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Human Resource Management: Defined

Human Resource Management has come to be recognized as an inherent

part of management, which is concerned with the human resources of an
organization. Its objective is the maintenance of better human relations in
the organization by the development, application and evaluation of
policies, procedures and programs relating to human resources to
optimize their contribution towards the realization of organizational

In other words, HRM is concerned with getting better results with the
collaboration of people. It is an integral but distinctive part of
management, concerned with people at work and their relationships
within the enterprise. HRM helps in attaining maximum individual
development, desirable working relationship between employees and
employers, employees and employees, and effective modeling of human
resources as contrasted with physical resources. It is the recruitment,
selection, development, utilization, compensation and motivation of
human resources by the organization.

History of Human Resource Management:


The early part of the century saw a concern for improved efficiency
through careful design of work. During the middle part of the century
emphasis shifted to the employee's productivity. Recent decades have
focused on increased concern for the quality of working life, total quality
management and worker's participation in management. These three
phases may be termed as welfare, development and empowerment.

Early records of trade, from 4500 B.C. to 300 B.C., not only indicate
international economic and political links, but also the ideas of social and
public administration. The world’s first management book, titled
‘Arlhãshastra’, written three millennium before Christ, codified many
aspects of human resource practices in Ancient India. This treatise
presented notions of the financial administration of the state, guiding
principles for trade and commerce, as well as the management of people.
These ideas were to be embedded in organisational thinking for centuries

(Rangarajan 1992, Sihag 2004). Increasing trade, that included
engagement with the Romans, led to widespread and systematic
governance methods by 250 A.D. During the next 300 years, the first
Indian empire, the Gupta Dynasty, encouraged the establishment of rules
and regulations for managerial systems, and later from about 1000 A.D.
Islam influenced many areas of trade and commerce. A further powerful
effect on the managerial history of India was to be provided by the British
system of corporate organisation for 200 years. Clearly, the socio cultural
roots of Indian heritage are diverse and have been drawn from multiple
sources including ideas brought from other parts of the old world.
Interestingly, these ideas were essentially secular even when they
originated from religious bases.

In the contemporary context, the Indian management mindscape

continues to be influenced by the residual traces of ancient wisdom as it
faces the complexities of global realities. One stream of holistic wisdom,
identified as the Vedantic philosophy, pervades managerial behaviour at
all levels of work organisations. This philosophical tradition has its roots
in sacred texts from 2000 B.C. and it holds that human nature has a
capacity for self transformation and attaining spiritual high ground while
facing realities of day to day challenges (Lannoy 1971). Such cultural
based tradition and heritage can have a substantial impact on current
managerial mindsets in terms of family bonding and mutuality of
obligations. The caste system, which was recorded in the writings of the
Greek Ambassador Megasthenes in the third century B.C., is another
significant feature of Indian social heritage that for centuries had
impacted organizational architecture and managerial practices, and has
now become the focus of critical attention in the social, political and legal
agenda of the nation.

One of the most significant areas of values and cultural practices has been
the caste system. Traditionally, the caste system maintained social or
organizational balance. Brahmins (priests and teachers) were at the apex,
Kshatriya (rulers and warriors), Vaishya (merchants and managers) and
Shwdra (artisans and workers) occupied the lower levels. Those outside
the caste hierarchy were called ‘untouchables’. Even decades ago, a
typical public enterprise department could be dominated by people
belonging to a particular caste. Feelings associated with caste affairs
influenced managers in areas like recruitment, promotion and work
allocation. Indian institutions codified a list of lower castes and tribal
communities called ‘scheduled castes and scheduled tribes’. A strict
quota system called, ‘reservation’ in achieving affirmative equity of
castes, has been the eye of political storm in India in recent years. The

central government has decreed 15 per cent of recruitment is to be
reserved for scheduled castes and a further seven and half per cent for
scheduled tribes. In addition, a further 27 per cent has been decreed for
other backward castes. However, the liberalisation of markets and global
linkages have created transformation of attitudes towards human resource
(HR) policies and practices (Khalilzadeh-Shirazi & Zagha 1994, Gopalan
& Rivera 1997). Faced with the challenge of responding to the rationale
of Western ideas of organization in the changing social and economic
scenario of Indian organization, practitioners are increasingly taking a
broader and reflective perspective of human resource management
(HRM) in India.

This manuscript has three main parts. In the first part is provided an
overview of important historical events and activity that has influenced
contemporary managerial tenets, the second part of the manuscript
describes the emerging contemporary Indian HRM practices and
indicates some interesting challenges. Much of the second part is also
summarized on four informative Figures. The concluding section, the
third part of the manuscript, succinctly integrates the two preceding parts.

