic HR values and innovation. Corporate innovation exercises that do not make this link with underlying values remain just that-exercises. In fact, the National Australia Bank example demonstrates that innovation is the expression of values, a means of bringing them to life. Another example of HR as the pivot of cross-functional development took place at Cemex, the large Mexican-based multinational cement company. In this instance, the Cemex HR department started with a value that is central to any organization-the strength of the promises people make to their corporate colleagues. In a sense, one can see business as a network of promises people make to each other, either implicitly or explicitly. Take internal meetings. When people say they will attend a meeting at a certain time and then show up late, they are breaking a promise, a low-priority promise, but a promise nonetheless. It undermines the degree of trust that exists within the organization and reduces the company's ability to operate effectively. Sometimes this can even be the result of a conflict in values (some alphatypes seem to think that, in the corporate jungle, showing up late for a meeting demonstrates their importance, rather than their inability to manage their own time). Yet this conflict in values can have significant, negative implications for a company. Supply chains are complicated these days: Immediate delivery depends upon every link in the chain connecting seamlessly. A broken promise in one place can lead to gridlock in a great number of places. Cemex decided the value of its people keeping their time commitments to one another was too important to leave to personal whim or chance. It demanded a company-wide effort. The company's HR department addressed the problem head-on. The first thing they did was seek out a consulting company with experience in improving the quality of promises made within companies. Perhaps it serves as proof of the growing importance of this function that Cemex found a firm that does indeed specialize in that. How do you get people to keep their promises? It comes down to getting people to work together to jointly find the flaws in their working relationship and address them collectively. For example, they will bring together departments to map the ways they are supposed to work together and diagnose the recurrent breakdowns in execution. They improve the process by redesigning the coordination mechanisms and improve skills levels by training people to make contracts, ones that are more precise, realistic, and ultimately more achievable.
As a result of this effort and technological innovations to improve scheduling of truck routes, Cemex was able to guarantee delivery of cement to construction sites within a 20-minute window. Twenty minutes: That is the length of time we associate more with delivering hot pizza than wet cement. It is even more impressive considering the industry average delivery window is three hours! HR AS INNOVATION ACADEMY These are examples of ways that HR serves as the cross-fertilizer of concepts and teams, or, in the case of Whirlpool, the incubator of ideas. However, not all HR departments are in a position to do those things. Whether they have the opportunity to do that may depend upon the organizational structure of the company and its culture. What about the HR department that does not have the mandate, the independence or the corporate flexibility to do that? How can HR departments advance corporate strategy or competitive values without producing or developing the "big idea?" Is it possible for HR departments to generate companywide innovation by focusing on the teaching/learning dimensions of its traditional mandate? The answer is: Some companies do it, so it obviously can be done. General Motors, a firm for which I worked, was involved in a project that did not involve corporate transformation, but focused instead on traditional HR functions. All large companies have high-potential younger executives whose attitudes and cultural outlooks are still being formed. How can their thinking be influenced? A common way is to bring them together to listen to a few well-known gurus for a few days. Part of the core team that learned our methods and became familiar with our tools helped set up a Discovery Center-a sort of innovation academy-in North America. The Discovery Center sought to further the development of talented individuals with leadership potential within the company. Every week, high-potential GM employees would do tours of duty at the Discovery Center, learning our tools and methods to address key strategic issues as defined by GM's Strategy Board. For example, the board wanted to explore emerging characteristics and requirements specific to emerging cities in developing countries, an especially important strategic area given GM's
