HRM Session # 1: Summary – Sections G and H

Enhancing organizational effectiveness by ensuring that organization has the right people, in right
number, performing the right role to maximum potential is the objective of HRM. Business
challenges like globalization, organizational growth, technology, change, and intellectual capital
have transformed the role of HRM from mere administration and support function to one with
more strategic importance in business organizations. The activities performed by HRM function
include: Pre-joining and joining (HR Planning and job analysis, recruitment and selection,
induction and placement); Performing (training and development, performance management
rewards and compensation, employee welfare, benefits and employee relations, motivation and
retention); Exit (manpower and human capital analysis and accounting). The effectiveness and
efficiency of HRM function will be reflected in a firm’s profitability, growth, (employer)branding,
legal compliance, and CSR.
HR strategy in any organization(s) is derived from its Business strategy (e.g. differentiation, cost
leadership). HR strategy will be translated into HR systems and practices (like hiring policies,
training and development activities, performance management systems and employee retention).
Effective HRM practices will result in positive employee attitudes (satisfaction, commitment etc.,)
and behaviour (OCB); these attitudes and behaviour in turn creates organizational effectiveness.
Hence integrating HR strategy with Business strategy is the key to success in organizations. This
principle of aligning HR policies and practices with business strategy is known as Strategic Human
Resource Management (SHRM).
SHRM essentially involves formulating and executing HR policies and practices that produce
employee behaviour and attitude that enables the organization to meet its strategic aims. External
competitive environment (STEP forces) and internal strengths & weaknesses (SWOT analysis) of
an organization determines its strategic situation. Based on their strategic situation firms’ will
proceed with their strategic plan (e.g. expansion, diversification, cutting cost); to support these
strategic objectives organizations will execute HR policies and practices (recruitment & selection,
training & development, PMS etc.,).
Infosys
The journey of Infosys since its inception in early 80’s to economic downturn in 2002
demonstrates the importance of aligning organization’s strategic situation with strategic plan and
strategic plan with HR strategies. As indicated in the case, Mr. Narayan Murthy, founder of Infosys
was professional, ethical, people focused and believed in wealth creation and its distribution. 1981-
91: during the early years of Infosys, the external environment of was non-conducive for the
company and Infosys strategy essentially revolved around body shopping (consultation).
1991-2001: Economic liberalization resulted into reduced trade restrictions which in turn lead to
demand enhancement; however, at the same time competition crop up both from domestic firms
and MNCs. To meet the growing demand manpower of the company increased tremendously,
people focused practices were adopted. Focus was on improving brand equity. Key strategies
during this period focused on developing Offshore development centers (ODCs) and Global
Delivery Model (GDM). During this period the HR practices focused on enhancing emotional
bonding of employees – world class campus, ESOPs, HALE, C-life, customized training,
challenging and overseas job opportunities etc., are some of the HR practices observed in the
company.
2002-03: these years witnessed economic downturn, SEBI restrictions, intensified competition and
restrictions on US B1 visa; internally company witnessed reduced employee satisfaction, raising
costs, SOP, variable pay system was introduced. These changes lead to change in the business
strategy; consulting, ITES/GDM, BPO operations were started operating as independent firms.
The case is an illustration of the linkages between (1) a firm’s external environment, (2) culture, (3)
business strategy and (4) HR practices.
The case also serves as a useful illustration of the Nadler Tushman model.