Objectives and importance of Human

Resource Management

The role of HR has changed greatly since medieval times when the major
motivational factors were basic human necessities and the role of HR was
to arrange for these in proportion to the work done. Today’s company
should consist of fast, flexible and dynamic teams of enthusiastic,
motivated, creative and fully self expressed people. Human resource will
have to play a substantial role in the business. In order to perform this
role HR professionals should have: Thorough Knowledge of business as
well as of Human resource functions, the ability to lead any change
process, innovation, problem solving , the leadership ability to influence
the organization, etc.

There is a paradigm shift to align people to the business and so today

there is a demand to have HR professionals as business partners. There
are 4 basic roles as HR professionals. One as an administrator, two as an
agent of change, three as a employee champion (as opposed to employer
champion)and four as a business partner. Since there are different sets of

people who have different expectations, there have to be newer roles and
newer competencies of Human Resources.

Objective of HR department:

Human Resource Management Objectives:

• To help the organization reach its goals.

• To ensure effective utilization and maximum development of human


• To ensure respect for human beings. To identify and satisfy the needs of

• To ensure reconciliation of individual goals with those of the


• To achieve and maintain high morale among employees.

• To provide the organization with well-trained and well-motivated


• To increase to the fullest the employee's job satisfaction and self-


• To develop and maintain a quality of work life.

• To be ethically and socially responsive to the needs of society.

• To develop overall personality of each employee in its multidimensional


• To enhance employee's capabilities to perform the present job.

• To equip the employees with precision and clarity in Trans action of


• To inculcate the sense of team spirit, team work and inter-team


HR department with the right skills can contribute to a Six Sigma
initiative at both strategic and tactical levels. This article describes the
areas in which HR should play a role in Six Sigma and discusses how HR
professionals can increase their chances of being included in Six Sigma
decision-making and implementation.To appreciate the important role
HR has in Six Sigma, it is important to begin this discussion by having an
understanding of what Six Sigma is, all the roles played by others in a Six
Sigma implementation, and the factors critical to a successful

The Challenges of Workplace

The future success of any organizations relies on the ability to manage a

diverse body of talent that can bring innovative ideas, perspectives and
views to their work. The challenge and problems faced of workplace
diversity can be turned into a strategic organizational asset if an
organization is able to capitalize on this melting pot of diverse talents.
With the mixture of talents of diverse cultural backgrounds, genders, ages
and lifestyles, an organization can respond to business opportunities more
rapidly and creatively, especially in the global arena (Cox, 1993), which
must be one of the important organizational goals to be attained. More
importantly, if the organizational environment does not support diversity
broadly, one risks losing talent to competitors.

Planning a Mentoring Program:

One of the best ways to handle workplace diversity issues is through

initiating a Diversity Mentoring Program. This could entail involving
different departmental managers in a mentoring program to coach and
provide feedback to employees who are different from them. In order for
the program to run successfully, it is wise to provide practical training for
these managers or seek help from consultants and experts in this field.
Usually, such a program will encourage organizations members to air
their opinions and learn how to resolve conflicts due to their diversity.
More importantly, the purpose of a Diversity Mentoring Program seeks to
encourage members to move beyond their own cultural frame of
reference to recognize and take full advantage of the productivity
potential inherent in a diverse population.

An organization that sees the existence of a diverse workforce as an

organizational asset rather than a liability would indirectly help the
organization to positively take in its stride some of the less positive
aspects of workforce diversity.

Importance of HRM:

The role of the HR manager must parallel the needs of the changing
organization. Successful organizations are becoming more adaptable,
resilient, quick to change directions, and customer-centered. Within this
environment, the HR professional must learn how to manage effectively
through planning, organizing, leading and controlling the human resource
and be knowledgeable of emerging trends in training and employee

At present, there are automated Human Resource Management Systems

(HRMS) as well as benefits management systems that assist employees in
managing their facilities and incentives. Because of this aspect, the role
of HR is changing. A growing trend in modern day HR practice is the
need to integrate Decision Support Management Systems (DSM). Just as
an organisation’s business and financial development is augmented with
the use of sophisticated analytical tools, HR decisions today are
supplemented using DSM programmes. HR decisions need to be focused
towards the common goal of supporting business decisions. HR managers
therefore have to administer systems to foster effective decision-making
abilities in individuals. The ultimate goal is to produce a leader for
tomorrow. While making a decision, the quality of the decision itself is
very important. To permit DSM, the HR manager should identify vital
indicators of success within himself, the employees and the company.
The indicators act as a framework to facilitate the decision making
process. The quality of the decisions also depends on identifying
appropriate outcome measures in all aspects of decision-making. The
outcome should be long-term and not short term.

HR is about administering the system to get an outcome and not ensuring

that a system is in place, but still does not provide the necessary outcome.