massive investments in productive capacity across Asia. The team developed an original point of view on the subject, not only through on-site study missions to factories or interviews with luminaries, but also by directly experiencing and understanding how consumers live and what their needs are. The benefits of this revolutionary approach will become more and more apparent as the highpotential young managers learning this approach reach higher levels of responsibility. GM insiders themselves refer to their company as the big oil tanker. The purpose of this project is to help turn the big oil tanker around. That takes a lot of people sharing a customer-focused and values-based attitude. HR departments are in a good position to help shape and sharpen that attitude. HR AS AN INNOVATION ENGINE Clearly, there are a great many things that HR leaders can do to help a company change direction. They can take big dramatic steps, as they did at Whirlpool. They can bring together teams from across the firm to address customers' needs, as they did at National Bank of Australia. Or they can slowly change the way of thinking by influencing the next generation of corporate leaders, as they are trying to do at General Motors. Perhaps the question is not, "What can HR do?" The question might more properly be, "Why don't more HR departments take a leading-edge role in corporate transformation and renewal?" It is indicative of the state of things that in writing this article, it was difficult to find many examples of companies where HR departments had taken a broad leadership role in fostering innovation. HR executives should be asking two questions, "Why aren't there more? And why isn't my company one of them?" Perhaps part of the reason is the division within the discipline. HR is the Gemini of the corporate galaxy-its twins are the innovation side and the enforcement side. The enforcement side ensures the organization follows the relevant laws and regulations, but a police force is not likely to lead a revolution. If revolution is to come, if it is to come at all, it will be from the organizational effectiveness/development side of HR. That means, in the beginning, perhaps only half of the discipline is a potential source of innovation. Of that half, how many have the freedom and the opportunity to pursue innovation? How many are permitted to reach out,
examine values, and turn them into projects that can expand a company's growth potential and add value? How many HR executives have heard "no" so many times, they would not recognize the sound of "yes?"
LECTURE 40 – 42 :WORKFORCE DIVERSITY AND ITS IMPLICATIONS & CULTURAL ISSUES OF EXPATRIATES
Any attribute that humans are likely to use to tell themselves ‘that person is different from me’ and thus includes such factors as race, sex, age, values and cultural norms, etc.
Narrow definitions tend to reflect Equal Employment Opportunity (EEO) law and define diversity in terms of race, gender, ethnicity, age, national origin, religion, and disability. Broad definitions may include all the different characteristics that make one individual different from another. It includes sexual orientation, values, personality characteristics, ethnicity, religion, education, language, physical appearance, martial status, lifestyle, beliefs, ideologies and background characteristics such as geographic origin, tenure with the organization, and economic status and the list could go on.
FACTORS INFLUENCING DIVERSITY IN THE WORKPLACE
(1) Demographic changes (2) Global marketplace (3) Economics (4) Comfort with being different (5) A diverse customer base (6) Equal Employment Opportunity and Affirmative Action programs.
MANAGING WORKFORCE DIVERSITY How administrators manage diversity greatly depends on the needs of the organization. For example, some companies may want a diversified work force in order to make them more competitive in the global market. Diversity helps them to better understand international markets. While other organizations consider diversity as a means to bring about greater harmony in the workplace and an opportunity to prepare employees and volunteers to deal with the nation's changing demographics. Regardless of the reasons, managing diversity is here to stay. So, it's no longer an issue whether to implement diversity training, but how diversity training will be implemented. "Managing for Diversity" pertains to a philosophy that is purely motivated by business purpose and market advantage. It is seen as a strategy for improving organizational competitiveness and efficiency. It is distinctly different from policies grounded in social purposes such as equal employment opportunity or affirmative action. It focuses on managing the mix of individuals assigned to a task, involved in the subordinate-supervisor relationship, or employed in the organization. It may address decisions about composition of work groups, choice of supervisor, and training and other support for diverse groups. ATTEMPTS TO BETTER MANAGE DIVERSITY THROUGH:VOULNTARY AFFIRMATIVE ACTION PROGRAMS Through voluntary affirmative action programs, the employer makes an extra effort to hire and promote those in the protected (female or minority) groups. Affirmative action refers to legally mandated written plans and statistical goals for the recruitment, training and promotion of specific under-utilized groups. This quantitative, compliance-driven approach is remedial in that it attempts to set right past wrongs. There are 2 basic strategies used under affirmative action are as follows:1. GOOD FAITH EFFORT STRATEGY: It emphasizes on identifying and eliminating the obstacles to hiring and promoting women and minorities on the assumption that eliminating these obstacles will result in increased utilization of women and minorities.
