Business Strategy and HRD

2. “The HR Manager often walks a tightrope between employees and management.” Explain this
statement with the help of examples. In your opinion, what are some of the things that HR needs
to do to balance better?

Human Resource (HR) Managers are expected to make a contribution to the management of
their organization to create added value, to improve its competitive advantage. They are
supposed to manage the most crucial assets of any organization-its people.

In doing so it will identify some issues which need to be considered, and how they may be
approached. The focal point is how to determine the best practice in various HR-related
decisions, if there is indeed any "best practice”. Acute problems are concerned with the
ambiguity and the complexity of the issue-managing people. And people are the most difficult
asset to be managed-they are unpredictable (at least to some extent), they have their own will
and plans (which do not necessarily fit in with those of the organization), they are affected by
the external and internal environment. But people are the source for the competitive advantage
of any company, firm or organization. It is recognized today that the seeds for success lie in
getting the best out of the people.

Due to these external and internal forces, various contingencies can be found which put into
question the possibility of identifying 'best practice'. In most cases there is no "best rule' or fixed
indications, but certain guidelines can be presented to clarify what is inconceivable, what would
be the extreme case, and where the HR manager will look for the optimum point. A balance is
needed and the risk in not looking for the balance is worse than going for the extremes. To use a
metaphor, HR managers need to walk on a tightrope in search of best practice.

Example:
Recruitment
The most important input that the HRM deals with is the people brought into the work- place.
Recruitment shapes the face of the organization’s future by determining who will be the actors
in the next scenes of the play. The HRM people are expected to lead the process of recruitment-
to create a large pool of candidates, and to pick the crème de la crème. However, not every
good candidate is good for any organization. And some candidates, one must admit, are just no
good. Thus, even for good ones (what is good?) a selection process needs to be conducted. But
do organizations choose people for their qualifications? Their skills? Their general or specialist
skills? Their ability to perform certain tasks? Their fit with the culture of the organization? This is
the first issue to be established. A combination is needed, and a specific mixture will be chosen
in the end. The HR managers need an insight for achieving the best combination.

When going for graduate recruitment, should the organization direct itself to attract new
graduates or should it aim at experienced people? company which opts for the latter, it felt that,
in the present state of the labour market, job hopping occurs too frequently and it sees no
reason and has no incentive to support other firms by training and preparing good experienced
accountants just to lose them later to competitors. Such an approach, even if understandable,
carries within itself some dangers-by giving up the opportunity to raise and develop dedicated
people right from the start, the firm will never have that core of loyal, committed people. The
likelihood that they will be loyal on a long-term basis is low.
If all the graduates sought are experienced, no one will be occupying the lower level positions,
which have a crucial role in the ability of the firm to function.
Local, national or international search? Opting for local people produces support for the
community and may provide people with prospects for long-term employment and an
attachment to the work-place. Having a nationwide search will create more choice and can bring
“new blood” into the system.
The solution suggested for HR managers is not to go for the extreme, i.e. in graduate
recruitment, not only to look for new graduates but also to advertise for experienced people. A
balance should be sought. Where to draw the line: This is the dilemma, and here the metaphor
of “walking on a tightrope” is applicable. HR managers have to find the right balance between
internal and external Recruitment for their own organization. Future managers can be
developed within the corporation or bought from the external labour market.

The role becomes even more complicated once the “obtain” is done, and the “retain” element is
confronted. How to retain people-should be organization develop people’s competencies or buy
them when needed? Are they available in the market? Can they be developed? This leads us to
the issue of the labour market, and the question of the internal or external job market is at
stake: when filling managerial posts, the organization can look internally or externally. “Internal
promotions” is the percentage of appointments which are filled by members of the organization.
Some propose that a high internal promotion rate indicates a healthy internal labour market
system. Many emphasize the advantages gained by organizations that tend to count on internal
promotions. On the other hand, too high a rate of internal promotion blocks the organization-
from having 'new blood’. Thus it seems again that going for the extremes is risky, no matter
which one is chosen.
There is no way to determine the point of optimum as it will vary based on many factors-type
of industry, job market characteristics, organizational culture and markets, etc.

Appraisal and Compensation

In the area of performance appraisal there are some issues agreed upon, such as the use of
performance appraisal for feedback rather than a monitoring system, and the increased use of
360 degree feedback systems. However debate might arise as to the extent to which these
systems can be used for performance related pay. Should such systems remain at the individual
level or the group level? Dilemmas here are what proportion of the salary should be subjected to
performance related pay, and what criteria should be used for determining it.

The dilemma of a compensation system was well expressed by ‘Algorithmic’ and ‘Experimental’
patterns. The organizations needs to choose between the two and, as argued, most find some
intermediate approach rather than going for the extreme pattern. ‘Algorithmic’ pattern is when
the main emphasis is on the use of mechanistic, pre- determined, standardized, repetitive
procedures. Internal equity and hierarchical position count. These will be based mainly on job
design evaluations which will not necessarily fit all organizational positions.
In the 'Experimental' pattern, the strategies are flexible and adaptive, and can thus respond to
changing circumstances. Personal skills and attributes as well as performance serve as a basis for
pay determination. Sensitivity to the market (rather than internal equity in the case of
Algorithmic pattern) and risk sharing between employees and the firm characterize this pattern.
These two patterns represent two extreme poles on a continuum, with most organizations
falling somewhere between these two end poles. Flexible remuneration may include: individual
payments; merit pay, merit bonus; gain-sharing: profit sharing; ownership; and skill-based pay.

As suggested above, there is an optimum level between the Algorithmic and the Experimental
patterns. It depends on several factors, and will vary across organizations. The sector, the labour
market, the economic conditions at the time-these and other factors need to be taken into
account by the HR manager when deciding on the policy of compensation.
Conclusions
There is an optimum position between the various extremes that HR managers can choose.
However, this optimum point depends on several factors, and will vary across organizations. A
variety or factors should be taken account of by the HR manager when setting policies and
practices, trying neither to set a rigid "best practice nor to reject it totally. Each organization may
develop its own guidelines for best practice, considering its unique circumstances. This is why
the role of the HR manager may be seen as 'walking the tightrope’. To achieve this, the solution
depends first on awareness of both extreme options, and an understanding that going to the
extreme might not benefit anyone-neither the individual nor the organization. Bench-marking
against others can be helpful in providing guidelines tor the HR manager. There are optimal
ranges where the best practice of HRM should be. For each organization, profession or location,
the range may differ. Using creativity, bench-marking, and being open minded, will enable HR
managers to balance on the ‘tightrope' of decision making, and may lead to a better use of the
most important asset of any organization, its people.