Small firms, with limited opportunities, limited markets and limited

resources, must use every means available for improving performance
and insuring survival. Although many human resource management
(HRM) practices are advocated as leading to firm improvement and/or
survival, little research in this area pertains to small businesses.

Small firm owners have been poked and prodded and studied, but we still
know very little about their management capabilities. Additional research
is needed to provide more understanding of the strengths and weaknesses
of these owners. In a study of managerial skills, there are many places to
start. But, if small firms are creating new jobs and hiring new employees,
then one place to begin would be in the area of human resource
management (HRM). HRM also has value because it provides an
interface between an owner and the firm's current employees.

This study examines determinants of the formalization of HRM practices

with small firms. We derive five hypotheses that identify possible
determinants of the level of formalization, including firm size, family
business, the availability of an HRM department or HRM manager, and
the existence of a formal business plan. We test these hypotheses using
data on more than 700 Dutch small firms. We find that, within this
sample of small firms, larger firms apply more formalized HRM practices
than smaller firms do. However, once we take certain contextual variables
into account, the direct relation with firm size becomes substantially less.
Indirect relations with firm size also exist: firm size is a determinant of
the probability that an HRM department is present, which in turn is
related to the formalization of all HRM scales. Finally, family businesses
apply less formal HRM practices, as do businesses without a business

Small firm owners were contacted by mail and asked to respond to a

questionnaire about their HRM practices. In the original study done ten
years ago, manufacturers were chosen because it was expected that they
would be somewhat labor intensive, and would have a human resource
management program in place. That sample was drawn systematically
(every fifth firm with less than 500 employees) from a one-state database
of manufacturing firms. The limiting of the sample to one state was an
attempt at minimizing extraneous variables, since firms in one state all
face the same laws, environmental forces, and constraints.

Further research is needed to determine if the perceptions of the small

business owners are out of step with good management practices. The
responses by the small business owners in this study indicated a lack of
agreement with textbook theories about HRM practices. Diversity A
broad definition of diversity ranges from personality and work style to all
of the visible dimensions such as race, age, ethnicity or gender, to
secondary influences such as religion, socioeconomics and education, to
work diversities such as management and union, functional level and
classification or proximity/distance to headquarters.

Diversity are able to implement a range of managed technology solutions
that include the following features:

· Management of responsibility for an organisation’s entire contingent


· Consolidated pay rolling and Contractor Care program across the

contingent workforce

· Contractor performance measurement and reporting

· Workforce planning and metrics – providing contractor workforce

demographic reporting and the effective redeployment of contingents

· Full reporting across the contingent workforce.

Workplace diversity

Workplace diversity has taken on a new face. Today, workplace diversity

is no longer just about anti-discrimination compliance. Workplace
diversity now focuses on inclusion and the impact on the bottom line.
Leveraging workplace diversity is increasingly seen as a vital strategic
resource for competitive advantage. More companies are linking
workplace diversity to their strategic goals and objectives--and holding
management accountable for results. Thus, HR plays a key role in
diversity management and leadership to create and empower an
organizational culture that fosters a respectful, inclusive, knowledge-
based environment where each employee has the opportunity to learn,
grow and meaningfully contribute to the organization's success.

Cultural diversity

Organizations around the world has been realizing the cultural diversity
within organization is not a negative aspect, rather can facilitate
organizational stalk for glory. However it is not an easy task to manage
employees with different cultural backgrounds. Nevertheless there are
many policy guidelines that can make task easy.

On a broader perspective, cultural diversity can be manage through

communicating (creating awareness among all employees about diverse

values of peers through communication), cultivating ( facilitating
acknowledgement, support and encouragement of any employee’ success
by all other workers), and capitalizing (linking diversity to every business
process and strategy such as succession planning, reengineering,
employee development, performance management and review, and
reward systems) strategies.

A contingent workforce is a provisional group of workers who work for
an organization on a non-permanent basis, also known as freelancers,
independent professionals, temporary contract workers, independent
contractors or consultants. Contingent Workforce Management (CWM) is
the strategic approach to managing an organization's contingent
workforce in a way that itreduces the company's cost in the management
of contingent employees and mitigates the company's risk in employing
them .According to the US Bureau of Labor Statistics (BLS), the
nontraditional workforce includes "multiple job holders, contingent and
part-time workers, and people in alternative work arrangements." These
workers currently represent a substantial portion of the U.S. workforce,
and "nearly four out of five employers, in establishments of all sizes and
industries, use some form of nontraditional staffing." "People in
alternative work arrangements" includes, independent contractors
employees of contract companies, workers who are on call, and
temporary workers. Staffing companies represent a conventional resource
of contingent workforce talent, as individuals attempting career
independence commonly default to staffing companies for their
placement. Staffing companies generally work by charging a fee to the
business wishing to engage the consultant on top of the rate that the
individual consultant charges. Advantages and Disadvantages of using
Contingent Workers Advantages Disadvantages Flexibility in type and
amount of labor resources Loyalty to employer or company Save costs in
benefits and tax Disturbs organizations core morale and culture
Immediate access to expertise not present internally Training costs
Savings in long-term compensation costs