2. QUOTA STRATEGY: It mandates bottom-line results by instituting hiring and promotion restrictions.
TYPES OF DIVERSITY
GENDER DIVERSITY Women have been moving steadily into occupations, professions and managerial jobs previously reserved for men. Their access to education and training continues to improve, providing many with the necessary qualifications to aspire to jobs in senior management. PROCTOR & GAMBLE Motto: gender diversity is not a problem to be fixed but a strength to be leveraged. There’s actually a very strong business case for P&G to take it up:P&G is into business like cosmetics, sanitary napkins, baby diapers, etc, since the ultimate consumers or decision makers for several of our businesses are women themselves, they are able to relate to the consumer needs a lot better than male managers. SHOPPER’S STOP 2 years ago, shoppers stop took a call: it planned to correct the disproportionately low percentage of women working for it. There were 2 reasons why they close to act on it. First, they felt that women inherently possess skills like empathy, intuition and nurturing instincts, which make them more amenable to handling functions such as customer care and human resource. Second, gender diversity helped them in creating a positive culture, where the behaviour and conduct of employees tended to be more acceptable. AGE DIVERSITY Mature workers are competent, dependable, strong work ethics, punctual, committed to quality, lower absenteeism, less likely to change jobs, proven ability to take of business. Fresher/ young people are enthusiastic, innovative and have the zeal to prove them. An organization should try to maintain a balance between mature and young employees because it provides the organization a competitive benefit.
CULTURAL DIVERSITY The biggest driver for a higher level diversity strategy is the need to tap the creative, cultural and communicative skills of a variety of employees and to use those skills to improve company policies, products and customer experiences. One company just did that:The Latino employee network at FRITO-LAY, the snack food division of PEPSICO, proved invaluable during the development of DORITOS GUACAMOLE FLAVOURED TORTILLA CHIPS. Members of the network, called Adelante, provided feedback on the taste and packaging to help ensure that the product would be regarded as authentic in the Latino community. The Adelante member’s insights helped make the guacamole flavored Doritos one of the most successful new product launches in the company’s history.
REASONS FOR VALUING DIVERSITY
Companies today are increasingly striving for racial, ethnic and sexual work force balance “Not because of legal imperatives, but as a matter of enlightened economic self interest”. (1) Diversity among the workforce introduces new ideas or ways of thinking that improve the quality of decisions and organizational outputs. (2) To respond to competition, labor shortages, changing demographics and changing workforce values. (3) To show that the organization is strategically driven, well managed and quality focused. (4) To form better work relationships among employees (5) To enhance social responsibility (6) To address legal concerns.
(7) It has become necessary to recruit, train and promote diverse new groups because this will adapt best to externally changing sociological realities and to changing market preferences. Ford Motor Company The world's second largest automaker, selling vehicles in 200 markets and with approximately 345,000 employees on six continents. Ford has a well-defined diversity policy aimed at creating an inclusive corporate culture. . For Ford, diversity is an essential ingredient in the mix to transform the company to a team-based workplace and to help understand our customer needs. Its diversity philosophy is based on the premise that the diversity of its workforce, dealer network and supplier community can help it to access and serve world markets better. . Periodic interactions among employees help in surfacing diversity-related issues of the employees, and to promote diversity vision and values. Moreover, it has specific programs aimed at reducing gender imbalance, respecting individual employee needs such as holidays to celebrate.
• • • • • • Society will become more diverse and, therefore, the workforce and the marketplace will become more diverse. There will be more globalization of corporations, which will lead to a more global workforce, marketplace, and economy Diverse work teams will be a reality in organizations Diversity will become more of a business concern than a social concern and be more closely linked to competitive strategies Diverse populations will make more money and spend more money and this increase in wealth will empower diversity Senior managers will become more involved in diversity issues because they will realize that the diverse workforce needs to be better utilized in order to remain competitive
More managers will face the challenge of dealing with backlash and diversity training will be integrated more with other types of training.