Global Human Resource Management Cross

Border Scenario

Outsourcing involves the transfer of the management and/or day-to-day
execution of an entire business function to an external service provider.
The client organization and the supplier enter into a contractual
agreement that defines the transferred services. Under the agreement the
supplier acquires the means of production in the form of a transfer of
people, assets and other resources from the client. The client agrees to
procure the services from the supplier for the term of the contract.
Business segments typically outsourced include information technology,
human resources, facilities, real estate management, and accounting.
Many companies also outsource customer support and call center
functions like telemarketing, cad drafting, customer service, market
research, manufacturing, designing, web development, content writing,
ghostwriting and engineering.

Reasons for Outsourcing:

- Cost savings. The lowering of the overall cost of the service to the
business. This will involve reducing the scope, defining quality levels, re-
pricing, re-negotiation, cost restructuring.
- Access to lower cost economies through offshoring called "labor
arbitrage" generated by the wage gap between industrialized and
developing nations.

- Cost restructuring. Operating leverage is a measure that compares fixed

costs to variable costs. Outsourcing changes the balance of this ratio by
offering a move from fixed to variable cost and also by making variable
costs more predictable.

- Improve quality. Achieve a step change in quality through contracting

out the service with a new service level agreement.

- Knowledge. Access to intellectual property and wider experience and


- Contract. Services will be provided to a legally binding contract with

financial penalties and legal redress. This is not the case with internal

- Operational expertise. Access to operational best practice that would be

too difficult or time consuming to develop in-house.

- Staffing issues. Access to a larger talent pool and a sustainable source of


- Capacity management. An improved method of capacity management
of services and technology where the risk in providing the excess
capacity is borne by the supplier.

- Catalyst for change. An organization can use an outsourcing agreement

as a catalyst for major step change that can not be achieved alone. The
outsourcer becomes a Change agent in the process.

- Reduce time to market. The acceleration of the development or

production of a product through the additional capability brought by the

- Commodification. The trend of standardizing business processes, IT

Services and application services enabling businesses to intelligently buy
at the right price. Allows a wide range of businesses access to services
previously only available to large corporations.

- Risk management. An approach to risk management for some types of

risks is to partner with an outsourcer who is better able to provide the

Criticism of Outsourcing:

There is a strong public opinion regarding outsourcing (especially when

combined with offshoring) that outsourcing damages a local labor
market. Outsourcing is the transfer of the delivery of services which
affects both jobs and individuals. It is difficult to dispute that outsourcing
has a detrimental effect on individuals who face job disruption and
employment insecurity; however, its supporters believe that outsourcing
should bring down prices, providing greater economic benefit to all.
There are legal protections in the European Union regulations called the
Transfer of Undertakings (Protection of Employment). Labor laws in the
United States are not as protective as those in the European Union. A
study has attempted to show that public controversies about outsourcing
in the U.S. have much more to do with class and ethnic tensions within
the U.S. itself, than with actual impacts of outsourcing.

Failure to realize business value

The main business criticism of outsourcing is that it fails to realize the
business value that the outsourcer promised the client. Language skills in
the area of call centers end-user-experience is deemed to be of lower
quality when a service is outsourced. This is exacerbated when
outsourcing is combined with off-shoring to regions where the first
language and culture are different. The questionable quality is particularly
evident when call centers that service the public are outsourced and
offshored. There are a number of the public who find the linguistic
features such as accents, word use and phraseology different which may
make call center agents difficult to understand. The visual clues that are
present in face-to-face encounters are missing from the call center
interactions and this also may lead to misunderstandings and difficulties.
Social responsibility Outsourcing sends jobs to the lower-income areas
where work is being outsourced to, which provides jobs in these areas
and has a net equalizing effect on the overall distribution of wealth. Some
argue that the outsourcing of jobs (particularly off-shore) exploits the
lower paid workers. A contrary view is that more people are employed
and benefit from paid work. On the issue of high-skilled labor, such as
computer programming, some argue that it is unfair to both the local and
off-shore programmers to outsource the work simply because the foreign
pay rate is lower. On the other hand, one can argue that paying the
higher-rate for local programmers is wasteful, or charity, or simply
overpayment. If the end goal of buyers is to pay less for what they buy,
and for sellers it is to get a higher price for what they sell, there is nothing
automatically unethical about choosing the cheaper of two products,
services, or employees.

Quality of service

Quality of service is measured through a service level agreement (SLA)

in the outsourcing contract. In poorly defined contracts there is no
measure of quality or SLA defined. Even when an SLA exists it may not
be to the same level as previously enjoyed. This may be due to the
process of implementing proper objective measurement and reporting
which is being done for the first time. It may also be lower quality
through design to match the lower price. There are a number of
stakeholders who are affected and there is no single view of quality. The
CEO may view the lower quality acceptable to meet the business needs at
the right price. The retained management team may view quality as
slipping compared to what they previously achieved. The end consumer
of the service may also receive a change in service that is within agreed
SLAs but is still perceived as inadequate. The supplier may view quality

in purely meeting the defined SLAs regardless of perception or ability to
do better.

Quality in terms of end-user-experience is best measured through

customer satisfaction questionnaires which are professionally designed to
capture an unbiased view of quality. Surveys can be one of research. This
allows quality to be tracked over time and also for corrective action to be
identified and taken.

Staff turnover

The staff turnover of employee who originally transferred to the

outsourcer is a concern for many companies. Turnover is higher under an
outsourcer and key company skills may be lost with retention outside of
the control of the company.

In outsourcing offshore there is an issue of staff turnover in the

outsourcer companies call centers. It is quite normal for such companies
to replace its entire workforce each year in a call center. This inhibits the
build-up of employee knowledge and keeps quality at a low level.
Company knowledge Outsourcing could lead to communication problems
with transferred employees. For example, before transfer staff have
access to broadcast company e-mail informing them of new products,
procedures etc. Once in the outsourcing organization the same access
may not be available. Also to reduce costs, some outsource employees
may not have access to e-mail, but any information which is new is
delivered in team meetings.

Qualifications of outsourcers

The outsourcer may replace staff with less qualified people or with
people with different nonequivalent qualifications.

In the engineering discipline there has been a debate about the number of
engineers being produced by the major economies of the United States,
India and China. The argument centers around the definition of an
engineering graduate and also disputed numbers. The closest comparable
numbers of annual gradates of four-year degrees are United States
(137,437) India (112,000) and China (351,537).

The turn of the 21st century saw a sea change in the Indian industry, often
referred to as India Inc. The change was that the hitherto docile and meek
Indian industry that acted as suppliers to the big companies of the west
and Far East woke up. The hungry tiger that was woken up went on the
prowl gobbling up companies across the globe. The world started to
accept and recognize the power of the Indian industry. One of the key
challenges that India Inc. had to face was its global face. Suddenly, the
companies were employing people from across the globe. Essential as it
is to keep a motivated staff, the new situation gave birth to a Global
Human Resources Management (Global HRM) function within the

The primary objective of the Global HRM function was to ensure that the
company had a local look in its geographies of presence. A multi-national
company would not like to be seen as an Indian or a Chinese company.
This objective in turn gave rise to further objectives. Thus, for a Global
HRM function the objectives can be summarized as follows:

* Ensure an international look with respect to local sensitivities

* Spread cross-cultural sensitivities and awareness amongst managers

and employees across the globe

* Bring in a local perspective in the region of operation

Implementing such practices were not an uphill task for Indians who have
been used to a multi-cultural society for centuries. However, core
organizational practices needed to be consistent across geographies.

The international look was achieved by hiring on board managers from

across geographies. Companies like Infosys and Wipro have people from
across the globe on their board of directors. Such actions build
confidence at lower levels that the company is indeed a global one. Often
it is also a practice to hire local talent and even have a person local to the
geography as the chief of the operations from that geography.

Often, in a multi-national organization, geographically spread out team

need to work together. In this scenario, it is of utmost importance to make
the different parties aware of the cultural sensitivities. Today, most of the
organizations have comprehensive cross cultural trainings that they
impart to their employees across geographies. Such trainings help in
avoiding misunderstandings and also pave the way for people from

different cultures to work painlessly. Cross cultural awareness or
sensitivities can make or break subsidiaries of an organization.

A local perspective of the region instils a sense of belongingness for the

employees from that region. For instance, it would be prudent to follow
the complex Japanese traditions for the Japanese subsidiary of an Indian
company. Having a local chief of operations goes a long way in winning
the trust of the locals. The local perspective also implies that the
employees who join the subsidiary do not experience a culture shock. For
a local presence to grow, the Global HRM team must ensure that the
operations in a particular area look as local as possible, without
compromising on the core values of the company.

Global HRM function enables the different parts of the organization

function smoothly and effectively. Such a function holds the important
responsibility of holding the organization together as one. Thus it is
common that the Global HRM function has representatives from
executive management.