CULTURAL ISSUES OF EXPATRIATES The trend of globalization is providing opportunities for Indian firms to reach foreign markets. The business model of many upcoming industries like the information technology sector is dependent heavily on the foreign markets. This increases the need of professionals working in foreign cultural settings. The merger and acquisition activity especially the crossborder acquisitions have reached much higher levels. The trend of acquisitions is not only restricted to the new sectors like Information Technology, Telecom and Business Process Outsourcing, but core sector companies like Manufacturing (For Example: Bharat Forge acquiring Carl Dan Peddinghaus in Germany) and Mining (For Example: Sterlite group acquiring mines in Australia) have observed spurt in such activities too. The sheer size of certain deals in the range of 200- 300 Million dollars (acquisition of Tetley, UK, Flag Telecom in Bermuda) indicates global aspirations of the Indian firms. The Pharmaceutical companies have widened their reach in world market with examples like Ranbaxy and DRL having presence in many countries. The globalization dreams present a new challenge for the Indian firms; the challenge to develop competent managers who would be able to work in new environments efficiently and will act as a bridge between the parent company and its subsidiaries. The globalization will also bring new employees to the Indian firms, the ones with different origin, language and national culture adding complexities to the culture of Indian organizations. The firms thus need to develop systems and processes not only to train managers for expatriate assignments but also to handle cultural diversity. This task can be achieved by well designed cross-cultural training programs which will help employees in coping up with the stress and cultural shock while dealing with a new culture. The need for cross-cultural training will be for both:
Indian expatriates and employees dealing with expatriates of other origins. The cross-cultural training will also be required for the Indian companies getting into Business Process Outsourcing as the clients belong to culturally different environments. Working effectively in cross-cultural context is becoming vital competence for aspiring managers. The present article attempts to define the possible sources of cross-cultural differences, its impact on business practices, competencies required for the expatriates, evolution of employees. Determinants of cultural differences: There have been many attempts to define cultures and what differentiates them. The study by Hofstede defined and differentiated between cultures on various dimensions – viz. collectivism vs. individualism, power distance, uncertainty avoidance, masculinity vs. feminism and long vs. short term orientation. The author classified a number of countries on these parameters. These parameters can be defined as: 1. Power distance: degree of inequality in power between a less powerful individual and a more powerful one in which they belong to same social system. 2. Masculinity vs. feminism: refers to the distribution of emotional roles between the genders. It opposes a tough masculine to tender feminine society. 3. Uncertainty avoidance: is the extent to which a culture programs its members to feel either comfortable or uncomfortable in unstructured situations. 4. Individualism vs. collectivism: is the degree to which individuals are supposed to look after themselves or remain integrated into groups usually around the family cross-cultural training, issues to be considered while developing cross-cultural training and different ways of training the
5. Long term vs. short-term orientation: refers to the extent to which a culture programs its members to accept delayed gratification of their material, social and emotional needs. The differences in cultural values were shown by the study of Hofstede (2001), which involves 60, plus countries where each one of them was classified on these parameters.These cultural differences may effect motivational factors, collectivism at work place, organizational structure design etc.Various studies have tried to study these differences. The difference in cultures has been associated with perceptions and paradoxes. The study by Osland and Bird (2000) lists down the paradoxes and the reasons for them. The paradoxes arise because of perceptual schemas (cultural myopia and lack of experience), theoretical limitations emic and etic studies which present one sided views of the cultures (From inside and outside the culture while ignoring the other ones.). The other reasons for misunderstandings are tendency for observers to confuse individual and group values, unresolved cultural issues, role differences and real vs. espoused values. The cultural differences and varying approaches lead to significant difference in business practices which must be recognized by the trainers and employees receiving expatriate assignment. How do people and practices differ across cultures : The differences in cultures lead to significant differences in the way people react to a stimulus. The motivational needs of the managers and executives vary across the cultures. The motivational factors that work in India may not be relevant in China, hence the expatriates will need to understand the basic differences in the employee behavior. The production facilities of firms may be similar across all the subsidiaries but the employee behavior in these facilities may not remain the same. Impact of dealing with a different culture