Human resource management (HRM) refers to all of the

dedicated activity that an organization uses to affect
the behaviors of all the people who work for it.
- Jackson & Schuler

Because the behaviors of employees influence profitability, customer

satisfaction and a variety of other important measures of organizational
effectiveness, managing human resources is a key strategic challenge for
all companies, and particularly so for those engaged in cross border
alliances (Briscoe & Schuler, 2004).

Every organization, from the smallest to the largest, engages in a variety

of human resource management activities. Human resource management
activities I include formal policies and everyday practices for managing
people. Policies are statements that offer a general statement of how
people will be managed. For example, there may be a policy to reward
employees for their performance to the, organization. HRM practices then
take the next step and provide offer a more specific statement of how

people will be managed For example the practice of paying commissions
based on individual sales performance is a practice that would be
consistent with an HRM policy of rewarding employees for performance.
Another practice that would also be consistent with this policy would be
offering team-based incentives that are tied to the performance of a team
against stated team goals.

The more systematically HRM policies and practices are matched to the
company, the more financially successful the company is likely to be
(Becker, Huselid & Ulrich, 2001). This principle is as true for the
successful management of cross-border alliances as is it for organizations
in general. And, as is true for business in general, the stakes are high.
Successful cross-border alliances make create new jobs, improve the
economic conditions of a community, and produce wealth for
shareowners. Conversely, failed cross-border alliances may mean lost
jobs, loss of tax revenue, declining share values, and even the eventual
demise of companies. In the remainder of this chapter, we describe some
of the human resource issues that arise in CBAs and discuss their
implications for a variety of human resource management activities
(Briscoe & Schuler, 2004).

It's clear that you cannot stay in the top league if you only grow
internally. You cannot catch up just by internal growth.
If you want to stay in the top league, you must combine.
- Daniel Vasella, CEO, Novartis (Herper, 2002)

The media often portray business organizations as warring enemies who

define their own success by the demise of their competitors. Executives
sometimes use similar imagery to motivate their "troops." What such
images ignore are the strong interdependencies among business
organizations and the degree to which cooperation results in mutual
gains. Just as nations have discovered the benefits of economic
cooperation, businesses have learned that success often depends on
forming strategic alliances.

Successfully managing strategic alliances is surprisingly difficult,

however. The 1998 DaimlerChrysler cross-border merger illustrates some
of the management challenges inherent in managing cross-border
alliances. Competitive forces in the global auto industry initially led the
two companies to merge. The combination looked good on paper, but
cultural differences interfered with management's ability to quickly reap
the economic benefits they had anticipated. Clashes due to differences in
country cultures and company cultures nearly doomed the new company's

success. It seemed to take years for management to focus on a common
vision and agree to the need for a single unifying culture. Although the
alliance seems now to be succeeding, the initial years of difficulty might
have been avoided if the managers had understood and appreciated the
many HR issues that would require their.


In general, strategic alliances involve two or more firms agreeing to

cooperate as partners in an arrangement that's expected to benefit both
firms. Sometimes strategic alliances involve one firm taking an equity
position in another firm. In the most extreme case, one firm acquires the
other firm. But less extreme equity positions also are common. Ford, for
example, has equity in both foreign and U.S. auto parts producers, but it
has not acquired these companies. Many strategic alliances do not affect
legal ownership, however. In the airline industry, a common type of
alliance is between an airline and an airframe manufacturer. In high-tech
industries, strategic alliances allow older, established firms to gain access
to the hot new discoveries being made by scientists in universities and in
small, creative organizations. For example, the U.S. biotechnology
industry is characterized by networks of non-equity relationships between
new biotechnology firms dedicated to research and new product
development and established firms in industries that can use these new
products, such as pharmaceuticals. In return for sharing technical
information with the larger firms, the smaller firms gain access to their
partners' resources for product testing, marketing, and distribution, we
focus on strategic alliances between firms that are headquartered in
different countries. We refer to these as cross-border alliances, or CBAs.
Cross-border alliances can be defined as partnerships that are formed
between two or more firms from different countries for the purpose of
pursuing mutual interests through sharing their resources and capabilities.
As is true for strategic alliances in general, there are many types of cross-
border alliances. Two broadly categories of cross-border alliances are
those that involve equity investments and those that involve no shared
equity or joint capital investment.