The cultural change leads to cultural shock, which is a mental state of stress caused by acute changes in the culture. The expatriates tend to feel lonely because all of a sudden every thing changes including the work environment, peers, processes and to an extent organizational culture and value system. The employees react by comparing the new culture to their own values and beliefs and at times are unable to accept the vast difference between the two. The process of encountering and accepting the new changes or in other words process of acculturation can be classified in four stages. Initial stage of elation and optimism Period of frustration, depression and confusion Gradual satisfaction Mastery stage Oberg described four stages of adjustment: Stage I, the initial, or honeymoon stage; Stage II, the disillusionment, or culture shock stage; Stage III, the adjustment, or adaptation stage; and Stage IV, the mastery stage. The honeymoon stage is a period lasting less than two months. Here the employee is thrilled with the new experience. The culture shock stage occurs as the individual copes seriously with living in the new culture on a daily basis, as a lack of understanding of the culture inhibits awareness of what is appropriate, or inappropriate, behavior in the new cultural environment, resulting in confusion, frustration, tension and depression. The frustration occurs as the person begins to realize that past behaviors are inappropriate in the host culture but has not yet learned what behaviors to substitute. The adjustment stage is characterized by increased ability to adapt in the new culture; and, in the mastery stage, adjustment is about as complete as possible, and anxiety is largely gone. Rhinesmith (1970), classified reactions to a different culture in three categories that are flight, fight and adaptation. The flight here characterizes reactions like rejecting new culture and people and withdrawing from any opportunity of improvement of mood leading to optimism and
interacting with new people or situations that cause discomfort. The Fight is approaching new culture with hostility and term adaptation is used for people who undertake the process of understanding the difference and adjusting to the new culture. Defining Expatriate Competencies: The expatriates need to perform the same set of functions but in a completely different environment which can cause lot of stress to the person. The cultural stress will have significant impact on various aspects of the job related behavior. Most of the expatriate failures are related lack of adjustment in new culture. Hence while defining the competencies for the expatriates human resource professionals also need to assess the soft skills of employees which will be handy in the new environment like tolerance of cultural difference, ability to adapt new culture and interpersonal relationships. The cross-cultural skills required for successful expatriate assignment can be listed broadly as (Hofstede, 2001): • • • • • • The capacity to communicate respect The capacity to be non judgmental The capacity to understand relativity of one’s own knowledge and perception The capacity to display empathy The capacity to be flexible Tolerance for ambiguity
The focus is clearly on the soft skills and emotional maturity. The people undertaking foreign assignments must be mature and stable enough to accept the existence of cultural differences. They should also be able to understand the context of various situations and happening, which calls for objective evaluation of a situation without bringing in one’s own biases and perceptions. The cross-cultural competencies have can be viewed as
combination of three different dimensions (Black and Mendenhall, 1990) that are self maintenance dimension (mental health, psychological wellbeing, stress reduction and self confidence), relationship dimension (ability to foster relationship with the people of host nations and perceptual dimension (perceptions of host nation’s culture and its social systems. Thus perceptions have been given an important role in defining competencies. Most often employees tend to make perceptions based little information they receive through the media or stories. This leads to general stereotyping causing formation of wrong notions about the host culture. The employee should instead form opinions and beliefs related to the host nation only after spending considerable amount of time over there. The events which are used to form these perceptions should be seen in depth using the back ground information like social value system, political system and cultural values. Only then a clear picture of host nation culture will emerge. The employees on expatriate assignments must be able to decode various verbal and non-verbal ways of communication used in the new culture and work in unstructured and ambiguous situations (Demers, 2002). The expatriate employees should have capabilities to deal with alienation and isolation, willingness to communicate and empathy for people of other cultures (Mendenhall and Odou, 1986). The competencies required for expatriate assignments have been classified under categories of stable and dynamic competencies in the paper by Sullivan (1999). The author has broken the dimensions proposed by Black and Mendenhall (1990) in stable and dynamic components. The components are listed in the following table:
Hence the employees should have the ability to question the perceptions and resolve conflicts arising out of the cultural differences. The stress management skills have been given importance because the cultural differences and lack of proper socialization along with cultural shock causes stress on the expatriates. The stress might also arise from living at a distance from the family.
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