A non-equity cross-border alliance is an investment vehicle in which

profits and other responsibilities are assigned to each party according to a

contract. Each party cooperates as a separate legal entity and bears its
own liabilities. Non-equity alliances have great freedom to structure their
assets, organize their production processes, and manage their operations.
This type of alliance can be developed quickly to take advantage of short-
term business opportunities, then dissolved when their tasks are
completed. Among the many types of non-equity alliances are joint
exploration projects, research and development consortia, co-production
agreements, co-marketing arrangements, and long-term supply
agreements. International joint ventures and international mergers &
acquisitions are two major types of equity-based cross-border alliances.
Such arrangements typically represent a long-term collaborative strategy.
Furthermore, equity-based alliances require active day-to-day
management of a wide variety of human resource (HR) issues. Some of
the HR issues that are critical to the success of equity-based cross-border
alliances may also arise in non-equity cross-border alliances, but they
may be less central to the success of the alliance. In equity-based cross-
border alliances, however, long-term success is impossible unless HR
issues are managed effectively. While there are many lessons that can be
transferred from our discussion of equity-based cross-border alliances to
managing HR issues in non-equity alliances, most of our discussion
focuses on describing the challenges of managing human resources in
equity-based cross border alliances. More specifically, we focus on
international joint ventures and international mergers and acquisitions.


An international joint venture (IJV) is one type of equity-based cross-

border alliance. Alliance partners form a joint venture when they create a
separate legal organizational entity representing the partial holdings of
two or more parent firms. In international joint ventures, the headquarters
of at least one partner is located outside the country of the joint venture.
Joint ventures are subject to the joint control of their parent firms. The
parent firms, in turn, become economically and legally interdependent
with each other. Firms form international joint ventures for many reasons.
In some countries, the host government provides strong incentives to
foreign firms to use joint ventures as a mode of entry into their markets
(Geringer & Hebert, 1989).

Another reason to form joint ventures is to gain rapid access to new

markets. Learning is another objective behind many international joint

ventures. By partnering with local companies instead of entering a market
on their own, foreign firms can more quickly develop their ability to
operate effectively in the host country. IJVs also provide a means for
competitors within an industry to leverage new technology and reduce
costs. In the auto industry, for example, Ford, General Motors, Daimler-
Chrysler, Nissan and Renault formed an international joint venture,
Covisint, in order to manage their supply chains using business-to-
business e-commerce (Greenhalgh,2001).

Ford's former CEO Jac Nasser explained the reasoning behind the
formation of this IJV: "We see this technology [e-business] as so
powerful that, for it to be optimized, we need it to become an industry
standard. So, rather than have 15 different standards out there ... we
figured out that it would be more efficient if the basic architecture was
common." Assuming Covisint succeeds, it will fundamental lay alter
supply chain relationships within the automobile, industry. For various
reasons, managing IJVs successfully is difficult, and many ultimately fail.
IJV failures often stem from poor management of human resource issues.
Prior to formation of an IJV, human resource management professionals
can help the potential partners assess their cultural compatibility. As the
new entity is formed, recruiting and selecting of key executives to staff
the IJV becomes critical. With the staff in place, HRM practices that
align employees' skills and motivations with the business objectives of
the IJV can determine whether it ultimately achieves the desired
outcomes (for an example of a model for strategic staffing in IJVs, see
Petrovic & Kakabadse, 2003).



Companies today need to be fast, efficient, profitable, flexible, adaptable,

future-ready and have a dominant market position. Without these
qualities, it is virtually impossible to be competitive in today's global
economy. In addition to participating in strategic alliances to develop the
capabilities they need to compete, many firms evolve and grow through
mergers or acquisitions.

Among the most significant transnational merger and acquisition deals in

recent years are Daimler-Chrysler, Chase J. P. Morgan, McKinsey-
Envision, UBS-Warburg-Paine Webber, Credit Suisse-DLJ, Celltech-

Medeva, SKB-Glaxo, NationsBank-Bank of America, Vivendi-Universal,
Pfizer-Warner Lambert, Nestle-Purina, and Deutsche Telekom-Voice
Stream. Although global economic and market conditions move up and
down, the future appears ripe for a continuation of international merger
and acquisition activity.

In a merger, two companies agree to join their operations together to form

a new company in which they participate as equal partners. In an
acquisition, one firm buys controlling or full interest in another firm with
the understanding that the buyer will determine how the combined
operations will be managed.

The majority of acquisitions are friendly - that is, the acquired firm
solicits bids and enters into an acquisition voluntarily. Sometimes,
however, a firm becomes a takeover target. Although mergers and
acquisitions are technically different, it's common to refer to all these
means for combining the operations of two firms as mergers - and
acquisitions, or just M&As (Charman, 1999; Deogun & Scannell, 2001).

Some observers argue that the increased pace of international mergers

and acquisitions is a major driving force behind the development of
multi-government agreements and rules for business conduct (Tyson,
2001). IM&A deals can have enormous economic and social
consequences. They can quickly put the major competitors within a
country out of business, and they can determine whether, how and where
people work. Gaining government approval for international M&As is
sometimes difficult, but the initial step of gaining approval usually proves
to be far easier than successfully managing the new entity. As is true for
international joint ventures, international mergers and acquisitions unfold
through many stages. At each stage, success requires effectively
managing many human resource (HR) issues. This involves identifying
the HR issues and their implications for human resource management

Human Resource Management: Scope

The scope of HRM is very wide:

1. Personnel aspect-This is concerned with manpower planning,

recruitment, selection, placement, transfer, promotion, training and
development, layoff and retrenchment, remuneration, incentives,
productivity etc.

2. Welfare aspect-It deals with working conditions and amenities such as
canteens, creches, rest and lunch rooms, housing, transport, medical
assistance, education, health and safety, recreation facilities, etc.
3. Industrial relations aspect-This covers union-management relations,
joint consultation, collective bargaining, grievance and disciplinary
procedures, settlement of disputes, etc.

Human Resource Management: Beliefs

The Human Resource Management philosophy is based on the following
• Human resource is the most important asset in the organization and can
be developed and increased to an unlimited extent.
• A healthy climate with values of openness, enthusiasm, trust, mutuality
and collaboration is essential for developing human resource.
• HRM can be planned and monitored in ways that are beneficial both to
the individuals and the organization.
• Employees feel committed to their work and the organization, if the
organization perpetuates a feeling of belongingness.
• Employees feel highly motivated if the organization provides for
satisfaction of their basic and higher level needs.
• Employee commitment is increased with the opportunity to dis¬cover
and use one's capabilities and potential in one's work.
• It is every manager's responsibility to ensure the development and
utilization of the capabilities of subordinates.

Human Resource Management: Functions

In order to achieve the above objectives, Human Resource Management
undertakes the following activities:

1. Human resource or manpower planning.

2. Recruitment, selection and placement of personnel.
3. Training and development of employees.
4. Appraisal of performance of employees.
5. Taking corrective steps such as transfer from one job to another.
6. Remuneration of employees.
7. Social security and welfare of employees.
8. Setting general and specific management policy for organizational
9. Collective bargaining, contract negotiation and grievance handling.
10. Staffing the organization.
11. Aiding in the self-development of employees at all levels.
12. Developing and maintaining motivation for workers by providing

13. Reviewing and auditing man¬power management in the organization
14. Potential Appraisal. Feedback Counseling.
15. Role Analysis for job occupants.
16. Job Rotation.
17. Quality Circle, Organization development and Quality of Working

Human Resource Management: Major Influencing Factors

In the 21st century HRM will be influenced by following factors, which
will work as various issues affecting its strategy:
• Size of the workforce.
• Rising employees' expectations
• Drastic changes in the technology as well as Life-style changes.
• Composition of workforce. New skills required.
• Environmental challenges.
• Lean and mean organizations.
• Impact of new economic policy. Political ideology of the Govern¬ment.
• Downsizing and rightsizing of the organizations.
• Culture prevailing in the organization etc.

Human Resource Management: Futuristic Vision

On the basis of the various issues and challenges the following
suggestions will be of much help to the philosophy of HRM with regard
to its futuristic vision:

1. There should be a properly defined recruitment policy in the

organization that should give its focus on professional aspect and merit
based selection.

2. In every decision-making process there should be given proper

weightage to the aspect that employees are involved wherever possible. It
will ultimately lead to sense of team spirit, team-work and inter-team

3. Opportunity and comprehensive framework should be provided for full

expression of employees' talents and manifest potentialities.

4. Networking skills of the organizations should be developed internally

and externally as well as horizontally and vertically.

5. For performance appraisal of the employee’s emphasis should be given

to 360 degree feedback which is based on the review by superiors, peers,
subordinates as well as self-review.

6. 360 degree feedback will further lead to increased focus on customer
services, creating of highly involved workforce, decreased hierarchies,
avoiding discrimination and biases and identifying performance

7. More emphasis should be given to Total Quality Management. TQM

will cover all employees at all levels; it will conform to customer's needs
and expectations; it will ensure effective utilization of resources and will
lead towards continuous improvement in all spheres and activities of the

8. There should be focus on job rotation so that vision and knowledge of

the employees are broadened as well as potentialities of the employees
are increased for future job prospects.

9. For proper utilization of manpower in the organization the concept of

six sigma of improving productivity should be intermingled in the HRM

10. The capacities of the employees should be assessed through potential

appraisal for performing new roles and responsibilities. It should not be
confined to organizational aspects only but the environmental changes of
political, economic and social considerations should also be taken into

11. The career of the employees should be planned in such a way that
individualizing process and socializing process come together for fusion
process and career planning should constitute the part of human resource